HRMG 460 exam 2

efficiency wage

-above market wages will improve efficiency by attracting workers who will perform better and be less willing to leave -staffing programs must have the capability of selecting the best employees; work must be structures to take advantage of employees greater efforts

pay level policy options: match the competition

-attempts to ensure an organizations wage costs are approximately equal to those of its products competitors; ability to attract potential employees will be approximately equal to its labor market competitors -avoids placing an employer at a disadvantage in pricing products or in maintaining a qualified work force -may not provide an employer with a competitive advantage in its labor market

unemployment insurance overview

-benefits financed by federal and state taxes levied on employers -federal: employers pay 6.2% on first $7,000 earned by each employee -state: each company's additional state rate depends on its own experience with unemployment -lower percentages charged to employers with fewer discharged employees

consolidated omnibus budget reconciliation act (COBRA)

-coverage: employers with 20 or more employees -eligibility: current and former employees, their spouses and dependents -qualifying events: specified events (layoffs) -qualifying event coverage: 18 to 36 months, depending on category of event

family and medical leave act

-coverage: employers with 50 or more employees -for: unpaid leave up to 12 weeks/yr -eligibility: 12 months employment with employer in which employee works 1,250 hrs -qualifying events: specified family or medical reasons -conditions: employee must be able to return to same job or one with equal status -health benefits: continue while employee is on leave -notification: 30 days (when the event is expected)

how is external competitiveness expressed?

-determining a pay mix relative to those of competitors -setting a pay level: above, below, or equal to competitors

other medically related insurance plans

-disability (short term, long term) -vision -dental

pay level policy options: flexible policies

-employers have more than one pay policy -policy may vary for different job families (example: above market for critical skill groups, below or at market for others) -policy may vary for different pay elements or pay forms (example: above market in total compensation, below market in base pay, above market in incentives and rewards, at or above market in benefits)

workers compensation overview

-form of no-fault insurance -employer repliable for providing benefits to employees that result from work related injuries, occupational diseases, and death claims, regardless of fault -employees don't need to establish employers gross negligence, and employers is immune from lawsuits -exceptions: employers that intentionally contribute to dangerous workplace and employee injuries that are self-inflicted or stem from intoxication, willful disregard for safety rules -covered by state, not federal laws -employers pay premium to insurance company or state fund

strategic reasons for offering benefits

-help attract employees -help retain employees -increase job satisfaction -favorable tax treatment for qualified plans -elevate the image of the organization with employees and other organizations

organization factors

-industry and technology -employer size -organizational strategy some industries have an easier time paying people more money than others; some have thin profit margins and others have larger profit margins

reservation wage

-job seekers will not accept jobs with pay below a certain wage, no matter how attractive other job aspects -pay level will affect ability to recruit

organizational factors

-labor intensive industries generally do not pay as highly as technology intensive industries -larger organizations tend to pay more than smaller ones -the organizations business strategy and compensation objectives have implications for pay form and pay level decisions

what shapes external competitiveness?

-labor market factors (nature of demand, nature of supply) -product market factors (degree of competition, level of product demand) -organization factors (industry, strategy, size, individual manager)

miscellaneous benefits

-life and AD&D insurance -paid time off during working hours -payment for time not worked -child care -elder care -pet insurance -legal insurance

pay level policy options: lead policy

-maximizes ability to attract and retain quality employees and minimizes employee dissatisfaction with pay -may offset less attractive features of work -if used only to hire new employees, may lead to salary compression of current employees

pay level policy options: lag policy

-may hinder a firms ability to attract potential employees -if pay level is lagged in return for promise of higher future returns: may increase employee commitment, foster teamwork, may possibly increase productivity

cost control strategies

-motivate employees to change demand for health care: manipulate deductibles, coinsurance rates, co-pays, maximum benefits level -change structure of health care delivery: HMO v PPO -preventive health programs: smoking cessation, weight loss programs, more selective hiring

to be eligible for unemployment insurance

-not have left a job voluntarily -be able and available for work -be actively seeking work -not have refused offer of suitable employment -not be unemployed due to labor dispute (except in a few states) -not have been terminated for gross violations of conduct -must have been employed for a minimum period of time with sufficient prior earnings

the future of social security

-number of retired workers is rising without a corresponding increase in number of contributors to offset costs -reform options: increase payroll tax, decrease level of benefits, use general revenues, and have social security go to an employee's own account to be earmarked for his/her personal retirement

