Mie 330 Exam 4

Medical Insurance

70% of full time employees in US receive medical benefits Policies typically cover Hospital expenses Surgical expenses Visits to physicians

Pay Policy Line

A graphed line showing the mathematical relationship between job evaluation points and pay rate.

Preferred Provider Organization (PPO)

A health care plan that contracts with health care professionals to provide services at a reduced fee and gives patients financial incentives to use network providers.

Health Maintenance Organization (HMO)

A health care plan that requires patients to receive their medical care from the HMO's health care professionals, who are often paid a flat salary, and provides all services on a prepaid basis.

Employee Wellness Program (EWP)

A set of communications, activities, and facilities designed to change health-related behaviors in ways that reduce health risks.

Pay Range

A set of possible pay rates defined by a minimum, maximum, and midpoint of pay for employees holding a particular job or a job within a particular pay grade. Flexibility helps organizations balance conflicting info from job evaluations and market surveys

Merit Pay

A system of linking pay increases to ratings on performance appraisals. Use merit increase grid. Performance rating, compa-ratio

Pay Differential

Adjustment to a pay rate to reflect differences in working conditions or labor markets. Differentials often offered in US by geographic location. Common approach is to move employee higher in pay structure to compensate for higher costs of living

Employee Stock Owner-ship Plan (ESOP)

An arrangement in which the organization distributes shares of stock to all its employees by placing it in a trust. Most common form of ownership

Standard Hour Plan

An incentive plan that pays workers extra for work done in less than a preset "standard time." encourages employees to work as fast as possible. Employees often neglect quality or customer service

Jakar does not know a lot about investing and wants to ensure he has some retirement income when he is retires. Agnes plans on changing employers every few years and is interested in investing her own money. Which plan would be best for Jakar and Agnes, respectively? Defined benefit; defined contribution Defined contribution; defined benefit Contributory; defined benefit Defined contribution; non-contributory

Answer: A A defined-benefit plan guarantees a specified level of retirement income. Usually the amount of this defined benefit is calculated for each employee based on the employee's years of service, age, and earnings level. A defined-contribution plan sets up an individual account for each employee and specifies the size of the investment into that account, rather than the amount to be paid out upon retirement.

John works twisting pretzels in a pretzel factory. Pablo works on IT systems integration at a credit card company. The best pay plans for these individuals would most likely be _____ and _____, respectively. merit pay; individual bonus sales commissions; merit pay piecework; merit pay individual bonus; sales commissions

Answer: C Piece-rate pay plans typically are suited for routine, standardized jobs with output that is easy to measure, such as the number of pretzels twisted. Merit pay rewards employees based on performance appraisals.

Mariah found out that a friend of hers, Joanne, who has a similar job in the same town makes significantly more money than she does. Which of the following is probably a cause of this difference in pay? The companies are in different product markets with different pay strategies. Mariah's job is nonexempt. Joanne's job involves extensive use of computers, All of these are valid.

Answer: D All of these are valid reasons for differences in pay ranges.

Incentive pay for executives

Balanced scorecard Securities and exchange commission Dodd frank wall street reform/consumer protection act

Short Term Incentives

Bonuses based on ROI, years profits, or other measures related to goals Actual payment of bonus can be delayed to gain tax advantages

Retirement Plans

Contributory plan: funded by employer and employee Noncontributory plan: funded entirely by employer Defined benefit plan: guarantees specified level of retirement income

Prevailing wages: Davis Bacon Act

Davis-Bacon covers construction contractors that receive more than $2,000 in federal money

Communication

Demonstrates that the pay plan is fair When employees understand the plan. It is more likely to influence their behavior as desired Important when changing pay plan

Equal Employment Opportunity

Differences in pay must not be based on employees age, sex, race, or other protected status

Participation in Incentives

Employee participation can be part of general move to employee empowerment Employees have hands on knowledge of behaviors that are effective

Flexible Spending Account

Employee-controlled pretax earnings set aside to pay for certain eligible expenses, such as health care expenses, during the same year

Communicating Fairness

Employees care about their pay relative to others' pay These feelings are based on what employees perceive Employees can easily gather pay data using Internet

Communication Essential

Employees must be given information about benefits Necessary to attract, motivate, and retain talent It is difficult for employees and applicants to understand the value of benefits, so companies must help Employers can use a variety of media to communicate

Judging Fairness (Equity) continued

Employees who perceive they are under-rewarded are likely to make up the difference in one of three ways: 1- Putting forth less effort (reducing inputs) 2-Finding ways to increase outcomes (e.g., stealing) 3-Withdrawing by leaving or refusing to cooperate

Life Insurance

Employers may provide life insurance or offer the opportunity to buy coverage at low group rates Term life insurance: if employee dies during term of policy, beneficiaries receive a death benefit payment

