Compensation 3

Pay discrimination—access vs. valuation discrimination

-Access: denies particular jobs, promotions or training opportunities to qualified women or minorities. -Valuation: looks at pay women and men receive for the jobs they perform.

Pay Openness

-Advantages: Employee has more power -Disadvantages: people being uncomfortable sharing their pay.

Who are special groups—what makes them special?

-Corporate directors -Top management executives -Supervisors -Professional employees -Sales staff -Contingent workers -Specific groups receive special treatment -In the form of add-on packages not received by other employees -Or as compensation components entirely unique in the organization -Characteristics of special groups -Tend to be strategically important to the firm -Positions tend to have built-in conflict

Government as a stakeholder, employer and purchaser

-Discuss the role of government in compensation" the government passes laws, the government also has a an intrest in protecting people, prevent discrimination. Government is also an employer. Influences the labor supply -primary govt roles of law making: government in an employer & influences labor supply through purchases.

Employee financed

-Employee pays total costs for some benefits -By law the organization must bear the cost for some benefits

Flexible Benefits

-Employees choose packages that best satisfy their unique needs -Flexible benefits help firms meet the changing needs of a changing workforce -Increased involvement of employees and families improves understanding of benefits -Flexible plans make introduction of new benefits less costly -Employees make bad choices and find themselves not covered for predictable emergencies -Administrative burdens and expenses increase

Impact on nonunion firms—spillover

-Employers seek to avoid unionization by offering workers wages, benefits and working conditions won in rival unionized firms. -Outcomes: -Nonunion management continues to enjoy freedom from union "interference" in decision making. -Workers receive "spillover" of rewards obtained by unionized counterparts -Offer workers wages, benefits, and working conditions so that the employees don't join a union (keep the unions out of work)

Cost containment

-Probationary periods -Benefit limitations -Co-pays -Administrative cost containment (e.g., outsourcing, negotiating lower fees) -Wellnessprobrams -Shifting costs to workers who engage in unhealthy behaviors?

Pay increases with low motivational value—general increase, across-the-board, seniority increase

-Provide equal increases to all employees regardless of performance. -General increase -Cost-of-living or across-the-board adjustments. -Pay increases based on a present progreession pattern (steps) based on seniority.

Designing merit guidelines—differentials, no increase for poor performers

-What should the poorest performer be paid as an increase? -How much should average performers be paid as an increase? -How much should top performers be paid as an increase? -What should be the size of the percentage increase differential between different levels of performance?

Factors leading to inaccurate appraisals

-guilt -embarrassment about giving praise -taking things for granted -not noticing good or poor performance -The halo effect -dislike of confrontation -spending too little time on preparation of the appraisal

Rating errors

-halo/horns (easier to eliminate) -first impression -recency -leniency (most difficult to eliminate) -severity -central tendency -clone of similar-to-me -spillover

How to make sure performance appraisals are legally defensible—written instructions, clear criteria, job analysis, training, etc.

-provide specific written instructions (incl. training) on how to complete appraisal -clear criteria for evaluating performance - dimensions should be written, objective, and clear -provide a rational foundation for personnel decisions via adequately developed job descriptions -require supervisors to provide feedback about appraisal results to employees -incorporate a review of performance ratings by higher-level supervisors -consistent treatment across raters, regardless of race, color, religion, sex, and national orgin should be evident

Gap between workers and their manager is

27% smaller in unionized firms. Managers in union firms receive higher wages than nonunion managers. Narrowing of gap arises because worker wages increase faster than managerial wages in unionized firms.

Corporate directors

Annual retainer, attendance fees, fees for participation on subcommittees, increased emphasis on director rewards that link to corporate performance (more pay is stock-based, some companies are tying pay to stock performance.

Maturity Curves

As you're further away from getting your degree, how do we keep those skills you learned while getting your degree

Executives

Base salary, short-term (annual) incentives or bonuses, long-term incentives and capital appreciation plans, executive benefits, executive perks.

COBRA

Consolidated Omnibus Budget Reconciliation Act. Coverage: Employers with 20 or more employees. Eligibility: Provides current and former employees and their spouses and dependents with temporary extension of health care benefits. Qualifying events: Specified events (e.g., layoffs). Qualifying event coverage: 18 to 36 months, depending on the category of qualifying event. Cost: Cost of insurance plus 2%

Contributory

Costs shared between employer and employee

ERISA

Employee Retirement Income Security Act: for employers who choose to have a retirement plan, this act sets some formidable rules that must be followed to be in compliance.

