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Reward Level Strategy

'How much is being offered?' Answering this question is the goal of the Reward Level Strategy. In formulating Reward Level Strategy, organizations must define what Level of each reward will be offered.

Green Circle Rates

Employees whose pay is below the range for their job.

Employer Mandate

A Mandate which states that organizations with 50 or more employees are required to either offer health insurance to their employees or pay an additional tax for not having done so.

Leading the Market

A Rewards Strategy in which the firm is trying to provide more of a given reward than its competitors for those employees.

Matching the Market

A Rewards Strategy of providing an amount of the reward equal to the market average.

Paid Time Off Bank

A bank of hours in various forms of paid leave, from which the employee can draw time from for any purpose.

Vacation Time Off

A break from work, with no constraints on how the employee wants to use the time.

Safety and Security Needs

A desire for security, stability, dependency, protection, freedom from fear and anxiety, and a need for structure, order, and law.

Strategy Shift

A gradual shift towards being involved in businesses with a more value-driven purpose as organizations systematically define their activities in light of their values.

Scatterplot

A graphic tool used to display the relationship between two quantitative variables, using an X and Y axis.

Job Family

A grouping of jobs that have similar functions or content.

Sunset Clause

A law or regulation that ceases to have effect, after a specific date is reached.

Reference ID

A letter and/or numeric code used to reference each job within an organization.

The Occupational Outlook Handbook (OOH)

An additional resource provided by the Bureau of Labor Statistics (BLS).

Cost-sharing

An approach in which the insurance only pays for a portion of medical expenses.

Cost of Living Adjustment (COLA)

A periodic salary or wage increase to compensate for inflation.

Communication Strategy

A plan for creating, sharing, and receiving information relating to its Total Rewards Systems.

Defined Benefit

A plan in which an organization uses a time-based formula to calculate how much pension an employee has earned, and upon retirement the organization pays the employee a guaranteed amount per year throughout retirement.

Exclusive Provider Organization (EPO) Plan

A plan in which any expenses an employee incurs outside of the network are not reimbursed.

Preferred Provider Organization (PPO) Plan

A plan in which the organization or health benefits provider establishes a network of health services providers with whom they have negotiated cost-saving terms in exchange for inclusion in the network.

Point-of-Service Organization (POS)

A plan similar to the PPO with the exception that the plan specifies a medical services point of contact for employees.

Indemnity Plans

A plan that allows employees to go to any physician and create costs for the organization only when health services are utilized.

Premium Sharing Policies

A policy in which the employer does not pay the full premium for the health insurance.

Co-pay Policy

A policy that requires employees to pay a set amount for each time any service is used.

Long-term Disability Policy

A policy that will replace a portion of an employee's salary if injuries prevent them from returning to work for a longer period of time, up to 3 months.

Short-term Disability Policy

A policy that will replace a portion of an employee's salary if injuries prevent them from returning to work for a relatively short period of time (e.g., three weeks).

Unemployment Insurance

A program in which organizations pay an unemployment tax at a rate that is partially determined by the organization's history of employment practices that contribute to unemployment (such as layoffs).

Negative Location Externality

A punishment or nuisance that an employee experiences by virtue of living in a particular location.

Compa-ratio

A ratio frequently used to measure the conformity of pay rates to the pay plan.

Positive Location Externality

A reward or benefit, not paid for by the organization, that the employee experiences by virtue of living at a particular location.

Benchmark Competitors

A selection of primary organizations that exemplify the labor and product/service markets in which the organization competes.

Custom Questionnaires

A series of questions that job incumbents complete on their own.

Risk and Uncertainty

A situation in which unforeseen or uncontrollable circumstances result in changes in profitability.

Pilot Program

A small-scale preliminary experiment that allows the organization to better understand the design parameters, how the program is received, and the impact of the program on work outcomes.

Employee Benefit Preference Survey

A survey used to ask employees directly about their benefit preferences.

