HRMN 5470 Exam 1
Family & Medical Leave Act of 1993
Requires employers to provide employees 12 weeks of unpaid leave per year in case of family emergency; guarantees unpaid leave and the right to return to either the same position or a similar position with the same pay, conditions, and benefits; legally required benefit.
Executive Order 11246
Requires companies (employing 50 or more employees) that hold federal government contracts worth more than $50,000 to develop written affirmative action plans each year. (Pay Discrimination EO)
Four broad categories of performance appraisals
Trait systems Comparison systems Behavioral systems Goal-oriented systems
T/F: A hardworking, highly skilled employee is likely to choose to remain employed under an incentive system because both diligence and skill presumably contribute to higher quantity and quality of output - thus higher pay.
True
T/F: Research shows that incentives are often associated with higher performance.
True
Older workers benefit protection act
Under particular circumstances, employers may require older employees to pay more for health care, disability, or life insurance This is the case because these benefits cost more for older workers (an older worker may be more likely to become ill) Older workers cannot be required to pay more toward their insurance as a condition of employment Charging more cannot be a condition of employment Older workers could choose lower, less costly levels of cover, could pay more to maintain coverage, or drop out of the plan
traditional pay
generally includes an annual salary or hourly wage - Increased periodically on a seniority or merit basis with permanent increase to base pa
First Amendment to the Constitution
"Congress shall make no laws respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances."
Fifth Amendment to the Constitution
"No person shall...be deprived of life, liberty, or property without due process of law..."
Fourteenth Amendment, Section 1
"No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States, nor shall any State deprive any person of life, liberty, or property without due process of law; nor deny any person within its jurisdiction the equal protection of the law."
Article I, Section 8
"The Congress shall have the power...to regulate Commerce with foreign nations, and among the several States, and with the Indian Tribes..."
Incentive Pay
- Increases base pay on goal attainment with pay increase nonrecurring - Companies use incentive pay to reward individual employees, teams of employees, or whole companies based on their performance
Stakeholders
- employees - line managers -executives -unions - US govt
Disadvantages of Individual Incentive Pay Plans:
1. Can promote inflexibility. Because supervisors determine employee performance levels, workers under individual incentive plans are dependent on supervisors setting work goals. If worker becomes highly proficient, he/she is not likely to increase performance beyond reward compensation goal. 2. Poses measurement problems when management implements improved work methods or equipment. Employees will need time to become proficient performers under changes. 3. May encourage undesirable workplace behavior when plans reward only one or a subset of dimensions that constitute employees' total job performance.
Advantages of Individual Incentive Pay Plans:
1. Can promote the relationship between pay and performance. Employees strive for excellence when they expect to earn incentive awards commensurate with job performance. 2. Promote an equitable distribution of compensation within companies (i.e., the amount the employees earn depends on job performance). Enables companies to retain best performers. 3. Are compatible with such individualistic cultures as the United States.
Two advantages of group incentive plans for companies:
1. Companies can more easily develop performance measures for group incentive plans than they can for individual incentive plans. - fewer groups than individuals - Companies generally use fewer resources to develop performance measures for groups. 2. Greater group cohesion associated with group incentive plans. - Cohesive groups usually work more effectively toward achieving common goals than do individual group members.
Main advantages of profit sharing plans:
1. Enable employees to share in companies' fortunes 2. Companies gain greater financial flexibility
Main disadvantages for profit sharing plans:
1. May undermine the economic security of employees 2. May fail to motivate employees because they do not see the link between their efforts and corporate profits
360-degree performance appraisal methods
A performance evaluation system that uses ratings provided by supervisors, coworkers, subordinates, customers, and the employees themselves
team-based incentives (small-group incentive plans)
A small group of employees shares a financial reward when a specific objective is met. Rewards allocated three ways: 1. Equal incentive payments to all teak members. 2. Different payments to team members based on their contributions to the goal. 3. Different payments determined by a ratio of each team member's base pay to the total base pay of the group.
sorting effect
Addresses an employee's choice to stay versus to leave his/her employer for another job, presumably one without an incentive pay contingent.
