MGT 3070 Exam 4

what are legal requirements for employee benefits?

-benefits required by law -tax treatment of benefits -antidiscrimination laws -accounting requirements

what are forms of pay for group performance (group incentives) ?

-gainsharing -bonuses -team awards Employers may address the drawbacks of individual incentives by including group incentives in the organization's compensation plan. To win group incentives employees must cooperate and share knowledge so that the entire group can meet its performance targets

Forms of group insurance:

-medical insurance -life insurance -disability insurance -long term care insurance Rates for group insurance are typically lower than for individual policies. Also, insurance benefits are not subject to income tax, as wages and salaries are. When employees receive insurance as a benefit, rather than higher pay so they can buy their own insurance, employees can get more for their money. Because of this, most employees value group insurance. The most common types of insurance offered as employee benefits are medical, life, and disability insurance.

what are some optional benefits programs?

-paid leave -group insurance -retirement plans -"family friendly" benefits -other quality of work-life benefits

Types of pay for organizational performance

-profit sharing -stock options -employee stock ownership plans (ESOPs)

*pay cycle* Why is Kimberly's raise so high?

-she is female-gender bias, women are not in their minimus -new in position -she has the lowest company ratio

Considerations for setting up a profit- sharing plan

1.Get everyone on board with the plan. 2.Make sure employees understand how the plan works. 3.Identify the behaviors and results that contribute to greater profits. 4.Consider linking rewards to the department's or division's performance, if profits can be assigned to the group. 5.Time the profit-sharing payments for maximum effect.

Employer approaches to controlling health care benefits costs:

1.Managed Care-cutting off insurance and care for patients 2.Health Maintenance Organizations (HMO)- limited number of specialists 3.Preferred Provider Organizations (PPO)-network of specialists 4.Flexible Spending Accounts- set amount of money to spend within a year -> reverts back to you if not spent 5.Consumer-Driven Health Plans (CDHP) 6.Employee Wellness Programs (EWP)

Effective incentive pay plans meet the following requirements:

1.Performance measures are linked to the organization's goals. 2.Employees believe they can meet performance standards. 3.The organization gives employees the resourcesthey need to meet their goals. 4.Employees value the rewards given. 5.Employees believe the reward system is fair. 6.The pay plan takes into account that employees may ignore any goals that are not rewarded. For incentive pay to motivate employees to contribute to the organization's success, the pay plans must be well designed. In particular, effective plans meet the requirements listed on this slide.

decisions about merit pay are based on two factors:

1.The individual's performance rating, and 2.The individual's compa-ratio (pay relative to average pay, as defined in our discussion of Chapter 11)

To receive benefits under unemployment insurance, workers must meet four conditions:

1.They meet requirements demonstrating they had been employed. 2.They are available for work. 3.They are actively seeking work. 4.They were not discharged for cause, did not quit voluntarily, and are not out of work because of a labor dispute. Workers who meet these conditions receive benefits at the level set by the state - typically about half the person's previous earnings - for a period of 26 weeks. All states have minimum and maximum weekly benefit levels.

•For every $1 you contribute to your company _____________, your company will contribute 50 cents. About 40% of companies contribute 50 cents for every dollar employees contribute up to 6% of their pay. Another 38% match employee contributions dollar for dollar, but the maximum is normally lower - commonly 3%

401(k)

-Federal law that requires employers to permit employees or their dependents to extend their health insurance coverage at group rates for up to 36 months following a qualifying event: •Layoff •Reduction in hours •Employee's death

Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985

•retirement plan in which the employer sets up an individual account for each employee and specifies the size of the investment into that account. -Section 401(k) plans •These plans free employers from the risks that investments will not perform as well as expected. •The responsibility for wise investing is with each employee. -401K

Defined contribution plan

federal law that increased the responsibility of pension plan trustees to protect retirees, established certain rights related to vesting and portability, and created the Pension Benefit Guarantee Corporation.

Employee Retirement Income Security Act (ERISA)

•______________ have responded to work-family role conflicts by offering family-friendly benefits. •In deciding the contents of a benefits package, organizations need to establish objectives and select benefits that support those objectives. •Organizations should also consider employees' expectations and values. •Employers must comply with the numerous laws and regulations affecting how they design and administer benefits programs.

Employers

•_________________ must contribute to the Old Age, Survivors, Disability, and Health Insurance program known as Social Security through a payroll tax shared by employers and employees. •Employers must also pay federal and state taxes for unemployment insurance. •State laws require that employers purchase workers' compensation insurance. •The major categories of paid leave are vacations, holidays, and sick leave.

