Test 2 Compensation
Which of the following is a characteristic of integrated paid time off policies?
Holiday, vacation, sick leave, and personal leave are combined
disadvantages of profit-sharing plans
However, they can undermine the economic security of employees bc of variable earnings which fluctuates their earnings- increased turnover for high performers. In addition, they may fail to motivate employees if they do not see a direct link between their efforts and corporate profits.
This is considered "at the heart" of person-focused pay programs.
Training
Job Family
Broadly similar jobs
behavioral systems
a type of performance appraisal method, requires that raters judge OBJECTIVE job behaviors to the extent to which employees display successful job performance behaviors. When done correctly, these results are relatively free of rater error and bias.
merit pay programs must be founded on
a well-designed PAS that accurately measures performance in order to be successful
Which of the following is a strategic purpose fulfilled by discretionary benefits?
accommodating a diverse workforce
profit sharing
add-on linked to group performance (team, division, total company) relative to exceeding some financial goal
Sorting Effect
addresses an employee's choice to stay versus leave their employer for another job presumably one without an incentive pay contingency. identifies, attracts, and retains the most capable employees. Different types of pay strategies may cause different types of people to apply to and stay with an organization.. highly skilled are likely to stay because they produce high quantities= higher pay.
why is it important to set up formal appeal mechanisms.
allows employees to voice their concerns over ratings they believe to be inaccurate. also allows them to give an explanation of certain circumstances.
Stock options describe
an employee's right to purchase company stock
Stock compensation plans is
an important type of deferred compensation for executives and 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.
lump-sum bonus
as with merit pay, granted for individual performance. does not add into base pay, but is distributed as a one-time bonus
flexible compensation
based on the idea that only the individual employee knows what package of rewards would best suit personal needs
why do rating errors occur
because raters must always make subjective judgements
discretionary benefits
benefits that employers offer at their own choice. offered at will of company mgnt
This term refers to the percentage of the health bill the insured employee is required to pay.
coinsurance
typical performance measures for an entire company
company profits cost containment market share sales revenue
What type of pension plan commonly includes profit-sharing plans, stock bonus plans, and employee stock ownership plans?
defined contribution
core compensation
describes the monetary rewards employees receive. thereare six types: base pay, seniority, merit, incentive, cost-of-living adjustments and pay-for-knowledge and skill-based pay
requiring companies to be accountable to shareholders requires
direct measurement of employee job performance
team based pay plans should
emphasize cooperation between and within teams compensate for additional responsibilities that come along with working in a team encourage team members to attain predetermined objectives for the team
who determines the objectives in a MBO strategy
employees and supervisors
the greatest challenge for companies is to ensure that
employees are given the opportunity to perform at exemplary levels.
Seniority pay does not fit well with the competitive strategies because
employees can count on receiving the same pay raises regardless of whether or not companies are meeting their differentiation or cost goals.
merit programs are most appropriate when
employees control their perf and conditions outside employee control do not substantially affect their perf.
human capital theory
employees knowledge and skills generate productive capital known as human capital.
comparison system
evaluate a given employees performance against other employees
Merit increases award what?
excellent effort or results
extrinsic needs
external- outside of u
This consumer-driven health care option allows employees to contribute pre-tax wages annually to pay for qualified medical expenses, but they will lose the balance not used at year's end.
flexible spending accounts
scanlon vs. rucker
formula used to measure productivity, scanlon- lower ratio, rucker- want larger ratio
occurs when employees of lower ability, skill, and effort benefit equally as employees of higher ability, skill, and effort in group incentive plans.
free rider effect
the inherent objectivity of seniority pay systems should lead to
greater cooperation among coworkers
What are the two types of fee-for-service plans?
indemnity plans, self-funded plans
intrinsic needs
internal- inside of u intangible
reward managers for increasing market share or reducing their budgets without compromising the quality and quantity of output.
management incentive plans
empowering employees should lead to
more self-corrective actions rather than reactive courses of action to supervisors feedback
who still participates in base salary on seniority or length of employee service?
most unionized private sector and public sector organizations, though the number is steadily declining
leniency error
occur when raters appraise an employer's performance more highly than it really rates, compared with objective criteria (employees will expect higher pay)
errors of central tendency
occur when raters judge all employees as average or close to average
illegal discriminatory bias
occurs when a supervisor rates members of his or her race, gender, nationality, or religion more favorably than members of other classes.
employee stock ownership plans ESOPs
place company stock in trust accounts for employees
companies may reduce base pay by
placing the reduced portion at risk in an incentive plan
incentives for lower level employees are based on professional level-
short term long term
5 criteria that can be used to evaluate jobs are
skill responsibility mental aptitude physical application working conditions
preeligibility period
spans from the initial date of hire to eligibility for coverage in a disability insurance program.
merit increases are given to employees based on
subjective appraisal of employee performance
t/f it is important for companies to strengthen the pay for performance link
true
union/nonunion workers tend to participate more in benefit plans than do nonunion employees
union (also directly contributed to the rise in offerings)
Merit increases help employers retain
valued employees
organizational units that perform the work of the organization on an ongoing basis.
work teams (process teams)
jobs that influence public policy significantly (law judges) are in what category
Scientific and Professional (SP) positions
Teams that have members learn scheduling, coordinating, training, and leading others are emphasized in what type of work team?
Self-regulating work groups
jobs that require high levels of specialized education (physicist) are in what category
Senior Level (SL)
reward employees with periodic additions to base pay according to job tenure.
Seniority pay (automatic pay increases)
Four ways in which firms using merit pay systems can ensure nondiscriminatory PA practices are (four activities to promote nondiscriminatory performance appraisal practices.)
conduct job analyses to ascertain characteristics necessary for a content valid performance appraisal incorporate these characteristics into a rating instrument. train supervisors to use the rating instrument properly. set up formal appeal mechanisms.
displays connections between the measurable factors upon which the employee is being appraised and the job itself
content validity
2 reasons companies generally use incentive pay
control payroll costs (replacing annual merit or seniority increases or fixed salaries with incentive plans that award pay raises only when the company enjoys an offsetting rise in productivity, profits, or some other measurable business success. motivate employee productivity (base pay on performance)
type of behavioral approach that identifies successful and unsuccessful job performance behaviors by both the employee and supervisor.
critical incident technique
three main types of behavioral systems
critical incident technique behaviorally anchored rating scales behavioral observation scales
typical performance measures for a group
customer satisfaction labor cost savings (base pay, overtime pay, benefits) materials cost savings reduction in accidents services cost savings (utilities)
what kind of companies may benefit from including incentive component in the core compensation programs they offer
cyclical industries such as retail
a type of team based reward approach that distributes payments to team members based on their contributions to the goal, this type can hinder cooperative behavior (may focus on their own performance to enhance income)
differential incentive payments
a type of team based reward approach that rewards each group member in proportion to the ratio of each team members' base pay to the total base pay of the group. this approach assumes that employees with higher base pay contribute more so should be rewarded according
differential payments by ratio of base pay
Income protection programs include
disability insurance, life insurance, retirement programs, and health protection programs.
