aPHR - Compensation and Benefits

List of Professions Exempt from FLSA

(1) Business Owner (2) Executive (3) Creative Professional (4) Learned Professional (5) Computer-related (some) (6) Outside Salespersons

Types of external equities

(Uses market information to develop pay ranges) Wage and salary surveys Bench mark jobs: jobs within your organization that can be matched to similar jobs in the market Collecting salary data: participate in industry surveys, purchase surveys, develop own survey (drawbacks include knowing your competition's pay practices - Sherman Antitrust Act, price/wage-fixing) Age data: adjust all salary survey data to same date Level data: adjust the salary survey data to better fit your job requirements (subjective)

Portal to Portal Act (1947) - Rest and Meal periods

- 20 minutes or less counted as time worked - 30 minutes or more usually unpaid

Types of Defined Compensation Plans - 403(b) Plan

- Available to employees of educational institutions and certain non-profit organizations - Both 401(k) and 403(b) contributions and investment earnings grow tax deferred until withdrawal (assumed to be retirement), at which time they are taxed as ordinary income

Flexible Benefit Plans - Health reimbursement account (HRA)

- Company funded expense accounts - Typically, employers put about $1,000 to $2,000 into each account - Employees, who manage the accounts, use the funds to buy health services and prescription drugs

Strategic Benefits Objectives Strategy Designed to:

- Comply with government required benefits - Enhance workers satisfaction - Attract and retain qualified workers - Reduce turnover

Types of Defined Compensation Plans - Roth 401(k) Plan

- Contributions are made with after-tax dollars - The account grows tax free - Withdrawals taken during retirement will not be subject to income tax, provided the participant is at least 59 1/2 and has held the account for five years or more

Non-Qualified (for ERISA) Retirement Plans

- Employee benefit plans that do not adhere to strict IRS standards - Cover only select groups of employees - Do not receive favorable tax treatment - Often used to provide additional, non-tax deferred, retirement benefits for executives

Managed Care Plans - Point-of-Service (POS)

- Employee chooses primary health provider - Doesn't have to go there first - Deductible if goes elsewhere

Flexible Benefit Plans - Flexible spending accounts (FSA)

- Employee may add pre-taxed dollars to the plan to pay for un-reimbursed medical expenses and dependent care - Must use the dollars within the year or lose them (exception: employer plans may allow a 2 1/2 month extension into the next year for follow-up treatment begun in the previous year) Section 125 of the IRS code

Defined Contribution Plans

- Employer and/or employee funded - Account in employee's name - Balance in account determined by fund performance

Types of Defined Compensation Plans - Safe Harbor 401(k) Plan

- Employer contributions must be fully vested when made; - Not subject to many of the complex tax rules associated with a traditional 401(k) plan, including annual IRS nondiscrimination testing

Traditional Pension Plan

- Employer promise of retirement income - Benefit determined by formula (example: age, years of service, compensation at time of retirement) - Monthly income for life - Insured by the Pension Benefit Guarantee Corporation (PBGC) - part of ERISA

Flexible Benefit Plans - Cafeteria plan

- Employer provides "credits" for employees to use to select benefits - Employee may "buy" additional credits with pre-tax dollars - May receive cash for unused credits

Managed Care Plans - Preferred Provider (PPO)

- Employers, or third-party insurers, contract with health care providers for reduced fees - Members may go inside network of providers for reduced fees, or pay more to go outside of network

Types of Benefits

- Government mandated benefits - Voluntary employee benefits

In general, ERISA does not cover:

- Group health plans established or maintained by governmental entities; - Churches for their employees; - Plans maintained solely to comply with applicable workers compensation, unemployment, or disability laws; - Plans maintained outside the United States for nonresident alien - Unfunded excess benefit plans

Types of Health Insurance Plans

- Indemnity plans - Managed care plans - Managing health insurance costs

Accidental Death and Dismemberment

- Insurance providing benefits for loss of life, limbs, or eyesight as the result of an accident - Usually included with life insurance

Federal and Medical Leave Act, FMLA - Amendment to FMLA - National Defense Authorization Act

- Leave for military families to deal with the obligations arising from a call to duty - Employers required to provide: up to 12 weeks of unpaid leave during any twelve month period to a eligible employee who is the spouse, parent, or offspring of a member of the Armed Forces on active duty to address any "qualifying needs" - Up to 26 workweeks of leave during a 12 month period to care for that service member

Financial benefits

- Life insurance - Accidental death and dismemberment - Long term disability - Short term disability - Tuition reimbursement