social security two main categories

-old age, survivor, and disability insurance -medicare, part A (compulsory hospital insurance)

signaling

-pay policies signal the kinds of behavior the employee seeks -pay practices must recognize desired behaviors with more pay, larger bonuses, and other forms of compensation

social security overview

-provides a basic foundation of security for American workers and their families -money comes from contributions made during working years by: employees, their employers, and self-employed people -for tax purposes, system is split into two programs: social security- 6.2% and medicare- 1.45% -employers and employees each pay these amounts

legally required benefits

-social security -workers compensation -unemployment insurance -FMLA and COBRA

decisions in pay-level determination

-specify pay level policy -define purpose of survey -specify relevant market -design and conduct survey -interpret and apply results -design grades and ranges or bands

human capital

-the value of an individuals skills and abilities is a function of the time and expense required to acquire them -higher pay is required to induce people to train for more difficult jobs

types of current health insurance plans

-traditional -health maintenance organization (HMO) -preferred provider organization (PPO) -consumer-driven health care (CDHC)

unemployment insurance

-virtually all workers covered under unemployment insurance laws, but must meet eligibly requirements to get benefits -payments typically continue for 26 weeks -extended benefits paid when there is high unemployment -benefits based on a percentage of an individuals earnings (usually 50%) over a recent 52-week period, up to a maximum amount set by that state

compensating differentials

-work with negative characteristics requires higher pay to attract workers -job evaluation and compensation factors must capture these negative characteristics

PPACA prominent provisions

1. dependents care up to age 26 on plans 2. health insurance "exchange" of private insurers 3. individual mandate; employers must have insurance from either employer or the exchange 4. guaranteed issue;plans are standardized in several ways;provide increased coverage for pre-existing conditions;minimum standards are imposed on health insurance plans, with no annual or lifetime caps allowed for "essential" benefits 5.pay or play; employers who don't offer health insurance to employees must pay a fee of $2,000 per employee to the government 6. Cadillac tax;. employers with very generous health insurance plans have to pay a "Cadillac" tax, ostensibly to motivate employers to control health care costs by selecting less expensive plans for their employee

what are employee benefits

1. employee protection programs 2. allowances "perks" 3. work-life balance programs

how organizations determine their relevant labor market

1. organizations that hire for the same occupation (work that is the same in terms of job, skills, or competencies) 2. geographic location (wages vary in different areas due to different costs of living) 3. size of competing firms (large firms usually pay more than smaller ones)

product market factors and ability to pay

1. product demand -puts a lid on maximum pay level an employer can set 2. degree of competition -in highly competitive markets, employers are less able to raise prices without loss of revenue -single sellers are able to set whatever price they choose

advantages of defined benefit plans

1. provides an explicit benefit which is easily communicated 2. company absorbs risk associated with changes in inflation and interest rates which affect cost 3. more favorable to long service employees 4. total employer costs are unknown

advantages of defined contribution plans

1. provides unknown benefit level is difficult to communicate 2. employees assume these risks 3. more favorable to short-term employees 4. total employer costs known upfront

medicare

a government health insurance program that covers almost all us citizens age 65 or older, and specifically covers hospitalization, convalescent care, and major doctor bills

preferred provider organization (PPO)

a select group of health care providers agree to provide price discounts and adhere to strict utilization controls (they agree to cost containment controls)

employee benefits questionnaire

a way of understanding what needs to go into a benefits package by surveying employees to discover which benefits they prefer

qualifying event

a worker can request to extend their company health insurance for 18 to 36 months (depending on the specific qualifying event) when such coverage would otherwise be lost

health savings account (HSA)

allow employees to set aside money tax-free, and they can use this money on health related expenses that insurance won't cover; there is no "use it or lose it" stipulation

defined benefit program

also known as a "pension", the employer makes a commitment in advance to a specific dollar amount payment to the retiree every month until that person dies

weighted mean

an average that gives more weight to pay data coming from organizations with more job incumbents

consumer driven health care (CDHC)

attempt to control costs while enabling employees to have more choices in health care; usually see things like plans with lower premiums but higher deductibles

mean

average pay rate

pay range

base pay in each grade has a range minimum and a range maximum

accidental death and dismemberment

clauses that pay additional money if the death is a result of an accident, or if there is a loss of a limb

compensation survey

conducted by an outside firm, lets organizations find out what competitors are paying

