hrir terms

Deferred Benefit Plan

A benefit option or package in which the employer agrees to give the specified benefit without regard to cost maximum. Opposite of defined contribution plan.

Defined Contribution Plan

A benefit option or package in which the employer negotiates a dollar maximum payout. Any change in benefit costs over time reduces the amount of coverage unless new dollar limits are negotiated.

Cafeteria (flexible) Benefit Plan

A benefit plan in which employees have a choice as to the benefits they receive within some dollar limit. Usually a minimum levels of health, disability, retirement and elective programs from which the employee may select a set dollar amount. Additional coverage may be available through employee contributions.

Single-Rate Pay System

A compensation policy under which all employees in a given job are paid at the same rate instead of being placed in a pay grade. Generally applies to situations in which there is little room for variation in job performance, such as assembly line.

Pay-for-Knowledge Plans

A compensation practice whereby employees are paid for the number of different jobs they can adequately perform or the amount of knowledge they possess.

Balanced Scorecard

A corporate wide, overall performance measure typically incorporating financial results, process improvements, customer service and innovation.

Criterion Deficiency

A criterion is deficient if it fails to include all of the dimensions relevant to performance.

Cash Balance Plan

A defined benefit plan that looks like a defined contribution plan. Employees have a hypothetical account, into which is deposited what is typically a percentage of annual compensation. The dollar amount grows both from contributions by the employer and by some predetermined interest rate.

Incentive Stock Options (ISO)

A form of deferred compensation designed to influence long-term performance. Gives an executive the right to pay todays market price for a block of shares in the company at a future time. No tax is due until the shares are sold.

Pay Satisfaction

A function of the discrepancy between employees perceptions of how much pay they should receive and how much pay they do receive. If these perceptions are equal, an employee is said to experience pay satisfaction.

Job Hierarchy

A grouping of jobs based on their job-related similarities and differences and on their value to the organisations objectives.

Job Class (Grade)

A grouping of jobs that are considered substantially similar for pay purposes.

Contingent Employees

A growing workforce that includes flexible workers, temporaries, part time employees, and independent contractors whose employment is of a limited duration.

Alternation Ranking

A job evaluation method that involves ordering the job description alternately at each extreme. All the jobs are considered. Agreement is reached on which is the most valuable and then the least valuable. Evaluators alternate between the most valued and the next least valued and so on until the jobs have been ordered.

Job-Based Structure

A job-based structure relies on work content, tasks, behaviours and responsibilities.

Bonus

A lump-sum payment to an employee in recognition of goal achievement

Benefit Ceiling

A maximum payout for specific benefit claims.

Consumer Price Index (CPI)

A measure of the changes in prices in a fixed market basket of goods and services purchased by a hypothetical average family. Not an absolute measure of living costs, rather a measure of how fast costs are changing.

Balance Sheet Approach

A method for compensating expatriates based upon the belief that the employee should not suffer financially for accepting a foreign-based assignment. The expatriates pay is adjusted is adjusted so that the amounts of the financial responsibilities the expatriate had prior to the assignment are kept at about the same level while on assignment. THe company pays for the difference.

Central Tendency

A midpoint in a group of measures.

Expectancy (VIE) Theory

A motivation theory that proposes that individuals will select an alternative based on how this choice relates to outcomes such as rewards. The choice made is based on the strength or value of the outcome and on the perceived probability that this choice will lead to the desired outcome.

Drive Theory

A motivational theory that assumes that all behaviour is induced by drives (energizers such as thrist, hunger, sex) and that present behaviour is based in large part on the consequences or rewards of past behaviour.

Budgeting

A part of the organisations planning process: helps to ensure that future financial expenditures are coordinated and controlled. It involves forecasting the total expenditures required by the pay system during the next period as well as the amount of the pay increase. Bottom up and top down are the two typical approaches to the process.

Interval Scaling

A particular numerical point difference has the same meaning on all parts of a scale.

Criterion Pay Structure

A pay structure to be duplicated with a point plan.