Fair Labor Standards Act of 1938 (FLSA)
Addresses three main issues: minimum wage, overtime pay, and child labor provisions. (7.25/hr minimum wage, overtime pay is 1.5 times normal hr rate)
Bennett Amendment
Allows employees to charge employers with Title VII violations regarding pay only when the employer has violated the Equal Pay Act of 1963.
Link pay to performance
Always link pay to performance
Pregnancy Discrimination Act of 1978
An amendment to Title VII of the Civil Rights Act of 1964; prohibits disparate impact discrimination against pregnant women for all employment practices. Employers must treat pregnancy/childbirth as a disability. Protects women's rights who take leave for pregnancy-related reasons (seniority, retirement benefits).
Occupational Wage Differentials
An occupation is a group of jobs, found at more than one company, characterized by a: Common set of tasks, and related in terms of - Similar objectives - Methodologies - Materials - Products - Worker actions - Worker characteristics Two examples of occupations include - Office support (e.g., file clerks, clerk typists) - Human resources management (e.g., compensation analyst, training and development specialist) - Lawyers, judges, and related workers - Cooks and food preparation workers - Law enforcement workers (e.g., bailiffs, police officers)
Walsh-Healey Public Contracts Act of 1936
Applies to companies that sell to the federal government and have contracts worth at least $10,000. -Requires these companies to meet guidelines regarding wages and work hours, child labor, convict labor, and hazardous working conditions. -Contractors must observe the minimum wage and overtime provisions of FLSA. -In addition, the act prohibits the employment of individuals younger than 16 and convicted criminals. -Furthermore, it prohibits contractors from exposing workers to any conditions that violate the Occupations Safety and Health Act.
Discretionary Benefits
Are benefits that employers offer at their own choice. These benefits fall into three broad categories: protection programs, pay for time not worked, and services. EX:Internal Revenue Code, Employee Retirement Income Security Act, Pension Protection Act
Line Employees
Are directly involved in producing companies' goods or service delivery. Assembler, production worker, and sales employees are examples of these jobs.
Legally Required Benefits
Are legally mandated benefits that are protection programs, which attempt to promote worker safety and health, maintain family income stream, and assist families in crisis. EX: Social security act, workers comp, Family and medical leave act, Patient Protection and Affordable Care Act, Consolidated Omnibus Budget Reconciliation Act, Health Insurance Portability and Accountability act
management incentive plans
Award bonuses to managers when they meet or exceed objectives on sales, production, or other measures for their division, department, or unit. Often involves multiple complex objectives.
Current profit-sharing plans
Award cash to employees typically on a quarterly or annual basis ** company has to meet its goal
Four broad categories of rating errors
Bias errors Contrast errors Errors of central tendency Errors of leniency or strictness
referral plans
Companies commonly rely on ___________ _________to enhance recruitment of qualified employees. Employees receives monetary bonuses under these plans for referring new customers or recruiting successful job applicants
stock options
Describe an employee's right to purchase company stock.
Competitive Advantage
Describes a company's success based on employees' efforts to maintain market share and profitability over several years.
Core Compensation
Describes the monetary rewards employees receive. Includes two forms of base pay: hourly pay (or wage) and salary. Also includes seniority pay, merit pay, incentive pay, cost-of-living adjustments (COLAs), and pay for knowledge.
performance appraisals
Drive merit pay programs. Depend on (1) design of appraisal program (2) supervisors' use of ________ _______
Main disadvantage of group incentive compensation:
Employee turnover. • Implementation of group incentive program may lead to turnover due to the free-rider effect. • Free-rider effect: Some employees may make fewer contributions to the group because they possess lower ability, skills, or experiences than other group members. - Members who make greatest contributions are likely to leave overtime, especially if each group member is receiving the same compensation regardless of effort/contribution.
profit sharing plans
Employees earn a financial reward when their company's profit objective is met; • pay that is over and above COLAs and/or merit raises
Merit Pay
Employees earn permanent increases to base pay according to their performance. Merit pay rewards excellent effort or results, motivates future performance, and helps employers retain valued employees.