mental health parity and addiction act of 2008

does not require plans to provide mental health and substance use disorder benefits if they don't already do so;but if they do provide these benefits, the law simply requires that they are offered "on par" with physical health benefits when it comes to things like maximum benefits levels covered, deductibles, co-pays, treatment limitations

work-life balance programs

drug and alcohol counseling, referrals for child/elder care, telecommuting or flexible work schedules, paid time off

factors that influence choice of benefit package for employees

employee factors: 1. equity: fairness historically and in relationship to what others receive 2. personal needs as linked to: age, sex, marital status, and number of dependents

flexible spending accounts (FSA)

employees are allowed to pay for specified health care costs not covered by their insurance plan; employees decide ahead of time how much money to put into their account up to a limit specified by the federal government, then are reimbursed tax free by employers for those expenses during the year as they occur -use it or lose it

factors that influence choice of benefit package for employers

employer factors: 1. relationship to total compensation costs 2. costs relative to benefits 3. competitor offerings 4. role of benefits in: attraction and retention 5. legal requirements

flexible (or cafeteria style) benefit plan

employers give employees a fixed amount of money from which they can select their benefits

pension protection act of 2006 (PPA)

employers with under-funded defined benefit plans have to pay higher premiums

probationary period

excludes employees from participation in a benefit until some pre-set period has expired

range overlap

exists between adjacent pay grades; if overlap is large this means that one could earn almost as much in a lower pay grade as he/she could in the next higher grade -want to minimize overlap to motivate employees to work harder

determining externally competitive pay levels and structures

external competitiveness: pay relationships among organizations-->specify pay-->select market-->design survey-->draw policy lines-->merge internal and external pressures-->competitive pay levels, mix, and structures

claims

filed by employees when asserting that an insured against event has occurred

product demand

for the organizations goods or services places a ceiling (or upper limit) on how much they can spend on compensation related expenses -product market factor

allowances or perquisites

goods or services provided by the employer to employees (company car, country club membership)

family and medical leave

granted for specified family or medical reasons; leave is unpaid but health benefits are continued while employee is on leave; employee must be allowed to return to the same or a comparable job once the level expires

pay grades

group job evaluation data on the horizontal axis

pay level

have to determine how the jobs, skills, and/or competencies in our organization will be paid in relation to how that work is paid by other organizations (our relevant labor market)

experience rating

how frequently that organization has work related injuries and illnesses, and how severe these injuries and illnesses are

degree of competition

in the product market must be considered; in highly competitive markets, employers are constrained in how much they can pay employees -product market factors

total compensation

includes base pay, short term incentive pay, long term incentive pay, and benefits

employee retirement income security act of 1974 (ERISA)

intended to safeguard the investment interest of employees in retirement plans

health maintenance organization (HMO)

is a form of prepaid medical services

health insurance exchange

is a government regulated marketplace of exclusively private insurers (there is no "public option" in the legislation that passed); individuals can purchase health insurance that is eligible for federal subsidies

vesting

is a term used to describe how long the employee must work for the employer to actually "own" the contributions made to his/her retirement plan by the employer

disability insurance

is available for workers who are fully insured (40 quarters of coverage)and have met a minimum threshold for working within a recent time period

long term disability insurance

is between 6 months and life (and generally pays anywhere from 50-70% of regular pretax earnings)

short term disability insurance

is defined as 6 months or less (and generally pays anywhere from 50-100% of regular pretax earnings)

life insurance

is one of the most commonly-provided employee benefits, and confers a payment to a pre-specified beneficiary when the employee dies to deal with funeral and burial expenses, and to replace part of the lost household earnings

qualified plans

is one that meets certain legal stipulations, and most companies meet these stipulations so they can receive the favorable tax treatment

total cash

is the combination of base pay plus short term incentive pay, so it includes money paid in recognition of employee performance

deductible

is the portion of the cost of an insured event that an employee must pay first before the insurance company will pay the remainder

design/choose the survey

key issues to consider: various sources of salary survey data, how many employers to include, which jobs to include of examine (benchmark jobs, high-low approach, benchmark conversion/survey leveling)

