HRM chapter 9

Wage and Hour Provisions

The minimum wage prescribed by federal law has been raised many times, from an original figure of 25 cents per hour to 7.25 dollars per hour on July 24, 2009. The minimum wage is assessed every few years to ensure it is adjusted for cost-of-living factors.

Hay profile method

A job evaluation technique using three factors-Knowledge, Mental Activity, and Accountability-to evaluate executive and managerial positions

Consumer price index (CPI)

A measure of the average change in prices over time in a fixed "market basket" of goods and services.

Point System

A quantitative job evaluation procedure that determines the relative value of a job by the total points assigned to it.

Pay-for-performance standard

A standard by which managers tie compensation to employee effort and performance. It serves to raise productivity and lower labor costs in today's competitive economic environment. Without this standard, motivation to perform with greater effort will be low, resulting in higher wage costs to the organization.

Wage and Salary Survey

A survey of the wages paid to employees of other employers in the surveying organization's relevant labor market.

Job Classification System

A system of job evaluation in which jobs are classified and grouped according to a series of predetermined wage grades.

Job evaluation

A systematic process of determining the relative worth of jobs in order to establish which jobs should be paid more than others within an organization.

Job evaluation for Management Positions

Because management positions are more difficult to evaluate and in certain demands not found in jobs at the lower levels, some organizations do not attempt to include them in job evaluation programs for hourly employees. Rather they employ either a standardized (purchased) program or a customize a point method to fit their particular jobs.

Cost of Living

Because of inflation, compensation rates have had to be adjusted upward periodically to help employees maintain their purchasing power. Granting wages based largely on "cost-of-living" figures will not insipid higher employee performance and may cause valued employees to leave the organization. Cost of living payments, when traditionally given, may be been by employees as "entitlements" unrelated to individual performance.

Nonexempt Employees

Employees covered by the overtime provisions of the Fair Labor Standards Act (FLSA)

Exempt Employees

Employees not covered by the overtime provisions of the Fair Labor Standards Act

Employer-Initiated Surveys

Employers wishing to conduct their own wage and salary survey must first select the jobs to be used in the survey and identify the organizations with who, they actually compete for employers.

Nonfinancial Compensation

Includes employee recognition programs, rewarding jobs, organizational support, work environment, and flexible working hours to accommodate personal needs.

Compensation scorecard

It collects and displays the results for all the measures that a company uses to monitor and compare compensation among internal departments or units.

Equity theory or Distributive Fairness

It is a motivation theory that explains how people respond to situations in which they fee they have received less (or more) than they deserve.

Internal Factors

It is that influence pay rates are the organization's compensation strategy, the worth of a job, an employee's relative worth in meeting job requirements, and an employer's ability to pay.

Strategic Compensation

It is the compensation of employees in ways that enhance motivation and growth, while at the same time aligning their efforts with the objectives of the organization.

Child Labor Provisions

Many employers who might otherwise be willing to hire Highschool students of Young adults are unwilling to pay them the same rate as adults because of their lack of experience.

External Factors

The major external factors that influence pay rates include labor market conditions, area pay rates, cost of living, collective bargaining if the employer is unionized, and legal requirements.

Work valuation

A job evaluation system that seeks to measure a job's worth through its value to the organization.

Area Pay Rates

A formal pay structure should provide rates that are in line with those being paid by other employers for comparable jobs within the area.

Three traditional methods of comparison provide the basis for the principal systems of job evaluation:

1. Rank the value of jobs from the highest to lowest 2. Classify jobs so they can be benchmarked internally and externally 3. Award points to each job based on how much they are linked to organizational objectives.

To achieve these goals, policies must be established to guide management in making decisions. Formal statements of compensation policies typically include the following:

1. The rate of pay within the organization and whether it is to be above, below, or at the prevailing market rate 2. The ability of the pay program to gain employee acceptance while motivating employees to perform to the best of their abilities 3. The pay level at which employees maybe recruited and the pay differential between new and more senior employees 4. The intervals at which pay raises are to be granted and the extent to which edit and/ or seniority will influence the raises 5. The pay levels needed to facilitate the achievement of a sound financial position in relation to the products or services offered

The more common goals of a strategic compensation policy include the following:

1. To reward employees' past performance 2. To remain competitive in the labor market 3. To maintain salary equity among employees 4. To mesh with employees' future performance with organizational goals 5. To control the compensation budget 6. To attract new employees 7. To reduce unnecessary turnover

Wage curve

A curve in a scattergram representing the relationship between relative worth of jobs and pay rates.

Davis-Bacon Act of 1931

Also referred to as the Prevailing Wage Law, is the oldest of the three federal wage laws. It requires that the minikin wage rates paid to the people employed on federal public works projects worth more than 2000 dollars be at least equal to the prevailing rates and that overtime be paid at one and one-half times this rate.

Pay Equity

An employee's perception or is achieved that compensation received is equal to the value of the work performed. This embraces the concepts of fairness.

Escalator clauses

Clauses in labor agreements that provide for quarterly cost-of-living adjustments in wages, basing the adjustments on changes in the consumer price index.