Employers

•Employers must not base differences in pay on an employee's age, sex, race, or other protected status. •Any differences in pay must be tied to such business-related considerations as job responsibilities or performance. •The goal is for employers to provide equal pay for equal work. -These laws do not guarantee equal pay for men and women, whites and minorities, or any other groups, because so many legitimate factors, from education to choice of occupation, affect a person's earnings.

Equal Employment Opportunity

federal law that establishes a minimum wage and requirements for overtime pay and child labor. In the United States, employers must pay at least the minimum wage established by law. A wage is the rate of pay per hour.

Fair Labor Standards Act (FLSA)

ØIn U. S. spends more on health care than any other country ØHealth-care expenditures have risen from 5.3 % of GNP in 1960 to 15.3% today. ØCost control attempts - by employers such as managed care, fall into six major categories: 1.plan design 2.use of alternative providers 3.use of alternative funding methods 4.claims review 5.education and prevention 6.external cost control systems Ø ØTrend - to shift costs to employees through use of deductibles, coinsurance, exclusions and limitations and maximum benefits.

Healthcare: controlling costs and improving quality

_______________________ is pay tied to individual performance, profits, or other measures of success. Organizations select forms of incentive pay to energize, direct, or control employees' behavior. •To be effective, incentive pay should encourage the kinds of behaviors most needed, and employees must believe they have the ability to meet the performance standards. •Employees must value the rewards, have the resources they need to meet the standards, and believe the pay plan is fair.

Incentive pay

forms of pay linked to an employee's performance as an individual, group member, or organization member. •Incentive pay is influential because the amount paid is linked to certain predefined behaviors or outcomes. - reinforcement •For incentive pay to motivate employees to contribute to the organization's success, the pay plans must be well designed. Along with wages and salaries, many organizations offer _____________________- that is, pay specifically designed to energize, direct, or control employees' behavior. -not standard pay -reinforced routine

Incentive pay

•The relative pay for different jobs within the organization •Accountant vs. Engineer

Job structure

____________________ is one of the most valued employee benefits. •To manage the costs of health insurance, many organizations offer coverage through a health maintenance organization or preferred provider organization, or they may offer flexible spending accounts. •Retirement plans may be contributory or noncontributory. These plans may be defined benefit plans or defined contribution plans.

Medical insurance

•90% of all full-time employees in the U.S. receive medical benefits •Policies typically cover: -Hospital expenses -Surgical expenses -Visits to physicians •Additional coverage may include: -Dental care -Vision care -Birthing centers -Prescription drug programs •Mental Health Parity Act (1996)

Medical insurance

•_________________- may recognize individual performance through such incentives as piecework rates, standard hour plans, merit pay, sales commissions, and bonuses for meeting individual performance objectives. •Common group incentives include gainsharing, bonuses, and team awards. •Incentives for meeting organizational objectives include profit sharing and stock ownership.

Organizations

•The overtime rate under the FLSA is 1½ times the employee's usual hourly rate, including any bonuses, and piece-rate payments. •Exempt employees - managers, outside salespeople, and other employees notcovered by the FLSA requirement for overtime pay. •Nonexempt employees - employees covered by the FLSA requirements for overtime pay. Another requirement of the FLSA is that employers must pay higher wages for overtime, as defined as hours worked beyond 40 hours per week.

Overtime Pay

-Most flexible approach -Employer pools pools personal days, sick days, and vacation days for employees to use as the need arises •Vacation •Holidays •Sick Leave •Personal Days •Floating Holidays •Jury Duty •Funerals •Military Duty •Time Off to Vote

Paid Time Off (PTO)

federal agency that insures retirement benefits and guarantees retirees a basic benefit if the employer experiences financial difficulties.

Pension Benefit Guarantee Corporation (PBGC)

•Performance bonuses are not rolled into base pay. •The employee must re-earn them during each performance period. •Sometimes the bonus is a one-time reward. •Retention bonus; stay - on bonus Bonuses for individual performance can be extremely effective and give the organization great flexibility in deciding what kinds of behavior to reward.

Performance bonuses

•20 % of employees responsible for generating often 60 to 80 % of health care costs •Cost control efforts will be more successful to the extent that the costs generated by the Pareto group can be identified and managed effectively •Issues Since 2000, health care premium costs have more than doubled. Two important phenomena are often encountered in cost control efforts. First, piecemeal programs may not work well because steps to control one aspect (such as medical cost shifting) may lead employees to "migrate" to other programs that provide medical treatment at no cost to them (like workers' compensation). Second, there is often a Pareto group, which refers to a small percentage (perhaps 20 percent) of employees being responsible for generating the majority (often 60 to 80 percent) of health care costs. Obviously, cost control efforts will be more successful to the extent that the costs generated by the Pareto group can be identified and managed effectively.