Disadvantages of forced distribution
distortion of ratings actual distribution of perf may be substantially diff from rating bc of force to go into one group workers feel ratings are dictated by unreal models rather than by performance
when can the use of incentive pay can lower payroll costs
during lean periods and enhance the level of rewards when business activity picks back up
MBO can promote
effective communication
designing a pay for performance plan
efficiency, equity/fairness, compliance
Concept for paying for performance
efficient, fair, legal/ethical
the hallmark of the scanlon plan is its
emphasis on employee involvement
Information for PA can be ascertained from what five sources
employee employees supervisor employee coworkers employee supervisees (subordinates) employee customer or clients
Your company asked you to come up with a contribution plan that invests the contributions in company securities and distributes the payouts in stock instead of cash. Which plan would you suggest they use?
employee stock option plan (ESOP)
a type of company wide incentive where Companies grant employees right to purchase share of company.
employee stock options
2 basic kinds of stock plans
employee stock ownership plan ESOPs Stock compensation plans
disadvantages of group incentives
employee turnover-feelings of inequity bc of free rider effect discomfort- uncomfortable with the fact that other members perf influences their own
disadvantages to comparison systems
encourage subjective judgements (increase chance for rater errors and biases) small diff in performance may become exaggerated when supervisors feel compelled to distinguish among levels of employee performance.
service benefits
enhancements as tuition reimbursement and day care services to employees and their families
a type of team based reward approach that reinforces cooperation among team members except when team members perceive differences in member contributions or performance
equal incentives payment approach
three common distribution methods for profit sharing
equal payments, proportional payments based on annual salary, and proportional payments based on contribution to profits. (not very feasible bc difficult to isolate contributions)
Company stock shares represent
equity segments of equal value.
the amount of taxes each citizen pays is based on
established tax codes
Merit pay rewards
excellent effort or results and motivates future performance.
two advantages seniority pay has on employers
facilitates the administration of pay programs (pay increase amounts are set in advance) less likely to offend other employees by favoritism bc seniority is an objective basis for making awards.
Supervisors, HRM, and compensation professionals must address what 8 potential problems in regards to merit pay program
failure to differentiate among performers poor performance measures supervisors biased ratings of employee job performance lack of open communication btw mgnt and employees undesirable social structures factors other than merit undesirable competition little motivational value
t/f teams or groups do not receive incentive pay
false, incentive pay rewarded based on criteria like customer satisfaction, safety records, quality, and production records.
t/f seniority is a subjective standard.
false. objective.
employee retirement income security act
federal law that sets minimum standards for pension plans in a private industry. This does not require an employer to establish a pension plan, and only requires those who establish plans to meet minimum standards.
These types of insurance plans provide protection against health care expenses in the form of cash benefits paid to the insured, or directly to the provider after the services are rendered.
fee-for-service plans
four ways supervisors may bias evaluation results
first impression effects, positive and negative halo effects, similar-to-me effects, and illegal discriminatory bias
disadvantages of trait PAS
highly subjective because they are based on the assumption that every supervisors perception of a given trait is the same. (meaning of description may be diff to diff ppl) employees are rated on subjective personality factors rather than objective perf data employees may become defensive rather than trying to take corrective action
Which of the following is covered by Medicare Part A?
home health care
In regards to merit increases and inflation, employees are concerned about
how well merit increases raise purchasing power (whether they have been adjusted to inflation to increase their buyer power)
The rationale for a seniority pay system is based on
human capital theory
employee involvement is required in all but what GS plan?
improshare
gain sharing incentive program that focuses on providing employees with an incentive to finish products
improshare
type of program aimed at producing more products with fewer labor hours
improshare
Bonuses paid on a weekly basis based on a ratio of standard labor hours to actual labor hours in
improsharing
what gain sharing plan uses buy-back provision
improsharing
Improshare
improved productivity through sharing. measures productivity physically rather than in terms of dollar savings like those used in the scanlon and rucker plans. based on a labor hour ratio formula, a standard is determined by analyzing historical accounting data to find the number of labor hours needed to complete a product. Productivity is then measured as a ratio of standard labor hours and actual labor hours.
where do group incentive plans work best
in manufacturing and service delivery environments that rely on interdependent teams
rating errors
in performance appraisals reflect differences between human judgment processes versus objective, accurate assessments uncolored by bias, prejudice, or other subjective, extraneous influences.
2 advantages to companies who use piecework plans in manufacturing settings:
incentive effect and sorting effect
difference btw incentive pay and seniority/longevity or merit
incentive is one time ... seniority and merit are permanent
adds to base pay as a one-time payment. It is designed to control costs and motivate employee productivity.
incentive pay
provides benefits for extended periods of time anywhere between six months and life.
long term disability
Which pay based system is used for most government employees
longevity
General Schedule System for federal employees is called
longevity based pay
The fit of seniority pay practices with the two competitive strategies
lowest cost and differentiation
the goal of a work team is
maintain consistency in performance quality and output
could be the most effective PAS
management by objectives MBO
an approach that may help reduce supervisors arbitrary decisions about merit increases by clarifying the standards against which employees performance are judged.
matching employees performance to job description criteria
individual incentive
measures of performance are objective
work teams are effective when
members are cross trained to perform team members work when one is absent
the traditional U.S. business practice sets employees' base pay on
merit
a widely used form of performance-based pay in U.S. companies.
merit pay
program that does little to integrate workforce members
merit pay program- focus fundamentally on individual employees.
the absence of favoritism allows supervisors and managers to
motivate employees to perform their jobs
employees earn more/less under a piecework system than they would a standard hourly pay system
much less
example of public sector
municipal, state, and fed gov't organizations
for a merit pay program to succeed it must
must know efforts will be rewarded with pay raises requirements must be realistic employees must have skills and abilities to meet goals and requirements employees must perceive a strong relationship between performance and pay
what kind of direction do teams follow? supervisor??
no specific orders from a supervisor but they must initiate plans for achieving their teams production.
employees assigned to work on a specific task in addition to normal work duties, operate on a temporary basis until reaches a recommendation to top mgnt, voluntary basis or are appointed, not compensated in many cases for extra work
parallel teams (or task forces)
How is Medicare Part A financed?
payroll taxes paid by both employers and employees
provide income to employees and their beneficiaries during some or all of their retirement.
pension programs
successful merit pay programs depend equally on
perf appraisal approach as professional skills in designing and implementing such plans
individual incentive plans are most appropriate when
performance can be measured objectively (units produced) when employees have sufficient control over work outcomes (equipment breakdown) do not create a level of unhealthy competition among workers that ultimately leads to poor quality. (may sacrifice quality to achieve quantity- results in rewards)
Supervisors periodically review employees' job performance compared to
performance standards and goals.
serve as guidelines for establishing performance targets
performance standards listed within job descriptions
In merit pay plans, permanent pay increases are based on
performance.