Legal requirements

Equal pay for equal work Minimum wage Overtime Restrictions on child labor

Compensable Factors

Experience Education Complexity Working conditions Responsibility

Judging Fairness (Equity)

External equity: fairness of one's pay relative to what employees in other organizations earn doing the same job Internal equity: fairness of one's pay relative to pay of co-workers

Child Labor

FLSA sharply restricts use of child labor Children under 14 may not be employed Children aged 14 and 15 may work only outside school hours, in nonhazardous jobs, and for limited time periods Children aged 16 and 17 may not be employed in hazardous job exemptions: babysitting, acting

"Family Friendly" benefits

Family leave Child care College savings Elder care

Prevailing Wages

Federal contractors must pay employees at least equal to the prevailing wages in the area

Family and Medical Leave Act (FMLA)

Federal law requiring organizations with 50 or more employees to provide up to 12 weeks of unpaid leave after childbirth or adoption; to care for a seriously ill family member or for an employee's own serious illness; or to take care of urgent needs that arise when a spouse, child, or parent in the National Guard or Reserve is called to active duty.

Fair Labor Standards Act (FLSA)

Federal law that establishes a minimum wage and requirements for overtime pay and child labor.

Consolidated Omnibus Budget Reconciliation Act (COBRA)

Federal law that requires employers to permit employees or their dependents to extend their health insurance coverage at group rates for up to 36 months following a qualifying event, such as a layoff, reduction in hours, or the employee's death.

Accounting Requirements

Financial Accounting Standards Board (FASB) sets requirements for companies' financial statements

Social Security

Flat payroll tax on employees and employers -The federal Old Age, Survivors, Disability, and Health Insurance (OASDHI) program, which combines old age (retirement) insurance, survivor's insurance, disability insurance, hospital insurance (Medicare Part A), and supplementary medical insurance (Medicare Part B) for the elderly.

Health care

For employers with at least 50 employees, payment of a fee to the federal government if the employer does not meet conditions for providing health insurance benefits

Incentive Pay

Forms of pay designed to energize, direct, or control employees' behavior Often linked to employee's performance as an individual, group member, or organization member May be in form of a commission or bonus

Workers' Compensation continued

Four major categories of benefits: Disability income Medical care Death benefits Rehabilitative benefits

Gainsharing

Group incentive program that measures improvements in productivity and effectiveness objectives and distributes a portion of each gain to employees. Addresses challenge of identifying appropriate performance measures for complex jobs. Employees determine how to improve own and groups performance

Vesting Rights

Guarantee that when employees become participants in a pension plan and work a specified number of years, they will receive a pension at retirement age, regardless of whether they remained with the employer.

Patient Protection and Affordable Care Act

Health care reform law passed in 2010 that includes incentives and penalties for employers providing health insurance as a benefit. Employers not required by law to provide health care

The organization's goals

High quality work force Cost control Equity and fairness Legal compliance

Pay for Executives

How does executive compensation affect employees? Executive pay relevant to pay structure; equity theory

Sales Commissions

Incentive pay calculated as a percentage of sales Some earn commission in addition to base salary Some work on straight commission plan with no salary Some earn no commissions at all

Profit Sharing

Incentive pay in which payments are a percentage of the organization's profits and do not become part of the employees' base salary. May encourage employees to think like owners

Straight Piecework Plan

Incentive pay in which the employer pays the same rate per piece, no matter how much the worker produces.

Differential Piece Rates

Incentive pay in which the piece rate is higher when a greater amount is produced.

Paid Leave

Major categories: vacations, holidays, sick leave 23 vacation days and 10 paid holidays Sick-leave days that accumulate with length of service Personal days, floating holidays, and PTO options

Job Evaluation

Measures relative internal worth of organizations jobs Committee identifies each jobs compensable factors

Gathering Information About Market Pay

Multiple sources of data: Pay surveys Bureau of Labor Statistics (BLS) Society for Human Resource Management (SHRM) Consulting groups

Pay Ratio Reporting

Must report ratio of CEO pay to pay of median employee Intended to increase transparency and make social responsibility a more vital part of pay policies

Performance Bonuses

Not rolled into base pay Employee must re-earn bonus during each period May be a one-time reward May be linked to objective performance measures

Ethical issues

Occur when company links pay to stock performance Executives may be tempted to lie about companys performance due to potential large earnings Insider trading gives unethical advantage

Key Jobs

Organizations define key jobs to help create pay structures Key jobs have relatively stable content and are common among many organizations Pay for key jobs can be based on survey data

Labor Markets

Organizations must compete to obtain human resources Competition establishes minimum pay to hire an employee for a job

Product Markets

Organizations that offer similar goods and services Organizations compete on quality, service, and price Cost of labor a significant part of organizations cost

Overtime Pay

Overtime is hours worked beyond 40 hours per week Under FLSA, employers must pay 1.5 times employee's usual rate for overtime hours Exempt employees - managers, outside salespeople, and other employees not covered by the FLSA requirement Nonexempt employees - employees covered by FLSA requirements for overtime pay

Skill-Based Pay Systems

Pay structures that set pay according to the employees' levels of skill or knowledge and what they are capable of doing.

