CHV1- Total Rewards and Benefits

Garnishment

A court order that directs an employer to set aside a portion of an employee's wages to pay a debt owed to a creditor.

Preferred provider organization (PPO)

A health care provider that contracts with an employer or an employer group to supply health care services to employees at a competitive rate.

Portability

A pension plan feature that allows employees to move their pension benefits from one employer to another.

401(k) plan

Agreement in which a percentage of an employee's pay is withheld and invested in a tax-deferred account.

Draw

Amount advanced against, and repaid from, future commissions earned by the employee.

Benefit

An indirect reward given to an employee or group of employees for organizational membership.

Walsh-Healey Public Contract Act

Any government contractor ($10,000 or more) must pay prevailing wage for that area

ERISA

Applied to pension/retirement benefits plans

Managed care

Approaches that monitor and reduce medical costs through restrictions and market system alternatives.

Entitlement philosophy

Assumes that individuals who have worked another year are entitled to pay increases, with little regard for performance differences.

Utilization review

Audit of services and costs billed by health care providers.

Time based step-rate pay

Based on longevity and occurs on a predetermined schedule

Base pay

Basic compensation that an employee receives, usually as a wage or salary.

HIPPA

Be very careful with the info you know about people and be careful who else knows it.;

Flexible spending accounts

Benefits plans that allow employees to contribute pretax dollars to fund certain additional benefits.

_____, which uses fewer pay grades with wider ranges, has grown in popularity.

Broadbanding

Pay survey

Collection of data on compensation rates for workers performing similar jobs in other organizations.

Commission

Compensation computed as a percentage of sales in units or dollars.

Variable pay

Compensation linked directly to individual, team, or organizational performance.

Variable pay

Compensation linked to individual, group/team, and/or organizational performance.

Global market approach

Compensation plan that attempts to be more comprehensive in providing base pay, incentives, benefits, and relocation expenses regardless of the country to which the employee is assigned.

Balance-sheet approach

Compensation plan that equalizes cost differences between the international assignment and the same assignment in the home country.

Tax equalization plan

Compensation plan used to protect expatriates from negative tax consequences.

Salaries

Consistent payments made each period regardless of the number of hours worked.

Living wage

Earnings that are supposed to meet the basic needs of an individual working for an organization.

The pension area is a complex one that is governed by what main law?

Employee Retirement Income Security Act (ERISA)

Exempt employees

Employees who are not paid overtime.

Nonexempt employees

Employees who must be paid overtime.

Davis-bacon act

Established prevailing wage and benefit requirements for contractors on certain federally funded or assisted construction projects (pay in accordance to local labor market); Emplohyers with federal contract of 2000 dollars or more

Well pay

Extra pay for not taking sick leave.

T/F-- Seniority-based pay increases are illegal.

False. They are indeed legal.

T/F--Pay is the number one motivator for people in the work place.

False; it is NOT the number one motivator

_____ benefits plans, which can be tailored to individual needs and situations, are increasing in popularity.

Flexible

Job evaluation

Formal, systematic means to identify the relative worth of jobs within an organization.

Market line

Graph line that shows the relationship between job value as determined by job evaluation points and job value as determined pay survey rates.

Job family

Group of jobs having common organizational characteristics.

Market banding

Grouping jobs into pay grades based on similar market survey amounts.

Pay grades

Groupings of individual jobs having approximately the same job worth.

COBRA

Health care insurance continuation; for employees who's employement has been terminated or dropped to part time

Serious health condition

Health condition requiring in-patient, hospital, hospice, or residential medical care or continuing physician care.

Health reimbursement arrangement (HRA)

Health plan in which the employer sets aside money in a health reimbursement account to help employees pay for qualified medical expenses.

Consumer-driven (CDH) plan

Health plan that provides employer financial contributions to employees to help cover their health-related expenses.

Health accounts (HSAs)

High-deductible health plans with federal tax advantages.

Red-circled employee

Incumbent who is paid above the range set for a job.

Green-circled employee

Incumbent who is paid below the range set for a job.

Benefit

Indirect reward given to an employee or group of employees as part of membership in the organization.

Non-compensation elements of Total Rewards

Job satisfaction (enjoyment experienced; as a result of performing the work itself); Autonomy (Employee discretion to do their work the way they see fit); Meaningful work (the work important to the employee or other people); Flexible schedules and work arrangements 9focus is on work/life balance); Growth opportunities (includes professional and intellectual growth, emotional maturity).; Relationships with other people (social network); Adequate Resources (opportunities for training, access to technology, etc.); Quality of leadership (the skills and knowledge of leaders, knowledge sharing, feedback.); Work environment (safety and comfort); recognition and awards

Compensable factor

Job value commonly present throughout a group of jobs within an organization.

Benchmark jobs

Jobs found in many organizations that can be used for the purposes of comparison.

Total rewards

Monetary and nonmonetary rewards provided by companies to attract, motivate, and retain employees.