Differential Piece Rate

A system in which a lower rate is paid for the first 10 units assembled, and then a higher rate is paid for each unit over 10 assembled.

Shadow Ranges

A system of smaller ranges within the pay ranges, applied to specific job families to provide guidance on appropriate compensation levels.

Piece Rate

A system that rewards employees with a fixed amount of compensation for each unit of work they produce.

Tournament Theory

A theory which states that people are highly motivated to receive extremely valuable rewards, even when the probability of receiving the reward is quite small.

Benefit Benchmark Survey

A tool that helps organizations better understand how employee benefits may impact their ability to attract and retain qualified employees.

Job Description

A written document that serves as the primary source of information about a job. It should be detailed enough that the day-to-day activities are referenced and should include a statement such as "other duties as assigned."

Person-organization Fit

Achieved in several ways, including recruiting and selecting employees based upon fit as well as technical skills, having a recruiting image that signals the values of the firm, socializing employees through training and rituals to understand the values of the firm, and aligning all elements of the rewards system to be consistent with the organizational values.

Reward Surveys

Aggregations of reward information gathered from other market organizations.

Total Rewards

All forms of pay and compensation, tangible benefits, and other intangible rewards that an organization provides

Hours Worked

All hours that an employee is permitted to work, plus time when the employee is required to be on the employer's premises, on duty, or at a designated work station.

Merit Pay Matrix

Allows organizations to simultaneously reward past performance but also support its Integrated Reward Structure.

Employee Retirement Income Security Act (ERISA)

An Act that regulates retirement plans offered by organizations.

Fair Labor Standards Act (FLSA)

An Act that requires organizations to determine the "employee status" of each job.

Consolidated Omnibus Budget Reconciliation Act (COBRA)

An Act which established that employees have a right to continue their employer-sponsored health care plan, at the employees' expense, for up to 18 months.

Health Insurance Portability and Accountability Act (HIPAA)

An Act which restricts the use of preexisting condition clauses from being used to deny new employees coverage for a particular medical condition that was previously covered under an insurance policy.

Family and Medical Leave Act (FMLA)

An Act which specifies that employees are entitled to up to 12 weeks of time off to recuperate from medical conditions or to handle qualified family needs such as the birth of a child or to care for an elderly relation.

Patient Protection and Affordable Care Act (ACA)

An Act whose objectives are to reduce the cost of health insurance and expand its coverage to all Americans.

Merit Pay

An annual increase in future compensation based on past performance.

Weighted Mean

An average that takes into account the proportional relevance of each component.

Reliable Measurement

An employee's level of skill, competency, or experience can be assessed consistently across employees and raters.

Health Maintenance Organization (HMO)

An organization that creates a more restricted network than the PPO and creates pre-paid services contracts with those health services providers.

Job Structure

An organized listing of the business's jobs that functionally groups and hierarchically arranges the jobs for rewards purposes.

Salary Level Test

Any employee paid less than $35,568 per year (or $684 per week) is nonexempt and covered by the FLSA.

Salary Basis Test

Any employee whose pay is reduced based on the hours worked is non-exempt.

Team-based Bonuses

Are like Individual-based bonuses in that they provide a lump sum reward that does not get added into future base pay, but the bonus is based on some measure of team performance instead of individual performance. That is, in order for an employee to receive a team-based bonus, it is not sufficient for the employee to perform well; the employee also has to ensure that the team collectively performs well.

Expectancy Perception

Asks, "Can I perform at the level required for the reward"? Which grows out of employees' perceptions of the clarity of performance expectations and of their own abilities

Valence Perception

Asks, "Do I value the reward?" Employees use their personal value systems and circumstances to evaluate the extent to which the rewards being offered are rewarding to them.

Instrumentality Perception

Asks, "If I perform, will I receive the reward"? It focuses on the contingency between employee actions and the reward.

SWOT Analysis

Assessing an organization's internal strengths and weaknesses and external opportunities and threats

Job-based Approach

Assumes that organizations provide rewards based upon the job that a person holds.