Non-contributory

Employer pays total costs

Child Labor

FLSA restricts hours and conditions of employment for minors. Persons under 18 cannot work in hazardous jobs. Persons under 16 cannot be employed in job involved interstate commerce.

FMLA

Family and Medical Leave Act. Eligibility: 12 months employment with employer in which employee works 1,250 hrs. Qualifying events: Specified family or medical reasons. Birth or adoption of a child. Own illness. Care for a sick family member. Conditions: Employee must be able to return to the same job or one with equal status. Health benefits: Continue while employee is on leave

Unemployment

Financed by federal and state taxes levied on employers Employers pay FUTA tax of 6% on first $7,000 earned by each employee. Experience rated: lower percentages charged to employers with fewer discharged employees.

Forced Distribution Scale

Forces the rater to place a designated portion of ratees in a limited number of categories

Dual Ladders

Great scientists and at some point to get pay raises they have to become an administrator

HIPAA

Health Insurance Portability and Accountability Act. Lessens an employer's ability to deny coverage for a preexisting condition. Prohibits discrimination on the basis ofhealth-related status. Stringent privacy provisions

Contingent workers

Include a person who works: through a temporary help agency, on an on-call basis, as independent contract. Typical salary arrangements: workers in the first two categories often earn less than workers in traditional arrangements, independent contractors often earn more.

Pension Benefit Guaranty Corporation (PBGC)

Insures payment of certain pension plan benefits

20% of all U.S. collective bargaining agreements permit some alternative reward system

Lump-sum awards, ESOPs, Pay-for-knowledge plans, Profit-sharing, Gain-sharing

Hours

Payment at one-and-a-half times the standard for working more than 40 hours per 168-hour week

defined benefit plan

Provides an explicit benefit which is easily communicated. Company absorbs risk associated with changes in inflation and interest rates which affect cost. More favorable to long service employees. Employer costs unknown.

Red circles green circles

Refers to salary of employees either above or below the salary range associated with the job which the employee is the job incumbent. A job holder who is paid above the salary range set for the job. A job holder who is paid below the range set for the job

Short and long-term disability

ST:pays a percentage of your salary for temporary disability because of sickness or injury (workers comp) LT: kicks in after short term. Underwritten by insurance firms and provides 60-70 percent of pre-disability pay for a period varying between 2 years and life

Concept of comparable worth

The idea that if jobs require comparable skill, effort and responsibility, the pay must be comparable, no matter how dissimilar the job content may be. Establishing a comparable worth plan involves the following four basic steps: 1. Adopt a single job evaluation plan for all jobs within a unit 2. All jobs with equal job evaluation results should be paid the same 3. identify general representation (percentage male and female employees) in each job group 4. The wage-to-job evaluation point ratio should be based on the wages paid for male-dominated jobs since they are presumed to be free of discrimination

Life insurance

Typical coverage would be a group term insurance policy with a face value of one to two times the employee's annual salary. To discourage turnover, almost all companies make this benefit foreitable at the time of departure from the company.

Defined Contribution

Unknown benefit level is difficult to communicate. Employees assume these risks. More favorable to short-term employees. Employer costs known up front.

Top Down

Upper management determines pay and allocates it "down" to each subunit for the plan year.

Why benefits have grown

WWII Wage and price controls, cost (taxt( effectiveness of benefits, employer impetus (satisfaction, performance) Unions, government impetus.

Contingent vs Full time

Who should be protected or benefited?

MBO: (management by objectives)

a planning and appraisal tool that leads to generally positive results for both for individuals and the organization -at the start of the review period, the employee and supervisor discuss performance objectives -at the end of the review period they meet to record results formally

Role of benefits in Motivation

benefit schedules are designed to favor longer-term employees (retirement) and the amount of vacation time increases with more years on the job.

Administering benefit programs

communication, claims processing, cost containment

Subordinates

difficult to obtain candid reviews; if not anonymous, ratings are inflated

Scientists and Engineers

dual ladders and maturity curves

Adverse Selection

employees pick only benefits they will use; the subsequent high benefit utilization increases its cost

Worker's Comp

employer is liable for providing benefits to employees that result from occupational disabilities or injuries, regardless of fault.

Customers

especially for business unit performance

BARS (behaviorally anchored rating scale)

evaluator is specifically given descriptions of behaviors along a numerically rated scale and is asked to select the behavior that corresponds to employee's performance.

Performance dimension training

exposes supervisors to performance dimensions used.

Bottom Up

individual employees' pay for the next plan year is forecasted and summed to create an organization's salary budget.