Total Rewards

Not just compensation and benefits; includes anything and everything employees value and the employer is willing and able to offer; includes compensation and non-compensation elements; different value levels.

Pay compression

Occurs when the pay differences among individuals with different levels of experience and performance become small.

Lump-sum increase (LSI)

One-time payment of all or part of a yearly pay increase.

Bonus

One-time payment that does not become part of the employee's base pay.

Compa-ratio

Pay level divided by the midpoint of the pay range.

Straight piece-rate system

Pay system in which wages are determined by multiplying the number of units produced by the piece rate for one unit.

Wages

Payments calculated directly from the amount of time worked by employees.

Noncontributory plan

Pension plan in which all the funds for pension benefits are provided by the employer.

Contributory plan

Pension plan in which the money for pension benefits is paid by both employees and the employer.

Equity

Perceived fairness between what a person does and what the person receives.

Distributive justice

Perceived fairness in the distribution of outcomes.

Procedural justice

Perceived fairness of the process and procedures used to make decisions about employees.

_____ incentives often represent a significant portion of an executive's compensation package.

Performance-based

Productivity based pay

Piece rate; differential piece rate

_____ and _____ are the most commonly used individual incentives.

Piece-rate and bonus plans

Employee stock ownership plan (ESOP)

Plan designed to give employees significant stock ownership in their employers.

Stock purchase plan

Plan in which the employer provides matching funds equal to the amount invested by the employee for the purchase of stock in the company.

Paid-time-off (PTO) plan

Plan that combines all sick leave, vacation time, and holidays into a total number of hours or days that employees can take off with pay

Stock option plan

Plan that gives employees the right to purchase a fixed number of shares of company stock at a specified price for a limited period of time.

Health maintenance organization (HMO)

Plan that provides services for a fixed period on a prepaid basis.

Broadbanding

Practice of using fewer pay grades with much broader ranges than in traditional compensation systems.

Flexible benefits plan

Program that allows employees to select the benefits they prefer from groups of benefits established by the employer.

Workers' Compensation

Protects employees who are injured on the job.

Pay-for-performance philosophy

Requires that compensation changes reflect performance differences.

Pension plan

Retirement program established and funded by the employer and employees.

Cash balance plan

Retirement program in which benefits are based on an accumulation of annual company contributions plus interest credited each year.

Defined-benefit plan

Retirement program in which employees are promised a pension amount based on age and service.

Defined-contribution plan

Retirement program in which the employer makes an annual payment to an employee's pension account.

Competency-based pay

Rewards individuals for the capabilities they demonstrate and acquire.

Vesting

Right of employees to receive certain benefits from their pension plans.

Severance pay

Security benefit voluntarily offered by employers to individuals whose jobs are eliminated or who leave by mutual agreement with their employers.

Workers' compensation

Security benefits provided to persons who are injured on the job.

Adverse selection

Situation in which only higher-risk employees select and use certain benefits.

Perquisites (Perks)

Special benefits—usually noncash items—for executives.

Copayment

Strategy of requiring employees to pay a portion of the cost of insurance premiums, medical care, and prescription drugs.

Compensation committee

Subgroup of the board of directors that is composed of directors who are not officers of the firm.

Gainsharing

System of sharing with employees greater-than-expected gains in profits and/or productivity.

Profit sharing

System to distribute a portion of the profits of an organization to employees.

_____ is the major federal law that affects pay systems. It requires most organizations to pay a minimum wage and to comply with overtime provisions, including appropriately classifying employees as exempt or nonexempt and as independent contractors or employees.

The Fair Labor Standards Act (FLSA), as amended

Pay equity

The concept that the pay for all jobs requiring comparable knowledge, skills, and abilities should be the same even if actual job duties and market rates differ significantly.

Ways to calculate pay

Time based step-rate pay, Combination step rate and performance, Straight Piece Rate, Differential Piece Rate, knowledge based system, skill based systems, competency based systems; these are not very common

Seniority

Time spent in an organization or on a particular job.

T/F-- Merit pay is not a motivator for those who are driven by intrinsic goals.

True

T/F--Use of defined-contribution plans and individual retirement accounts is growing.

True

Market pricing

Use of market pay data to identify the relative value of jobs based on what other employers pay for similar jobs.

Is freezing pay legal?

Yes, if a company cannot afford to raise pay, it is legal

Hazard pay

additional pay for elements such as chemicals, radiation, extreme conditions

Benefits provide additional compensation to some employees as a reward for organizational membership. Because benefits generally ____________, they are highly desired by employees.

are not taxed

Compensation provided by an organization can come directly through _____ pay and _____ pay, and indirectly through _____.

base pay and variable pay and indirectly through benefits

Direct Compensation

base pay, differential pay (night shift; holiday pay at a different rate), ST (short term) incentive pay, LT incentive pay, recognition and achievement awards, commission,

Forms of pay

base pay, overtime pay, commission, other incentives (bonuses, awards)

Differential piece rate

base wage; piece rate up to a certain level or par; additional (higher) rate above that level

Holiday pay, vacation pay, various leaves of absence, and paid-time-off plans are another means of providing _____ to employees.

benefits

A compensation committee, which is a subgroup of the _____, generally has authority over executive compensation plans.

board of directors

Efforts to control the costs of health benefits have included

changing employee copayments and employee contributions, using managed care, and switching to consumer-driven health (CDH) plans.