Phenomena in Cost Control Efforts

•A wage based on the amount workers produce. •Quality , CS issues As an incentive to work efficiently, some organizations pay production workers a________________________, a wage based on the amount they produce. reinforces getting stuff done quickly

Piecework rate

*pay cycle* why is James % higher than Scotts or lower?

Scott is topping out in his range so therefore he cant go higher, going to max out if he continues to perform well -give him a lower raiser but give bonus on the side

•Employers and employees share the cost of Social Security through a payroll tax. The percentage is set by law. •In 2008, employers and employees each paid a tax of 7.65% on the first $102,000 of the employee's earnings -6.2% of earnings goes to OASDHI -1.45% of earnings goes to Medicare (Part A) -For earnings above $102,000 only the 1.45% for Medicare is assessed •Why people who claim Social Security early often live to regret it Workers who meet eligibility requirements receive the retirement benefits according to their age and earnings history. Employers and employees share the cost of Social Security through a payroll tax. -take out social security after age 62, get more money the older you are

Social Security

•The federal Old Age, Survivors, Disability, and Health Insurance (OASDHI) program which combines: -Old age (retirement) insurance -Survivor's insurance -Disability insurance -Hospital insurance (Medicare Part A) -Supplementary medical insurance (Medicare Part B) In 1935 the federal Social Security Act established old-age insurance and unemployment insurance. Congress later amended the act to add survivor's insurance (1939), disability insurance (1956), hospital insurance (Medicare Part A, 1965), and supplementary medical insurance (Medicare Part B, 1965) for the elderly. Together, the law and its amendments created what is now the Old Age, Survivors, Disability, and Health Insurance (OASDHI) program, informally known as

Social Security

What are the benefits required by Law?

Social security unemployment insurance workers compensation insurance family and medical leave health care

•Incentive pay in which the employer pays the same rate per piece, no matter how much the worker produces. •$.80 per component

Straight Piecework plan

1.Shop for bargains. Every year, the company should research available plans and compare quotes from different providers. 2.Know what employees care about. Would they be willing to accept a higher deductible if it means the company can also afford prescription drug coverage? 3.If employees are willing to take responsibility for their own health care spending, offer a health- savings account or consumer-driven plan. With the cost of health care continuing to soar, employers are trying to help employees stay healthy and use their benefits efficiently. This slide (and the one that follows) presents some ways companies have slowed the rise in their health benefits costs.

Suggested ways employers can control the cost of health benefits

is one of the important 401(k) plan documents that provides plan participants (and their beneficiaries) with the most important details of their benefit plan,

The Summary Plan Description (SPD)

•Family and Medical Leave Act (FMLA) of 1993 -Requires organizations with 50 or more employees to provide up to 12 weeks of unpaid leave: •After childbirth or adoption •To care for a seriously ill family member •For an employee's own serious illness -Employers must also guarantee these employees the same or comparable job when they return to work. In the United States, unpaid leave is required by law for certain family needs. Recent amendments signed into law expand the coverage for time off to care for an injured family member returning home from military combat.

Unpaid Family and Medical Leave

•When employees experience pregnancy and childbirth, employers must also comply with the Pregnancy Discrimination Act. •If an employee is temporarily unable to perform her job due to pregnancy, the employer must treat her in the same way as any other disabled employee. -e.g., modified tasks, alternative assignments, disability leave, or leave without pay

Unpaid Family and Medical Leave

•State programs that provide benefits to workers who suffer work-related injuries or illnesses, or to their survivors. •They operate under a principle of no-fault liability: -An employee does not need to show that the employer was grossly negligent in order to receive compensation. -The employer is protected from lawsuits. Prior to workers' compensation laws, employees who suffered work-related injury or illness had to bear the cost unless they won a lawsuit against their employer. Those who sued often lost the case because of the defenses available to employers.

Workers' compensation

•Mariah found out that a friend of hers with a similar job in the same town makes significantly more money than she does. Which of the following is probably not the cause of this? a)Different cost-of-living b)The companies are in different product markets with different pay strategies c)Mariah is a poor performer d)Mariah's job is non-exempt

a)Different cost-of-living

delayering and skill based pay systems

alternatives to job-based pay

finding companies ratio

any salary in relation to midpoint

•XYZ company has determined that they will have to reduce their benefits costs to stay competitive. Which of the following solutions is not a choice for XYZ? a)Eliminate health coverage b)Reduce the percentage of employees' Social Security insurance they pay. c)Reduce their unemployment insurance costs by managing their workforce to avoid layoffs. d)Institute a safety program to minimize worker's compensation costs.

b)Reduce the percentage of employees' Social Security insurance they pay.

