Chapter 9 Compensating Employees STUDY!!!!

What would many manager argue that pay differences should be based on:

being based on performance would be more equitable than those based on such personal contributions, such as seniority.

How do organizations recognize job related contributions:

by assigning pay in accordance with the difficulty and importance of jobs.

Direct Compensation:

Consists of the basic wage or salary, and performance-based pay.

Wage Givebacks:

A reduction in employee wages or benefits conceded by a labor union in exchange for other benefits or in recognition of unfavorable economic conditions. A union can play a big role in the job evaluation process and may determine the type of pay plan an organization will have. If a company is not unionized, compensation of employees may affect whether or not a union-free environment is maintained.

Americans with Disabilities Ace

ADA Prohibits employers from discriminating agains people with disabilities.

Sales Incentive Plans:

All of the incentive plans discussed so far are usually applied to line employees in manufacturing or other similar industries. Sales incentive plans apply to salespeople and managers, who generally receive their pay in the form of Commission.

Indirect Compensation

Also known as non-monetary. Includes employee services, benefits, training's, and or any other form of compensation or benefit.

What conditions must be present to effectively motivate performance in a group:

Group Performance Measure (standards and goals) Group members must believe that they can achieve these objectives through effective performance Organizational Culture must be supportive of group collaboration and cooperation.

What are the two most common forms of fixed pay:

Hourly Wage Salary

Organization-Wide Incentive Plans:

Organization/Plant-Wide bonus sharing plans (profit sharing arrangement) allow employees within the organization to both contribute and benefit from the organizations success. Under these systems, employees receive , as a bonus, a percentage of their base wage if the organization reaches a set goal.

For compensation to be successful, what must it rely on:

Other HR Functions such as job analysis and PAs

Fixed Pay:

Pay that does not vary according to performance. Also known as Base Pay.

Variable Compensation Links what to what:

Pay to employee and organizational performance.

Variable Compensation a one time_______________________that must be re-established and re-earned during each performance period.

Payment

Profit-Sharing Plans:

Often not considered a form of Incentive Compensation, because individual employees have only partial and indirect control over organizational profit.

Establishing Pay Structure:

Once Jobs are evaluated and job classes are determined, wage rates or ranges need to be established.

While there have been amendments to this law that have influenced and updated the law, the basic premise hasn't changed. This law is the primary law governing wages and salaries. Which of the following is this law? Appearance Performance Seniority Age

Performance

Title VII of the Civil Rights Act

1964 including the 1991 revision prohibits employment discrimination bases on race, color, religion sex and national origin.

The Lilly Ledbetter Fair Pay Act:

2009 Relaxes the statue of limitations for filing an equal-pay lawsuit, providing "more effective remedies to victims of discrimination in the payment of wages on the basis of sex.

Standard Hour Plan:

Another common incentive program. Similar to the Piecework Plan, but instead of using money per unit, time per unit is used instead. Tasks are broken down according to the amount of time it takes to complete them. Through studies, the time to perform a task then becomes a STANDARD TIME.

Exempt Employees:

Are not covered by the FLSA rules and regulations. As such, exempt employees are excluded from minimum wage, hours worked, and overtime pay. For a position to be exempt, an employer must pay a salary and not an hourly wage.

Determining Job Classes:

Based on the results of Job Evaluations, but before salaries are determined, job classes or job families are created. Job Classification (Job Families) includes grouping together all jobs that are similar in value. All jobs in a class or family are assigned one salary or range of salary.

HR Planning and compensation:

Compensation is normally integrated into an organizations strategic planning. Depending on the goals of different parts of an organization and the overall vision, compensation may be different in different parts or different locations of said organization.

Two Types of Profit-Sharing Plans:

Cash Plans Wage-dividend Plans

Step-Schedule:

Common in government jobs. This is where wages increase incrementally (in steps) over a period of time. Two people with the same job would make the same pay if there were with the agency for the same amount of time.

Equal Pay Act

EPA 1963 Requires that nearly all employers pay men and women equally for the same work.

Recruitment and Selection and Compensation:

Employees differ in the value they place in how much they are paid. If HR departments are able to determine how important pay is to certain people the can recruit people to fill different jobs in the organization with specific pay-policy options.

While there have been amendments to this law that have influenced and updated the law, the basic premise hasn't changed. This law is the primary law governing wages and salaries. Which of the following is this law?

FLSA Fair labor standards act

The primary lay governing wages and salaries:

FLSA 1938 Fair Labor Standards Act

Family and Medical Leave Act

FMLA entitles job-protected leave for employees due to family and medical necessity.

Measured Day Work Plans:

Formal production standards are established and employee performance is judged against standards. Typical standards are less precise Standards may be determined by a ranking procedure, rather than by and objective index (units produced).

When using a performance bases system, what type of pay is the majority of an individuals compensation:

Incentive Pay

In order of operation, list the steps from Job Analysis to Wage Determination

Job Analysis Job Evaluation Establish Job Class Determine Wage Structure Determine Wage

What are the four principal determinants of wages that represent the critical nature of activities in most compensation departments:

Job Evaluation Determination of Job Classes Establishment of Pay Structure Individual Wage Determinations

How are compensation and job analysis related:

Job analysis determines the job description, which determines the job evaluation.