Individual-based Approach

Assumes that rewards should be based upon the characteristics of the person holding a job.

Performance-based Approach

Assumes that rewards should be based upon the performance or results produced by an employee.

Equity Theory

Based on comparisons between the ratio of employees' inputs and rewards to the ratio of inputs and rewards of others.

Ethical Challenge

Can also exist in establishing market rates. For example, if a manager has an informal conversation about pay rates with a colleague at another organization and then uses this information to keep pay rates artificially low, is this ethical? Said another way, where does a "market survey" end and where does "price fixing" begin? These ethical issues illustrate the importance of having clear and transparent systems for establishing market rates and job matches to minimize the opportunity for biases to enter into the system.

Organizational Performance

Can include effectiveness at meeting customer needs, new product creation, and gains in market share, profits, and other measures of financial return on the firm's assets.

Critical Success Factors

Capabilities, activities, customer perceptions, and market positions that allow an organization to outcompete its rivals

Spot Awards

Cash bonuses given out based on weekly or daily behavior, to recognize extra effort.

Transparency

Clear information on the who, what, when, and why of the reward system is available to all.

Commission-based

Commission-based reward systems are most often used for jobs with a sales component and provide employees a set percentage of the sales that they make. They are used to provide a strong incentive to create sales and also to maximize the size of those sales. In a pure Commission system, the full risk of low performance is borne by the employees. For this reason many organizations pair a commission-based system with some other form of base pay (such as salary) to more evenly distribute that risk.

On-call Pay

Compensates employees for being available to work based on short notice from the organization.

Observe and Interview Incumbents

Conduct more in-depth interviews with job incumbents to ascertain the tasks, duties, and responsibilities. Care should be taken to interview multiple incumbents of varying experience with a common set of structured questions.

Competencies

Configurations of knowledge, skills, and traits that enable employee performance.

Geographic Pay

Connects to the total reward philosophy and global compensation by providing employees a high pay rate for taking assignments in less desirable or inconvenient locations.

Transformational Leadership

Creates a sense of purpose in the minds of employees, motivating them to transcend self-interest in order to accomplish the goals of the organization. Through their directions, stories, actions, and systems, Transformational Leaders inspire employees in such a way that employees see the connection between their values and the purpose of the organization. Through this leadership approach, therefore, employees can receive greater intangible rewards from their membership in the organization.

Sick Days

Days that an employee is paid even though they do not attend work, with the expectation that an employee is actually unwell when the days are used.

Personal Days

Days which the employee is free to not come into work, even if they are not sick.

Decentralized Approach

Decisions can be made by the employee's immediate supervisor or manager.

Intangible Rewards

Defined as psychological, social, and contextual factors in organizations outside the traditional pay and employee benefits categories that are rewarding to employees.

Child Labor

Defines the type of work appropriate for children and the ages at which children can work.

Reinforcement Theory

Derived by behavioral scientist B.F. Skinner and others, is built on the assumption that behavior is a function of its consequences.

Central Tendency

Describes what's typical for a set of data, usually measured by the arithmetic mean, median, or mode.

Job Descriptions

Descriptions that detail the work done in the organization.

Profit Sharing

Designed to distribute a portion of the firm's annual profits back to the firm's employees. The goal of these systems is to align both the incentives for employees and the variable labor costs with the interests of the organization.

Static

Didn't change much over time.

Red Circle Rates

Employees whose pay is above the range for their job.

Flexible Spending Accounts

Employee accounts used to set aside pre-tax funds from their wages that can then be drawn upon to receive reimbursement for health related expenses.

Linear Careers

Employees can expect to spend the duration of their careers with a single organization.

Networked Careers

Employees change jobs frequently, sometimes changing functions and industries to bring unique perspectives and competencies to their new roles.

Voice

Employees should be given input into the decision.

Non-exempt Employees

Employees who are covered by the minimum wage and overtime pay provisions of the FLSA.