a combination of performance measures directed toward the company's long- and short-term goals and used as the basis for awarding incentive pay •The four categories of a balanced scorecard caninclude: -financial -customer -internal -learning and growth Any form of incentive pay has advantages and disadvantages. Because of this, many organizations design a mix of pay programs. The aim is to balance the disadvantages of one type of incentive pay with the advantages of another type. One way of accomplishing this goal is to design a ___________________________ - a combination of performance measures directed toward the company's long- and short-term goals and used as the basis for awarding incentive pay.

balanced scorecard

•A ____________________________ can be used as the basis for awarding incentive pay. It also helps employees to understand and care about the organization's goals. •The mix of pay programs is intended to balance the disadvantages of one type of incentive with the advantages of another type. •Communication and participation in decisions can contribute to employees' feelings that the organization's incentive pay plans are fair.

balanced scorecard

•It combines the advantages of different incentive pay plans. •It helps employees understand the organization's goals. •By communicating the balanced scorecard to employees, the organization shows employees information about what its goals are and what it expects employees to accomplish. -creating meaningful metrics that can't be manipulated

balanced scorecard

•a procedure in which an organization compares its own practices against those of successful competitors •Pay surveys •Trade and industry groups •Professional groups •Bureau of Labor Statistics (BLS) •Society for Human Resource Management (SHRM) •American Management Association -employees do this too now with the internet

benchmarking

•Communicating information about ________________ is important so that employees will appreciate the value of their benefits. •Communicating their value is the main way benefits attract, motivate, and retain employees.

benefits

•Like pay, _____________ help employers attract, retain, and motivate employees. The variety of possible benefits also helps employers tailor their compensation packages to attract the right kinds of employees. •Employees expect at least a minimum level of benefits, and providing more than the minimum helps an organization compete in the labor market. •Benefits are also a significant expense, but employers provide benefits because employees value them and many benefits are required by law.

benefits

•Jakar does not know a lot about investing and wants to ensure he has some retirement income when he is old enough to retire. Agnes plans on changing employers every few years and is interested in investing her own money. Which plan would be best for Jakar and Agnes, respectively? a)Defined contribution; defined benefit b)Contributory; defined benefit c)Defined benefit; defined contribution d)Defined contribution; non-contributory

c)Defined benefit; defined contribution

•To correct a Red-circled employee, I would..... a)Give them a raise b)Demote them c)Give them a bonus, but no raise d)Move them to a job with a higher pay range

c)Give them a bonus, but no raise

•John works twisting pretzels in a pretzel factory. Pablo works on IT systems integration at a credit card company. The best pay plans for these individuals would be ________ and _______, respectively.

c)Piecework, Merit pay

•Children aged 16 and 17 may not be employed in hazardous occupations defined by the U.S. Department of Labor. •Children aged 14 and 15 may work only outside school hours, in jobs defined as nonhazardous, and for limited time periods. •A child under age 14 may not be employed in any work associated with interstate commerce. •Exemptions include baby-sitting, acting, and delivering newspapers. The FLSA sharply restricts the use of child labor, with the aim of protecting children's health, safety, and educational opportunities. The restrictions apply to children younger than 18.

child labor

•Organizations must communicate benefits information to employees so that they will appreciate the value of their benefits. •Employees are interested in their benefits, and they need a great deal of detailed information to take advantage of benefits. •websites

communicating benefits to employees

• demonstrates to employees that the pay plan is fair. •When employees understand the requirements of the incentive pay plan, the plan is more likely to influence their behavior as desired. •Book eg •Important when the pay plan is being changed.

communication

•_________________________ is especially important when the organization is changing its pay plan. •Because executives have such a strong influence over the organization's performance, incentive pay for them receives special attention. Performance measures should encourage behavior that is in the organization's best interests, including ethical behavior.

communication

•the ratio of average pay to the midpoint of the pay range. • If the average equals the midpoint, CR is 1. • If CR is greater than 1, the average pay is above the midpoint. • IF CR is less than 1, the average pay is below the midpoint. When compa-ratios are more or less than 1, the numbers signal a need for the HR department to work with managers to identify whether to adjust the pay structure or the organization's pay practices. Thecompa-ratios may indicate that pay structure no longer reflects market rates of pay. Or perhaps performance appraisals need to be more accurate

compa-ratio (CR)

•The characteristics of a job that the organization values and chooses to pay for. -Experience -Education -Complexity -Working conditions -Responsibility

compensable factors

• There is currently a strong demand for nurses in the labor market. •Hospitals will have to pay ______________ wages and other perks to attract and retain staff.