Exempt
Employees not covered by the overtime provisions of the Fair Labor Standards Act
behavioral encouragement plans
Employees receive payments for specific behavioral accomplishments (good attendance or safety records).
Lilly Ledbetter Fair Pay Act of 2009
Enables a female employee to file a charge of illegal pay discrimination within 180 days following receipt of a paycheck in which she feels that she may have been discriminated against.
gain sharing plans
Group incentive systems that give employees a financial reward based on improved company performance in areas such as increased productivity, lowering costs, and improving safety. Emphasizes employee involvement and giving suggestions. Three main components of most _____________ ______________ ________________: 1. Progressive leadership philosophy, involving a cooperative organizational climate 2. Employee involvement through suggestions and problem-solving ideas 3. Bonuses - awarded when productivity exceeds productivity targets
Improshare
Improved Productivity through Sharing—measures productivity physically rather than in terms of dollar savings like those used in the Scanlon and Rucker plans. These programs aim to produce more products with fewer labor hours. Under Improshare, the emphasis is on providing employees with an incentive to finish products. The Improshare bonus is based on a labor hour ratio formula
piecework plans
Individual incentive pay program, rewards employees based on their individual hourly production against an output standard, determined by the pace at which manufacturing equipment operates. For each hour, workers receive piecework incentives for every item produced over the designated production standard. Workers also receive a guaranteed hourly pay rate regardless of whether they meet the designated production standard.
Salary
Is a form of base pay. Employees earn salaries for performing their jobs, regardless of the actual number of hours worked. Is generally measured on an annual basis
Management by objectives (MBOs)
Is a goal-oriented performance-appraisal method; used mainly for professional employees; requires that supervisors and employees agree upon objectives; employees write their goal accomplishments; supervisors evaluates performance based on goal accomplishment. Advantage: can create effective communications between employee and supervisor. Drawbacks: time consuming; can create a "results at any cost" mentality
Behaviorally Anchored Rating Scale (BARS)
Is a specific kind of behavioral system, based on the critical incident technique (CIT). Use of examples of critical incidents to evaluate an employee's job performance behaviors directly
Behavioral Observation Scale (BOS)
Is a specific kind of behavioral system, displays illustrations of positive incidents (or behaviors) of job performance for various job dimensions. The evaluator rates the employee on each behavior according to the extent to which the employee performs in a manner consistent with each behavioral description. Drawbacks: time consuming to develop and maintain; demands continuous and close observation of employee, which is not possible when supervisors are responsible for several employees
Critical Incident Technique (CIT)
Is a specific kind of behavioral system, requires job incumbents and their supervisors to identify performance incidents (on-the-job behaviors and behavioral outcomes) that distinguish successful performance from unsuccessful ones.
Forced distribution
Is a specific kind of comparison performance appraisal system: in which raters assign employees to groups that represent the entire range of performance. Employees are assigned to groups that represent the range of performance (best, moderate, and poor performers). Drawbacks: can distort ratings because employee performance may not fall in these predetermined distributions; high chance for rater biases.
Deferred compensation
Is supposed to create a sense of ownership, aligning the interests of the executive with those of the owners or shareholders of the company over the long term.
Incentive pay
Known as variable pay. Rewards employees for partially or completely attaining a predetermined work objective.
Rehabilitation Act
Mandates that federal government agencies take affirmative action in providing jobs for individuals with disabilities (401 FEP Manual 325).
