Compensation Exam 2

4 steps to adopt a comparable worth plan

1. Adopt a single 'gender neutral' point job evaluation plan for all jobs within a unit. 2. All jobs with equal job evaluation results should be paid the same. 3. Identify the percentages of male and female employees in each job group. 4. The wage-to-job evaluation point ratio should be based on the wages paid for male-dominated jobs. Major problem with "Comparable Worth" - most firms don't use a single job evaluation method for all types of jobs.

marginal product

1. Diminishing marginal productivity means each additional employee has a progressively smaller share of production factors to work with. e.g., office space, number of computers, telephone lines and hours of clerical support. Until these factors change, each new hire produces less than the previous hire. The amount each hire produces is the _____________

lead pay level policy

1. Maximizes the ability to attract and retain quality employees, and minimize dissatisfaction with pay. It may offset less attractive job features. Linked to reduced turnover, quit rates and absenteeism. Negative effects include the need to increase current employees wages and it may mask negative job attributes

lag pay level policy

1. Paying below market rates may not attract employees unless coupled with higher future returns. The combination may: increase employee commitment, and foster teamwork, which may increase productivity.

survey

Is the systematic process of collecting and making judgments about the compensation paid by other employers

fuzzy markets

New organizations and unique jobs may fuse diverse factors making relevant markets fuzzy. Place more emphasis on external market data.

order 11246

Prohibits discrimination on the basis of race, color, religion, sex, or national origin. Requires affirmative action plans w/ utilization, goals, action.

grade

a pay __________ is a step within a compensation system that defines the amount of pay an employee will receive. ... If he or she continues to work in the same role, the pay grade allows upward movement in salary, usually one pay step per year of service within the pay grade assigned to that job

broad banding

collapses salary grades into only a few broad bands, each with a sizable range.

private survey data

comes from Local consultants, Hay, Aon Hewitt, Mercer, Towers Watson. Often very expensive and not validated.

mean

commonly understood. If only using company data, will not accurately reflect market

legislative

congress. Makes laws

portal to portal

declares time spent on activities before beginning the 'principle activity' is not compensable

disparate treatment

direct, unequal treatment. Intentional

market pricing

emphasize external competitiveness and deemphasize internal alignment. Objective: base most of the internal pay structure on external rates, and break down the boundaries between the internal organization and the external market forces.

OFCCP

enforces compliance. Selects contractors on formula. Audits, on site review.

equal pay act

equal pay for men and women doing substantially similar work.

osha

established 8 hour work day

lilly ledbetter

established a statute of limitations

sarbanes-oxley

executives cant retain bonuses or stock if they mislead the public.

pay range

exists whenever two or more rates are paid to employees in the same job. Recognize individual performance differences with pay, meet employee expectations that their pay will increase over time, even in the same job, and encourage employees to remain

human capital theory

general and specific skills require an investment in human capital. Firms will invest in firm-specific skills, but not general skills. Workers must pay for investment in general skills. There MUST be a sufficient return on investment for the investment to take place. Workers, for example, must see a payoff for training.

weighted mean

gives equal weight to each individual's wage, captures size of supply and demand in the market

standard deviation

how tightly all rates are clustered around mean. Tells how similar the market rates are from each other. Small SD means they are close together, large means they are more spread out

disparate impact

indirect, unequal consequences, unintentional

comparable worth

is a political football - considerable pressure from political pressure groups and unions

access discrimination

is the denial of particular jobs, promotions or training opportunities to qualified women or minorities.

aging/trending

is used to forecast rates for a future date.

valuation discrimination

looks at the pay women and minorities receive for the jobs they perform. Hinges on equal pay for equal work.

occupation, geography, competitors

managers define markets by: (3)

median

minimizes distortion caused by outliers.

fair labor standards act

minimum wage, hours worked, overtime, prohibits child labor.

mode

most common, must draw frequency distribution to calculate it.

quartiles and percentiles

orders all data points lowest to highest then convert to percentages. Common in salary surveys, frequently used to set pay ranges or zones.

1. control costs and increase revenues 2. attract and retain employees

pay level and pay mix decisions focus on: (2)

labor costs

pay level x number of employees. As pay increases, labor costs increase. Not all organizations pay the same rate. Your pay strategy should translate into revenues exceeding the cost of the strategy.

reservation wage theory

predicts job seekers won't accept jobs if pay is below a certain wage, no matter how attractive other jobs aspects are: pay MUST meet a minimum level.

executive

president. enforces laws.

product demand, degree of competition

product factors and ability to pay: the two key product market factors are ______ (caps maximum pay level) and _______ (highly competitive markets are less able to raise prices)

civil rights act

protects age and disability

Bureau of labor statistics (BLS)

public survey data

prevailing wage laws

set pay for work done to produce goods and services contracted by the federal government. Prevailing wage is minimum wage that must be paid for work done on covered government projects or purchases.

The Bourse

stores that allow haggling until an agreement is reached, eBay is an example. In both examples, employers are buyers and potential employees are sellers.

quoted price

stores that label each item's price or ads that list job opening's starting wage.

judicial

the courts. review laws

low-high approach

wages of lowest and highest paid benchmark jobs used as anchors for skill based structures.

reasons to pay "above market" prices

what competitors it compares to, and what pay forms are included.

ADEA

you can't discriminate because of age

Equal employment opportunity commission (EEOC)

1. is responsible for enforcing federal laws that make it illegal to discriminate against a job applicant or an employee because of the person's race, color, religion, sex (including pregnancy, gender identity, and sexual orientation), national origin, age (40 or older), disability or genetic information. It is also illegal to discriminate against a person because the person complained about discrimination, filed a charge of discrimination, or participated in an employment discrimination investigation or lawsuit.

marginal revenues

1. money generated by sale of marginal product. Employers want to maximize profits, so they will hire until the marginal revenue equals the costs associated with the most recent hire. Used to determine pay level set by market forces and the marginal revenue generated by each new hire. It provides an analytical framework, but oversimplifies.

FLSA

Covers all employees of companies engaged in interstate commerce or in the production of goods for interstate commerce. Major provisions include: minimum wage, hours of work, and child labor. Records must be kept of employees, their hours worked, and their pay

pay level

The average of the array of rates paid by an employer: (base + bonuses + benefits + value of stock holdings) / number of employees

external competitiveness

The pay relationships among organizations - the organization's pay relative to its competitors

pay mix

The various types of payments, or pay forms, that make up total compensation

labor intense (education, healthcare)

______ industries pay lower than technology industries (oil companies, pharmaceuticals)

marginal revenue of labor

______________ is the additional revenue generated when the firm employs one additional person, with other production factors held constant.

marginal product of labor

___________________ is the additional output associated with the employment of one additional person, with other production factors held constant.

benchmark job approach

benchmark jobs have stable job content, are common, and include sizable numbers of employees. Eastman used to price entire structure to determine base pay raises. Make sure benchmarks are valid! Eastman often met with consultants, etc. to calibrate jobs

efficiency-wage theory

according to the __________ theory, high wages may increase efficiency and actually lower labor. The underlying assumption is that pay level determines effort.

compensation managers

are usually responsible for surveys. use outside consulting firms to protect against lawsuits.