Merit pay increases are permanent/temporary
permanent
cost of living adjustments
permanent increases to base pay
4 common types of individual incentive plans
piecework plans management incentive plans behavioral encouragement plans referral plans
what drives the prevalence (commonness) of public sector seniority pay ? why?
political pressures because a seniority system specifies the amount of pay raise an employee will receive according to his or her seniority- its automatic. These politically automatic pay adjustments protect public sector employees from the quirks of election year politics. Fed, state, and local gov't can avoid direct responsibility for pay raises so employees can receive fair pay without political objections.
factors that can inhibit effective gain sharing programs
poor communication highly competitive product markets companies that experience variable profits
two waiting periods of short term disability
preeligibility period and elimination period
3 features of short term disability plans
preexisting condition clause two waiting periods exclusions of particular health conditions
Which of the following is a feature of short-term disability plans?
preexisting conditions
pay a portion of company profits to employees, separate from base pay, cost-of-living adjustments, or permanent merit pay increases.
profit sharing plans
Types of companywide incentive plans include
profit sharing plans and employee stock option plans.
a type of team that usually works across such functions as engineering, product development, and marketing to ensure the market demands (Toyota ___ team would ensure excellent gas milage)
project team
a group of people assigned to complete a one-time project, well defined roles, may work on specific phases of the project
project teams
what type of companies are shielded from competitive pressures
public utilities
5 types of performance criteria for incentive pay decisions
quality output dependability cooperation ideas
the main perf standards for merit pay include
quality, quantity, and timeliness of work
the measures used to appraise performance should be
quantifiable and accessible
typical performance measures for an individual
quantity of work output quality of work output monthly sales work safety record work attendance
central tendency errors are most often committed when
raters are required to justify extreme ratings with written explanations (therefore they try to avoid doing so by rating everyone as average)
In the scanlon plan, formulas are designed to suit the individual needs of the company. these formulas are usually based on
ratio of labor costs and sales value of production (SVOP).
when merit increases are based on factors other than merit, this
reduces the emphasis on job performance
job control unionism
refers to a union's success in negotiating formal contracts with employees and establishing quasi judicial grievance procedures to adjudicate disputes between union members and employers
human capital
refers to employees' knowledge and skills, enabling them to be productive
just meaningful pay increase
refers to the minimum pay increase that employees will see as making a substantial change in compensation
just-meaningful pay increase
refers to the minimum pay increase that employees will see as making a substantial change in compensation
similar to me effect
refers to the tendency on the part of the raters to judge employees favorably that they perceive as similar to themselves
seniority pay rewards employees overtime because employees do what
refine existing skills or acquire new ones that enable them to work more productively
the NLRA was established to
regulated companies and establish an appropriate balance of power between parties. This law accommodates employers and employees with partially conflicting and partially shared goals.
where pay level is an indicator of status, permanent merit increases may
reinforce an undesirable social structure (salary differentials prevail each time)
characteristics of well-designed group incentive plans
reinforce teamwork cultivate loyalty to the company increase productivity
how can HR prof prevent central tendency error
require justification for ratings at every level of the scale not just extremes
cross functional areas of team members
research and development marketing finance manufacturing
as a result of increased global competition, employers are using compensation programs that emphasize
rewards according to performance attainment.
the tendency for supervisors to rate most employees as excellent performers arises from
self-promotion motives
in unionized workplaces, what is the deciding factor in nearly all job scheduling, transfer, layoff, compensation, and promotional decisions?
seniority
Designed to award job tenure Set base pay with time-designated increases Employees perceive that they are treated fairly Facilitates administration of pay Avoids perception of favoritism Poor fit with most competitive strategies
seniority pay
what two things reward employees with periodic additions to base pay according to employees' length of service in performing their jobs.
seniority pay and longevity pay
Discretionary benefits are generally divided into which three categories?
services, paid time-off, protection programs
rule of thumb to distinguish btw short term goals and long term
short term- 5 years or less
disability plans that consider disability as an inability to perform any and every duty of the disabled persons occupation such as recovering from injuries, surgery, hospitalization, pregnancy
short-term disability
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 or on the job experience
competitive strategies
strategies that strongly position the company against competitors and that give the company the strongest possible strategic advantage
measurements of performance (sales, units produced, absenteeism) assessments tend to be objective/subjective? why?
subjective (based on or influenced by personal feelings, tastes, or opinions) because accurate job performance measurements are very difficult to obtain.
used to evaluate existing systems and processes, to select new technology, and to improve existing products
task forces (parallel)
a small group of employees that share a financial reward when a specific objective is met
team-based or small-group incentive plan
What is the most common type of life insurance policy offered by companies?
term life insurance
Smaller Scanlon ratios indicate
that labor costs are lower relative to SVOP. (strive for lower ratios)
Larger Rucker ratio indicates
that the value added is greater than the total employment costs. (used to determine whether bonuses will be awarded) (companies prefer a larger ratio)
Federal employees are subject to longevity pay via
the General Schedule (GS) system
jobs that require executive decision making are classified into what category?
the Senior Executive Service (SES)
company politics assumes that the value of an employees contributions depends on
the agenda, or goals, or the supervisor rather than employee contributions
the knowledge and skill sets required to contribute effectively to the work of a process team can be acquired with
the assistance of person-focused pay
Base pay
the basic cash compensation that an employer pays for the work performed. Tends to reflect the value of the work itself and ignore differences in individual contributions
nonunion companies fashion their employment practices after union companies as a tactic to minimize
the chance that their employees will seek union representation (may offer comparable benefits to the ones in union shops)
weights of criterion are indicative of
the degree of risk to an employee this is on an incentive plan
Disadvantages of BARS
the difficulty of developing and maintaining the volume of data necessary to make it effective requires companies to maintain distinct appraisal documents for each job as jobs change, documentation must be updated
criteria used to judge the appropriateness of an information source
the evaluator should be aware of the objectives of the employees job evaluator should frequently have occasion to observe the employee on the job evaluator should be capable of determining whether the employees performance is satisfactory
when using merit pay and writing job descriptions, HR prof must ensure that
the job requirements provide a useful measurement standard for evaluation
human capital
the knowledge and skills that workers acquire through education, training, and experience that enables them to be productive.
threshold of money
the limit to which you absolutely need to get paid to take a job (everyone is different)
exclusion provisions
the particular conditions that are ineligible for coverage; for example, most disability insurance plans do not provide coverage for disabilities that result from self inflicted injuries
Merit pay programs occur most often in what sector
the private FOR PROFIT sector rather than state or local governments.
for merit pay, there must be explicit perf standards that specify
the procedures or outcomes against which employees job perf can be clearly evaluated.
trait systems are common in companies that focus on
the quality of interactions with customers
studies show that the extent to which supervisors like the employees the supervise determines
the size of pay raises in a merit pay program
in unionized workplaces, collective bargaining agreements may determine
the specific type of seniority system used
Group incentives reward employees for
their collective performance.
In a forced distribution method, supervisors often provide positive PR to most of their employees because
they do not want to alienate them
With a seniority based pay system, employees perceive that they are treated fairly when
they earn pay increases by an objective standard instead of supervisory judgment.
how do traditional pay programs such as merit, seniority, or individual incentives affect team performance?
they undermine the ability of teams to function effectively. they do not encourage team behaviors and limit team effectiveness.
disadvantages of MBO are
time consuming requires constant flow of information btw employees and employers focus only on attainment of specific goals which often excludes other imp outcomes
what type of individual incentive plan should be used when
time to produce a unit is relatively short, usually less than 15 min and the cycle repeats continuously. usually found in manufacturing industries such as textile and apparel.
Company stock represents
total equity or worth of a company.