Potential performance appraisal liabilities
Merit pay increases based on factors other than job performance cam lead to discrimination (based on Equal Pay Act of 1963)
rating errors
Occur in performance appraisals (PAs) when the PAs reflect differences between human judgment processes versus objective, accurate assessments uncolored by bias, prejudice, or other subjective, extraneous influences.
bias errors
Occur in the performance evaluation process when the rater evaluates the employee based on the rater's negative or positive opinion of the employee rather than on the employee's actual performance.
errors of central tendency
Occur when raters judge all employees as average
contrast errors
Occurs when a rater compares an employee to other employees rather than to specific explicit performance standards.
negative halo effect
Occurs when a rater generalizes employee's negative behavior on one aspect of the job to all aspects of the job; bias error
positive halo effect
Occurs when a rater generalizes employee's positive behavior on one aspect of the job to all aspects of the job; bias error
first-impression effect
Occurs when a rater makes an initial favorable or unfavorable judgment about an employee and then ignores or distorts the employee's actual performance based on this impression; bias error
illegal discrimination bias
Occurs when a supervisor rates members of his or her race, gender, nationality, or religion more favorably than members of other classes; bias error
leniency error
Occurs when supervisors rate everyone high on the scale
strictness error
Occurs when supervisors rate everyone low on the scale
5 types of individual incentive plans
Piecework plans Management incentive plans Behavioral encouragement plans Referral plans Spot bonuses
deferred profit sharing plans
Place cash awards in trust accounts for employees - Source of retirement income - Can also be considerer a long term incentive
Scanlon Plan
Plan's main components: Emphasis on employee involvement in teamwork to reduce costs Two-tiered cost-savings suggestion system: 1. production-level committees 2. company-wide screening committees -Equation = labor costs/SVOP
Americans with Disabilities Act of 1990 (ADA)
Prohibits discrimination against qualified individuals with mental or physical disabilities within and outside employment settings, including public services and transportation, public accommodations, and employment. Applies to employers with 15 or more employees. "Qualified individual with a disability" must be able to perform the essential functions of a job; employer may make reasonable accommodations.
Civil Rights Act of 1964
Prohibits discrimination on the basis of sex, race, color, religion or national origin*** - Governs private employers, unions, employment agencies, federal, state and local governments - Title VII also brought about the Equal Employment opportunity commission (EEOC) - You have 180 days to bring a complaint to the EEOC and EEOC has 60 days to investigate and determine if there Is sufficient evidence to bring about a case
Title VII of the Civil Rights Act of 1964
Promotes equal employment opportunities for underrepresented minorities.
Worker's Compensation
Provided income to workers who were unable to work due to injuries sustained on the job.
Lowest-cost Strategy
Referred to as cost leadership. Focuses on gaining competitive advantage by being the lowest-cost producer of a product or service within the marketplace, while selling the product of service at a price advantage relative to the industry average.
paired comparisons
Refers to a specific kind of comparison method for appraising job performance. Supervisors compare each employee to every other employee, identifying the better performer in each pair. Drawbacks: small perceived performance differences between employees may become exaggerated if supervisors have to distinguish among levels of employee performance; high chance for rater biases.
trait system
Refers to a type of performance-appraisal method, requires raters to evaluate each employee's traits or characteristics (quality of work, quantity of work, appearance, dependability, cooperation, initiative, judgment, leadership responsibility, decision-making, ability, and creativity). Drawbacks: Highly subjective; difficult to defend
incentive effect
Refers to a worker's willingness to work diligently to produce more quality output than simply attending work without putting in the effort.
Human Capital
Refers to employees' knowledge and skills, enabling them to be productive.
human capital
Refers to employees' knowledge and skills, enabling them to be productive.
similar-to-me effect
Refers to the tendency on the part of raters (e.g., supervisors) to judge employees favorably who they perceive as similar to themselves; bias error
Geographic pay differential
Relative pay differentials are often expressed as the percentage difference between a specific location and the national average - The relative pay differential for Los Angeles is 20% higher than the national average - The relative pay differential for Lincoln, Nebraska is 3% less than the national average * Pay rate differentials do NOT control for the influence of other variables**
behavioral systems
Represent a type of performance appraisal method, require that raters judge the extent to which employees display successful job performance behaviors.