competitive

•To remain _____________________, employers must meet the demands of the product and labor markets. •Limit their costs as much as possible. •Pay at least the going rate in their labor markets. •According to equity theory, employees think of their pay relative to their inputs - training, experience, and effort. •To decide whether their pay is equitable, they compare their outcome (pay)/input ratio with other people's outcome/input ratios.

competitive

the overtime ay for an employee who works 50 hours to earn a base rate of $10 per hour plus a weekly bonus of $30. The overtime pay is based on the base pay ($400) plus the bonus ($30), for a rate of $10.75 per hour. For each of the 10 hours of overtime, the employee would earn $16.13, so the overtime pay is $161.30 ($16.13 times 10). When employees are paid per unit produced or when they receive a monthly or quarterly bonus, those payments must be converted into wages per hour, so the employer can include these amounts when figuring the correct overtime rate.

computing overtime pay

Although labor and product markets limit organizations' choices about pay levels, there is a range within which organizations can make decisions. The size of this range depends on the details of the organization's competitive environment. If many workers are competing for a few jobs, employers will have more choice. Employers can be more flexible about pay policies if they use technology and work design to get better results from employees than competitors do.

deciding what to pay

•Reducing the number of levels in the organization's job structure. •More assignments are combined into a single layer. •These broader groupings are called broad bands. •More emphasis on acquiring experience, rather than promotions. The traditional and most widely used approach to developing a pay structure focuses on setting pay for jobs or groups of jobs. This emphasis on jobs has some limitations.

delayering

•Incentive pay in which the piece rate is higher when a greater amount is produced. •$1 for components over 12 / hr

differential piece rates

product markets and labor markets

economic influences on pay

•Organizations can address differences in employees' needs and empower their employees by offering flexible benefits plans in place of a single benefits package for all employees. •Cafeteria-style plan: a benefits plan that offers employees a set of alternatives from which they can choose the types and amounts of benefits they want.

employee expectations and values

Why did companies like IBM get sued for not classifying employees correctly?

employees did overtime and didn't get paid for it, were supposed to be classified as non-exempt

•To meet the standard of ____________________________________-, employers must provide equal pay for equal work, regardless of an employee's age, race, sex, or other protected status. •Differences in pay must relate to factors such as a person's qualifications or market levels of pay. •Under the Fair Labor Standards Act (FLSA): •The employer must pay at least the minimum wage established by law. •Overtime pay for hours worked beyond 40 in each week must be paid.

equal employment opportunity

______________ tells organizations that employees care about their pay relative to what others are earning and that these feelings are based on what employees perceive (what they notice and form judgments about). An organization can do much to contribute to what employees know and, as a result, what they perceive. If the organization researches salary levels and concludes that it is paying its employees generously, it should communicate this. If the employees do not know what the organization learned from its research, they may reach an entirely different conclusion about their pay.

equity theory

____________________ has drawn public scrutiny because top executive pay is much higher than average workers' pay. •The great difference is an issue in terms of equity theory. •Employees' opinions about the equity of executive pay can have a large effect on the organization's performance.

executive pay

group incentive program that measures improvements in productivity and effectiveness and distributes a portion of each to employees. • addresses the challenge of identifying appropriate performance measures for complex jobs. • frees employees to determine how to improve their own and their group's performance. -all you have to do is define your goal

gainsharing

pay at a rate that falls below the pay range for the job.

green-circle rate

•Bonuses for group performance tend to be for smaller work groups. •These bonuses reward the members of a group for attaining a specific goal, usually measured in terms of physical output.

group bonuses

non-exempt

hourly

•Two employees who do the same job cannot be paid different wages because of gender, race, or age. •It would be ________ to pay these two employees differently because one is male and the other is female. •Only if there are differences in their experience, skills, seniority, or job performance are there legal reasons why their pay might be different.

illegal

The organization's pay structure should reflect what the organization knows about market forces, as well as.....

its own unique goals and the relative contribution of each job to achieving the goals.

•An administrative procedure for measuring the relative internal worth of the organization's jobs. Along with market forces and principles of fairness, organizations consider the relative contribution each job should make to the organization's overall performance. Creation of a pay structure requires that the organization develop an internal structure showing the relative contribution of its various jobs.

job evaluation

•Organizations make decisions to define a______________________, or relative pay for different jobs within the organization. Organizations also must establish pay levels, or the average paid for the different jobs. •These decisions are based on the organization's goals, market data, legal requirements, and principles of fairness. •Together, job structure and pay level establish a pay structure policy.

job structure

job evaluation and compensable factors

job structure: relative value of jobs

•The traditional approach to building a pay structure is to use a _____________________. •Alternatives to the traditional approach include broad banding and skill-based pay. •The Uniformed Services Employment and Reemployment Rights Act (USERRA) requires employers to make jobs available to any of their employees who leave to fulfill military duties for up to five years.