Person-Based Structure

A person-based structure shifts the focus to the employee: the skills, knowledge or competencies the employee possesses whether or not they are used in the employees particular job.

ESOP (Employee Stock Ownership Plan)

A plan in which a company borrows money from a financial institution by using its stock as collateral for the loan. Principal and interest loan repayments are tax deductible. With each loan repayment, the lending institution releases a certain amount of stock being held as security. The stock is then placed into an employee stock ownership trust (ESOT) for distribution at no cost to all employees. The employees receive the stock upon retirement or separation from the company.

Profit-Sharing Plan

A plan that focuses on profitability as the standard for group incentive. These plans typically involve one of three distributions: 1) Cash or current distribution plans provide full payment to participants soon after profits have been determined (quarterly or annually). 2) Deferred plans have portion of current profits credited to employee accounts, with cash payments made at time of retirement, disability, severance or death. 3) Combination plans that incorporate aspects of both current and deferred options.

Comparable Worth

A policy that women performing jobs judged to be equal on some measure of inherent worth should be paid that same as men, excepting allowable differences differences, such as seniority, merit, production-based pay plans, and other non sex related factors. Objective is to eliminate use of the market in setting wages for jobs held by women.

Performance Evaluation (Performance Apprasial)

A process to determine correspondence between worker behaviour/task outcomes and employer expectations (performance standards)

Career Path

A progression of jobs within an organisation.

Benchmark (key) job

A prototypical job, or group of jobs, used as a reference point for making pay comparisons within or without the organisation. Benchmark jobs have well-known and stable contents: pay differentials among them are relatively stable. A group of benchmark jobs, taken together, contains the entire range of compensable factors and is accepted in the external labour market for setting wages.

Paired Comparison Ranking

A ranking job evaluation method that involves comparing all possible pairs of jobs under study.

Clone Error

A rating error that occurs when a rater gives better ratings to individuals who are like the rater in behavior or personality.

Central Tendency Error

A rating error that occurs when a rather consistently rates a group of employees at or close to the midpoint of a scale irrespective of the true score performance of ratees. Avoiding extremes (high and low) in rating across employees.

360-Degree Feedback

A rating method that assesses employee performance from five points of view: supervisor, peer, self, customer and subordinate

Merit Pay

A reward that recognises outstanding past performance. It can be given in the form of lump-sum payments or as increments to the base pay. Merit programs are commonly designed to pay different amounts (often at different times) depending on the level of performance.

Flat Rate

A single rate, rather than a range of rates, for all individuals performing a certain job. Ignores seniority and performance differences.

Strategic Perspective

A strategic perspective focuses on those compensation choices that help the organisation gain and sustain competitive advantage.

Job Description

A summary if the most important features of a job. It identifies the job and describes the general nature of the work, specific task responsibilities, outcomes, and the employee characteristics required to perform the job.

Job Evaluation

A systematic procedure designed to aid in establishing pay differentials among jobs within a single company. It includes classification, comparison of the relative worth of jobs, blending internal and external market forces, measurement, negotiation and judgement.

Competency Analysis

A systematic process to identify and collect information about the competencies required for the person and the organisation to be successful.

Skill Analysis

A systematic process to identify and collect information about the skills required to perform work in an organisation.

Agency Theory

A theory of motivation that depicts exchange relationships in terms of two parties: agents and principals. According to this theory both sides of the exchange will seek the most favorable exchange possible and will act opportunistically if given a chance. As applied to executive compensation, agency theory would place part of the executives pay at risk to motivate the executive (agent) to act in the best interest of shareholders (principals) rather than in the executives own self interests

Equity Theory

A theory proposing that in an exchange relationship (such as employment) the equality of outcome/input ratios between a person and a comparison other (a standard or relevant person/group) will determine fairness or equity. If the ratios diverge from each other, the person will experience reactions of unfairness and inequity.

Efficiency Wage Theory

A theory that explains why firms are rational in offering higher-than-neccesary wages.

Straight Ranking Procedure

A type of performance appraisal format in which the rater compares or ranks each employee relative to each other employee.