Traditional vs. incentive pay plans
traditional: based on fixed hourly wage or annual salary and increased periodically on a seniority or merit basis (past performance). merit- amount not known until afterwards of assessments of performance incentive- award amounts communicated in advance for certain performance levels
4 types of performance appraisals
trait systems comparison systems behavioral systems goal-oriented systems
a type of PAS that focuses on employees rather than employee performance
trait-oriented
a type of PAS where one is scored using descriptors ranging from unsatisfactory (poor) to outstanding
trait-oriented
Piecework plans
typically production employees- an individual incentive pay program, rewards employees based on their individual hourly production against an objective output standard, determined by the pace at which manufacturing equipment operates. (an employees compensation depends on the # of units she or he produces over a given period)
establish workers rights and obligations and participate in describing and delineating jobs.
union shops
annual merit pay increase amounts that are
usually total no more than a small percentage of base pay 2-6%
the difference between the value of the sales price of a product and the value of materials purchased to make the product
value added (the amount of value one adds to a product production process)
Rucker ratio can be calculated using
value added formula: measures productivity by dividing value added by total employment costs.
The giving of one's time to support a meaningful cause is better known as this.
volunteerism
merit pay
wage increase granted to employee as function of some assessment of employee performance. add on to base pay in subsequent years
How often will Jill receive an unemployment check?
weekly
when is gain sharing most appropriate in the workplace
when workplace technology does not constrain productivity improvements (ex: assembly line workers ability to improve productivity is limited)
a type of team incentive program where membership is relatively permanent, focus on performance sharing instead of on set of tasks, and members work full time
work teams (process teams)
Types of teams for team incentive plans are
work teams (process teams), project teams, and parallel teams.
HR dept should provide all supervisors and raters with
written definitive standards
a performance appraisal method relied on to reduce the costs of recruiting and hiring new employees
360 (formulates a judgement on input from multiple sources)
This performance appraisal system relies on many appropriate sources of information and works well for team-based work teams.
360-degree performance appraisal
In 2007, about how many non-fatal injuries and illnesses, in private workplaces, were reported?
4 million
As of March 2009, how much did U.S. companies spend per employee on average to provide legally required benefits?
$4,400
Benchmark Jobs in Job Classification NQ Job Evaluations
-Contents are well know, relatively stable, and agreed to by the ER. -Represent the entire range of jobs to be evaluated. -A sizable portion of the workforce is employed in these jobs, and the jobs are common across a number of different employers. - External pay rates for the jobs are an acceptable basis for setting wages.
Rewards can be allocated in one of three ways:
-The first method is equal incentive payments to all team members. -The second method is differential payments to team members based on their contributions to the goal. -The last method is differential payments determined by a ratio of each team members' base pay to the total base pay of the group.
There are three components of Scanlon plan:
-an emphasis on teamwork to reduce costs, assisted by management-supplied information on production concerns. -suggestion systems that route cost-saving ideas from the workforce through a labor-mgnt committee that evaluates and acts on accepted decisions. -Monetary rewards for productivity improvements to encourage employee involvement
main advantages of group incentives
-companies can more easily develop performance measures for group plans than individual plans. (fewer groups in a company than indiv) -greater group cohesion.
2 types of piecework plans
-hourly production against an output standard (each hour, workers receive piecework incentives for every item produced over the designated production standard) also guaranteed a hourly pay rate. -establishment of individual perf. standards that include both objective (units produced) and subjective (quality) criteria
Regarding gov't employees, What three types of positions are exceptions to longevity pay and are classified into separate categories when determining pay
-jobs that require high levels of specialized education (physicist) -influence public policy significantly (law judges) -require executive decision making
Seniority pay and longevity pay assume that (basis for seniority and longevity pay)
1. Employees become more valuable over time 2. Good employees may leave if not compensated fairly
Corporate Strategy
An organization's plan for how it will achieve its goals
most commonly used compensation method in the U.S.
Merit pay (Fits well with U.S. culture of rewarding individual achievement)
factors of performance plan
1. base line, 2. measurement, 3. control, 4. incentive intensity, 5. cutoff, 6. Distribution format, 7. time, 8. understanding, 9. Risk
Correlation Coefficient
A common measure of association and indicates how changes in one variable are related to changes in another
Low-Cost Corporate Strategy
A corporate strategy that depends on providing low-cost products or services to a broad range of customers
Focused Low-Cost Corporate Strategy
A corporate strategy that depends on providing low-cost products or services to a narrow range of customers
Differentiator Corporate Strategy
A corporate strategy that depends on providing unique products or services to a broad range of customers
Focused Differentiator Corporate Strategy
A corporate strategy that depends on providing unique products or services to a narrow range of customers
Coordination and Departmentation
A dimension of organization structure that describes the methods used to coordinate the work of individual employees and subunits in an organization
Decision-Making and Leadership Structure
A dimension of organization structure that describes the nature of the decision-making and leadership processes used in an organization
Communication and Information Structure
A dimension of organization structure that describes the nature of the processes for communication in an organization
Control Structure
A dimension of organization structure that describes the nature of the processes used to control employee behaviour in an organization
Job Design
A dimension or organization structure that describes the manner in which the total task of an organization is divided into separate jobs
Reliability
A measure of the consistency of results among various analysts, various methods, various sources of data, or over time.
preexisting condition
A mental or physical disability that existed before an insurance policy was purchased.
an entity such as an arbitrator or tribunal board, generally of a public administrative agency, which has powers and procedures resembling those of a court of law or judge, and which is obligated to objectively determine facts and draw conclusions from them so as to provide the basis of an official action.
A quasi-judicial body
Classification Method of Job Evaluation
A series of classes covers the range of jobs.
example of a project team
A team of engineers working on the construction of a bridge can be given as an example of project teams
Contingency Approach to Organizational Design
An approach to organization design based on the premise that the best type of structure for an organization depends on the key contingencies (contextual variables) associated with that organization
Classical Managerial Strategy
An approach to management that assumes most employees inherently dislike work but can be induced to work in order to satisfy their economic needs
Human Relations Managerial Strategy
An approach to management that assumes most employees inherently dislike work but can be induced to work in order to satisfy their social needs
High-Involvement Managerial Strategy
An approach to management that assumes that work can be intrinsically motivating if the organization is structured properly
Ability
An employees skill level
Compensable Factors
Are based on the strategic direction of the business and how the work contributes to these objectives and strategy
According to the job characteristics theory, this core characteristic refers to the amount of freedom, independence, and discretion the employee enjoys in determining how to do the job.
Autonomy
performance appraisals
Away of telling employees what is expected of them in their jobs and how well they are meeting those expectations. An evaluation that measures employee performance against established standards in order to make decisions about promotions, compensation, training or termination
a PAS in which scores from each job dimension are averaged to provide an overall rating of performance.
BOS
how do BOS and BARS differ
BOS incorporates only positive perf. behaviors
why must supervisors be trained to use the rating instrument properly
Because the UNIFORM application of standards is extremely important. they need to know how to apply PAS when they make judgements. they should also be aware of common rater errors.
Which type of individual incentive plan focuses on accomplishments such as improving attendance or safety records?
Behavior encouragement plans
PAS based on 8-10 expected job behaviors. based on actual observable job behaviors. encourages all raters to make evaluations in similar ways.
Behaviorally-anchored rating scales (BARS)
Hay Job Evaluation System
Claims that job evaluation establishes the relative value of jobs based on their content, independent of a link to the market.
3 main reasons U.S. business are using 360 degree PA
Company downsizes reduces hierarchy so supervisors are becoming responsible for more workers making it harder to observe a single employees performance the 360 PAM is consistent with the increased prevalence of work teams in companies companies placing great emphasis on customer satisfaction as competition for a limited set of customers increases.
reward employees when the company exceeds minimally acceptable performance standards.