Exempt Employees

Employees who are exempt from the overtime requirements of the Fair Labor Standards Act, such as outside salespeople and executives who have administrative or managerial responsibilities.

Shift Differential Pay

Employees working the evening or night shift receive a high pay rate.

Hybrid Strategy

Employing a combination of cost-leadership, differentiation, and niche-focused business strategies

Social Security

Enacted in 1935, it is a program that provides a retirement safety net for retiring employees who are of approved retirement age and have worked for a specified number of years.

Broadbanding

Entails the use of a few broad bands (or grades) to organize work for pay purposes.

Job-Specific Reward Level Strategy

Establishing different Reward Level Strategies for different job families or hierarchical levels.

Bad Data Challenge

Exists because the data a company obtains about market rates may not be an accurate representation of the market. It is often difficult to fully understand the quality of the data obtained from various sources, or how best to integrate this information, which adds error to any reward system based on that data.

Data

Facts and statistics collected for reasoning or calculation.

Fair Labor Standards Act (FLSA) of 1938

Federal law that requires employers to determine the "employee status" of each job so that certain protections (minimum wage, overtime pay, and child labor) can be provided to non-exempt employees.

National Culture

Finally, differences in National Culture should be considered when rewards systems are designed because employees from diverse cultures may have very different definitions of what is rewarding.

Individual Bonus

First, it is a monetary reward given to a single employee based upon that employee's performance. It is an individual-level reward. Second, bonuses do not accumulate into base pay. That is, receiving a year-end bonus one year does not affect the employees' wages or salary for the next year.

Flexible Benefit Plans

Flexible benefit plans provide employees options in which benefits they receive.

Scanlon Plans

Focus on improvements in labor costs.

Procedural Justice

Focuses on the process by which the reward distribution was determined.

Cost Leadership Strategy

Focusing business priorities on providing a lower-cost product or service

Eligibility

Generally speaking, the eligibility should be restricted to ensure that the number of employees certifying (and therefore being paid at the higher rate) is in line with current and future needs for that capability.

Autonomy

Giving employees discretion in choosing what to do and how to do it.

Outcomes

Goals or the criteria by which a rewards system can be judged

Merit Increase Grids

Guidelines provided by the HR department recommending appropriate pay increases for different performance levels.

Rucker Plans

Have a broader base of metrics.

Broad Input

Help, advice and thoughts from employees of all levels of the organization.

Portal-to-Portal Act

Helped to define some of the rules for the FLSA.

Primary Duties Test

If an employee has significant discretion and exercises independent judgment, that employee is classified as exempt from FLSA provisions. The tests of duties are broken into exemption criteria for Executives, Learned Professionals, Creative Professionals, Administrative, Computer, Outside Sales, and High Compensated.

Job Performance Model

Is a depiction that defines performance and outlines its causes.

Correcting Mechanism

In place to fix any mistake made by the system.

Performance Management System

Involves creating performance plans, providing support and resources, appraising performance, and providing feedback and coaching.

Gain Sharing

Is a system of establishing a baseline of unit-level results and sharing improvements above that baseline with employees in that unit.

Compensable Factor

Job elements or criteria that identify what the organization values for purposes of job evaluation. Idenifying compensable factors is step one in the Point factor Approach.

Benchmark Jobs

Jobs that are representative of the type, content, and level of jobs in the organization.

Feedback

Knowledge of the results of the employee's work.

Workers' Compensation

Laws that require employers to make provisions for employees who are injured at work.

Hybrid Approach

Leading the market on certain forms of rewards while matching or lagging the market on other forms.

Weaknesses

Limitations a firm faces when seeking to deliver value to customers.

Highly Compensated

Making more than $107,432 per year.

Outside Sales

Making outside sales away from the employer's place of business.

Motivational Judgement

Managers need to understand the importance of Motivational Judgement because different views of motivation might be useful at different times. In some ways, these views are compatible. For example, reinforcement and expectancy theory would both recommend that contingencies in pay be made very clear. In other ways, the theories have some points of conflict. For example, Intrinsic Motivation would suggest that the clear contingencies in pay serve to undermine employees' intrinsic reasons for working.