Ranking Format

A type of performance appraisal format that requires that the rater compare employees against each other to determine the relative ordering of the group on some performance measure.

Lead Pay-Level Policy

A wage structure that is set to lead the market throughout the plan year. Its aim is to maximise a firms ability to attract and retain quality employees and to minimise employee dissatisfaction with pay.

Lag Pay-Level Policy

A wage structure that is set to match market rates at the beginning of the plan year only. The rest of the plan year, internal rates will lag behind market rates. Its objective is to offset labour costs, but it may hinder a firms ability to attract and retain quality employees.

Compensation

All forms of financial returns and tangible services and benefits employees receive as part of an employment relationship.

Total Returns

All returns to an employee, including financial compensation, benefits, opportunities for social interaction, security, status and recognition, work variety, appropriate workload, importance of work, authority/control/autonomy, advancement opportunities, feedback, hazard-free working conditions, and opportunities for personal and professional development. An effective compensation system will utilise these returns.

Criterion Contamination

Allowing nonperformance factors to affect performance scores.

Top-Down Approach to Pay Budgeting

Also known as unit level budgeting, an approach in which a total pay budget for the organisation (or unit) is determined and allocated down to individual employees during the plan year. There are many kinds of unit-level budgeting. They differ in the type of financial index used as a control measure. Controlling to a planned level rise and controlling to a planned compa-ratio are two typical approaches.

Cost Containment

An attempt made by organisations to contain benefits costs, such as imposing deductibles and coinsurance on health benefits or replacing defined benefit pension plans with defined contribution plans.

Pay Level

An average of the array of rates paid by an employer.

Human Capital Theory

An economic theory proposing that the investment one is willing to make to enter an occupation is related to the returns one expects to earn over time in the form of compensation.

Management by Objectives (MBO)

An employee planning, development and appraisal procedure in which a supervisor and a subordinate or group of subordinates, jointly identify and establish common performance goals. Employee performance on the absolute standards is evaluated at the end of the significant period.

Line of Sight

An employees ability to see how individual performance affects incentives payout. Employees on a straight piecework pay system have a clear line of sight. THeir pay is a direct function of the number of units they produce; employess covered by profit sharing have a fuzzier line of sight. Their payout are a function of many forces, only one is individual performance.

Performance Standards

An explicit statement of what work output is expected from employees in exchange for compensation.

Sales Value of Production (SVOP)

An incentive metric that calculates the dollar value of goods produced and in inventory.

Success Sharing

An incentive plan (eg profit sharing or gain sharing) in which an employees base wages matches the market wage and variable pay adds on during successful years. Because base pay is not reduced during bad years, employees bear little risk.

Risk Sharing

An incentive plan in which employees base wages are set below a specified level (eg 80 percent of market wage) and incentive earning are used to raise wages above the base. In good years an employees incentive pay will more than make up for the 20percent shortfall, giving the employee a pay premium. Because employees assume some of the risk, risk sharing plans pay more generously than success sharing plans in good years.

Motivation

An individuals wlillingness to engage in some behaviour. Primarily concerned with 1. what energises human behaviour. 2. What directs or channels such behaviour. 3. How this behaviour is maintained or sustained.

Sales Compensation

Any form of compensation paid to sale representatives. Sales compensation formulas usually attempt to establish direct incentives for sales outcomes.

Standard Rating Scale

Appraisal system characterised by 1. one or more performance standards being developed and defined for the appraiser and 2. each performance standard having a measurement scale indicating varying levels of performance on that dimension. Appraisers rate the appraisee by checking the point on the scale that best represents the apraisees performance level. Rating scales vary in the extent to which anchors along the scale are defined.

Bottom-up Approach to Pay Budgeting

Approach in which individual employees pay rate for the next plan year are forecasted and summed to create an organisations total market.

Supply Chain Analysis

As applied to work flow analysis, supply chain analysis looks at how an organisation does its work: activities pursued to accomplish specific objectives for specific customers.