Comparison systems/ranking
Represent a type of performance-appraisal method: require that raters evaluate a given employee's performance attainments. Employees are ranked from the best performer to the poorest performer. Drawbacks: small perceived performance differences between employees may become exaggerated if supervisors have to distinguish among levels of employee performance; high chance for rater biases.
Stock compensation plans
Represent an important type of deferred compensation for executive.
Services
Represent discretionary employee benefits that provide enhancements to employees and their families (tuition reimbursement and day care assistance).
Employee stock option plans
Represent one type of companywide incentive. Companies grant employees the right to purchase shares of company stock
Pay Structures
Represent pay rate differences for jobs of unequal worth and the framework for recognizing differences in employee contributions.
Cost of Living Adjustments (COLAs)
Represent periodic base pay increases that are based on changes in the prices, as indexed by the consumer price index (CPI). Enable workers to maintain their purchasing power and standard of living by adjusting base pay for inflation. Is an adjustment to core compensation.
Wage
Represents a form of base pay. Employees earn hourly pay for each hour they work.
Hourly Pay
Represents a form of base pay. Employees earn this type of pay, which is sometimes referred to as wage, for each hour they work.
Paid Time Off
Represents discretionary employee benefits (vacation time) that provide employees time off with pay.
stock shares
Represents equity segments of equal value. Equity interest increases positively with the number of stock shares held.
Compensable Factors
Represents job attributes (skill, effort, responsibility, and working conditions) that compensation professionals use to determine the value of jobs.
Employee Benefits
Represents nonmonetary compensation. Includes any variety of programs that provide paid time off (vacation), employee services, (transportation services), and protection programs (life insurance).
Base Pay
Represents the monetary compensation employees earn on a regular basis for performing their jobs. Hourly pay (or wage) and salary are the main forms.
company stock
Represents total equity or worth of a company.
Equal Pay Act of 1963
Requires that men and women should receive equal pay for performing equal work. Applies to jobs of substantially equal worth based on compensable factors: skill levels, effort, responsibilities, and similar working conditions. Enforced by Equal Employment Opportunity Commission (EECO).
ADA Amendments Act of 2008
Retains the basic definition of "disability" under the ADA. However, it expands the definition of "major life activities" by including two lists of activities: The first list includes Equal Employment Opportunity Commission (EEOC) recognized activities such as walking and some not-specifically recognized EEOC activities such as bending, communicating, and reading. The second list includes major bodily functions. In short, this Act stresses that the definition of disability should be interpreted in favor of broad coverage of individuals to maximum extent permitted by the terms of the ADA.
group incentive plans
Reward employees for their collective performance Use has increased in industry Two types: Team based or small group Gain sharing
Companywide incentives
Reward employees when the company exceeds minimum acceptable performance standards (e.g., profits or overall value of the company based on its stock price).
Company-Wide Incentive Plans
Rewards employees when company meets performance standards Two types -Profit sharing plans -Employee stock options
merit pay programs
Rewards employees with permanent increases based on job performance. Represents an adjustment to core compensation. Most common in private sector. Generally based on subjective appraisal of employee performance.
Longevity Pay
Rewards with permanent additions to base pay those employees who have reached pay grade maximums and who are not likely to move into higher pay grades. Used by state and local governments as incentive to: (1) stay on the job; reduce employee turnover and (2) reward employees for continuous years of service. Represents an adjustment to core compensation.
Civil Rights Act of 1991
Shifted the burden of proof of disparate impact from employees to employers overturning several U.S. Supreme Court rulings: Antonio v. Wards Cove Packing Co., Lorance v. AT&T Technologies, and Boureslan V. Aramco.
Rucker Plan
Similar to Scanlon Plan. This plan: • Emphasizes employee involvement and monetary incentives • Uses a value-added formula to measure productivity: - the difference between the value of the sales prices and the value of materials used to make the product • equation = (value added) - (costs of materials, supplies, services rendered)/ Total employment costs (wages, salaries, payroll taxes, etc.) • A larger _____________ ratio indicates that the value added is greater than the total employment costs.