Unemployment insurance

Payroll tax on employers that depends on state requirements and experience rating -A federally mandated program to minimize the hardships of unemployment through payments to unemployed workers, help in finding new jobs, and incentives to stabilize employment.

Long term disability insurance

Percentage of employees salary paid as benefits after an initial period and potentially for rest of employees life Employers can also offer long term insurance care

Short Term disability insurance

Percentage of employees salary paid as benefits for six months or less

Effective Incentive Pay Plan Requirements

Performance measurements linked to company goals Employees believe they can meet performance standards Employees given resources needed to meet goals Employees value rewards given Employees believe reward system is fair Pay plans consider that employees may ignore any goals that are not rewarded

Market forces

Product markets Labor markets

Workers' compensation insurance

Provide coverage according to state requirements; premiums depend on experience rating -State programs that provide benefits to workers who suffer work-related injuries or illnesses, or to their survivors. Generally two thirds of workers earnings tax free. Operate under principle of no fault liability

Pay Level: Deciding What to Pay

Ranges depend on the competitive environment Market rate versus paying above market rate to acquire top talent Pay policies are one of most important HR tools to encourage desired behaviors and discourage undesired behaviors

Hourly Wage

Rate of pay per hour worked.

Piecework Rate

Rate of pay per unit produced.

Piecework Rate

Rate of pay per unit produced. Wage based on the amount an employee produces

Salary

Rate of pay per week, month, or year worked.

Pay Rates

Rates of key jobs can be based on market research Nonkey jobs often have no survey data available; professional must base rate off job evaluation by plotting data on graph Pay policy line on graph shows relationship between job evaluation points and pay rates

Compa-Ratio

Ratio of average pay to the midpoint of pay range Ensures that pay policies and practices match If average equals midpoint, CR is 1 If CR is greater than 1, average pay is above midpoint If CR is less than 1, average pay is below midpoint

Delayering

Reducing the number of levels in the organization's job structure. More assignments combined into single layer called a broad band. More emphasis on acquiring experience, not promotions

Summary Plan Description

Report that describes a pension plan's funding, eligibility requirements, risks, and other details.

Cash Balance Plan

Retirement plan in which the employer sets up an individual account for each employee and contributes a percentage of the employee's salary; the account earns interest at a predefined rate.

Defined Contribution Plan

Retirement plan in which the employer sets up an individual account for each employee and specifies the size of the investment into that account.

Stock Options

Rights to buy a certain number of shares of stock at a specified price. Traditionally have been granted to executives

Pay Grades

Sets of jobs having similar worth or content, grouped together to establish rates of pay. May not match market rate.

Benefits' Costs: Approaches to saving money

Shift from traditional health insurance to PPOs and CDHPs Shift more of the cost to employees Exclude or limit coverage for certain types of claims Learn which providers and treatments deliver the best value

Team Awards

Similar to group bonuses Likely to use a broad range of performance measures Cost savings Completion of project Meeting deadlines

Long Term Incentives

Stock options Stock purchase plans Rationale is that executives will want what is best for organization because that will cause the stock value to grow

Pay Level

The average amount (including wages, salaries, and bonuses) the organization pays for a particular job.

Minimum Wage

The lowest amount that employers may pay under federal or state law, stated as an amount of pay per hour.

Experience Rating

The number of employees a company has laid off in the past and the cost of providing them with unemployment benefits.

Pay Structure

The pay policy resulting from job structure and pay level decisions.

Job Structure

The relative pay for different jobs within the organization.

Unemployment Insurance continued

To receive benefits, workers must meet four conditions: Can demonstrate they were employed Available for work Actively seeking work Were not discharged for cause, did not quit voluntarily, and are not out of work because of a labor dispute

Family and medical leave

Up to 12 weeks of unpaid leave for childbirth, adoption, or serious illness

Group Bonuses

Used in smaller work groups Reward members of group for attaining a specific goal Usually measured in terms of physical output

Prevailing wages: Walsh Healy act

Walsh-Healy covers all government contractors receiving $10,000 or more in federal funds.

balanced scorecard

a combination of performance measures directed toward the company's long- and short-term goals and used as the basis for awarding incentive pay. Financial Customer Internal Learning and growth

Cafeteria-style plan

employees can choose the types and amounts of benefits they want from a set of alternatives

Qualified plans

more favorable tax treatment of benefits Employees may immediately take tax deduction contributions No immediate tax on employee for amount employer contributes Tax-free earnings on money in retirement fund