Cash Compensation

Monetary pay that employees receive in exchange for their work

Panel Interviews

Multiple job incumbents (and sometimes multiple job analysts) all meet together to analyze the job.

Physiological Needs

Needs that must be satisfied for the person to survive, including food, water, oxygen, sleep, sex, and sensory satisfaction.

Pay Compression

New employees and long-tenured employees are paid very similar amounts.

Pay Inversion

New employees are paid more than those employees with substantial experience in the organization.

Interactional Justice

Refers to perceptions of the extent to which the employee was treated with due respect.

Reward-level Strategy

Refers to the extent to which a company will pay above, at, or below the market average.

Motivational Preferences

Not all employees are motivated by the same rewards and systems should be designed with enough flexibility to allow for as much customization as possible. For example, one employee may be very interested in earning money to make a purchase. For that employee a cash bonus system may prove very effective. For another employee, however, they might find more value in having more time off. For that employee, the free time may actually prove more motivating.

Outliers

Numbers that are far above or below most of the other numbers.

Observe and Interview Leadership

Observe the workplace and interview the organizational leadership connected to the new job. Attention should be placed on understanding how the job interfaces with other jobs in the workplace.

Performance Appraisal

Obtaining ratings of an employee's past performance.

Health Savings Accounts

Organizational or employee accounts where pretax funds are deposited, upon which employees can draw for medical expense reimbursement.

Reward Equivalence

Organizations also face the important decision Reward Equivalence about across global locations. Due to differences in tax laws, costs of living, exchange rates, and differential perceived costs and rewards of the overseas assignments, organizations have to consider how to motivate the employees to take the expatriate assignment while simultaneously maintaining a sense of equity for those host country employees with which the expatriate works. Anchoring the definition of equivalence to the employees home country, the host country, or some global metric are common approaches.

Centralized Global Rewards Strategy

Organizations attempt to have a single set of policies that are determined by the organization and utilized at all locations.

Product and Service Markets

Organizations compete to create value through the production of goods or the provision of services for customers in exchange for money and loyalty.

Level

Organizations must define what level of each reward will be offered. The level of reward offered can be understood in two ways. First, the Absolute Level of a reward can be defined. Paying an employee $50,000 salary per year, for example, is a defining absolute level. Alternatively, organizations can define their strategy relative to the market.

Domestic Rewards Strategy

Organizations that operate in a single country can define a single Domestic Rewards Strategy.

Compensatory Time

Paid time off instead of overtime pay.

Skill Variety

Refers to the extent to which work is designed to require a variety of skills and poses a reasonable degree of challenge to the employee.

Motivation

Refers to the focus, effort and persistence that employees demonstrate.

Holiday Pay

Pay provided for many federally-recognized holidays.

Creative Professionals

People who are employed for the extraction of their skills concerning creativity.

Learned Professionals

People who have advanced knowledge in a field of learning, usually acquired by a prolonged course of specialized, intellectual instruction.

Executives

People who have managerial authority in a business organization.

Distributive Justice

Perceptions are based upon employees' views of the distribution of rewards in the organization.

Psychological Contract

Refers to the informal expectations and agreements between an employee and an organization.

Benefit Level Strategy

Refers to the level of each benefit type provided as well as the overall company expenditure.

Administrative

Pertaining to the activities of running an organization or a business.

Managed Care Plans

Plans that are adopted by organizations trying to slow the increasing cost of healthcare.

Variability Principle

Points out that new behaviors are most quickly acquired when employees receive the reward every time a behavior is exhibited (low variability), but they are more likely to persist in an acquired behavior even after rewards have stopped when the behavior was not rewarded every time (high variability, also known as intermittent reinforcement).

Frequency Policies

Policies that regulate how many skills or competencies a given employee can certify on during a specific time period.