R squared

key statistic from a regression analysis it tells you how well your internal alignment strategy predicts compensation survey data

a market line

links a company's benchmark jobs on the horizontal axis with market rates paid by competitors on the vertical axis

contributory benefits

meaning that the employee and employer both share part of the cost

employee-financed benefits

meaning that the employee choosing such a benefit pays the entire price

noncontributory benefits

meaning that the employer pays the full cost of the benefit

portability

means that you can take your retirement account with you when you change jobs -plan needs to be vested before it can be transferred

standard deviation

measures the extent to which values are tightly clustered around versus widely scattered from the mean

sorting effect

occurs when an organizations external competitiveness policy makes prospective employees gravitate toward different employers because they offer personally appealing pay systems

salary compression

occurs when salaries of new hires catches up to or exceeds the pay received by longer-tenured employees

traditional health insurance plan

only covers hospital expenses, surgical expenses, and physician charges

quartiles and percentages

order the data from lowest to highest, and then the distribution is "cut" into relevant percentages

survivor benefits

paid to (a) dependent, unmarried children of a deceased worker, (b) the spouse of a deceased worker paying for children, or (c) a widow or widower at least 60 years old

qualifying events

permissible changes to benefits during the plan year due to special circumstances like the birth of a child

unemployment insurance

programs that benefit individuals who become unemployed through no fault of their own

efficiency wage theory

proposes that higher wages can lead to greater efficiency and lower labor costs to the extent that those wages help the organization attract and retain more qualified employees, and increase employees efforts on the job

compensating differentials

prospective employees evaluate the "whole of the advantages and disadvantages of different employments" and choose to work for the employer that provides the highest "net advantage"

market line

purpose is to summarize what your relevant labor market is paying in a particular pay form for a series of benchmark jobs, as measured by the compensation survey

old age benefits

refer to retirement income provided by social security

coinsurance

refers to the part of the insurance premium that employees must pay

supply curve

represents the preferences of all employees who seek employment

copay

requires employees to pay for part of a benefit at the time the service is provided

employee protection programs

social security, health insurance

benefits ceiling

some benefits have limitations so that once a pre-specified ceiling is reached no further insurance benefit is provided

pay forms

sometimes refereed to as the "pay mix" and is simply an indication of what types of compensation will be paid to employees

human capital theory

states that individuals who invest in their education, training, and work experience expect to reap a return in the labor market

reservation wage theory

states that there is a minimum threshold of pay that individuals are willing to accept in exchange for their labor

signaling theory

suggests that the decisions employers make on pay level and pay form are construed by prospective employees as a signal for what kind of employee would "fit in" well with the organization

demand curve

summarizes the preferences of all employers in the labor market

pay policy line

summarizes your organizations pay level policy for a given form of pay

age/update

survey data to reflect an estimate of how much the market will move between when the compensation data was collected and when you will use it

base pay

tells you how your competitors are assessing the basic value of the work

employee benefits

that part of the total compensation package, other than pay for time worked, provided to employees in whole or in part by employer payments (life insurance, pension, workers compensation, vacation)

qualified plan

the benefit is available to all employees at their choosing

defined contribution plan

the employer makes specific contributions to individual employee retirement accounts (usually contingent on employee contributions that meet a pre-specified threshold)

relevant labor markets

the exact sample of organizations you elect for pay comparison purposes

marginal revenue product

the incremental revenue that results from hiring additional employees

mode

the most frequently cited pay rate

patient protection and affordable care act (PPACA or Obamacare)

the objective (and actual impact) of the law is not to make health care more affordable per se; the main thrust of this law is to increase the number of Americans who have health insurance coverage (which would hopefully contribute to managing health care costs with healthy individuals having more incentive to get insurance and pay the premiums)

select relevant market competitors

the relevant labor market includes employers who compete: for same occupations or skills, for employees in the same geographic area, with the same products and services, you might also consider some measure of organization size

external competitiveness

the systematic process of establishing how a single organizations pay will compare to other similar organizations

pay structure

to price our jobs, skills, and/or competencies with actual wage or salary dollar amounts

retirement and savings plans

two types: -defined benefits plans (pension) -defines contribution plans

regression analysis

used to connect our data points with the best fitting line (the one that best minimizes variations when summarizing lots of data)

benchmark conversion

used when a job in the survey is close to but not identical to a corresponding job; take your job evaluation manual to evaluate the survey job, and then you can estimate the difference in relative value between your job and the survey job

median

value in the middle of the distribution, which can minimize the impact of outliers `

workers compensation

was established as a form of no-fault insurance; the costs associated with work-related injuries and illnesses are a cost of doing business

open enrollment

when existing employees lock in permanent changes to their benefits for the following plan year

initial enrollment

when new hires choose their benefits prior to getting their first paycheck