Fair Labor Standards Act of 1938 (as Amended)

Commonly referred to as the Wage and Hour Act, covers employees who are engaged in the production of goods for interstate and foreign commerce, including those whose work is closely related to or essential to such production.

Compensation Implementation-Pay Tools

Compensation design systems, such as job evaluations, provide for internal equity and serve as the basis for pay rate determination.

Pay Rate Compression

Compression of pay between new and experienced employees caused by the higher starting salaries of new employees; also the differential between hourly workers and their managers.

Indirect Compensation

Comprises of the many benefits supplied by employers like Leave, Hospitalization, Insurance, Travel Benefit/ Package, Clothing, Educational Leave, Mandate Benefits, Phones/Laptop, Retirement Programs.

Direct Compensation

Encompasses employee wages and salaries ,incentives, bonuses and commissions.

The three kinds of pay equity

External, Internal, and Individual

Pay grades

Groups of jobs within a particular class that are paid the same rate.

Pay Secrecy

Misperceptions by employees concerning the equity of their pay and its relationship to performance that can be created by secrecy about the pay that others receive. The reasons for this is that managers may be unwilling to admit is that it gives them greater freedom in compensation management. This generates distrust in the compensation system, reduce employee motivation, and inhibit organizational effectiveness.

Walsh-Healy Act of 1936

Officially called PublicContracts Act, covers workers employed on government contract work for supplies, equip me to and materials worth in excess of 10000 dollars.

Compensation Assessment

Once it has been implemented, assessing the effectiveness of your compensation system is vitally important to linking compensation with strategy.

Collective Bargaining

One of the primary functions of a labor union, is to bargain collectively over conditions of employment, the most important of which is compensation. The agreements negotiated by unions tend to establish rate patterns within the labor market.

Minimum Wage and Pay Compression

Organization's wishing to minimize the problem may incorporate the following ideas into their pay policies: 💧Reward high performance and merit-worthy employees with large pay increases. 💧Design the pay structure to allow a wide spread between hourly and supervisory employees. 💧Prepare high-performing employees for promotions to jobs with higher salary levels. 💧Provide equity adjustments for selected employees hardest hit by pay compression.

Worth of a Job

Organizations without a formal compensation program generally base the worth of jobs the subjective opinions of people familiar with the job.

Competence-based pay

Pay based on an employee's skill level, variety of skills possessed, or increased job knowledge

Employer's Ability to Pay

Pay levels are limited by earned profits and other financial resources available to employers.

Red circle rates

Payment rates above the maximum of the pay range

Individual Equity

People compare themselves to others in their organization with the same job.

Internal Equity

People compare themselves to peers in different jobs in the same organization.

External Equity

People in similar jobs compare themselves to what others are making in different organizations.

Exemption from Overtime Provisions

The feature of the FLSA that perhaps creates the most confusion is the exemption from over time requirements for certain groups of employees or from coverage by certain of the act's provisions.

Labor Market Conditions

The labor market reflects the forces of supply and demand for qualified labor within an area.

Formalized compensation goals..

Serves as guidelines for managers to ensure that wage and benefit policies achieve their intended purpose.

Compensation

Systematic approach providing monetary and non monetary value to employees in exchange for work performed. It is a way to increase employee loyalty, it is seen as a way to decrease the likelihood that its employees will be hired away by competitors.

Job Ranking System

The simplest and oldest system of job evaluation by which jobs are arrayed on the basis of their relative worth.

Compensation Strategy

The strive to promote a compensation policy that is internally fair.

Government Regulation of Compensation

There are laws that were enacted during the 30's to prevent the payment of abnormally low wage rates and to encourage the spreading of work, among a greater number of workers.

Pay Equity Provisions

These are laws that protect employees against pay discrimination.

Rate Ranges

They are generally divided into a series of steps that permit employees to receive increases up to the maximum rate for the range on the basis of merit or seniority or a combination of the two.

Expectancy theory - of motivation

This helps determine your compensation strategy by predicting that one's level of motivation depends on the attractiveness of the rewards sought and the probability of obtaining those rewards.

Job evaluation

This is a relied system that aids in rate determination. This can assist the organization in maintaining some degree of control over its pay structure.

Compensation Design-The Pay Mix

This is how pay is determined by a combination of internal and external factors that influence, directly or indirectly , the rates at which employees are paid.

The Point Manual

This is required in the point system; it is, in effect, a handbook that contains a description of compensable factors and the degrees to which these factors may exist within the jobs.

Broad branding

This is used to structure an organization's compensation payments to employees.

Employee's Relative Worth

This system, moreover, must provide a visible and credible relationship between performance and any raises received.

HRIS and Salary Surveys

Wage and benefits survey data can be found on numerous websites. Managers and compensation specialists can search for applicable surveys for either purchase or participation.

Real wages

Wage increases larger than rises in the consumer price index, that is, the real earning power of wages; it is where the union's goal in each new agreement achieve an increasing for improving the purchasing power and standard of living of it's members.

Piecework

Work paid according to the number of units produced.

Hourly Work

Work paid on an hourly basis.

Collecting Survey Data

While many organizations conduct their own wage and salary surveys, a variety of pay surveys are available to satisfy the requirements of most public and not-for-profit or private employers