job-based approach

•jobs that have relatively stable content and are common among many organizations. •Organizations can make the process of creating the job structure and the pay structure more practical by defining key jobs. •Research for creating the pay structure is limited to the key jobs that play a significant role in the organization.

key jobs

•Organizations must compete to obtain human resources in labor markets. •Competing for labor establishes the minimum an organization must pay to hire an employee for a particular job. -An organization cannot make spending decisions independent of the economy. Organizations must keep costs low enough that they can sell their products profitably, yet they must be able to attract workers in a competitive labor market.

labor markets

•Employers may provide life insurance to employees or offer the opportunity to buy coverage at low group rates. •Term life insurance - if the employee dies during the term of the policy, the employee's beneficiaries receive a death benefit payment. -Usually twice the employee's yearly pay. •Additional benefits may include accidental death and dismemberment.

life insurance

•Include stock options and stock purchase plans. •Rationale for these long-term incentives is that executives will want to do what is best for the organization because that will cause the value of their stock to grow.

long term incentives

•Insurance that pays a percentage of a disabled employee's salary after an initial period and potentially for the rest of the employee's life.

long-term disability insurance

•A system of linking pay increases to ratings on a performance scale. •They make use of a merit increase grid. •The system gives the lowest paid best performers the biggest pay increases.

merit pay

•At the federal level, the FLSA establishes a minimum wage of: -$6.55 per hour as of July 2008 -$7.25 per hour as of July 2009 •The FLSA also permits a lower "training wage" -paid to workers under the age of 20 for up to 90 days -approximately 85 percent of the minimum wage

minimum wage

•the lowest amount that employers may pay under federal or state law, stated as an amount of pay per hour.

minimum wage

•Benefits packages are _________________________, making them harder for employees to understand and appreciate. •The important role of benefits is one reason that benefits are subject to government regulation. -Legally required benefits. -Tax laws can make benefits favorable.

more complex than pay structures

•Overtime pay is required, whether or not the employer specifically asked or expected the employee to work more than 40 hours. •Thus, if the employer knows the employee is working overtime but does not pay time and a half, the employer may be violating the FLSA

overtime pay

•The overtime rate under the FLSA is 1½ times the employee's usual hourly rate, including any bonuses, and piece-rate payments. •Exempt employees - managers, outside salespeople, and other employees notcovered by the FLSA requirement for overtime pay. •Nonexempt employees - employees covered by the FLSA requirements for overtime pay.

overtime pay

•Employee participation in pay-related decisions can be part of a general move toward employee empowerment. •Employee participation can contribute to the success of an incentive plan. •Complicated!

participation in decisions

processes that make incentives work

participation in decisions communication

•adjustment to a pay rate to reflect differences in working conditions or labor markets. •Many businesses in the United States provide pay differentials based on geographic location. •The most common approach is to move an employee higher in the pay structure to compensate for higher living costs. •See Ahold salary ranges by region

pay differential

The ways employees respond to their impressions about equity can have a great impact on the organization. Typically, if employees see their pay as equitable, their attitudes and behavior continue unchanged. If employees see themselves as receiving an advantage, they usually rethink the situation to see it as merely equitable. If employees conclude that they are under-rewarded, they are likely to make up the difference in one of three ways. (These are discussed on the following slide.)

pay equity

•If employees conclude that they are under-rewarded, they are likely to make up the difference in one of three ways: 1.They might put forth less effort (reducing their inputs). 2.They might find a way to increase their outcomes (e.g., stealing). 3.They might withdraw (by leaving the organization or refusing to cooperate). •Employees' beliefs about fairness also influence their willingness to accept transfers or promotions.

pay equity

sets of jobs having similar worth or content, grouped together to establish rates of pay.

pay grades

•The average amount the organization pays for a particular job - our accountants vs. those at another co.

pay level

-pay at the rate set by the market -pay at a rate above the market -pay at a rate below the market

pay level: deciding what to pay

a graphed line showing the mathematical relationship between job evaluation points and pay rate. reflects the pay structure of the external market in relationship to the job evaluation points for the organization's key jobs. It is then used to determine salaries for non-key jobs, for which the organization has no survey data.

pay policy line

a set of possible pay rates defined by a minimum, maximum, and midpoint of pay for employees holding a particular job or a job within a particular pay grade.

pay ranges

organization obtains pay survey data for its key jobs pay policy line is established pay rates for non-key jobs are then determined

pay rates

•The pay policy resulting from job structure and pay-level decisions

pay structure

•Pay structure represents the organization's policy. •However, what the organization actually does may be different. •The HR department should compare actual pay to the pay structure, making sure that policies and practices match. •Compa-ratio is the common way to do this.