Total Cash

Base wage plus cash bonus; does not include benefits or stock options.

Cost of Living Increase

Based on change in cost of living (as measured by the CPI)

Competency

Basic knowledge and abilities employees must acquire or demonstrate in a competency-based plan in order to successfully perform the work, satisfy customers and achieve business objectives.

Flexible Benefit Plan

Benefit package in which employees are given a core of critical benefits (necessary for minimum security) and permitted to expend the remainder of their benefit allotment on options that they find most attractive.

Performance Share/Unit Plans

Cash or stock awards earned through achieving specific goals.

Broad Banding

Collapsing a number of salary grades into a smaller number of broad grades with wide ranges.

Employee Contributions

Comparisons among individuals doing the same job for the same organisation.

Compentency-Based System

Compensation approach that links pay to the depth and scope of competencies that are relevant to doing the work. Typically used in managerial and professional work where what is accomplished may be difficult to identify.

Skill-Based System

Compensation approach that links pay to the depth and/or breadth of the skills, abilities and knowledge a person acquires/demonstrates that are relevant to the work. Typically applies to operators, technicians and office workers where the work is relatively specific and defined. The criterion chosen can influence employee behaviour by describing what is required to get higher pay.

Best-Pay Practices

Compensation practices that allow employers to gain preferential access to superior human resource talent and competencies (i.e valued assets), which in turn influence the strategies the organisation adopts.

Tacit Work

Complex work as compared to transactional or routine work.

Compliance

Compliance as a pay objective means conforming to federal and state compensation laws and regulations.

Procedural Justice/Fairness

Concept concerned with the process used to make and implement decisions about pay. It suggests that the way pay decisions are made and implemented may be as important to employees as the result of the decisions.

Compensation Differentials

Differentials in pay among jobs across and within organsations and differences among individuals in the same job in an organisation.

Valuation Discrimination

Discrimination that focuses on the pay women and minorities receive for the work they perform. Discrimination occurs when members of these groups are paid less than the white males for performing substantially equal work. Based on the the standard 'equal pay for equal work'.

Entitlement

Employee belief that returns and/or rewards are due regardless of individual or company performance.

Expatriates

Employees assigned outside their base country for any period of time in excess of one year.

Short-Term Incentives

Inducements offered in advance to influence future short-term (annual) results. Usually very specific performance standards are established.

Long-Term Incentives

Inducements offered in advance to influence longer-rate (multiyear) results. Usually offered to top managers and professionals to get them to focus on long-term organisation objectives.

Task (Work) Data

Information on the elemental units of work (tasks), with emphasis on the purpose of each task, collected for job analysis. Work data describes the job in terms of actual tasks performed and their output.

Job Content

Information that describes a job. May include responsibility assumed and/or the tasks performed.

Increase Guidelines

Inherent compensation system controls. They specify the amount and timing of pay increase on an organisationwide basis.

Quantitative Job Analysis (QJA)

Job analysis method that relies on scaled questionnaires and inventories that produce job related data that are documentable, can be statistically analysed and may be more objective than other analysis.

Compensable Factor

Job attributes that provide the basis for evaluating the relative worth of jobs inside an organisation. A compensable factor must be work-related, business related and acceptable to the parties involved.

Classification

Job evaluation method that involves slotting job descriptions into a series of classes or grades that cover the range of jobs that serve as a standard against which the job descriptions are compared.

Hierarchical (Job Structures)

Jobs ordered according to their relative content and/or value.

Entry Jobs

Jobs that are filled from the external labour market and whose pay tends to reflect external economic factors rather than an organisations culture and traditions.

Seniority Increases

Pay increases tied to a progression pattern based on seniority. To the extent performance improves with time on the job, this method has the rudiments of paying for performance.

Direct Compensation

Pay received directly in the form of cash (wages, bonuses, incentives)

Pay-For-Performance Plans

Pay that varies with some measure of individual or organisational performance, such as merit pay, lump sum bonus plans, skill-based pay, incentive plans, variable pay plans, risk sharing and success sharing.