Human Resource Strategies
Specify the particular use of HR practices to be consistent with competitive strategy.
Davis-Bacon Act of 1931
Standards for contractors with federal (contracts Contracts valued at more than $2,000) - Applies to on-site laborers and mechanics - Contractors must pay wages at least equal to the prevailing wage in the local -The act also requires that contractors offer fringe benefits that are equal in scope and value to fringe compensation that prevails in the local area.
human capital theory
States that employees' knowledge and skills generate productive capital known as human capital. Employees can develop knowledge and skills from formal education and/or on-the-job experiences.
Paycheck Fairness Act
Strengthens Equal Pay Act of 1963 by strengthening the remedies available to put sex-based pay discrimination on par with race-based pay discrimination. Employers are now required to justify unequal pay by showing that the pay disparity is not sex based, but, rather, job related. Prohibits employers from retaliating against employees who share salary information with their coworkers.
Staff Employees
Support the functions performed by line employees. Human resources and accounting are examples of these functions.
individual incentive plans
These plans reward employees whose work is performed independently. Some companies have piecework plans, typically for their production employees. Under piecework plans, an employee's compensation depends on the number of units she/he produces over a given period.
Goal-oriented systems
a type of performance appraisal plan used mainly for managerial and professional employees and typically evaluate employees' progress toward strategic planning objectives
Age Discrimination in Employment Act of 1967 (ADEA)
age 40 and over from illegal discrimination in employment, pay, and benefits.
project teams
consist of a group of people assigned to complete a one-time project - Ex: Engineers working on the construction of a bridge
pay rate differentials
do NOT control for the influence over other variables
Protection Programs
employee benefits that provide family benefits, promote health, and guard against income loss caused by such catastrophic factors as unemployment, disability, or serious illness.
Nonexempt
employees covered by the FLSA requirements for overtime pay - earn less than $455 per week or 23,660 per year
where are the compensable factors defined
equal pay act
parallel teams
include employees assigned to work on a specific task in addition to normal work duties
Extrinsic Compensation
includes both monetary and non-monetary rewards (benefits, vacation days)
work teams
refer to organizational units that perform the work of the organization on an ongoing basis - Ex: Customer service teams, assembly teams on production lines
Human Capital Theory
refers to sets of collective skills, knowledge, and abilities (KSAs) that employees can apply to create value for their employers
Strategic Compensation
refers to the design and implementation of compensation systems to reinforce the objectives of both HR strategies and competitive business strategies
interindustry wage differentials
represent the pattern of pay and benefits associated with characteristics of industries. Interindustry wage differentials can be attributed to a number of factors, including the industry's product market, the degree of capital intensity, the profitability of the industry, and unionization of the workforce Industry's product market: Where there is little competition (mining, utilities), there is greater flexibility for providing higher wages - Capital intensity: The extent to which companies' operations are based on the use of large-scale equipment, and capital intensity is associated with higher wages - Industry profitability: Presumably, employee higher levels of knowledge, skills and abilities contribute to company profitability, which, in turn, is associated with higher wages - Unionization of the workforce: More highly unionized industries pay more highly, in part, because the collective bargaining process gives labor greater leverage for negotiating higher wages and benefits
Intrinsic Compensation
represents employees' critical psychological states that result from performing their jobs; not a paycheck EX: experiencing a great feeling from the belief that one's work matters in the lives of others
Compensation
represents the rewards employees receive for performing their jobs represents both the intrinsic and extrinsic rewards employees receive for performing their jobs and for their membership as employees. Together, both intrinsic and extrinsic compensation describe a company's total compensation system
Pay-for-Knowledge Plans
reward managerial, service, or professional workers, for successfully learning specific curricula
Seniority Pay
seniority pay systems reward employees with periodic additions to base pay according to employees' length of service in performing their jobs
spot bonus
type of individual incentive: employees receive small monetary gifts for outstanding work or effort during a reasonably short time period (ex giftcards)
Skill-Based Pay
used mostly for employees who perform physical work and increases these workers' pay as they master new skills