Computer

Programming, network administration

Stock Options

Provide employees the right to purchase a set amount of shares of stock for a set price.

Life Insurance

Provides a payout to survivors of the employee upon his or her death. The amount of coverage paid for by the organization is often limited to a percentage of the employee's salary, but many organizations provide employees the option of purchasing higher amounts of coverage.

Hazard Pay

Provides employees a premium increase in pay for jobs that involve a higher degree of risk to the employee.

Unemployment Compensation

Provides temporary income to employees who have lost employment.

Differentiation Strategy

Providing innovative, exceptional, and high-quality products and/or services to customers

Generic Questionnaires

Purchased from a third party, they use general questions to which incumbents respond using scaled ratings.

External Reward Positioning

Refers to how an organization's Rewards compare to the Rewards offered for comparable work in other organizations.

Benefit Mix Strategy

Refers to the particular combination of benefit types that an organization offers.

Performance Assessment

Refers to the process of defining and measuring the performance of individuals, teams, units, and organizations.

Paid Leave

Refers to various forms of pay for time not worked.

Fixed Rewards

Remain constant independent of changes in the criteria.

Organizational Citizenship Behaviors (OCB)

Represent those value-creating activities in which employees engage but which are not part of their job. Employees who go beyond their defined responsibilities to help a colleague at work contribute significantly to an organization's success.

Task Significance

Represents the extent to which the employee perceives that completion of their work has important consequences for others.

Job-value Structure

Represents the structure of jobs internally positioned according to their relative value.

Job Matching Challenge

Results from difficulties in determining exactly which organizational jobs match up with each benchmark job in the wage surveys. By carefully choosing benchmark jobs and using sources with detailed descriptions, this challenge can be partially addressed.

Consolidate Information Into Job Description Draft

Review the information gathered from the interviews to create the draft of the job description. This draft should note any points of uncertainty or disagreement among information sources.

Decentralized Global Rewards Strategy

Rewards policies are established and monitored at the country level with each location having discretion to adapt to their unique situations and contexts.

Employment-based Reward

Rewards that are only contingent on an employee maintaining employment with the organization.

Variable Pay

Rewards that vary as performance varies.

Performance-based Pay

Rewards with distributions dependent upon performance levels.

Base Pay

Salary or hourly wages

Principle of Overlap

Says that there should be overlap in the pay ranges for successive pay grades or bands.

Regular Workweek

Seven consecutive periods of 24-hour days

Timing Principle

Specifies that the smaller the time gap between the behavior and the reward or punishment, the greater impact on behavior.

Job Characteristics Theory

Specifies the qualities of work that will be inherently motivating and rewarding to employees.

Total Rewards Content Strategy

Specifies the type, level, and combination of rewards offered to employees

Incentive Stock Options

Specify an exercise price that is above the current market price to take into account that the organization expects the employees to outperform expected market returns.

Principle of Inclusiveness

States that a pay range needs to be large enough to capture the pay range of all jobs in that grade or band.

Purpose Principle

States that employees derive intangible rewards from an organization's value-consistent Purpose. That is, when the core purposes of a business align with the values of an employee, then that employee will perceive value in maintaining his or her relationship with the organization. There are several actions organizations can take to use the Purpose Principles as part of their Total Rewards strategy.

Pay As Meaning Principle

States that the rewards employees receive from organizations have informational value in addition to their economic value.

Principle of Control

States that the size of pay ranges should be kept sufficiently small to enable an organization to control labor costs.

Reinforcement Principle

States that when positive consequences (rewards) follow a behavior, that behavior becomes more likely to be seen in the future. Conversely, when negative consequences (punishments) follow a behavior, then that behavior will be less likely to be observed. Thus, designing a reward system requires careful consideration to the consequences that follow performance-related behavior at work.

Relative Level

States the rewards strategy as greater than, equal to, or less than some labor market reference point

Intrinsic Motivation Theory

Stipulates that employees attribute their behavior to internal and external causes; also referred to as Self-determination Theory.