Variable Pay

Pay tied to productivity or some measure that can vary with the firms productivity.

Lump-Sum Award

Payment of entire increase (typically merit based) at one time. Because amount is not factored into base pay, any benefits tied to base pay do not increase.

Commission

Payment tied directly to achievement of performance standards. Commissions are directly tied to a profit index (sales, production level) and employee costs; thus, they rise and fall in line with revenues.

Inventories

Questionnaires in which tasks, behaviours and abilities are listed. The core of all quantitative job analysis.

Zones

Ranges of pay used as controls or guidelines with pay bands that can keep the system more structurally intact. Maximum, midpoints and minimums provides guides to appropriate pay for certain levels of work. Without zones employees may float to the maximum pay, which for many jobs in the band is higher than market value.

Halo Error

Rating error in which an appraiser gives favorable ratings to all job duties based on impressive performance in just one job function.

Leniency Error

Rating error in which the rater consistently rates some higher than is deserved.

Spillover Error

Rating error in which the rater continues to downgrade an employee for performance errors in prior rating periods.

First Impression Error

Rating error in which the rater develops a negative (positive) opinion of an employee early in the review period and allows it to negatively (positively) colour all subsequent perceptions of performance.

Job Structure

Relationship among jobs inside an organisation, based on work content and each jobs relative contribution to achieving the organisations objectives.

Pay Mix

Relative emphasis among compensation components such as base pay, merit, incentives and benefits.

Pay-Policy Line

Representation of the organisation pay-level policy relative to what competitors pay for similar jobs.

Extrinsic Rewards

Rewards that a person receives from sources other than the job itself. They include compensation, supervision, promotions, vacations, friendships, and all other important outcomes apart from the job itself.

Transactional Work

Routine work

Market Pricing

Setting pay structures almost exclusively through matching pay for a very large percentage of jobs with the rates paid in the external market.

Topping Out

Situation in which employees in a skill-based compensation plan attain the top pay rate in a job category by accumulating and/or becoming certified for the top-paid skill block(s).

Skill-Based Structure

Skill-based structures link pay to the depth or breadth of the skills, abilities and knowledge a person acquires that are relevant to the work.

Merit Increase Guidelines

Specifications that tie pay increases to performance. They may take one of two forms: The simplest version specifies pay increases permissible for different levels of performance. More complex guidelines tie pay not only to performance but also to position in the pay range.

Broad-Based Option Plans (BBOPs)

Stock grants: A company gives employees shares of stock over a designated time period.

Global Approach

Substitution of a particular skill and experience level for job descriptions in determining external market rates. Includes rates for all individuals who possess that skill.

Job-Based Systems

Systems that focus on jobs as the basic unit of analysis to determine the pay structure, hence job analysis is required.

Hit Rate

The ability of a job evaluation plan to replicate a predetermined, agreed-upon job structure.

Validity

The accuracy of the results obtained; that is, the extent to which any measuring device measures what it purports to measure.

Marginal Product of Labour

The additional output associated with the employment of one additional human resource unit, with other factors constant.

Flexible Compensation

The allocation of employee compensation in a variety of forms tailored to organisation pay objectives and/or the needs of individual employees.

Valence

The amount of positive or negative value placed on specific outcomes by an individual.

Utility Theory

The analysis of utility, the dollar value created by increasing revenues and/or decreasing costs by changing one or more human resource practices. It has most typically been used to analyse the payoff to making more valid employee hiring/selection decisions.

Pay Structures

The arrays of pay rates for different job within a single organisation; they focus attention on differential compensation paid for work of unequal worth.

Base Wage

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.

Competitive Intelligence

The collection and analysis of information about external conditions and competitors that will enable an organisation to be more competitive.

Competitive Position

The comparison of the compensation offered by one employer relative to that is paid by its competitors.

Total Compensation

The compete pay package for employees, including all forms of money, bonuses, benefits, services and stock.