Company-wide incentive programs
technique for comparative PAS
Comparison systems forced distribution paired comparison
Pay-for-knowledge and skill-based pay are two types of person-focused pay programs that fall under this pay category.
Competency-based
Compliance
Conforming to federal and state compensation laws and regulations
examples of work teams include
Customer service teams, assembly teams on production lines
plans place cash awards in trust accounts for employees. These trusts are set aside on employees' behalf as a source of retirement income.
Deferred profit sharing (not taxed until employee begins drawing upon retirement)
This term refers to the level of specialization or expertise an employee possesses in a particular job.
Depth of skills
Domain
Describes the specific products or services offered by a given organization
the General Schedule
Determines the pay range of a government employee, (employees receive raises regardless of performance) Classifies federal gov't jobs into 15 classifications based on such factors as skill, education, and experience levels. In the past, GS personnel were generally paid the same amount regardless of where they worked. The intent of the GS is to keep federal salaries equitable among various occupations and between men and women ("equal pay for equal work").
disadvantages of BOS
Difficult and time consuming to develop and maintain raters must be able to observe employees closely and regularly to assure an accurate appraisal (hard if supervise a lot of people)
Objectives
Part of compensation policies and objectives. (e.g. efficiency, fairness, and compliance)
Long-Linked Technology
Divides the total task of producing a product or service into a series of small sequential steps performed by differential employees
Advantages of trait PAS
Easy to construct easy to use applies to a wide range of jobs easy to quantify for merit pay purposes
drives organizational productivity and includes improvement suggestions and problem-solving ideas.
Employee involvement
Qualitative Job Analysis (QJA)
Employees are directed to a website where they complete a questionnaire.Such an approach allows statistical analysis of the results.
Exempt Status
Employees who are are exempt from regulations of the Fair Labor Standards Act (FLSA) and hence do not receive overtime pay. Salaried workers fall under this category.
This type of appraisal error takes place when managers rate employee's performance more highly than they should compared with objective criteria.
Errors of leniency
Market Based Evaluations
Evaluating jobs on the basis of their market values can develop a job worth hierarchy. Prevailing rates are used as the relative worth of the jobs. Once a hierarchy is developed around benchmarek market rates, the remainder of the jobs are typically placed into the hierarchy based on whole job comparisons to benchmark jobs. Decide the point of reference for comparison. Compare duties, scope and reporting relationships NOT TITLES.
Position Analysis Questionnaire (PAQ)
Groups information into seven basic factors: information input mental processes, work output, relationships with other persons, job context, other job characteristics, and general dimensions
t/f The Fed gov't has modified its current pay system (the GS)
FALSE. considered but has not yet.
Factor Comparison in Quantitative job evaluation
Factor Comparison (job to job comparison) more complex than ranking or classification and is rarely used. identifies dollar values for each level. Best used with stable wages and a flat rate for each job. Sometimes used as part of a labor contract.
Contextual Variables
Factors in the firm's context that indicate the most appropriate managerial strategy and organizational structure
Pay Objectives
Guide the design of the pay system.
Identifying Compensable Factors
Hay Plan, of Guide Chart Profile method - know-how, problem solving, and accountability. Factor Evaluation System - knowledge required, supervisory controls, guidelines, complexity, scope and effect, personal contracts, purpose, of contacts, purpose of contacts, physical demands, and the work environment.
Craft Technology
Few exceptions are inherent in the production process, but there is no standardized way to deal with them when they do occur
Routine Technology
Few exceptions occur during the production process, and those exceptions that do occur can be dealt with in a standardized way
Defender Corporate Strategy
Focuses on dominating a narrow product or service marker segment
Analyzer Corporate Strategy
Focuses on exploiting new opportunities at a relatively early stage while maintaining a base of traditional products or services
rewards employees for partially or completely attaining a predetermined work objective. It is compensation, which fluctuates according to a pre-established formula, individual or group goals, and company earnings.
Incentive pay (variable pay)
Variable Pay
Incentives. Tied to the performance of an individual employee, a team of employees, a total business unit, or some combination
Total Compensation
Includes pay received as cash and indirectly as benefits (e.g. pensions, medical insurance, uniforms)
Motivation
Intensity, direction, and persistence of an employee.
Validity
Is the analysis and accurate portrait of the work?
Why did the Federal Employees Pay Comparability Act never get implemented?
It introduced a "locality pay adjustment" component to the GS salary structure. The methodology used to compute locality adjustments did not result in equal pay for equal work and the high projected cost of closing the pay gap (as determined by FEPCA) between federal salaries and those in the private sector. As a result, FEPCA has never been fully implemented.
NQ Job Evaluations: Ranking and Classification
Job Classification (Job to predetermined standard comparison) grouping jobs into grads, each having a class description to use for job comparisons. = General Schedule system by federal government. Classes may be described further by naming BENCHMARK JOBS. Good to use in grouping a large number of jobs. Difficult to use with groups having overlapping jobs.
NQ Job Evaluations: Ranking and Classification
Job Ranking (job to job comparison) a hierarchy of jobs from lowest to highest of importance. Whole job, comparing one job to another.
Nonquantitative Job Evaluation
Job Ranking (job to job comparison) a hierarchy of jobs from lowest to highest of importance. Whole job, comparing one job to another. Job Classification (Job to predetermined standard comparison) grouping jobs into grads, each having a class description to use for job comparisons. = General Schedule system by fed.gov. Ofter referred to as whole-job methods, as they evaluated the entire job and place different jobs in order w/o a number value being assigned to each job. As a result, one can tell that Job A is more important than Job B but not how much more important.
disability plan where one is unable to engage in any occupation for which the individual is qualified by reason of training, education, or experience.
Long term disability
Supply Chain Analysis
Looks at how an organization does its work: activities pursued to accomplish specific objectives for specific consumers.
a type of PAS used mainly for managerial and professional employees and typically evaluates employees progress toward strategic planning objectives
MBO
best know management incentive plan is
MBO (outcome oriented performance appraisal technique for merit pay systems)
Which performance appraisal tool is most often used with managers and professional employees?
Management by objectives
Which type of individual incentive plan requires the achievement of multiple, complex objectives without compromising the quality and quantity of output that is generated by employees?
Management incentive plans
award bonuses to managers when they meet or exceed objectives based on sales, profit, production, or other measures for their division
Management incentive plans piecework (one specific objective) Management incentive (multiple complex objectives)
Nonroutine Technology
Many exceptions are inherent in the production process, and there is no standardized way to deal with these exceptions
Engineering Technology
Many exceptions occur in the production of service or delivery process, but there are standardized ways of dealing with them
a collective bargaining agreement is designed to
Negotiate labor contracts Provide grievance procedures
Team Incentives
Offers higher pay if the team performance warrants it
Managerial Strategy
One of three main patterns or combinations of structural variables that can be adopted by an organization, namely classical, human relations, or high involvement
Alternation Ranking
Orders job descriptions alternately at each extreme
the amount for merit pay increase should reflect
PRIOR job performance levels and motivate employees to strive for exemplary perf.
Which type of individual incentive plan rewards employees based on their individual hourly production against an output standard?
Piecework plans
Quantitative job evaluation Point Factor method and Factor Comparison method
Point Factor - involves using specific Compensable factors to evaluate relative job worth. Compensable factors reflect the dimensions along which jobs are perceived to add value to the org.