Professional compensation

- Maturity curve - pay for years of experience - teachers, scientists, engineers - Dual career ladder (path) - professional may take technical or managerial track and be eligible for same compensation level

Types of Defined Compensation Plans Vesting Vesting schedules

- Maximums set by ERISA - For employer matching contributions 3 years cliff for 6 year graded - For employer profit sharing contributions 5 year cliff or 7 year graded

Tuition Reimbursement

- Must comply with Section 127 of IRS code - Now includes graduate level courses

Types of Defined Compensation Plans - Money Purchase Plans

- Non-discretionary - Fixed percentage of employee earnings each year

Job evaluation methods

- Non-quantitative (whole job) methods: ranking, paired comparison, job classification system - Quantitative methods: point factor method, factor comparison, hay profile, market-based evaluation

Portal to Portal Act (1947) - Waiting and on-call

- Not paid unless it restricts the employee's activities

Internal Revenue Service (IRS) Rulings

- Official documents published by the Internal Revenue Service as revenue rulings, revenue procedures, notices, announcements, and news releases provide information and guidance for tax payers. They are published weekly in the Internal Revenue Bulletin.

Portal to Portal Act (1947) - Training time

- Paid if employer requires the training - Unpaid if voluntary on employee's own time

Portal to Portal Act (1947) - Travel time

- Paid if on-the-job travel between work sites - Unpaid if commuting to and from work - Paid if one day assignment to another city (may deduct time employee would normally commute to the regular work site) - Travel away from home (overnight) (work day paid including travel time during work day; travel outside of work day is unpaid; however, work performed while traveling is paid)

Employer Compensation Philosophies - Contribution (Merit)

- Pay based on performance differences

Managed Care Plans - Health Maintenance Organizations (HMOs)

- Pre-paid - Health care provider paid per member each month - Member chooses primary care physician - Member pays nominal co-insurance fee each health care visit

Executive Exemption to FLSA

- Primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise; - Must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and, - Must have the authority to hire or fire other employees, or the employee's suggestions and recommendations as to the hiring, firing, advancement, promotion, or any other change of status of other employees must be given particular weight.

Types of Defined Compensation Plans

- Profit Sharing Plans - Money Purchase Plans - 401(k) Plan - 403(b) Plan - Roth 401(k) Plan - Safe Harbor 401(k) Plan - Employee Stock Ownership Plans (ESOPS) - Vesting

Long term disability

- Provides partial income replacement - Usually third-party insurance

Short term disability

- Provides partial income until long-term disability insurance becomes effective - Usually employer self-insured

Computing Withholding from Pay Required reports

- Quarterly reports of gross payroll and withheld taxes filed with federal, state, and local taxing authorities - Annual IRS W-2 forms prepared for each employee and also submitted to federal and state tax agencies

ERISA Qualified Retirement Plans

- Retirement plans that meet ERISA fiduciary and reporting and disclosure standards may qualify under the IRS Code to receive favorable tax treatment - Employee contributions to the plan are tax deferred until retirement - Employer contributions are tax deductible for the current year

Types of Defined Compensation Plans - 401(k) Plan

- Section 401(k) of IRS code - Employee contributes pre-tax percentage of income through payroll deductions - Employee chooses investment options - The employee's dollars in the plan always belong to the employee - Employer may also contribute to the plan

State Laws

- State laws are often more restrictive than federal law - Must follow both and honor the most restrictive - The HRCI certification exams only address federal law

Patient Protection and Affordability Care Act (Affordable Care Act) (2010)

- The Act does not require employers to provide health insurance - However, all existing employer provided health plans must: 1. restrict annual limits; 2. prohibit rescinding (dropping) coverage except in the case of fraud or intentional misstatement of material fact; 3. limit excessive waiting periods of coverage; 4. provide coverage for non-dependent children up to age 26. Employers who do not offer health benefits, or whose workers get coverage through a state exchange, will pay a $2,000 annual penalty per employee. This provision applies to employers with 50 full-time or full-time equivalent workers. The first 30 employees are exempt from the penalty.