Reward System

The composite of all organisational mechanisms and strategies used to formally acknowledge employee behaviours and performance. It includes all forms of compensation, promotions and assignments; non-monetary awards and recognitions; training opportunities; job design and analysis; organisational design and working conditions; the supervisor; social networks; performance standards and reward criteria; performance evaluation etc.

Organisational Culture

The composite of shared values, symbols and cognitive schemes that ties people together in the organisation.

Cost Cutter

The cost cutter efficiency-focussed strategy stresses doing more with less by minimizing costs, encouraging productivity increase, and specifying in greater detail exactly how jobs should be performed.

Customer-Focused Business Strategy

The customer focused business strategy stresses delighting customers and bases employee pay on how well they achieve this.

Congruency

The degree of consistency or fit between the compensation system and other organsiational components such as strategy, product market stages, cultures and values, employee needs and union status.

Incentive Effect

The degree to which pay influences individual and aggregate motivation among employees at any point in time.

Compensation Objectives

The desired results of the pay systems. The basic pay objectives include efficiency, fairness and compliance with laws and regulations. Objectives shape the design of the pay system and serve as the standard against which the success of the pay system is evaluated.

Labour Supply

The different numbers of employees available at different pay rates.

Turnover Effect

The downward pressure on average wage that results from the replacement of high wage earning employees with workers earning a lower wage.

Sorting Effect

The effect that pay can have on the composition of the workforce. Different types of pay strategies may cause different types of people to apply to and stay with an organisation.

Labour Demand

The employment level organisations require. An increase in wage rates will reduce the demand for labour, other factors constant. Thus the labour demand curve (the relationship between employment levels and wage rates) is downward sloping.

Compression

The existence of very narrow pay differentials among jobs at different organisation levels as a result of wages for jobs filled from the outside (frequently these are entry level jobs) increasing faster than internal pay structure.

Perquisites (Perks)

The extras bestowed on top management such as private dining rooms, company cars.

Managing Compensation

The fourth dimension in the pay model; ensuring the right people get the right pay for achieving the right objectives in the right way.

Strategy

The fundamental direction of the organisation. It guides the deployment of all resources, including compensation.

Culture

The informal rules, rituals and value systems that influence how people behave.

Innovator

The innovator stresses new products and short response time to market trends.

Job Specifications

The job specifications that can be used as a basis for hiring are knowledge, skill and abilities required to adequately perform the tasks.

Range Maximums

The maximum values to be paid for a job grade, representing the top value the organisation places on the output of the work.

Pay Increase Guidelines

The mechanisms through which levels are translated into pay increases and therefore, dictate the size and time of the pay reward for good performance.

Range Minimums

The minimum values to be paid for a job grade, representing the minimum value the organisation places on the work.

Relational Returns

The non quantifiable returns employees get from employment, such as social satisfaction, friendship and belonging.

Tournament Theory

The notion that larger differences in pay are more motivating than smaller differences. Pay increases should get successively greater as one moves up the job hierarchy. Differences between the top job and second highest job should be the largest.

Recency

The opposite of first-impression error. Performance (either good or bad) at the end of the review period plays too large a role in determining an employees rating for the entire period.

Horn Error

The opposite of halo error; downgrading an employee across all performance dimensions exclusively because of poor performance on one dimension.

Severity Error

The opposite than leniency error. Rating someone consistently lower than is deserved.

Employee Benefits

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

External Competitiveness

The pay relationship among organisations; focuses attention on the competitive position reflected in these relationships.

Internal Alignment

The pay relationships among job or skill levels within a single organisation; focuses attention on employee and management acceptance of those relationships. It involves establishing equal pay for jobs of equal worth and acceptable pay differentials for jobs of unequal worth.

Instrumentality

The perceived contingency that an outcome (performing well) has another outcome (a reward such as pay)

Planned Pay-Level Rise

The percentage increase in average pay that is planned to occur after considering such factors as anticipated rates of change in market data, changes in cost of living, the employers ability to pay, and the efforts of turnover and promotions. This index may be used in top-down budgeting to control compensation costs.

