9.10 - End of Topic Review

Performance Personal factors such as seniority, gender, age, size of family, experience, and appearance have been found to influence individual wages, along with performance contributions. Variables such as an employee's potential and his/her negotiating skills also play a role in determining compensation levels. In reality, individual wage determinations are often based on personal contributions and performance, not performance alone.

All of the following are personal factors that may affect pay differentials among individuals with similar jobs, except for... Age Appearance Seniority Performance

The jobs can be different but need to be similar in value Determining job classifications (or job families) includes grouping together all jobs that are similar in value. The jobs within the same class may be quite different, but they should be roughly comparable in value to the organization. All jobs in each class are assigned one salary or one range of salaries.

How are jobs grouped together in job families? The jobs need to be similar and similar in value The jobs can be different but need to be similar in value The jobs can be different and can be different in value The jobs need to be similar and different in value

Building structure Incentive pay plans are a specific type of performance-based pay system that is used to encourage specific actions and motivate employees. They are typically structured in a way that reflects the organization's strategy, culture, objectives, and financial capabilities. Incentive programs are often used to attract and retain employees. They can be used at the individual, group, and organizational levels.

Incentive pay plans are usually structured in a way to reflect all of the following about the organization except... Financial capabilities Strategy Culture Building structure

True Although job classes are determined for the purpose of establishing wage rates, job classes are often based on wage rates that already exist. While this practice may seem somewhat backwards, it is very common within most organizations.

True or False: Although job classes are determined for establishing wage rates, they are often based on wage rates that already exist.

True Because many organizations need high levels of cooperation among their employees, organizations may use some form of incentive on an organization-wide basis. These plant-wide bonus sharing plans (or profit-sharing arrangements or plans) allow all employees within the organization to contribute to and benefit from the organization's success.

True or False: Profit-sharing plans allow all employees in the organization to contribute to and benefit from the success of the organization. TrueFalse

False Although cash flow plans and wage-dividend plans are the most common types of profit-sharing plans, organizations continue to develop and customize plans to meet their own individual needs.

True or False: There are only two types of profit-sharing plans: the cash plan and the wage-dividend plan. TrueFalse

False To maintain a competitive edge in the world marketplace, companies realize that they not only need to attract, but also retain and motivate the best employees that they can find. Compensation becomes a significant and timely tool to carry out this task.

True or False: To maintain a competitive edge, companies realize they only need to attract the right employees and they will be competitive in today's market. TrueFalse

False Compensation, being one of the most important HR activities to individuals, as well as organizations, has an extensive set of relationships with other HR activities. For example, for compensation to be successful, it relies on job analysis and performance appraisal as both these functions provide input in determining total compensation. Compensation also influences other HR activities such as recruitment, selection, union-management relationships, and HR planning.

True or False: Unlike most HR activities, compensation has little relation to a wide range of other HR activities.

There must be individual performance measures For group incentive systems to effectively motivate performance, several conditions must be present: 1) Group performance measures (standards and goals) must be in place, 2) Group members must believe that they can achieve their objectives through effective performance 3) Organizational culture must be supportive of group collaboration and cooperation

What conditions must not be present for group incentive systems to effectively motivate performance? There must be individual performance measures There must be group performance measures The group's members must believe they can achieve the objectives The organizational culture must support group cooperation

That people get paid what they feel they deserve in relation to others An important element of any compensation structure is pay equity. Pay equity refers to what people feel they deserve to be paid in relation to what others deserve to be paid.

What is Pay Equity? That individuals get paid just like everyone else with the same title That women and men are paid the same That everyone in the organization is paid the same That people get paid what they feel they deserve in relation to others FEEDBACK

Process of comparing jobs to determine their relative worth within the organization Job evaluation is defined as the process of comparing jobs by the use of formal and systemic procedures to determine their relative worth within the organization. It should be noted that job evaluation is the process of evaluating the job - not the person performing the job. It is used to establish internal equity within the organization.

What is a job evaluation? Process of comparing employees to other employees to determine the job's worth to the organization Process of comparing jobs to determine their relative worth within the organization Evaluation of the person performing the job Evaluation of the group of employees performing the job

The relationship between compensation and performance appraisal The relationship between compensation and performance appraisal is perhaps the most important relationship for individuals within the organization. Especially where performance-based pay exists, the results of the performance evaluation are significant. Without the ability to measure performance in a reliable and valid way, linking such an important reward as pay to the results may lead to diminished motivation and lowered performance.