Voluntary Employee Benefits

- The Patient Protection and Affordability Care Act (Affordable Care Act) (2010)

Types of Defined Compensation Plans - Vesting

- The right the employee has to the employer provided funds in a defined-contribution plan - The employee may not own the employer dollars in the plan until vested

Life insurance

- Typical 1 1/2 time annual salary - Over $50,000, employee is taxed on the excess premium

Cash Balance Plan

- Unfunded account - Employees know what they will receive at retirement - At retirement can choose "lump sum" or annuity - If terminated earlier, can "cash out" fund

Determining Individual Pay - Compa-Ratio

- Used to determine how employees pay is disbursed within the pay range - Individual pay divided by the midpoint of the salary range - Can use to analyze if pay is too low or high for company's pay philosophy (lead, match, or lag) - May be used for individual jobs, departments, or total organization

Developing Job Grades

A job grade is a grouping that encompasses positions with the same or similar values in order to assign compensation rates and structures. The range of pay for every job within a job grade is traditionally the same, with a minimum and maximum rate being established. Determine natural breaks between jobs Determine number of grades Broadbanding Creates broad pay ranges

Types of Defined Compensation Plans - Employee Stock Ownership Plans (ESOPS)

A tax-qualified retirement plan Employer puts company stock into employee account rather than dollars Upon termination of employment, participants receive a tax-qualified distribution from the plan in shares of stock or cash

Incentive pay

Additional pay on top of base pay - bonus, incentives, stock options Based on individual, group, or organizational performance - Individual: cash bonus - Discretionary - Performance based - Formula based - percentage of profits Differential and incentive pay must be included when determining overtime pay for non-exempt employees

Voluntary Paid Time Off (not federally required) Paid time off banks (PTO)

Allow employees to combine their paid time off The accumulated time can then be used for vacation, personal time, personal illness or time off to care for dependents

Pay Increases - Skill-based pay

Also called Pay-for-Knowledge or Multi-Skilled pay - Salary increased as new skills are learned

Consolidated Omnibus Budget Reconciliation Act (COBRA) (1986)

Amendment to ERISA Provides for temporary continuation of group health coverage, at group rates, that otherwise might be terminated Covered employers: 20+ EEs (includes part-time EEs counted as a fraction of full time) Qualifying events: certain events that would cause an individual to lose health coverage - loss of job, full to part-time, divorce of beneficiary, maximum age of child Qualified beneficiaries: former employees and their dependents; retirees Coverage ends when: - the maximum continuation period expires: 18 months for the employees; up to 36 months for divorced spouse or children - eligible for another employer group health plan; or - eligible for Medicare or Medicaid

Health Insurance Portability and Accountability Act (HIPAA) (1996)

Amendment to ERISA Provides new rights and protections for participants and beneficiaries in group health plans Prohibits discrimination against employees and dependents based on their health status Requires group health plans to make individual coverage available to persons who leave the group health plan Provides standards for the protection of personal health information

Pay Increases - Cost of Living Allowance (COLA)

Annual salary increase based on the CPI Attempts to keep employees at same level of living Consumer Price Index (CPI) - measures the average change over time of the prices in a "market basket" of goods and services

The Mental Health Parity and Addiction Equity Act (2008)

Applies to employers with 50 or more employees; The Act does not require employer provided mental health benefits; It does require that group health insurance plans that include a mental health benefit provide the same annual and lifetime dollar limits for mental health benefits as they do for other medical and surgical benefits; The requirement does not apply to benefits for substance abuse or chemical dependency.

Pay Adjustment matrix, or Salary Guide Chart

Attempt to bring individual pay rates closer to the midpoint of the range Individuals below the midpoint receive higher percentage increase Individuals above the midpoint receive lower percentage increase

Managing health insurance costs

Attempt to control the financing and delivery of health services to keep health insurance premiums from escalating by the implementation of: - Utilization review: insurance provide, or third party, audits member health services - Pre-authorization for hospitalization - Reasonable and customary: insurance provider only pays what is typical fee for certain medical procedures in local geographical area - Second opinions: may be required before surgery - Wellness programs: encourage healthy lifestyles

Direct compensation

Base pay Hourly (non-exempt) Salaried (exempt) Salaried (non-exempt) Single Rate (flat rate)] Piecework Knowledge-based pay Competency based Skill based Sales commission Differential pay Incentive pay

Pay Increases - Seniority

Based on time spent in the organization or on a particular job

Types of Defined Compensation Plans Vesting Types of Vesting

Cliff vesting: must be member for specified period of time; then all employers contributions become employees Gradual, or Graded Vesting: employer contribution belongs to employee in specified percentage amounts over time

Job evaluation methods: paired comparison

Compare each job to every other job and rank in order of relative worth

Job evaluation methods: factor comparison

Compares benchmark jobs with market rates Select compensable factors and assign monetary value to each factor Each factor = dollars instead of points - Add up dollars to get wage for the job - Very quantitative and complex; rarely used

Direct compensation - Sales Commission

Compensation is computed as a percentage of sales in units or dollars Straight commission only: commission for each sale made Salary plus commission: small salary and commission for each sale; most common sales plan is salary plus bonus and/or commission Commission plus draw: loan to be repaid from future commission

Internal Revenue Service (IRS) Form W-4

Completed by employee to indicate his or her tax situation (exemptions, status, etc.). The W-4 form tells the employer the correct amount of tax to withhold from an employee's paycheck.

