PHR: Module 4: Total Rewards

Traditional IRAs

income put aside for the account is not taxed at the outset, but the funds are taxed when money is withdrawn, and an additional 10 percent tax penalty is applied if contributors withdraw funds before they are eligible - Workers are allowed to invest $6,000 in an IRA if under 50 and $7,000 if over 50. -Funds can be withdrawn when contributor turns 59.5 unless funds are being used related to higher education or purchase of first home

Group Model HMO

involve physician groups entering into contracts to provide services to HMO members. Physicians are typically paid based on the number of subscribers.

Simplified Employee Pension Plan (SEP)

involves employers setting aside money in retirement accounts for employee Employees do not contribute to these funds and are completely vested, so they can leave the company with the allocated funds at any time. Employers may not put more than 25 percent or $57,000 (whichever is less) of the employee's income into this - all employees must receive the same contribution

Golden Parachute

is a benefit offered to some executives as part of their compensation package. This benefit provides significant compensation to executives who are terminated, particularly when they are terminated because of a change in the company's structure - attract top executives who may otherwise be hesitant to come aboard - stock options, medical coverage, severance pay, or bonuses

Medicare Part C

is also known as Medicare Advantage and is an alternative to Parts A and B It involves receiving services from HMOs and PPOs that are Medicare-approved Individuals who are eligible for Part A and Part B are also eligible for the Advantage Plan, which can provide support for additional services like dental, vision, hearing, and prescription coverage. Participants must enroll during the open enrollment period.

Halsey Premium Plan

is an approach to compensation that rewards efficiency. It calls for paying employees an hourly wage as well as some predetermined percentage of their hourly rate (the premium) for any time they save relative to their past performance.

Shift Pay

is common in manufacturing industries, where it is used to compensate workers who work on less desirable shifts.

Broadbanding

is one approach to pay structure that involves creating a limited number of pay levels that are broadly defined. all jobs fall into one of these limited pay levels it creates a sense of fairness as it relates to compensation, limiting perceptions that some employees earn more for comparable work.

IRS 20 factor test

is used to determine whether someone paid to complete work for an organization is a proper employee or an independent contractor. Independent contractors have more behavioral and financial control over their work, as well as the ability to work with or for other organizations.

Job Pricing

Assigning a value to a particular position he amount someone is paid for a particular job in an organization is likely connected to the pay people receive in other positions both within and outside of the company. Generally, job types are assigned a pay range, allowing for some flexibility to determine a particular salary based on applicant skills, education, and experience, and the specific tasks done in that position.

Differential Pay

Extra pay, also known as premium pay, given to a worker to compensate for the danger, inconvenience, or added cost of a specific job or assignment - not required by federal law

Pay Equity

People with similar skills, tenure*, and work records should expect to earn the same amount of money in the same organization. As a rule of thumb for HR professionals: if two people working for the same company earn different rates of pay, the difference should have a logical and defensible explanation beyond, "That's the way it has always been."

Flextime

Plans in which employees usually must work 40 hours per week and typically 5 days a week but in which they have control over starting and ending times for each work day. This is increasing in trend

Different stages of companies and the ways they should compensate:

Start-up: Higher salary, low bonuses, low benefits Growth: Low salary, high bonuses, competitive benefits Maturity: Competitive salary, competitive bonuses, competitive benefits Decline: Moderate salary, moderate bonuses, moderate benefits

Total Rewards

The sum of all compensation and benefits paid to an employee including pay; benefits; incentives; and nonmonetary compensation such as professional development, career opportunities, flextime, telecommuting, personal stratification monetary and nonmonetary.

Prevailing wage

The usual wage, benefits and overtime that are paid in the largest city in each county to the majority of workers on a public works project

Imputed Income

The value of a service or benefit received by the employee that must be treated as income for taxes and reporting earnings to the Internal Revenue Service. I.e., group life insurance over $50,000

Compa-ratio

is a formula that allows for an employer to determine how close an employee's pay is to pay at the middle of an organization's pay range calculated by dividing the employee's base salary by the midpoint salary of the organizations pay range. Imagine an employee earns $50,000 a year at an organization where salaries range between $30,000 a year and $65,000 a year. The midpoint of that salary range is $30,000 + $65,000 a year divided by 2, or $47,500. The ratio is then $50,000 / $47,500, or 1.05%.

Skill Pay

is a way of rewarding employees who acquire new skills.

What is a voluntary payroll deduction paid by members of a labor union?

Union dues

Incentive Pay

Used to motivate achievement of specific goals. -Cash bonuses, stock shares, and stock options, etc.