The Piecework Plan:

Most common type of incentive plan. Employees are guaranteed a standard pay rate for each unit of output. Also called a piece rate. Piece Rate: The base pay is 45 an hour and an average piece output is 45 in an hour, than the piece rate is determined to be 1 dollar per unit.

Newly established organizations --often--need to establish job classes an pay structures for the first time. In the process, what and how do new firms most commonly base their compensation structure on:

New firms will often base their compensation structure on surveys of what other organizations are paying--through the use of a WAGE SURVEY.

Give some examples that are used when determining wages:

Performance Contributions gender, age, size of family and appearance - ILLEGAL employee's potential and his or her negotiating skills and leverages years of experience, seniority, and skill level factors specific to the company such as overall budget, project deadlines, and talent pool availability.

What individual incentive plan guarantees a standard pay rate for each unit of output:

Piecework Plan

Cash Plans:

Provide for payment of profit shares at regular intervals--monthly or yearly. Percentage of profits distributed range from 8 to 75 percent. If profits are not realized, no cash payments are made to employees. Also called Gainsharing

Merit Based Pay:

Salary based on an employees performance in recent years.

Job Evaluation Compares what in relation to an employee:

Skills Used Knowledge Needed Behaviors Needed

Types of Incentive Plans:

The Piecework Plan Standard Hour Plan Measured Day Work Sales Incentive Plans Stock Options

Compensation Function of HR:

The activity within which organizations evaluate the contributions of employees for the purpose of distributing direct and indirect monetary and non-monetary rewards.

What is NOT a determining factor of basic wages: The individual wage determination The determination of employee classes The value/worth of the job The establishment of a pay structure

The determination of employee classes.

How are jobs grouped in job families:

The jobs can be different in type, but similar in value.

PAs and Compensation:

The most important relationship for individuals within an organization; especially where performance based pay exists. Without a valid system to measure performance, may lead to diminished motivation and lowered performance. When promotions are available as a reward for performance, the performance evaluation system can have an added significance.

What is Pay Equity:

The people get paid what they feel like they deserve in relation to others.

After jobs are evaluated, what happens next:

They are grouped into classes or grades. With each class, jobs are arranged in order of importance. Ranges of pay are established with the aid of wage surveys. Companies may pinpoint specific factors in jobs (skills or actions) to which they will attach a specific compensation.

What is in a large part, a goal of the Variable Compensation System:

To have employees perform at high levels.

Stock Option:

Usually offered to mangers. an opportunity for a manager to buy an organizations stock at another date, but at a price established when the option is granted. The idea is that managers will work harder to increase the performance and profitability of the company, if they can share in the long term success of the organization.

How do Unions regard senority:

Very Highly, and believe that it should be a critical factor in determining pay rate.

Labor Relations and Compensation:

Wage levels and individual wages can be determined greatly by the presence of a union. A union can not only influence wage gains, but also wage givebacks.

Team-Based Incentive:

When trying to determine individual performance in a group setting, it can become difficult. Team Based Incentives offer a Viable Option. Most group plans are adaptations to individual plans, but base rates are paid fro by a group standard output. If the group performance is above standard, than the premium is paid to the individuals of the group.

Can Variable Compensation and Fixed Pay be recieved at the same time:

Yes Ex: If someone made 40,000 a year, but was offered 10,000 as a bonus, if they met a certain sales goal. The 40,000 salary would be considered fixed pay, while the 10,000 bonus would be considered Variable compensation.

Commission:

a percentage of the sales revenue generated by the employee. Many sales people will receive base pay plus commission. Many managers believe that sales incentive plans motivate employees to achieve goals.

Incentive Pay Plans:

a specific type of performance-based pay which is used to encourage specific action and motivate employees.

Nonexempt Employees:

are covered by the FLSA rules and regulations.

Cost Leadership:

focusing on securing the most suitable candidate for the least expensive wage.

A majority of an individuals pay comes from_____________________under a variable compensation plan:

incentive pay

Job analysis/evaluation does what for compensation:

influences the basic compensation structure for the organization., including job classes and individual and job wage rates.

What do Wage Surveys provide:

information to help ensure external equity. Note: Job surveys help ensure internal equity.

Total Compensation:

is the entire value of all direct and indirect payments to the employee.

What does a Job Evaluation compare:

knowledge, skills, behaviors, and working conditions of all of the jobs within the organization. A company may assign points or weights to a number of valued factors. Each job will be ranked by how many points it receives overall.

What does the FLSA provide guidance on:

minimum wage hours worked overtime pay equal pay record-keeping child labor

2004 FLSA Amendment:

provided clarification regarding the exemption for executives, administrators, computer employees, professionals (learned and created), outside sales, and highly compensated employees. Further more, it provided clarification that no blue collar workers, police, firefighters, paramedics, and other first responders are exempt from overtime provisions of FLSA.

What does compensation influence:

recruitment selection union-management relationships HR Planning

Pay Equity:

refers to what people feel they deserve to be paid in relation to what others deserve to be paid.

Wage-Dividend Plans:

special type of cash plan sets the percentage of profits paid to employees according to the amount of dividends paid to stockholders. Often perceived as more fair to employees.

Equity Theory States:

that the motivation of an individual is positively correlated with his or her perception of justice and fair treatment as practiced by the management of the company or organization.

What is Job Evaluation:

the process of comparing jobs by the use of formal and systemic procedures to determine their relative worth within the organization.

How are Incentive Programs often used:

to attract and retain employees.