Technology
Procedures and resources used by an organization to transform inputs into outputs
Relational Returns
Psychological benefits. (e.g. learning opportunities, status, challenging work, and so on)
Quantitative Job Evaluation
Quantitative methods try to establish how much more one job is worth compared to another job by using a scaling system. Evaluates specific factors, use a scale and proved a score that indicates how valuable one job is compared to another. Point-factor method (Job to predetermined standard comparison.) Factor Comparison (job to job comparison) more complex than ranking or classificion and is rarely used. identifiies dollar values for each level.
This type of individual incentive plan rewards employees who recruit new customers or new employees. they rely on referral bonuses to enhance recruitment or highly qualified employees.
Referral plans
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.
Compensation
Refers to all forms of financial returns and tangible services and benefits employees receive as part of an employment relationship
External Competitiveness
Refers to pay comparisons with competitors
job control unionism
Refers to union's success in negotiating formal contracts with employees and establishing quasi-judicial grievance procedures to adjudicate disputes between union members and employers.
Content
Refers to what work is performed and how gets done
Intensive Technology
Requires that each item or case be dealt with individually, depending on the specific nature of each
Americans with Disabilities Act (ADA)
Requires that essential elements of a job must be specified for jobs covered by the legislation
This term refers to the degree to which the job requires the person to do different tasks that involves the use of a number of different skills, abilities and talents.
Skill variety
Task Data
Reveals the actual work performed and its purpose or outcome
Incentive Plans
Reward people for developing "innovative" new financial investment vehicles and for taking risks to earn themselves and their firms a lot money.
Which gain sharing plan focuses on lowering the percentage of labor costs using a value-added formula?
Rucker Plan
emphasizes employee involvement and provides monetary incentives. It uses a value-added formula to measure productivity.
Rucker Plan
The sum of sales revenue plus the value of goods in inventory.
Sales value of production SVOP
A form of gain sharing that believed employees will exercise self-direction and self-control if they are committed to company objectives and that employees will accept and seek out responsibility if given the opportunity
Scanlon Plan
Three most common forms of gain sharing plans are
Scanlon plan, Rucker plan, and Improshare. (employers today generally modify one of these traditional plans to meet their needs or adopt hybrid plans)
what is the basis for savings for each GS plan?
Scanlon- labor rucker- labor, raw, services improshare- hours of production
paid time off
Some employers have paid time off programs in which vacation time, holidays and sick leave for each employee
What are the waiting periods within the longevity step process
Steps 1-3: 1 year Steps 4-6: 2 years Steps 7-9: 3 years
Organizations
Systems that apply to procedures to a set of resources to transform inputs into valued outputs
This term refers to the degree to which the job enables the employee to work on it from start to finish.
Task identity
Conventional Job Analysis
The U.S. Government's step-by-step approach to job analysis.
Organization Structure
The means through which an organization generates the behaviours necessary to execute its corporate strategy
elimination period
The period of time after the beginning of an insurance policy for which no benefits are payable. exlude insignificant illness or few day injuries
Task Environment
The portion of the general environment that has direct relevance to a given organization
Job Evaluation
The process of systematically determining the relative worth of jobs to create a job structure for the organization. The evaluation is based on a combination of job content, skills required, value to the organization.
Essential Elements
Those that cannot be reassigned to other workers
Organizational Culture
The set of core values and understandings shared by members of an organization
Job Analysis
The systematic process of collecting information that identifies similarities and differences in the work
advantages of profit-sharing plans
These plans enable employees to share in companies' profits and allow companies greater financial flexibility.
Paired Comparison
Uses a matrix to compare all possible pairs of jobs
Mediating Technology
Uses standardized transactions to connect parties wishing a mutually beneficial relationship
Employees would need to learn these types of skills in order to develop self-managed work teams
Vertical
Total Cash Compensation
Wages + Bonuses
merit pay programs
reward employees with permanent increases to base pay according to differences in job performance.
Benchmark (key) Jobs
Would be identified for as many of the levels in the structure and groups of related jobs as possible
Job Description
Written Summary of the job. It contains info. on the tasks, people, and things included
merit pay programs dont work well with teams because
a company budget for pay increases causes them to compete for the same share of money. this merit pay programs are best suited for jobs where employees work independently. (clerical) (accounting)
Commission
a fee for services rendered based on a percentage of an amount received or collected or agreed to be paid (as distinguished from a salary)
Disadvantages of individual incentive programs
promote inflexibility (not likely to increase their performance beyond reward compensation maximum of 15% above perf standard for no more than 500 a month) Unrealistic standards may hamper employee motivation Setting performance standards is time consuming/ measurement problems exist when management implements improved work methods or equipment because it will take time to become proficient, thus employees may resist new methods. may encourage undesirable workplace behavior such as neglecting other dimensions of work when rewarded for output (such as neglecting quality) Factors beyond employee's control may affect outcomes
3 advantages of individual incentive pay plans
promote the relationship between pay and performance promote an equitable distribution of compensation within companies compatibility with an individualistic culture in U.S. also helps retain the best performers
discretionary benefits fall into three broad categories:
protection programs, paid time off, and services
protection programs
provide family benefits, promote health, and guard against income loss caused by catastrophic factors like unemployment, disability, or serious illness wage or salary
most common source of PA information source
supervisor
seniority pay
systems reward employees with permanent additions to base pay periodically, according to employees' lelngth of service performing their jobs.
longevity pay
systems reward 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
There are two major group incentive plans
team-based or small group, and gain sharing
This type of flexible work schedule allows employees to work four 10-hour days a week.
compressed work week
current profit sharing plans
award cash to employees as part of their regular core compensation, typically on a quarterly or annual basis. (thus subject to IRS taxation)
the level of risk tends to be greater among
higher level employees than lower (goals are harder to achieve for higher level employees.)
How many step pay increases are employees eligible for under longevity pay?
10
To be fully insured under OASDI, Simone would have to work at least how long?
10 years
Presently, how long does it take employees to progress from step 1 to step 10?
18 years
employee bonuses typically range between
5 and 10% of an employees base annual pay
national labor relations act
A 1935 law, also known as the Wagner Act, that protects workers rights, predicted on a fundamental but limited conflict of interest between workers and employers. Establishment of a collective bargaining system nationwide that sets down rules to protect unions and organizers, and created the National Labor Relations Board to regulate labor management relations.
structure of the Scanlon suggestion program
A two-tiered cost-savings suggestion system has two levels such as production-level committees and companywide screening committees. Workers make suggestions, production level committee accept or reject (with explanation) suggestion, production committee then forwards suggestions to a company wide screening committee (serve as a communication link btw management and employees) if accepted then suggestion is fully implemented (usually receive bonuses on a monthly basis)
Cost of Living
Adjustments in pay given to everyone, regardless of performance. This is done to help balance work and life
Disability insurance
An insurance plan that makes regular payments to replace income lost when illness or injury prevents the insured from working
what two factors to consider BEFORE deciding to use merit pay
commitment from top management (must be willing to take on the task of measuring employee perf) design of jobs (must be designed in a way that perf can be measured accurately)
Among the various performance appraisal techniques, this appraisal system is the most defensible in court because it is based on actual observable job performance behaviors
Behaviorally-anchored rating scales BARS
Which of the following is a reason many European and Japanese employees are better skilled and able to work more productively than American workers?