Outsourcing

The practice of hiring outside vendors to perform functions that do not directly contribute to business objectives and in which the organisation does not have a comparative advantage.

Exchange Value

The price of labour (the wage) determined in a competitive market; in other words. the labours worth (the price) is whatever the buyer and seller agrees upon.

Job Pricing

The process of assigning pay to jobs, based on thorough job analysis and job evaluation.

Pay Ranges

The range of pay rates from minimum to maximum set for a pay grade or class. It puts limits on the rates an employer will pay for a particular job.

Relative Value of Jobs

The relative contribution of jobs to organisational goals, to their external market rates or to some other agreed-upon rates.

Range Midpoint

The salary midway between the minimum and maximum rates of a salary range. The midpoint rate for each range is usually set to correspond to the pay-policy line and represents the rate paid for satisfactory performance on the job.

Job Analysis

The systematic process of collecting information related to the nature of a specific job. It provides the knowledge needed to define jobs and conduct job evaluation.

Forms of Compensation

The various types of pay, which may be received directly in the form of cash (wages, bonuses, incentives) or indirectly through series and benefits (pension, health insurance, vacations). This definition excludes other forms of rewards or returns that employees may receive, such as promotion, recognition etc.

Pay Forms

The various types of payments or pay mix, that make up total compensation.

Employer of Choice

The view that a firms external wage competitiveness is just facet of its overall human resource policy and that competitiveness is more properly judged on overall policies. Challenging work, great colleagues, or an organisation prestige must be factored into an overall consideration of attractiveness.

Content

The work performed in a job and how it gets done (tasks, behaviours, knowledge required)

Self-Funding Plans

These plans specify that payouts only occur after the company reaches a certain profit target. Then variable payouts for individual, team and company performance are triggered.

Performance Standard Training

Training that gives performance appraisers a frame of reference for making ratee appraisals.

Performance-Dimension Training

Training that gives performance appraisers an understanding of the dimensions on which to evaluate employee performance.

Incentive

Inducement offered in advance to influence future performance.

Pay Discrimination

Discrimination usually defined as including (1) access discrimination, which occurs when qualified women and minorities are denied access to particular jobs, promotions or training opportunities, and (2) valuation discrimination, which takes place when minorities or women are paid less than white males for performing substantially equal work

Compensating Differentials

Economic theory that attributes the variety of pay rates in the external labour market to differences in attractive as well as negative characteristics in jobs. Pay differences must overcome negative characteristics to attract employees.

Delayering

Eliminating some layers or job levels in the pay structure.

Rating Errors

Errors in judgement that occur in a systematic manner when an individual observes and evaluates a person, group or phenomenon. The most frequent described rating error include leniency, severity, central tendency and halo errors when evaluating employee performance.

High-Commitment Practices

Factors such as high base pay, sharing success only (not risks), guaranteed employment security, promotions from within, training and skill development, employee ownership, and long-term perspective. High-commitment practices are believed to attract and retain a high-commitmed workforce that will become the source of competitive advantage.

Distributive Justice

Fairness in the amount of reward distributed to employees.

Team Incentive

Group incentive restricted to team members with payout usually based on improvements in productivity, customer satisfaction, financial performance or quality of good and services directly attributive to the team.

Job Evaluation Committee

Group that may be charged with the responsibility of 1. selecting a job evaluation system. 2. Carrying out or at least supervising the process of job evaluation. 3. Evaluating the success with which the job evaluation has been conducted. Its role may vary among organisations, but its members usually represent all important constituencies within the organisation.

Marginal Productivity Theory (MPT)

In contrast to Marxist 'surplus value' theory, a theroy that focuses on labour demand rather than supply and argues that employers will pay a wage to a unit of labour that equals the units use (not exchange) value. That is work is compensated in proportion to its contribution to the organisations production objectives.

Individual Incentive Plans

Incentive compensation that is tied directly to objective measures of individual production.

Gain-Sharing (Group Incentive) Plans

Incentive plans are based on some measure of group performance rather than individual performance Taking data on a past year as a base, group incentive plans may focus on cost savings or on profit increases as the standard for distributing a portion of the accrued funds among relevant employees.