Direct compensation - Salaried (non-exempt)

Consistent payments made each pay period regardless of number of hours worked Overtime pay required

Amendments to ERISA

Consolidated Omnibus Budget Reconciliation Act (COBRA) (1986) Health Insurance Portability and Accountability Act (HIPAA) (1996)

Computing Withholding from Pay Involuntary Deductions

Court ordered Wage garnishment Child support

Other employer provided health plans

Dental: encourage timely dental check-ups - may pay 100% for preventative care; less for dental treatments Vision: may pay for exams and corrective lens Prescription Drugs: may pay for drugs after a deductible

Types of Defined Compensation Plans - Profit Sharing Plans

Discretionary employer contributions based on annual profits

Incentive pay Organization Plans - Profit-sharing

Distributing a portion of the organizations profits to employees

Social secuirty

Employer matches employee contribution Provides income when: - Retired - Disabled - Survivor benefit to spouse and minor children Medicare is a social security benefit

Computing Withholding from Pay Payroll Taxes

Employer required to withhold and/or pay on behalf of each employee: - Federal and state/local employee income taxes - Social security and medicare taxes - paid equally by employer and employee - State and federal unemployment tax (SUTA and FUTA) - paid by employer based on number of employees and experience rated

Indemnity health insurance plans

Full choice - any doctor, any hospital Fee-for-service - provider paid when service is provided May require deductibles

Genetic Information Non-Discrimination Act (GINA 2008)

Group health plans - Cannot require or request genetic testing - Cannot collect or use genetic information (such as family medical history) Exceptions - can collect or request genetic information only if necessary to comply with: - Occupational Safety and Health Act (OSHA) - Family and Medical Leave Act (FMLA)

Newborns' and Mothers' Health Protection Act (1996)

Group health plans that provide benefits for childbirth must permit mothers and their newborn children to remain in the hospital for 48 hours after a normal delivery or 96 hours following a cesarean section

Managed Care Plans

Health Maintenance Organizations (HMOs) Preferred Provider (PPO) Point-of-Service (POS)

Computing Withholding from Pay Voluntary deductions

Health insurance Retirement Union dues

Voluntary Paid Time Off (not federally required)

Holidays Vacation Sick leave Personal Absences Paid time off banks (PTO)

Hourly v. Piecemeal

Hourly: paid for amount of time spent working; must make minimum wage for every hour worked Piecemeal: paid for each product produced; must make minimum wage based on average workweek; if they don't produce product on average week to make minimum wage, need to increase pay rate

Women's Health Cancer Rights Act (1998)

If a group health plan or health insurance issuer covers mastectomies, then the plan is required to cover breast reconstruction surgery in connection with a mastectomy

Voluntary Paid Time Off (not federally required) Vacation

Main reasons employers provide paid vacation Reward for commitment to the organization Renewal time away from the physical mental stress of the job

Workers compensation

Mandated by federal law, regulated by each state Experience rated insurance funded by employer No-fault insurance if injured on-the-job or work-related disease Benefits - Fully paid medical care - Disability care - Rehabilitation - Death benefit

Unemployment insurance

Mandated by federal law, regulated by each state Experienced rated insurance funded by employers Administered and paid by each state Eligible if lose job - Not voluntarily termination - Must be actively seeking employment

Developing and establishing pay ranges - 2 methods

Market line (or wage curve) Range spread (width of the range)

Prevailing Wage Laws - Federal projects

Minimum wages and benefits workers on federal projects are to be paid are established based on what other workers doing the same job are paid in the geographic area Davis Bacon Act (1931) Walsh-Healy Public Contract Act (1936) McNamara-O'Hara Service Contract Act (1965) Defense Authorization Bill (1986)

Exempt Level Employees

Must regularly receive a predetermined amount of compensation each pay period; The compensation cannot be reduced because of variations in the quality or quantity of the work performed; The employee must be paid the full salary for any week in which the employee performs any work.