Both European and Japanese economies provide a higher quality of academic preparation and workplace learning for the non-college portions of their work forces.
The scanlon plan assumes that
companies will be able to offer higher pay to workers generate increased profit for stockholders lower prices for customers
for incentive pay programs, common measures of employee performance are
company profits, sales revenue, # of units produced by a business unit
a PAS best suited for small groups of employees who perform the same or similar jobs
comparative methods
a PAS in which employees are ranked from best performer to poorest performer and establish a performance hierarchy where the employee with the best perf receives the highest ranking
comparison systems
greatest disadvantage of seniority pay systems
Employees do not have any incentive to improve their skills or take risks bc they get a raise regardless.. employees receive raises for average and exemplary performance also, employees receive raises whether the company is meeting its competitive objectives or not.
Prospector Corporate Strategy
Focuses on identifying and exploiting new opportunities quickly
This group incentive system was designed to provide PARTICIPATING employees with financial incentives for productivity gains such as increasing customer satisfaction, increasing productivity, lowering costs, or improving safety and are shared by employees within the group.
Gain sharing
which type of PAS is often a component of a broader development program that can help employees achieve career goals
Goal oriented systems
Management by objective is part of which type of performance appraisal system?
Goal-Oriented system
Customer satisfaction, labor cost savings, materials cost savings, and reduction in accidents were listed as typical performance measures to which type of incentive plan?
Group
rate and rank performance of employees and pay increases are based on ranking
comparison systems
Effective incentive pay systems are based on three assumptions:
Individual employees and work teams differ in how much they contribute to the company, and in how well they do it. The company's overall performance depends on the performance of its employees. To attract, retain, and motivate high performers and to be fair to all employees, a company needs to reward employees on the basis of their relative performance.
3 categories of incentive pay
Individual incentive plans reward employees whose work is performed independently. Group incentive plans promote supportive, collaborative behavior among employees. Company-wide incentive plans tie employee compensation to a company's performance over a short time frame. 3 month-5 yr
essential for the content to be valid in a PAS
Job analysis
Skill variety, task identity, autonomy, and feedback are the elements that make up this theory.
Job characteristics
collective bargaining agreements led to
Job control unionism Collective bargaining units Union shops
This term reflects an approach to job design that results in the development of more intrinsically motivating and interesting work.
Job enrichment
This Medicare Plan was established with the passage of the Balanced Budget Act of 1997 as an alternative to the original program (parts A&B).
Medicare Advantage
Longevity is designed to
Pay grade maximum for length of service To reduce employee turnover Reward employees for continuous years of service
provides income benefits for limited periods of time, usually less than 6 months (26 wks)
Short-term disability
Compensable factors in Equal Pay Act and Title VII of the Civil Rights Act include
Skill - Responsibility - Effort - Working conditions - Supervision of Others Compensable factors should: -Reflect actual work being done -Be supported by documentation such as job descriptions -Reinforce the Org's strategic plan and culture -Be valued by all affected parties (stakeholders) -Be reviewed annually Once analysis complete for all compensable factors, the result gives the complete range of points related to the factors. The fewest points a job can be worth is determined by adding the points. The most points a job can be worth is 1100 determined by adding the max # of points for each factor.
affordable care act
The Affordable Care Act (ACA) was passed in 2010, Title 1 eliminates lifetime limits on covered insurance benefits, and it is phasing out the annual limits that companies can impose on coverage. The ACA also improves access to health insurance for children, young adults, and people with a pre-existing condition.
If an employee is rated as outstanding on her leadership ability she was probably rated using which appraisal system?
Trait system
Salary
Working for a fixed amount of annual or monthly pay regardless of hours worked.
Wages
Working for hourly wages rather than fixed (e.g. annual) salaries
gain sharing bonuses are usually based on
a formula that measures productivity that employees perceive as fair and that the employer believes will result in improvements in company performance.
across-the-board increase
a general adjustment that provides equal increases to all employees
success-sharing plans
a generic category of pay add-on which is tied to some measure of group performance, not individual performance
management by objectives
a goal oriented performance appraisal method, requires that supervisors and employees determine objectives for employees to meet during the rating period, then writes a report with progress toward objectives, and then the supervisor appraises how well they have achieved their objectives.
when considering the Level of risk, it increases as incentive pay represents
a greater proportion of total core compensation
common principle underlying the 3 best known gainsharing programs is
a group incentive system that provides ass or most employees a bonus payment based on improved company performance
emphasizes cooperation and rewards its members for the additional responsibilities they must take on being in a team as well as the skills and knowledge they must acquire.
a pay plan for teams (skill and knowledge based pay plans can address the additional responsibilities)
in a seniority based pay structure, employers award raises according to
a pay schedule
For exempt employees, merit increases are usually expressed as
a percentage of annual salaries
For non-exempt employees, merit increases are usually expressed as
a percentage of hourly wages
The only factors other than job performance that exceptions that employers can award merit pay increases without it potentially resulting in charges of illegal pay discrimination according to the EPA are
a seniority system merit system quality or quantity of production any factor BESIDES sex
behavioral observation scale
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
behaviorally anchored rating scales
a specific kind of behavioral system, is based on the critical incident technique and these scales are developed in the same fashion with one exception; for the CIT, a critical incident would be written as, "the incumbent completed the task in a timely fashion." For the BARS format, this incident would be written as, "the incumbent is expected to complete the task in a timely fashion." incidents are identified as expectations and emphasize the fact that the employee does not have to demonstrate the exact behavior
critical incident technique
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 performance; the supervisor then observes the employees and records their performance on these critical job aspects. They are often rated on how often they display the behaviors described in each critical incident
paired comparisons
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. the employees are then ranked according to the # of times there were identified as being the better perf.
forced distribution
a specific kind of comparison performance appraisal system in which raters (ex: supervisors) assign employees to groups that represent the entire range of performance. (best perf, moderate perf, worst perf)
In order for a merit pay program to be effective, employees must perceive
a strong relationship between attaining performance standards and pay increases.
brito v zia company
a supreme court ruling, deemed that the zia company violated Title VII of the civil rights act of 1964 when a disproportionate number of protected class individuals were laid off on the basis of low performance appraisal scores; zia company's action was a violation of title vii because the use of the performance appraisal system in determining layoffs was indeed an employment test; in addition, the court rule that the zia co had not demonstrated that its performance appraisal instrument was valid (did not assess any job related criteria)
the concept of just-meaningful pay increase is
a trivial pay increase will not motivate for future performance
comparison systems
a type of performance appraisal method, require that raters (ex: supervisors) evaluate a given employee's performance against other employees' performance attainments; employees are ranked from the best performer to the poorest performer
trait systems
a type of performance appraisal method, requires raters (ex: supervisors or customers) to evaluate each employee's traits or characteristics (ex: quality of work, quantity of work, appearance, dependability, cooperation, initiative, judgment, leadership responsibility, decision making ability, and creativity).
