HR Chapter 9

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What is a clawback policy?

employee can recover wages if they were calculated incorrectly

What are stock option plans designed to accomplish?

to integrate the interest of management with the company

Relating to the Dodd-Frank Act, what is say on pay?

1. 5000 companies hold say on pay votes 2. Say on pay: employees determine how much executives get paid

What are the five main components to executive compensation packages?

1. Base Salary 2. Stock option 3. perks 4. bonus

What is a compensation policy? What are the three different

1. Compensation Policy is a policy that provides general guidelines for making compensation decisions. 2. pay level compensation policies 3. pay mix compensation policies. In pay level compensation policies there are three pay levels: market lead, market match, and market lag.

What are the components of a total compensation program?

1. Direct 2. Indirect 3. The job 4. Job environment

Which theory provides the rationale for adopting seniority pay plans?

1. Human Capital Theory. 2. This theory is based on the idea that employees' knowledge and skills generate productive capital

Be familiar with Figure 9-2 relating to determinants of direct financial compensation.

1. Job structure 2. Competitive pay policies 3. Pay structures

Equal Pay Act of 1963

1. Men and women should receive equal pay for performing equal work.

What is pay structure? Pay grade? Wage curve? Pay range? (Be familiar with Fig. 9-7, page 264)

1. Pay structures represent pay rate differences for jobs of _unequal_ worth and the framework for recognizing differences in employee contributions. 2. A pay grade is the grouping of similar jobs to simplify pricing jobs. 3. Pay range span: The rate ranges established should be large enough to provide an incentive to do a better job. 4. A wage curve (or pay curve) is the fitting of plotted points to create a smooth progression between pay grades. The curve often equates to the market match policy.

Fair Labor Standards Act of 1938, as Amended (What is the difference between exempt and nonexempt employees

1. The purpose of the FLSA is to establish minimum labor standards by creating a MINIMUM WAGE 2. Made working longer hours EXPENSIVE with OVERTIME 3. The primary difference in status between exempt and nonexempt employees is their eligibility for overtime.

What are the 4 parts of direct financial compensation

1. Wages 2. salaries 3. commissions 4. bonus

What is meant by broadbanding? Under what circumstances could broadbanding be beneficial?

1. collapses many pay or salary grades into a few wide bands to improve organizational effectiveness. Broadbanding creates the basis for a simpler compensation system and places greater importance on flexible decision making.

Dodd-Frank Act of 2010

1. done in response to the great recession 2. Ended bailouts 3. protected consumers from abusive financial practices

Davis-Bacon Act of 1931

1. the first national law to deal with minimum wages. 2. mandates a prevailing wage for all federally financed or assisted construction projects exceeding $2,000 3. Contractors must pay wages at least equal to the prevailing wage in the local area.

How does the economy impact compensation decisions?

A depressed economy generally increases the labor supply. In addition, companies often choose not to award pay raises to contribute to cost containment objectives in a slow economic environment where business activity is likely to suffer. A booming economy, on the other hand, results in greater competition for workers and the price of labor is driven upward.

What are the five types of direct financial compensation? (Base pay, cost-of-living adjustments, seniority pay, performance based pay, person-focused pay)

Base Pay: the monetary compensation employees earn on a regular basis for performing their jobs. Hourly pay and salary are the main forms of base pay. Cost-of -Living Adjustments (COLA): escalator clause in a labor agreement that automatically increases wages as the U.S Bureau of Labor Statistics cost-of-living index rises. Seniority Pay: is the length of time an employee has been associated with the company, division, department, or job. It is a systems reward employee with periodic additions to base pay according to employees length of service. Performance Based Pay: is governed by how well one performs the job. Person-Focused Pay: compensates employees for developing the flexibility, knowledge, and skills to perform many jobs effectively.

compensation policies and their characteristics? What are the consequences associated with each policy?

Compensation policy: Choices that compensation professionals make to promote competitive advantage Pay level policies: Market lead policies Market match policies Market lag policies Pay _mix_ policieS A compensation policy refers to choices that compensation professionals make to promote competitive advantage. Broadly, policy choices are made about pay level and pay mix. Pay level compensation policies determine whether the company will be a pay leader, be a pay follower, or strive for an average position in the labor market. Pay level policies have the greatest impact on attracting and retaining employees. Pay mix policies refer to the combination of direct and indirect financial compensation and employee benefits components (see Figure 9-1) that make up an employee's compensation package. Pay mix policies have the greatest impact on motivating employees. The components of the compensation package help focus an employee's performance on what the employer expects, such as excellent customer service, sales, innovative use of technology, and so forth. Companies that pursue a market lead policy are organizations that pay higher wages and salaries than competing firms. Using this strategy, they feel that they will be able to attract high-quality, productive employees and thus achieve lower per-unit labor costs. Higher-paying firms usually attract more highly qualified applicants than lower-paying companies in the same labor market. Companies may choose to pay below the market rate (market lag policy) because of poor financial conditions or because they are hiring employees whose skills and expected impact on the company's success are relatively lower than employees whose skills and expected impact are much greater.