Principle of Parity

Suggests that, in general, the more grades that are used the smaller the ranges will be.

Business Strategy Support

Supporting a business' approach to adapting to changes in its environment in order to compete and win.

Obtain Feedback and Revise Job Description

Survey or interview based process to have the subject matter experts review the job description to ensure that it adequately captures the job. For jobs involving numerous incumbents, a survey can often be used with this step. Finally, a mechanism for resolving conflicts and for keeping the description updated should also be established, this is commonly done during annual performance reviews.

Niche-Focused Strategy

Targeting business priorities toward addressing a specific section of the market

Collaborative Environment

Teams of employees work in concert to be creative, solve problems, and produce results.

Multiple Sources

That is, if an employee's performance is being assessed, competencies rated, or market prices established, it is important that multiple people have input into the process. Ideally, some of this input should come from non-management peers to further enhance procedural justice.

Centralized Approach

The Human Resources department makes all decisions relating to pay strategy, as well as specific reward decisions.

Regular Rate of Pay

The basic hourly rate of pay plus any non-discretionary bonuses, shift differentials, production bonuses, and commissions earned

Tasks, Duties and Responsibilities (TDRs)

The building blocks of a job that represent the ways that an employee creates value for the organization. Statements of TDRs are usually limited to between 7-15 statements that begin with action verbs.

Pay Grades

The categories organizations put jobs into for rewards purposes.

Business Strategy

The collection of decisions, approaches, and activities that allow an organization to compete and win

Global Rewards Strategy

The collection of decisions, guidelines, and policies that define how the total rewards will account for country differences

Total Rewards Strategy

The combination of pay forms, plans, policies, and practices that enable long-term organizational performance

Transparent Measurement

The criteria and system should be easily understood and the processes for implementing the system should also be well documented and followed.

Total Rewards Process Strategies

The decisions, policies, and practices that define how Total Rewards are designed and implemented.

Strategic Measurement

The definition of criteria are all conceptually and empirically connected to employee, unit, and organizational outcomes.

Ego and Esteem Needs

The desire for self-respect, self-esteem, and for the esteem of others.

Technology

The equipment and knowledge used to produce goods and services. May vary greatly by industry.

Reward Strategy Line

The extent to which a company will pay above, at, or below the market average, shown in graphical form.

Internal Reward Alignment

The extent to which an organization's Total Rewards System aligns each employee's rewards with those received by others in the organization.

Growth Needs Strength

The extent to which employees value and desire challenge and responsibility in work.

Organizational Culture Fit

The extent to which the Rewards Strategy aligns with and supports the ingrained practices, norms, and values of the organization.

Task Identity

The extent to which the employee completes a whole and identifiable piece of work.

Rewards Strategy Coherence

The extent to which the parts of the strategy fit together in a logical and clear way.

Face Validity

The extent to which the system produces relative job values that appear to be accurate and credible. This concept is applied during Step Four of the Point Factor Approach to job evaluation.

Group-based Variable Pay

Ties rewards to the collective actions and results achieved by teams, groups and units in the organization.

Strengths

The firm's core competencies, abilities and capacities that provide an advantage when meeting the needs of target customers. (i.e., production costs, marketing skills, brand image, technology, design and financial resources).

Identify Job

The first step is to identify the job being analyzed. This includes obtaining previous job descriptions if analyzing an existing job, descriptions of any jobs being consolidated into the new job, or labels provided to the job by those requesting the job analysis. At this point it is recognized that the exact job title and job identification information is subject to change.

Deductible

The full amount of medical expenses up to a set amount, that must be paid by the employee.

Traditional Interview

The job analyst asks the job incumbent preset questions about the content, skills needed, and time spent on activities in the job.

Median

The middle number of a group of numbers when they are arranged from lowest to highest.

Job Title

The name by which the job is known within the company.

Social Needs

The need for emotional love, friendship, and affectionate relationships with people in general, but especially a spouse, children, and friends.