IRAs

individual retirement accounts: tax-favored retirement savings plans that individuals can establish themselves

Decentralization

involves giving separate organization units the responsibility of designing and administering their own systems -The advantage is the system can be tailored to each unit's unique needs -Disadvantages: -lack of consistency in policies and practices across the organization -difficulties in transferring employees between units -potential increases in pay discrimination

Minimum Wage

legislation is intended to provide an income floor for workers in society's least productive jobs. Almost all states have their own minimum wage to cover jobs omitted from federal legislations.

peers

little experience in conducting appraisals; lenient; can create group tensions

Centralization

locates design and administration responsibility in a single corporate unit -May become bureaucratic

Vision Care

noncontributory and usually cover partial costs of eye examination, lenses, and frames

Cost Containment

organization sets dollar maximum; employee chooses within the constraint

Two-Tier wage structure

phenomenon of union sector. Contract differentiates pay based upon hire dae. Employees hired after a target date receive lower wages than their higher-seniority peers in similar jobs.

Performance standard training

provides raters with a standard or "frame of reference" for making appraisal. What we mean by good, average and bad.

Pay secrecy

restricts the amount of information employees are provided regarding what their co-workers are paid. -Pros: organization control, protection of privacy, decreased labor mobility. -Cons: Employee judgements about fairness and their perceptions of trust may be sacrificed. Employee performance motivation can be expected to decrease. From an economics perspective. The labor market may be less efficient because employees will not move to their highest valued use.

Role of benefits in attraction

showing that benefits are well designed and meet the employees needs

Compression

situation that occurs when there is only a small difference in pay between employees regardless of their skills or experience.

Inversion

situations in which the starting salaries for new recruits to an organization increase faster than those for existing employees

Equal Pay Act

skill, effort, responsibility, and working conditions; differences can be based on seniority, merit, etc.

supervisors

they assign the work, have experience in conducting appraisals, and are more reliable -prone to halo and leniency

What Are Employee Benefits?

types of non-wage compensation provided to employees in addition to their normal wages or salaries.

Social Security

whether a worker retires, becomes disabled, or dies, social security benefits are paid to replace part of the lost family earnings.

Error training

(least effective): reduce psychometric errors by familiarizing raters with their existence

Union stipulations

-Equity - use group-based measures with equal payouts -Minimize bias -Use of objective performance measures in unionized firms -Use of measures based on past performance

Exempt/Non-Exempt

-Exempt: Employees are excluded from FLSA minimum wage and overtime provisions. -Nonexempt: employees are included in FLSA regulations and have full protection of the law.

General Healthcare

Health care costs are continuing to increase bc of technology, explosion of lawsuits, increased number of elderly people. Healthcare costs are above 6k per employee

Role of benefits in Retention

better benefits like work/life balance benefits like day care, elder care, fitness centers, etc. to fit the needs of the employees.

Compa-ratio

calculated by dividing the average pay for employees in a given job or pay grade by the pay range or grade. A compa-ratio greater than 1 means that, on average, the rates exceed the indent policy.

Supervisors

caught between demands or upper management in terms or production and employees in terms of rewards, reinforcements and counseling. Major challenge in paying supervisors (equity). Provide incentives to entice nonexempt employees to accept challenges of being a supervisor.

Dental

modest increase in dental care costs can be traced to stringent cost control strategies and an excess supply of dentists. As the excess turns into a predicted shortage in the coming years, we may expect dental benefit costs to grow at a faster rate

Self

more lenient and unreliable. Helpful for development.

Sales

often go for extended periods in the field with little supervision. Challenge is to stay motivated and continue making sales calls even in the face of limited contact or scrutiny from manager. Conflict is inevitable between customers who want product now and production facilities that can't deliver that quickly

Title VII of the Civil Rights Act of 1964

prohibits employment agencies, employers, and unions from discriminating against applicants and employees on the basis of race, color, religion, national origin, or sex. -Disparate Treatment: Occurs when an employee who is a member of a protected group is intentionally paid less. -Disparate Impact: Occurs when an apparently neutral compensation practice results in unintentional wage discrimination for a protected group

Types of performance appraisal formats

ranking, rating scales, BARS, essay, MBO

Essay

rater answers open-ended questions in essay form describing employee performance

Ranking

rater compares employees relative to each other -straight ranking, alternation ranking, paired comparison

Rating Scales

rater evaluates employees on some absolute standard -Each standard is measured on a scale- performance variation is described along a continuum -adjectives or behaviors, or outcomes (MBO)