What does FLSA not regulate?

Vacation, holiday, severance, or sick pay Meal or rest periods, holidays off, or vacations Premium pay for weekend or holiday work Pay raises or fringe benefits Procedures for discharging an employee, or immediate payment of final wages to terminated employees

Base Rate

Wages or salary before overtime pay, bonuses or other incentive pay

Flat-dollar retirement plan approach

a particular dollar amount is paid for each year of an employee's service. Often this dollar amount is determined during collective bargaining and is used to support hourly employees.

defined-contribution pension plan

a retirement plan, such as a 401K through which money is saved for retirement through investments controlled by the employee. -transfer risk to the employee

Defined-benefit plan

a traditional pension plan, funded and controlled by an employer -based on years of service and earning level - risks to these plans - cost more for employers

Portal to Portal Act

aims to specify the compensable time for which employers are accountable. The Act determines that commute time is not compensable, but that employers must compensate workers for performing job-related tasks outside of work hours or during lunch breaks.

Section 125 FSA

allow employees to set money aside pre-tax for certain expenses, including healthcare deductibles, child and elder care expenses, prescriptions, and other health services

Health Reimbursement Arrangement (HRA)

allow employers to reimburse employees for medical expenses. There are no limits to the amount employers are allowed to set aside for these arrangements, nor are there limits on distributions to employees - must be used in comprehensive insurance plans -money set aside by employers is untaxed and taxes are not withheld from employees distributions

White-collar exemptions- FLSA exempt

apply to employees whose duties are considered administrative, executive, or professional; the latter category includes doctors, lawyers, and teachers, among others

Qualified Domestic Relations Order (QDRO)

are legal orders that enforce these alternative payee arrangements for pension funds. Only spouses, former spouses, children, or dependents of an employee may be alternative payees for the employee's pension plan.

Roth IRAs

are made after taxes have been paid, and therefore when those funds are withdrawn, they are not subject to federal income tax. - can withdraw funds when they are 59.5 or become disabled.

Health Plan Purchasing Cooperatives (HPCS)

can help reduce the costs of healthcare. They involve cooperative contracts with insurance providers. Large cooperatives can leverage the volume of business for discounted rates.

Medicare Part B

covers medical insurance, which involves expenses related to things like doctors' visits, outpatient care, preventative services, screenings, surgical fees, and physical and occupational therapy -Not mandatory, and most participants will be required to pay a fee to participant in it.

Geographic Pay

differentials to account for economic differences between different locations.

Profit Sharing

encourages employees to contribute to the company's performance because employees are paid a portion of the company's profits. It can also help improve relationships between managers and production workers.

Omnibus Budget Reconciliation Act 1993

established that executives may not deduct more than $1,000,000 annually.

On-call Pay

if an employee's activities are restricted while on call (if, for example, a medical intern is required to remain on-call at a hospital in case a patient arrives) then that employers should receive on-call pay* for his or her time.

Stock Shares

if not cashed immediately, can be riskier than a cash payment, as their price is subject to market fluctuations.

How to know if your salary ranges are competitive?

- Ask around - Take a formal survey - Take advantage of industry associations - work with third-party vendors

Medicare Part A

- Hospital insurance - This part provides coverage for inpatient hospital care, hospice and some home health services, and inpatient care in many nursing facilities -is mandatory and, in most cases, does not require participants to pay a premium fee for coverage

Characteristics of Independent Contractors

- Pay all of their own Social Security taxes - Employers are not legally required to withhold federal and state taxes for them - Not required to pay overtime or on call pay

Mandatory Payroll Deductions

- Social Security - Medicare - State and Federal Income Taxes The amounts withheld and submitted on the employee's behalf are reported on W-2 forms at the end of each year. Other: - Court orders - Tax Levies - Wage garnishments

Cash Balance Plan

- When an organization promises to provide an employee with an established amount of money at retirement -typically deposits are made into these plans annually- add up to the appropriate amount at the time of retirement. - less costly then defined-benefit plans - easy to transfer to one work place to another

When are you eligible for Medicare?

- You are 65 or older - You have end-stage renal disease (meaning you are on dialysis or need a kidney transplant) - You have been collecting Social Security Disability Insurance for more than two years.

Non-qualified retirement plans

-Don't receive the same tax benefits - Usually don't extend this to all employees and certain employees may receive benefits that other do not.