Self-actualization Needs

The needs for self-realization, continuous self-development, and the process of becoming all that a person is capable of becoming.

Role and Control Strategy

The policies and practices that allocate design, implementation, and discretionary control of the rewards system.

Human Resource Management

The policies, practices, and systems that manage the interface between the organization and its employees in order to enable long-term organizational performance

Strategy

The process by which an organization decides on which products or services to market and sell, which industries to enter, and how the organization is going to reach its desired goals in the marketplace. How an organization is going to compete.

Job Evaluation

The process by which the value of each job in an organization is established. Methods include the Classification Approach, the Job Comparison Approach, and the Point factor Approach.

Factor Weighting

The process of deciding how important compensable factors are to the organization. It is Step Three in the Point Factor Approach to job evaluation.

Design Strategy

The process used to design the rewards system.

Value-Reward Line

The resulting line when regression is used to estimate the line summarizing the relationship between Job Evaluation Points and a compensation metric.

Absolute Level

The reward can be defined. Paying an employee $50,000 salary per year, for example, is a defining absolute level.

Reward Form Combinations Strategy

The reward forms offered (e.g., cash, benefits, etc.) and the way in which they relate to each other

Organizational Culture

The shared beliefs, values, norms, and assumptions of the organization.

Explanation

The systematic process of job evaluation, job analysis, market surveys, and performance measurement are important because they provide managers with the explanation of how a system was designed and a decision was made.

Expectancy Theory

The theory that motivation is a function not only of the perceived contingency of the rewards, but also of how much the employee values the reward, and whether or not they believe that they can perform at the required level

Dynamic Role-based

The work employees do changes on a regular basis.

Perquisites

There are an almost unlimited number of ways that employers can provide value to the employees through unique forms of benefits. Often referred to as Perquisites, or Perks, many of these are not 'standard benefits' that employees necessarily expect.

Intensive Communication

There will be many questions initially, and if those questions are not answered clearly and quickly then the answers employees receive through informal channels may not be accurate. This is damaging both if the information is negative (poor participation) or positive (unrealistic expectations).

Law of Unintended Consequences

This principle states that not all of the consequences of a reward system change are foreseeable.

Independent Contractors

Those who generally have the abilty to set their own hours and work processes, and who work and are paid on a project basis with the opportunity for profit or loss.

Rating Scales

Tools used to measure compensable factors in step two of the Point Factor Approach. Rating scales include Graphic RatingScales, Anchored Rating Scales, and Variable Distance Scales.

Job Specification

Translates the TDRs into Knowledge, Skills, Abilities, and Other (KSAOs) that an employee needs to perform the job at a satisfactory level.

Variable Distance Scale

Uses different point distances between each level in the scale which allows an organization to measure compensable factors in a way that takes into account the "natural breaks" in the factor being measured.

Anchored Rating Scale

Uses examples or definitions of typical behaviors to define each point along the scale.

Variable Rewards

Variable rewards are forms of compensation that increase or decrease based upon a criterion such as employee performance, unit performance, market performance, or even stock price.

Pay Form-Specific Reward Strategies

Varying pay-level strategies across reward types.

Capability-based Pay

When a reward system explicitly attempts to vary rewards based upon capabilities of the employees. Types include Skill-based pay, Competency-based pay, and Seniority-based pay.

Employer Matching

When an organization matches an employee's contribution to a retirement account, typically up to 3-5% of an employee's salary.

Lagging the Market

When an organization provides a lesser amount of the reward than its competitors.

Labor-driven Job Market

When the demand for a particular set of KSAs (knowledge, skills and abilities) is high and the supply of these KSAs is low.

Control Costs

Without a variable pay component, labor costs remain the same even when revenues, sales, or profits drop. Performance-based pay helps ensure that when performance is low, the company's cost structure is also reduced.

Individualistic Environment

Work is done independently by single employees reporting to a single supervisor.

Job Analysis

Yields a catalogue of Job Descriptions.