pay structure and actual pay

•The organization's product market includes organizations that offer competing goods and services. Apple vs. Google vs. BILO •Organizations compete on quality, service, and price. •The cost of labor is a significant part of an organization's costs.

product markets

•incentive pay in which payments are a percentage of the organization's profits and do not become part of the employees' base salary. •Profit sharing may encourage employees to think like owners. •Evidence is not clear whether profit sharing helps organizations perform better. Given the limitations of __________________ plans, one strategy is to use them as a component of a pay system that includes other kinds of pay more directly linked to individual behavior. This increases employees' commitment to organizational goals while addressing concerns about fairness.

profit sharing

Two important ways organizations measure their performance are in terms of their _________________________. In a competitive marketplace, profits result when an organization is efficiently providing products that customers want at a price they are willing to pay. Stock is the owners' investment in a corporation; when the stock price is rising, the value of that investment is growing. Rather than trying to figure out what performance measures will motivate employees to do the things that generate high profits and a rising stock price, many organizations offer incentive pay tied to those organizational performance measures. The expectation is that employees will focus on what is best for the organization.

profits and their stock price

•pay at a rate that falls above the pay range for the job. i.e.IT guys that top out of their grade

red-circle rate

•About half of employees working in the private business sector have employer-sponsored retirement plans. •Contributory plan - retirement plan funded by contributions from the employer and employee. •Noncontributory plan - retirement plan funded entirely by contributions from the employer.

retirement plans

•Defined benefit plan - pension plan that guarantees a specified level of retirement income. •The employer sets up a pension fund to invest the contributions. •Such plans must meet the funding requirements of the Employee Retirement Income Security Act (ERISA) of 1974. -The employer must contribute enough for the plan to cover all the benefits to be paid out to retirees.

retirement plans

exempt

salary

•Commissions - incentive pay calculated as a percentage of sales.-on top of base salary •Some salespeople earn a commission in addition to a base salary. •Straight commission plan - some salespeople earn only commissions. •Some salespeople earn no commissions at all, but a straight salary.

sales commissions

a gainsharing program in which employees receive a bonus if the ratio of labor costs to the sales value of production is below a set standard. A popular form of gainsharing is the _________________, developed in the 1930s by Joseph N. Scanlon, president of a union local at Empire Steel and Tin Plant in Mansfield, Ohio. _____________________ gives employees a bonus if the ratio of labor costs to the sales value of production is below a set standard.

scallion plan

By balancing this external and internal information, the organization's goal is to....

set levels of pay that employees will consider equitable and motivating.

What are two types of disability insurance? Employees risk losing their incomes if a disability makes them unable to work. Disability insurance provides protection against this loss of income.

short term and long term

what are incentive pay options for executives?

short term and long term

•Bonuses based on the year's profits, return on investment, or other measures related to the organization's goals. •Actual payment of the bonus may be delayed to gain tax advantages.

short term incentives

•Insurance that pays a percentage of a disabled employee's salary as benefits to the employee for six months or less.

short-term disability insurance

What do you do as a company that has an extra $100,000 to give?

should give it to employee in benefits, taxed less in income

•Pay structures that set pay according to the employees' levels of skill or knowledge and what they are capable of doing. •This is appropriate in organizations where changing technology requires employees to continually widen and deepen their knowledge.

skill-based pay systems

•An incentive plan that pays workers extra for work done in less than a preset "standard time." •Tune up - 2 hrs @ $30/hr or $60; if done faster, more $ •They encourage employees to work as fast as they can, but not necessarily to care about quality or service.

standard hour plan

•Rights to buy a certain number of shares of stock at a specified price. •Traditionally, stock options have been granted to executives. -allowing you to buy stock at a price

stock options

4.Review your claims history. You might be able to identify correctable problems. 5.Encourage healthy behavior with incentives like discounts for health club memberships, free health screenings, and lower premiums for employees who participate in a wellness program. 6.Promote a workplace culture that values healthy habits. 7.Measure the results of any initiative you try.

suggested ways employers can control the cost of health benefits

•Similar to group bonuses, but are more likely to use a broad range of performance measures: -Cost savings -Successful completion of a project -Meeting deadlines

team awards

•Benefits contribute to attracting, retaining, and motivating employees. •Employees have come to expect that benefits will help them maintain economic security. •Benefits impose significant costs. -of all money reserved for salaries, 1/3 goes to benefits

the role of employee benefits

T/F On average, workers in the United States are allowed two weeks of vacation, They don't take all the days to which they are entitled.