Medicare D

-prescription drug costs It is an optional benefit, and participants must pay a monthly fee - one must be eligible for Part A and Par B to be enrolled

Farm jobs child labor

16+ may work at any farm job, hazardous or not for unlimited hours 14 and 15 may work at nonhazardous job outside of school hours 12 and 13 may work at nonhazardous farm job outside of school hours with parents written consent or on same farm as parents under 12: May perform job on farms with parents written consent, outside of school hours on farms not covered by minimum wage requirements. May be employed by their parents in any occupation on a farmed owned or operated by parents

Nonagricultural jobs child labor

18+ may work at any job hazardous or not 16 and 17 may work at any nonhazardous job 14 and 15 - may work limited number of nonhazardous jobs for a limited period each week outside of school hours Under 14: only exceptions include newspaper delivery, acting in radio, television movies or live theater, working for their parents foamily-owned non-hazardous business

ERISA rule for longest vesting period

7 years must be 100% vested 20% vested by three years

Fair Labor Standards Act (FLSA)

Federal law that established minimum wage, maximum weekly hours and overtime pay requirements and prohibited the labor of children less than 16 years of age "Wage and Hour Act"

Benefits

Focuses on improving employees' economic security and their work-life balance to enhance their participation in the workplace. There are several benefits, including employee benefits, family-friendly benefits, employee assistance programs, etc.

Preferred Provider Organization (PPOs)

Healthcare plan that allows participants a greater choice of providers but a higher cost for those found outside of network.

Actual Deferral Percentage Test

IRS mandates this to ensure highly compensated employees don't benefit unduly from 401k plans at the expense of other employees. -HCE earn $130,000 or more a year., own 5% of company of 20% top paid employees If they find that highly compensated employees benefit from a plan more than non-highly compensated employees, then the organization must make adjustments or lose the tax benefits associated with the plan.

Call-back pay

If they are called back to work after their regular hours, as in the case of a workplace emergency. - double time or triple time

Individual Practice Association - HMO

this model involves groups of physicians in private practice who service HMO subscribers -However, in this case, the physicians are typically seeing far more patients who are not subscribers than those who are. These non-HMO patients help cover the cost of the fees that are lost when treating HMO patients

Job Evaluation

to categorize all jobs at a company according to the level of responsibility and required skills. The evaluation also considers the amount of supervision required for the job and the amount of supervision that the employee has over other workers.

Old Age, Survivors, and Disability Insurance Program

was established as part of the Social Security Act in 1935. This program offers benefits to employees who retire or become unable to work. To support the program, employees pay a percentage of their income to the federal government, and employers match those contributions. Employees may earn up to 4 credits a year for their contributions, and employees who have earned at least 40 credits are eligible to retire and collect a percentage of their income from Social Security. An eligible employee's surviving dependents may also collect these funds if the employee dies

Federal-State Unemployment Insurance Program

was established in 1935 as an extension of the Social Security Act. This program provides benefits to employees who have lost their employment for certain reasons. Employees may collect a percentage of their previous income in the form of unemployment for a limited amount of time after employment ends. - Usually can't collect this if terminated at fault -Employers pay state unemployment insurance tax to support this

Walsh-Healy Public Contracts Act

was passed in 1936 and was intended to protect employees working under government contracts from working for substandard wages It required organizations receiving government contracts greater than $10,000 to pay employees a wage that matches wages in the local area (i.e., the prevailing wage he Act also states that employees are entitled to overtime pay at a rate of 1.5 times their regular wage for every hour of work after 8 hours in a day or 40 hours in a week. Furthermore, it prohibits hiring children under 18 and people who have been convicted of a crime The Act requires that workplaces meet safety and sanitation standard

Retirement Equity Act

was passed in 1984. It reduced the existing age limits restricting participation in pension plans. Furthermore, the Act provided more protections for survivors of employees entitled to pensions, requiring that written approval be received from a spouse rejecting survivor benefits, and restricting conditions that could be placed on survivor plans

How much does an hourly person have to make if they want to be considered exempt?

$100,000 a year

How much do you have to be paid a week to be considered exempt?

$455 per week at least $23,600

FMLA

- 12 weeks of unpaid time - childbirth, adopt a child, take care of child, parent or spouse, take care of you - return to same or comparable job when back - have to work at least one year or 1250 hours- does not count, vacation, pto, etc. - can't be among the top 10% of the company Doesn't apply to employers with 50 employees of less -Health benefits must covered during time as usual -could be required to pay a bonus if everyone else got one when they were on leave. - can request 30 days notice of leave -may also request that all paid time be used before unpaid leave begins

Flexible benefits package

A benefits plan that allows employees to select from a pool of choices, including health coverage, retirement contributions, cash, vacation time, etc. Cafeteria Plans 125 Plans attempts to reduce the cost of benefits provides employees with certain sum of money allocated to their benefits plan and employee chooses where to spend it

Health Maintenance Organizations (HMOs)

A health plan that requires participants to receive all their healthcare from a defined group of providers. HMO and PPO

Managed Care

A system designed to control healthcare costs by restricting patient's access to certain doctors and hospitals, limiting treatment options, and using a management company to hold down costs. options vary in whether they prioritize saving money for employees or giving employees the freedom to determine where and when they receive medical procedures.