What is direct financial compensation?

Direct financial compensation (core compensation) consists of the pay that an employee receives in the form of wages, salaries, commissions, and bonuses.

What is a gainsharing plan? Scanlon plan?

Gain Sharing: describes a group of incentive systems that rewards employees with an incentive payment based on improved company performance Scanlon Plan: provides a financial reward to employees for savings in labor costs.

What is a job structure? Job evaluation? What is the purpose of a job evaluation?

Job Structure: an ordered set of similar jobs based on worth. Job Evaluation: process that determines the relative value of one job in relation to another.

What are the most prominent contextual influences of direct financial compensation?

Labor market Cost-of-Living differences Labor unions Economy Inter-industry wage differentials __Legislation__

What is a two-tier wage system?

New employees paid less and older employees are paid more

What is salary compression and under what circumstances does it occur?

Pay compression: Occurs when less-experienced employees are paid as much as or more than employees who have been with the organization

What is person-focused pay? Skill-based pay? Competency-based pay?

Person-Focused Pay: compensation for developing the flexibility, knowledge, and skills to perform a number of jobs effectively. Skill-Based Pay: system that compensates employees for their job-related skills and knowledge, not for their job titles. Competency-Based Pay: compensation plan that rewards employees for the capabilities they attain.

Individual incentive plans come in which types (piecework, management incentive plans, behavioral encouragement plans, referral plans) What are the pros and cons of each?

Piecework: Incentive pay plan in which employees are paid for each unit they produce. Management incentive plans: Bonuses to managers who meet or exceed objectives based on sales, profit, production, or other measures for their division, department, or unit, behavioral encouragement plans: Individual incentive pay plans that reward employees for specific such behavioral accomplishments as good attendance referral plans:Individual incentive pay plans for rewarding the referral of new customers or recruiting successful job applicants On the positive side, individual incentive plans promote an equitable distribution of compensation within companies (i.e., the amount employees earn depends on their job performance). The better employees perform, the more they earn. Equitable pay ultimately enables companies to retain the best performers. Paying better performers more money sends a signal that the company appropriately values positive job performance. Another advantage of individual incentive plans is their compatibility with such individualistic cultures as the United States. Because U.S. employees are socialized to make individual contributions and be recognized for them, the national culture of the United States probably enhances the motivational value of individual incentive programs. downside of individual incentive plans is that they may encourage undesirable workplace behavior when these plans reward only one or a subset of dimensions that constitute employees' total job performance. Let's assume that an incentive plan rewards employees for quantity of output. If employees' jobs address such various dimensions as quantity of output, quality, and customer satisfaction, employees may focus on the one dimension—in this case, quantity of output—that leads to incentive pay and thereby neglect the other dimensions.

What is the labor market?

Potential employees located within the geographic area.

The U.S. federal government's General Schedule represents what type of pay?

Seniority Pay

What are the different types of group incentive plans and the advantage of each?

Work (process) teams refer to organizational units that perform the work of the organization on an ongoing basis. Work teams are effective when individuals are cross-trained to perform team members' work when they are absent. The goal is to maintain consistency in performance quality (e.g., addressing customer concerns promptly even when one or more team members are absent) and output (e.g., in the case of assembly teams). Team members ultimately engage in performance sharing rather than focusing exclusively on one set of tasks.

What is a golden parachute contract?

a perk that protects executives if another firm buys out their company

What are the different types of performance-based pay (merit pay:, merit bonus, spot bonus, and incentive pay)?

merit pay: Pay increase added to employees' base pay based on their level of performance. merit bonus: One-time annual financial award, based on productivity that is not added to base pay. spot bonus: Relatively small monetary gifts provided to employees for outstanding work or effort during a reasonably short period of time. incentive pay: Compensation, other than base wages or salaries, that fluctuates according to employees' attainment of some standard (e.g., a pre-established formula, individual or group goals, or company earnings).

What are the different types of company-wide incentive plans and the advantage of each (profit sharing -various types), stock plan-various types)?

profit sharing: Company provides employees with a share of company profit Stock plan: employees are allowed to have a share of company stock


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