true

T/F the United States spends more of its total wealth on health care than other countries do

true

•A federally mandated program administered by the states. •Focuses on minimizing the hardships of unemployment: -Payments to unemployed workers. -Help in finding new jobs. -Incentives to stabilize employment. •Most funding comes from federal and state taxes on employers. Along with OASDHI, the Social Security Act of 1935 established a program of ___________________________. Technically, the federal government left it to each state's discretion to establish an unemployment insurance program. At the same time, the Social Security Act created a tax incentive structure that quickly led every state to establish the program.

unemployment insurance

•The size of the unemployment tax imposed on each employer depends on the employer's experience rating: -The number of employees a company has laid off in the past and the cost of providing them with unemployment benefits. •Careful human resource planning can minimize layoffs and keep their experience rating favorable. Employers with a history of laying off a large share of their workforces pay higher taxes than those with fewer layoffs. The use of experience ratings gives employers some control over the cost of unemployment insurance. Careful human resource planning can minimize layoffs and keep their experience rating favorable. -can only use unemployment if you are laid off

unemployment insurance

• Most large companies use some form of____________________, and they are spending almost 12 cents out of every dollar on this category of compensation. • •As recently as 1991, only about half of companies had a variable-pay plan for a majority of employees.

variable (incentive) pay

•Guarantee that when employees become participants in a pension plan and work a specified number of years, they will receive a pension at retirement age, regardless of whether they remained with the employer. Along with requirements for funding defined benefit plans, ERISA specifies a number of requirements related to eligibility for benefits (vesting) and communication with employees. -time period -pension plan

vesting rights

•Major categories of benefits: -Disability income -Medical care -Death benefits -Rehabilitative benefits •The amount of benefits income varies from state to state. It is generally two-thirds of the worker's earnings before the disability. •The benefits are tax free. The cost of workers' compensation is borne by the employer. The states differ in terms of how they fund workers' compensation insurance. Some states have a single state fund. Most states allow employers to purchase coverage from private insurance companies. Most also permit self-funding by employers.

workers' compensation

•The cost of the workers' compensation insurance depend on the: -Kinds of occupations involved -State where the company is located -Employer's experience rating •Unfavorable experience ratings lead to higher insurance premiums. -workers comp and unemployment have experience ratings

workers' compensation

•For each of the following jobs, identify the best type of incentive (e.g., individual, group, organizational). Be prepared to explain your answer. 1.Director of Marketing, Pepsi 2.Recruiter, Verizon 3.Cashier, CVS (drugstore) 4.Salesperson, Macy's ● A.Individual B.Group C.Organizational

•Director of Marketing, Pepsi - B or C; probably need to be a part of a team, so individual contribution could be measured by success of the marketing team, could receive portion of the proceeds attributed to increased market share by her team •Recruiter, Verizon- A or B; could be individual, although you'd need a good tracking system, would want as many good people as possible, could cause problems if it got too competitive •Cashier, CVS (drugstore) C - organizational because can't really reward individually unless you were able to monitor customer service, performing the cashier job does not have tremendous variability so may want to reward staying with the company by promising the chance to share the organization's profits •Salesperson, Macy's; A or B- could definitely be individual because you can track purchases made by salesperson, want them to sell as much as possible 1. organizational 2. individual 3. group 4. individual

an arrangement in which the organization distributes shares of stock to all its employees by placing it in a trust. •This is the most common form of employee ownership. -giving you a stock

•Employee Stock Ownership Plan (ESOP) -

Government regulation affects pay structure in the areas of- legal requirements of pay:

•Equal employment opportunity •Minimum wage •Pay for overtime •Prevailing wages for federal contractors All of an organization's decisions about pay should comply with applicable laws.

Establishing a pay structure simplifies the process of making decisions about individual employees' pay by grouping together employees with similar jobs. HR professionals develop this structure based on:

•Legal requirements •Market forces •The organization's goals

Organizations typically apply the information by establishing some combination of:

•Pay rates •Pay grades •Pay ranges

Organizations may reward individual performance with a variety of incentives:

•Piecework rates •Standard hour plans •Merit pay •Individual bonuses •Sales commissions

Are you being fully compensated by your employer?

•· Are you required to work unpaid overtime? Skip meal breaks? Are you improperly classified as exempt? •· If I am paid a salary, how do I know if I deserve overtime? •· What does it mean to be classified as an exempt employee? •· If I am exempt, can my pay be docked if I miss work? •· How do I recover unpaid overtime? •· Are meal breaks and rest breaks required under the Fair Labor Standards Act? •· Can my employer require me to work before I punch in and attend meetings and training off-the-clock? •· My paycheck comes from another state, and it takes days before it clears and can be used - is this legal? •· I think my employer has classified me as exempt to avoid paying overtime - what types of employees are typically misclassified?