Compressed workweek

Arrangement in which the employee works the required number of hours (typically 40) but does so in a fewer than 5 days. I.e. 4 10-hour shifts

Commissions

A. capped as a percentage of salary (i.e. 20% of salary cap) B. As a percentage of sales (i.e. $500,000 in sales and 3% commission) C. Team commission: individual plus team

Reporting Pay

An hourly employee who reports to work but is not given a full day's work—or perhaps does not work at all— is eligible for this in some states. Employees who have reported to work are entitled to receive some minimum compensation for showing up. -Not required under FLSA- either states do mandate it

Federal Insurance Contribution Act of 1935 (FICA)

Employers are legally required to provide Social Security to their employees. protect employees and their dependents by providing retirement benefits, disability income, Medicare, and survivor benefits

Internal Equity

Ensuring that the pay levels within an organization correspond to the level of responsibility and skills required for the job.

Sticky pay scales

Describe company pay scales that don't change quickly

Stock Options- ESOPs

Employee stock Option Plan are a form of deferred payment that can be traded for shares of the company's stock at some point in the future. However, they provide employees with motivation and a stake in the company's long-term performance.

Co-pay

Is the amount a patient must pay for a medical visit or prescription, in addition to whatever the insurer pays. -these can be used to cut cost for employees because employers will pay less for premiums

Aging Factor

Is the average percent increase in salaries per year multiplied by the number of years since the data was collected. You can use this in older surveys

Mental Health Parity Act

Requires that insurers provide the same limits for mental health services for employees that they provide for other medical benefits. This provision came in response to insurers previously placing stricter restrictions on mental healthcare as compared to other types of healthcare. This act does not, however, require that insurers offer mental health benefits, nor does it prohibit other kinds of restrictions.

Overtime- FLSA

The FLSA requires that nonexempt employees be paid at least 1.5 times their regular rates of pay after 40 hours of work in a workweek. It does not limit the number of hours that employees aged 16 and older may work in any workweek Also, it does not require overtime pay for work on Saturdays, Sundays, holidays, or regular days of rest, unless overtime is worked on such days.

External Equity

The comparison of pay levels of a company to other companies to ensure that the levels are comparable

General criteria to be considered exempt from FSLA

The employee must earn more than $455 per week The employee must be salaried—that is, not paid on an hourly basis The employee must perform certain exempt duties as part of his or her job

Identifying Independent Contractors

The permanency of the relationship with the individual The importance of the task performed by the individual The control the organization needs to have over the individual How invested the individual is in the tools and equipment needed to perform the work Whether the individual or the organization makes the primary decisions about competition in the marketplace Whether the individual operates independently from the organization Whether the individual assumes any risk of loss or profit

Final pay retirement plan approach

This approach bases benefits on the employee's average annual earnings during a specified time at the end of their career

Career Average retirement plan approach

This plan uses information spanning the length of the employee's career to determine the amount distributed at the time of retirement. Multiple ways: employees earn a percentage of the pay they received during each year they were participants in the plan. employee benefits are computed by taking an average of yearly earnings. The total benefit is a percentage of that average pay multiplied by years of service.

What is the main objective of a compensation program?

To retain employees and motivate them To offer fair reward for their achievements To create incentives for future efforts

Hazard Pay

Workers who are assigned to work in a dangerous place—in a war zone, for instance—or in a dangerous circumstance (such as handling explosives or hazardous waste) are often given this - hazard rate usually given as

Wage Compression

occurs when there are small differences in pay regardless of experience, skills, level, or seniority. This can lead to new employees having similar or even higher salaries than employees who have spent years with the company, which can cause workplace disputes and productivity losses Should be avoided because it raises questions about the fairness of an organization's compensation strategy, which may lead to staffing and performance problems. Employees who perceive that they are not being compensated fairly may become unmotivated and less productive.

Merit Pay

pay based on exceeding objectives or performance standards connects pay to performance

Economic Growth and Tax Relief Reconciliation Act (EGTRRA)

permits employees over the age of 50 to make greater contributions to 401(k) plans and to make catch-up contributions.

