Compensation Administration

Fair Labor Standards Act of 1938

A federal law governing minimum wage, overtime pay, equal pay for men and women in the same types of jobs, child labor, and record-keeping requirements.

job hierarchy

A grouping of jobs based on their job-related similarities and differences and on their value to the organization's objectives.

job classificiation (grade)

A grouping of jobs that are considered substantially similar for pay purposes.

Title VII

A major piece of legislation prohibiting pay discrimination. It is much broader in intent than the Equal Pay Act, forbidding discrimination on the basis of race, color, religion, sex, pregnancy, or national origin.

minimum wage

A minimum-wage level for most Americans established by Congress as part of the Fair Labor Standards Act of 1938.

ability

An individual's capability to engage in a specific behavior.

entitlement

Employee belief that returns and/or rewards are due regardless of individual or company performance.

pay mix or pay forms

Relative emphasis among compensation components such as base pay, merit, incentives, and benefits.

total compensation

The complete pay package for employees, including all forms of money, bonuses, benefits, services, and stock.

cost cutter

The cost cutter's efficiency-focused strategy stresses doing more with less by minimizing costs, encouraging productivity increases, and specifying in greater detail exactly how jobs should be performed.

culture

The informal rules, rituals, and value systems that influence how people behave.

relational return

The nonquantifiable returns employees get from employment, such as social satisfaction, friendship, feeling of belonging, or accomplishment.

External Competitiveness

The pay relationships among organizations; focuses attention on the competitive positions reflected in these relationships.

external competitiveness

The pay relationships among organizations; focuses attention on the competitive positions reflected in these relationships.

strategy

fundamental direction of the organization. It guides the deployment of all resources, including compensation.

correlation coefficient

how changes in one variable are related to changes in another.

innovator

stresses new products and short response time to market trends.

employee contributions

Comparisons among individuals doing the same job for the same organization

employee contributions

Comparisons among individuals doing the same job for the same organization.

valuation discrimination

Discrimination that focuses on the pay women and minorities receive for the work they perform. Discrimination occurs when members of these groups are paid less than white males for performing substantially equal work. This definition of pay discrimination is based on the standard of "equal pay for equal work." Many believe that this definition is limited and that valuation discrimination can also occur when men and women hold entirely different jobs (in content or results) that are of comparable worth to the employer. Existing federal laws do not support the "equal pay for work of comparable worth" standard.

access discrimination

Discrimination that focuses on the staffing and allocation decisions made by employers. It denies particular jobs, promotions, or training opportunities to qualified women or minorities. This type of discrimination is illegal under Title VII of the Civil Rights Act of 1964.

desparate treatment

Discrimination theory that outlaws the application of different standards to different classes of employees unless the standards can be shown to be business-related.

Desparate Impact

Discrimination theory that outlaws the application of pay practices that may appear to be neutral but have a negative effect on females or minorities unless those practices can be shown to be business-related.

nonexempt

Employees who are subject to the provisions of the Fair Labor Standards Act.

team incentive

Group incentive restricted to team members, with payout usually based on improvements in productivity, customer satisfaction, financial performance, or quality of goods and services directly attributable to the team.

exempt

Jobs not subject to provisions of the Fair Labor Standards Act with respect to minimum wage and overtime. Exempt employees include most executives, administrators, professionals, and outside sales representatives.

Americans with Disabilities Act of 1990

Legislation passed in 1990 that requires that reasonable accommodations be provided to permit employees with disabilities to perform the essential elements of a job.

Age Discrimination in Employment Act of 1967

Legislation that makes nonfederal employees age 40 and over a protected class relative to their treatment in pay, benefits, and other personnel actions. The 1990 amendment is called the Older Workers Benefit Protection Act.

prevailing wage laws

Legislation that provides for a government-defined prevailing wage as the minimum wage that must be paid for work done on covered government projects or purchases. In practice, these prevailing rates have been union rates paid in various geographic areas.

reengineering

Making changes in the way work is designed to include external customer focus. Usually includes organizational delayering and job restructuring.

pay techniques

Mechanisms or technologies of compensation management, such as job analysis, job descriptions, market surveys, job evaluation, and the like, that tie the four basic pay policies to the pay objectives.

Salary

Pay given to employees who are exempt from regulations of the Fair Labor Standards Act and hence do not receive overtime pay (e.g., managers and professionals). Exempt pay is calculated at an annual or monthly rate rather than hourly.

living wage

Pay legislation in some U.S. cities that requires wages well above the federal minimum wage. Often applies only to city government employees.

variable pay

Pay tied to productivity or some measure that can vary with the firm's profitability.

commission

Payment tied directly to achievement of performance standards. Commissions are directly tied to a profit index (sales, production level) and employee costs; thus, they rise and fall in line with revenues.

incentive effect

The degree to which pay influences individual and aggregate motivation among employees at any point in time.

sorting effect

The effect that pay can have on the composition of the workforce. Different types of pay strategies may cause different types of people to apply to and stay with an organization.

forms of compensation

The various types of pay, which may be received directly in the form of cash (e.g., wages, bonuses, incentives) or indirectly through series and benefits (e.g., pensions, health insurance, vacations). This definition excludes other forms of rewards or returns that employees may receive, such as promotion, recognition for outstanding work behavior, and the like.

pay objectives

What an organization seeks to achieve through its compensation strategy. Basic objectives are efficiency, fairness, ethics, and compliance with laws and regulations.

compensation

all forms of financial returns and tangible services and benefits employees receive as part of an employment relationship

competitive position

comparison of the compensation offered by one employer relative to that paid by its competitors.

strategic prospective

compensation choices that help the company gain and sustain competitive advantage

customer focused

stresses delighting customers and bases employee pay on how well they achieve this.

internal alignment

the pay relationships among jobs or skill levels within a single organization; focuses attention on employee and management acceptance of those relationships. It involves establishing equal pay for jobs of equal worth and acceptable pay differentials for jobs of unequal worth

Wage

Pay given to employees who are covered by overtime and reporting provisions of the Fair Labor Standards Act. Pay for workers who are nonexempt usually is calculated at an hourly rate rather than a monthly or annual rate.

comparable worth

A policy that women performing jobs judged to be equal on some measure of inherent worth should be paid the same as men, excepting allowable differences, such as seniority, merit, production-based pay plans, and other non-sex-related factors. Objective is to eliminate use of the market in setting wages for jobs held by women.

flat rate

A standard newspaper advertising rate with no discount allowance for large or repeated space buys.

Equal Pay Act of 1963

An amendment to the Fair Labor Standards Act of 1938 that prohibits pay differentials on jobs that are substantially equal in terms of skills, efforts, responsibility, and working conditions, except when they are the result of bona fide seniority, merit, production-based systems, or any other job-related factor other than sex.

motivation

An individual's willingness to engage in some behavior. Primarily concerned with (1) what energizes human behavior, (2) what directs or channels such behavior, and (3) how this behavior is maintained or sustained.

compliance

As a pay objective, conforming to federal and state compensation laws and regulations.

total cash

Base wage plus cash bonus; does not include benefits or stock options.