The concept of total rewards has become a crucial part of HR management, and includes

compensation, benefits, and performance and talent management.

Family-oriented benefits include

complying with the Family and Medical Leave Act (FMLA) of 1993 and offering adoption benefits, child-care assistance, and elder-care assistance.

Organizations provide retirement benefits through

defined-benefit, defined-contribution, or cash balance plans.

Base pay

empoloyee's wages or salary (in a usual work week. Exempt folks do not qualify for over-time pay

Social security

federally administered insurance and retirement program

Effective variable pay plans

fit both business strategies and organizational cultures, appropriately award actions, and are administered properly.

Shift differential (or shift premium)

graveyard shift or night shift; swing shift; rotating shifts

Special compensation categories

hazard pay, geographic pay, shift differential

The design of group/team variable pay plans must consider

how the incentives are to be distributed, the timing of the incentive payments, and who will make decisions about the variable payout.

Variable pay, also called _____, is compensation that can be linked to individual, group/team, and/or organizational performance

incentives

Benefits can be viewed as mandatory or voluntary. The general types of benefits

include security, health care, retirement, financial, family oriented, and time off.

The valuation of jobs can be determined using either

job evaluation or market pricing.

Indirect compensation

legally required benefits (workers comp, unemp.), diability insurance, health insurance, paid time off, unpaid leave, perks, cars, etc.

Because health care benefits costs have increased significantly, employers are

managing their health benefits costs more aggressively.

Decisions about compensation must always consider

market competitiveness and positioning, use of competency-based pay, and team rewards.

Other commonly offered employee benefits (these are not required by law)

pay for time not worked (holidays, vacation); disability income continuation (provides income to employees in the event of illness or diability); retirement savings programs (provides income continuation following retirement)

Once a firm has collected pay survey data, it can develop a pay structure, which is composed of

pay grades and pay ranges.

Merit pay cons

performance appraisals may not be accurate enough; supervisor bias can affect money; union contracts may limit or put up barriers to merit pay; not a good motivator to drive intrinsic goals; gaps in performance made clear to employees can cause negative marale

Individual pay increases can be based on

performance, seniority, cost-of-living adjustments, across-the-board increases, lump-sum increases, or a combination of different approaches.

Organization-wide rewards include

profit sharing and stock ownership plans.

Equal Pay Act (1963)

prohibits wage discrimination by requiring eual pay for equal pay for equal work; based on objective standards---job title, job description); skills, efforts, etc.

Unemployment compensation

provides income to employees who have lost their jobs

Benefits

rewards based on organization membership and sometimes position held.

Executive compensation must be viewed as a total package composed of

salaries, bonuses, benefits, perquisites (perks), and both short- and long-term performance-based incentives.

Sales employees may have their compensation tied to performance on a number of criteria. Sales compensation can be provided as

salary only, commission only, or salary-plus-commission or bonuses.

Step rate with variability-based performance considerations

sep says you get x dollars; if your performance is substantially above or below standard you may get more or less money

Legally required benefits

social security, unemployement compensation, workers compensation

Other commonly offered employee benefits

spouse/family income continuation (life insurance); health and liaibility protection (eg. Medical, dental, vision, prescription drug insurance coverage)

Piece rate

straight...directly tied to the number of pieces produced; wage plus piece rate

Measuring the effectiveness of sales incentive plans is a challenge that may require the plans to be adjusted based on

success metrics.

Vesting

that period of time before the matching contributions actually belong to the employee. Generally 5 years.

A base pay system is developed using information from valuations of jobs and pay surveys, both of which are designed to ensure that

the pay system is internally equitable and externally competitive.

Strategic considerations for benefits include

their value in creating a competitive advantage and aiding in attracting and retaining employees.

Compensation practices for international employees are much more complex than those for domestic employees, because

they are affected by many more factors.

"red-circled" jobs

those whose rates are above the applicable pay range

"green-circled" jobs

those whose rates are below the applicable pay range

Merit pay pros

ties rewards closely to performance and job mastery; may allow savings for company; allows differentiation between levels of performers; permanent increases to base pay (good for employee); good reward for extrinsically motivated employees

T/F-- For compensation expenditures to be administered effectively, compensation responsibilities of both HR specialists and managers must be performed well.

true

Combination step rate and performance structures

usual step increases; only granted additional money above the step avove-standard performance

Geographic pay

vary by city or state; based on cost of living where the employee works

Three prominent security benefits are

workers' compensation, unemployment compensation, and severance pay.