What is perhaps the most important financial relationship for individuals within the organization? The relationship between job analysis and compensation The relationship between compensation and HR planning The relationship between compensation and performance appraisal The relationship between selection and compensation

Building structure In designing compensation, the organization must measure the worth of each job and establish compensation that is fair in relation to other jobs in the organization, and in relation to the prevailing market. Legislation, union contracts, rising prices, and competitive activities influence the pay system.

Which of the following does not influence the pay system that an organization uses? Building structure Competitive activities Union contracts Legislation

Piecework plan A piecework plan is one of the most common types of incentive pay plans. Under the piecework plan, employees are guaranteed a standard pay rate for each unit of output. Other individual incentive plans are the standard hour plan, the measured day work plan, the sales incentive plan, and stock options.

Which of the following individual incentive plans guarantees a standard pay rate for each unit of output? Measured day work plan Piecework plan Stock options Standard hour plan

They must be a salaried employee FLSA often distinguishes between "exempt" and "nonexempt" employees. Nonexempt employees are covered by FLSA rules and regulations. Exempt employees are not. For a position to be exempt, employers must pay a salary rather than an hourly wage. It should be noted that exempt status is not a title, but a legal classification based largely on job content.

Which of the following is a correct statement about an employee that is exempt from FLSA requirements? They must be an hourly employee that contributes too little to the company They must be a salaried employee They can be any hourly employee They must be an independent contractor

Performance-based pay Compensation includes both direct and indirect compensation. Direct compensation includes basic wage and performance-based pay. Indirect compensation includes employee services, benefits, trainings and any other indirect form of compensation or benefit. Total compensation is the entire value of all direct and indirect payments to the employee.

Which of the following is a type of direct compensation? Employee services Benefits Performance-based pay Trainings

It is an efficient way to administer salaries One reason for grouping jobs into classes is efficiency of salary administration. It also helps to justify the small differences in pay that may exist between jobs. Further, small errors that occur in the evaluation of the jobs can be eliminated in the classification process. Some disadvantages are that employees may find fault in the classification, and jobs that are grouped together may be dissimilar if there are too few classes of jobs.

Which of the following is an advantage to grouping jobs into classes? Jobs that are grouped together are always similar It is an efficient way to administer salaries Small errors may occur in classifying the jobs Employees don't find fault with the classification results

- Jonathan gets paid on commission, meaning that he directly receives a small portion of his sales; - Maddy gets stock options in the company based on her yearly performance; - Martha gets a bonus of $10,000 a year if she meets her sales quota Variable compensation links employee pay to employee and organizational performance. Variable compensation is typically based upon either the employee's performance or the company's performance. For example, variable compensation may come in the form of profit sharing, bonuses and/or stock options. Variable pay is typically a one-time payment that must be re-established and re-earned during each performance period. Organizations will often use variable pay to provide incentives and align the interest of management with shareholders. Fixed pay, on the other hand, is compensation that does not vary according to performance. Also known as "base pay," fixed pay is nondiscretionary compensation that is independent of performance. Two of the most common types of fixed pay include an hourly wage and/or a yearly salary. In both of these situations, employees are paid regardless of performance.

Which of the following is an example of variable compensation? (Select all that apply) Jonathan gets paid on commission, meaning that he directly receives a small portion of his sales John gets paid $12 an hour Martha gets a bonus of $10,000 a year if she meets her sales quota Maddy gets stock options in the company based on her yearly performance Mary gets paid $55,000 each year, with a possibility of a raise after each 3 year period

Individual Teamwork Determination There are four principal determinants of wages, which represent the majority of activities in most compensation departments: 1) Job Evaluation 2) Determination of Job Classes 3) Establishment of Pay Structure 4) Individual Wage Determinations

Which of the following is not one of the four principal determinants of wages? Individual Teamwork Determination Job Evaluation Establishment of Pay Structure Individual Wage Determinations

Fair Labor Standards Act While there are a number of laws that govern compensation and benefits in the United States, the Fair Labors Standards Act (FLSA) has been the primary law governing wages and salaries since 1938. While periodic amendments, such as the 2004 amendment, have influenced and updated the law, the basic premise of the law hasn't changed. It provides guidance on minimum wage, hours worked, overtime pay, equal pay, record-keeping and child labor provisions.

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? Civil Rights Act Fair Labor Standards Act Family and Medical Leave Act Equal Pay Act