Fee-for-service plans

place no restrictions on the doctors and hospitals a patient may use for services. must pay for health services out of pocket and then submit claims to be reimbursed for those expenses. These plans are typically more expensive for both employers and employees than alternative plans

Point of Service (POS)

plans are similar to PPOs Doctors control the costs of the plan by making referrals to specialists when a patient needs additional care. Patients are expected to get such referrals from their physicians in all non-emergency cases.

Flexible work hours plan

plans in which employees usually must still work 40 hours per week and typically 5 days a week but in which they have control over the starting and ending times for work on each day.

Older Worker Benefit Protection Act

prohibits employers from discriminating against older employees when it comes to benefit plans. Employers are not permitted to exclude older workers from participating in or continuing to participate in benefit plans. Older workers exceeding an established age may only be excluded if employers can show that it results in a significant reduction in costs. Older workers may also choose to waive their rights regarding age discrimination claims, for example as part of a severance agreement or an early retirement agreement. In the case of an individual lay-off, older workers must be given at least 21 days to consider the agreement. In the case of a group lay-off, an employee is given 45 days to consider the agreement.

Consumer Credit Protection Act (CCPA)

prohibits employers from terminating employees whose wages are garnished for a single debt and limits the amount that can be withheld during a pay period.

Pension Protection Act 2006

protects employees when they are entitled to pension plans, but those plans do not have the funds necessary to provide the promised benefits. The Act requires employers to make additional contributions to pension plans that are determined to be underfunded. Employers who do not comply with the Act face steep tax penalties that started in 2015. the Act requires that employers who offer stock options as a benefit must provide at least three additional options from which employees may choose. Is that employers are permitted to enroll employees in 401(k) plans automatically, which means employees who don't want to participate in such plans must now opt out of them.

Summary Plan Descriptions

provide important information about healthcare plans, including provisions, rules, and policies that are part of the plan, as well as who is eligible for the plan and the conditions for disqualification or ineligibility -identifies plan sponsors, admins, and trustees -must contain any relevant collective bargaining agreement information

Qualified Retirement Plans

provide tax benefits for both employees and employers and meet guidelines outlined by the Employee Retirement Income Security Act (ERISA). must be available to all employees in an organization, and additional benefits cannot be offered to shareholders, executives, supervisors, or highly compensated employees.

Consumer Credit Protection Act

provides certain protections for employees whose wages are garnished. Employers are not allowed to terminate employees who have their wages garnished for a single debt, and limits are placed on how much may be garnished in any particular week.

FLSA Record Keeping Requirements

requires employers to keep records of wages paid, hours worked, and other relevant data for each nonexempt employee For employees who are subject to the minimum wage and/or overtime provisions, the following records must be retained for at least three years: Personal information, including employee's name, home address, Social Security number, occupation, gender, and birth date if under 19 years of age Hour and day when the workweek begins Total hours worked each workday and each workweek Total daily or weekly straight-time earnings Regular hourly pay rate for any week when overtime is worked Total overtime pay for the workweek Deductions from or additions to wages Total wages paid each pay period Date of payment and pay period covered

Group Incentive Pay

rewards groups for exceeding a goal as a team. Such a pay system makes a portion of middle-managers' compensation "at risk," dependent on the achievement of specified goals.

Uniformed Services Employment and Reemployment Rights Act (USERRA)

was passed in 1994 to protect individuals who serve in the military. In particular, it protects those who serve from losing their jobs or being denied employment because they are in the military, because they are about to join the military, and because they have taken a leave of absence to serve in the military (including both voluntary and involuntary service like active duty, training, boot camp, reserve duty, National Guard mobilizations, and fitness-for-duty examinations). Furthermore, it protects those who serve in the military from being denied benefits or promotions because of their military statuses - all covered is past, present and future - employers are not required to pay employees who are leave for service - must give the same benefits as other employees in organization who might take a leave of absence. employers should instate employees in positions at the organization that reflect their likely positions had they not taken leave. In some cases, this might mean the employee is promoted upon returning to work. Employees may not be discharged without cause within six months of returning from a leave of 30-180 days, or within one year for leaves of 181 days or more.

Davis-Bacon Act 1931

was the first federal legislation to mandate that laborers and mechanics be paid the prevailing wage* on public works projects. In particular, it was intended to protect employees in the construction industry, by preventing employers from hiring out-of-town or out-of-state workers, and paying them less than they would have to pay local workers.