What specifies the rate at which participants accumulate benefits?
accrual rules
What is they key to an effective merit pay program
accurate performance appraisals
cost-of-living
actual individual expenditures on goods and services. The only way to measure it accurately is to examine the expense budget of each employee
Longevity pay is used by state and local governments as
an incentive reduce employee turnover.
expectancy theory
argues that people behave as if they cognitively evaluate what behaviors are possible in relation to the value of rewards offered in exchange
While merit pay perf standards aim to be measurable and objective, incentive levels tend to be
based on even more OBJECTIVE criteria, such as quantity of items an employee produces per production pd.
why may it be difficult to establish appropriate perf goals
bc many companies simply do not fully describe the scope of these positions
why must appraisals be based on job related factors and not on any discriminatory factors?
because negative PA can affect an individuals employment status which is protected by the law
How is the CIT's strength also its weakness?
because the significant amount of documentation and continuous and close observation requirements can become overly burdensome to some supervisors.
companies should make adjustments to base pay according to changes in the cost of living or inflation before/after awarding merit pay raises
before (same with seniority pay)
major types of rating errors include
bias errors contrast errors errors of central tendency errors of leniency or strictness
awarded when actual productivity exceeds targeted productivity levels
bonuses (typically earned on a monthly basis)
a common trend for companies is to combine typical gain sharing plans with other approaches to
boost productivity and cost savings to an even greater degree than ever before.
employee involvement systems use
broadly based suggestion systems
management typically relies on _____________ to determine incentive pay levels.
business objectives
a maximum productivity improvement pay out level that is placed on productivity gains. any bones money above the maximum is placed in a reserve, if maximum is excessively repeated, the firm buys back the amount of productivity improvement over he maximum with a one time payment to employees (usually equal to the amount in reserve), standards are then adjusted so that a high level of productivity is set.
buy-back provision
how can HR dept help raters minimize errors
by carefully choosing the rating systems and to recognize and avoid common errors
what trend are companies going to upon obtaining PA information
calling on as many sources as possible to gain a more complete picture of employee job performance
These types of insurance plans are set up to cover things like dental care, vision care, and prescription drugs.
carve-out plans
has forced companies to reconsider their approach to employee compensation
changes in the global market place
Which of these is NOT covered under workers' compensation?
chronic unemployment
general schedule
classified federal government jobs into 15 classifications (GS-1 through GS-15) based on such factors as skill, education, and experience levels; in addition, jobs that require high levels of specialized education (ex: a physicist), significantly influence public policy (ex: law judges), or require executive decision making are classified in 3 additional categories: senior level, scientific & professional positions, and the senior executive service
internally consistent compensation systems
clearly define the relative value of each job among all jobs within a company; this ordered set of jobs represents the job structure or hierarchy; companies rely on a simple, yet fundamental, principle for building internally consistent compensation systems: jobs that require greater qualifications, more responsibilities, and more complex duties should be paid more highly than jobs that require lesser qualifications, fewer responsibilities, and less complex job duties.
IRS is responsible for
collecting taxes from U.S. citizens (it does not compete against any other business for tax payers; it exists to serve the public rather than make profits)
The formulas for profit-sharing
fixed first-dollar-of profits, graduated first-dollar-of profits, and profitability threshold formulas. Fixed first-dollar-of profits formula is based on a specific percentage of either pre- or post-tax annual profits. Graduated first-dollar-of-profits formula is based on percentages of pre- or post-tax profits and the percentage increases as profits increase. Profitability threshold formulas fund profit sharing pools when profits fall within predetermined minimum and maximum levels.
results at any cost
focus only on attainment of specific goals which often excludes other imp outcomes
seniority and longevity pay plans are likely to disappear from
for-profit companies in increasingly competitive markets.
a PAS in which the rater is forced to place a specific number of people for each performance category.
forced distribution
a PAS used to minimize the tendency for supervisors to rate most employees as excellent performers
forced distribution
The human capital theory suggests that employees can develop knowledge and skills from
formal education or on the job experiences.
These incentive plans reflect management philosophy that emphasizes employee involvement and suggestions.
gain sharing
compensation took used as an incentive program that was developed so that all employees could benefit financially from productivity improvements resulting from the suggestion system.
gain sharing
risk sharing plans
generic category of pay add-on (variable pay) that differs from success sharing in the employee not only shares in the successes but also is penalized during poor performance years. penalty is in form of lower total compensation in poor corporate performance years. reward, through, is typically higher than that for success-sharing programs in high performance years
welfare practices
generous endeavors undertaken by some employers for the comfort and improvement, intellectual and social, over and above wages paid. used to promote good mgnt and enhance worker productivity. motivated in part to minimize employees desire for union representation
what two things should supervisors discuss during PA meetings
goals for future performance and employee career paths
reward employees for their collective performance, rather than for each employee's individual performance. (contribution does not have to be equal as long as all group members have some impact on achieving the goal)
group incentive programs
bias errors
happen 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.
This type of consumer driven health care program allows employees to carry-over the unused funds still in their account.
health savings account
Companies use incentive pay to reward
individual employees, teams of employees, or whole companies based on their performance.
categories of incentive programs
individual, company wide, group plans
how are incentive rewards typically distributed to team members
individually
team based job design promotes
innovation in the workplace
This policy allows employees to schedule time-off without having to justify the reasons, and is more effective in controlling absenteeism than other types of absence control policies.
integrated paid time off
employees seniority is/is not easily indexed? why?
is because time on the job is relatively straight forward and concrete
an activity to promote nondiscriminatory PAP where companies define jobs and the discover what employee behaviors are necessary to perform the jobs.
job analysis
is vital to companies that wish to establish an internally consisten compensation system
job analysis
collective bargaining led to
job control unionism
a product of a job analysis that can be used to create objective performance measures
job descriptions (note the duties, requirements, and relative importance of a job within the company)
often give the most relevant input on whether content of PAS are valid
job holders, supervisors, and clients
refers to a cooperative organizational climate that promotes high levels of trust, open communication, and participation
leadership philosophy
The three components of gain sharing programs are
leadership philosophy, employee involvement systems, and bonuses.
protects employees' families by paying a specified amount to an employee's beneficiaries upon the employee's death. It may also include accidental death and dismemberment benefits.
life insurance
in what ways may a company strengthen the pay for performance link
link PA to business goals analyze jobs communicate establish effective appraisals empower employees differentiate among performers
Merit increases are based on
objective and subjective indicators of an employee's job performance.
contrast errors
occur when a rater compares an employee to other employees rather than to specific explicit performance standards. (error bc other employees are required to perform only at a minimum acceptable standard)
strictness errors
occur when raters judge employee performance to be less than what it is when compared against objective criteria (employees may receive small pay raises than deserved) this erodes employee belief that performance is related to pay raises.
positive halo effect
occurs when a rater (ex: supervisor) generalizes employees' positive behavior on one aspect of the job to all aspects of the job
first impression effect
occurs when a rater (ex: supervisor) makes an initial favorable or unfavorable judgment about an employee and then ignores of distorts the employee's actual performance based on this impression
negative halo effect
occurs when a rater generalizes an employee's negative behavior one one aspect of the job to all aspects of the job
external influences such as global competition, rapid technological advancement, and skill deficits of new and current members of the workforce, will probably force companies to establish was type of compensation tactics?
ones that reward their employees for learning job-relevant knowledge and skills and for making tangible contributions toward companies quests for CA. Seniority pay meets neither goal.
Problem with seniority and longevity pay with the baby boomer generation
only a small segment are approaching retirement age so the large amount of employees are continually increasing in pay due to the two pay processes many baby boom employees are delaying the start of retirement out of financial necessity.
in a comparison system, employees may be ranked on
overall perf or various traits