Standard Hour Plan

Individual incentive in which rate determination is based on time period per unit of production and wages vary directly as a constant function of product level. In this context, the incentive rate in standard hours plans is set based on completion of a task in some expected time period.

Straight Piecework System

Individual incentive plan in which rate determination is based on units of production per time period; wages vary directly as a constant function of production level.

Factor Scales

Measure that reflect different degrees within each compensable factor. Most commonly five to seven degrees are defined. Each degree may be anchored by typical skills, tasks and behaviour or key job titles.

Factor Weights

Measures that indicate the importance of each compensable factor in a job evaluation system. Weights can be derived through either a committee judgement or a statistical analysis.

Appeals Processes

Mechanisms are created to handle pay disagreements. They provide a forum for employees and managers to voice their complaints and receive a hearing.

Pay Techniques

Mechanisms or techniques of compensation management, such as job analysis, job descriptions, market surveys, job evaluation and the like, that tie the four basis pay policies to the pay objectives.

Conventional Job Analysis Methods

Methods that typically involve an analyst using a questionnaire in conjunction with structured interviews of job incumbents and supervisors. The methods place considerable reliance on analyst ability to understand the work performed and to accurately describe it.

Content Theories

Motivation theories that focus on what motivates people rather than on how people are motivated. Maslows need hierarchy theory and Herzberg two-factor theory are in this category.

Indirect Compensation

Noncash benefits provided to an employee.

Pay Grade

One of the classes, levels or groups into which jobs of the same or similar values are grouped for compensation purposes. All jobs in a pay grade have the same pay range; maximum, minimum and mid point.

Objective Performance-Based Pay Systems

Pay approach that focuses on objective performance standards (eg. counting objectives) derived from organisational objectives and a thorough analysis of the job (eg incentive and gain-sharing)

Subjective Performance-Based Pay Systems

Pay approach that focuses on subjective performance standards (eg achieving agreed upon objectives) derived from organisational objectives and a thorough analysis of the job.

Deferred Compensation Plan

Pay approach that provides income to an employee at some future time as compensation for work performed now. Types of deferred compensation programs include stock option plans and pension plans.

Differentials

Pay differences among levels within the organisation, such as the difference in pay between adjacent levels in a career path, between supervisors and subordinates, between unions and nonunion employees and between executives and regular employees.

Probationary Period

Period during which new employees are excluded from benefit coverage, usually until some term of employment (3 months usually) is completed.

Pay-With-Competition Policy

Policy that tries to ensure that a firms labour costs are approximately equal to those of its competitors. It seeks to avoid placing an employer at a disadvantage in pricing products or in maintaining a qualified work force.

Dual-Ladder Career

Presence of two different ways to progress in an organisation, each reflecting different types of contribution to the organsations mission. THe managerial ladder ascends through increasing responsibility for supervision or direction of people. The professional track ascends through increasing contributions of a professional nature that do not mainly entail the supervision of employees.

Benchmark Conversion

Process of matching survey jobs by applying the employer's plan to the external jobs and then comparing the worth of the external job with its internal match

Human Resource Planning System

Put in place by the benefit administrator to make realistic estimates of human resource needs and avoid a pattern of hasty hiring and morale-breaking terminations.

Performance Metrics

Quantitative measures of job performance.

Low-High Approach

Use of the lowest and highest paid benchmark job in the external market to anchor an entire skill based structure.

BARS (Behaviorally Anchored Rating Scales)

Variants on standard rating scales in which the various scale levels are anchored with behavioral descriptions directly applicable to jobs been evaluated.

Two-Tier Pay Plans

Wage structures that differentiate pay for the same jobs based on hiring date. A contract is negotiated that specifies that employees hired after a stated day will receive lower wages than their higher-seniority working on the same or similar wages.

Leveling

Weighting market survey data according to the closeness of the job matches.

Core Employees

Workers with whom a long-term, full time work relationship is anticipated