Exempt and Non-exempt status

Non-exempt: must be paid for all hours worked; must comply with overtime provisions of the FLSA; non-exempt employees must be paid overtime for hours worked over 40 hours per week Exempt from the provisions of the Fair Labor Standards Act, not entitled to overtime pay.

Developing Job Grades - Determine number of grades

Number of grades based on: Management philosophy, and Administrative considerations

Pay Increases - Lump sum increases

Onetime payment for all or part of a yearly pay increase Base pay remains the same - Next increase does not compound on current year's income

Direct compensation - Hourly (non-exempt)

Paid for each hour worked Overtime pay required

Sarbanes-Oxley Act (2002)

Participants and beneficiaries of defined contribution plans must be given 30 days' notice before plan blackout periods go into effect Blackout period - period of time when plan participants cannot make investment changes, obtain loans, or take distributions from their plan account (any period of time more than three consecutive days) - Typical blackout periods last four to six weeks while record keeping changes are being made due to changes in the plan provider

Direct compensation - Differential pay

Pay in addition to base pay for special work circumstances Shift pay - work undesirable 2nd or 3rd shift Premium pay - work on holidays ; may be 1 1/2 or even 2 x base pay Hazard pay - paid extra for hazardous duty Additional pay is temporary based on the unusual assignment

Types of Pay Withholding

Payroll taxes Voluntary deductions Involuntary deductions

Retirement benefits

Pension plans

Minimum standards for ERISA

Plans must provide participants with Summary Plan Descriptions (SPD) - Easy to read written summary of the plan documents giving participants details about the plan: services and benefits, eligibility, vesting, benefit Requires fiduciary responsibilities for those who manage and control plant assets - Employer has duty to handle and invest retirement funds prudently for the benefit of plan members - Fiduciary can be held personally liable for losses resulting from their fiduciary breach - Requires plans to establish a grievance and appeals process for participants to get benefits form their plans - Gives participants the right to sue for benefits and breaches of fiduciary duty - Revised SPD's must be given if plan changes

Incentive pay Organization Plans - Employee stock ownership plans

Profit sharing plan that gives employees shares of stock in the company Gives employees a stake in the organizations success Designed to increase employee effort, commitment, and loyalty

Voluntary Paid Time Off (not federally required) Sick leave

Provides income protection in case of personal illness

Pension plans

Provides income to retired employees - Contributory plans - both ER and EE contribute - Non-contributory plans - employer funded only

Social Security Act (1935)

Provides retirement, disability, and health insurance for retired persons and those unable to work

Employee Retirement Income Security Act, ERISA (1974)

Regulates private employ pension and health care to assure that retirement and health care plans are managed prudently and provide the benefits promised. Compliance allows IRS tax incentives for both employers and employees. Sets minimum standards.

Flexible Benefit Plans

Section 125 of the IRS Code - Premium only plans - Flexible spending accounts (FSA) - Cafeteria plan - Health reimbursement account (HRA) - Health savings account (HSA) 2004-2005 - Adverse selection

Flexible Benefit Plans Adverse Selection

Situation in which only higher-risk employees select and use certain benefits Employer faces higher rates if insufficient numbers select an insurance option that provides higher benefits

Voluntary Paid Time Off (not federally required) Holidays

Six usually recognized and paid by employers in the US New Years Day Memorial day Independence day Labor day Thanksgiving day Christmas day Most employers offer four to six additional holidays

Flexible Benefit Plans - Health Savings Account (HSA) 2004 - 2005

Tax-exempt employee savings accounts to pay for "out-of-pocket" medical expenses - Participants must be covered under "high-deductible" health insurance plans - minimum $1000; individual deductible, $2000; there is also family deductible option - Both employees and employers may contribute to the account - Qualified medical expenses: health insurance deductible, prescription drugs or products, over-the-counter drugs, long-term care insurance, health insurance premiums during any period of unemployment - Funds not used by the end of the year may be rolled over into the next year - Account is portable and may be "rolled-into" another employer plan

Payroll Administration Collect Wage Informaiton

The Department of Labor's Wage and Hour Division (under the Fair Labor Standards Act) requires employers to keep payroll records for all non-exempt employees. The basic records include: 1. Employee's full name and social security number; 2. Address, including zip code; 3. Birth date, if younger than 19; 4. Sex and occupation; 5. Time and day of week when employee's workweek begins; 6. Hours worked each day; 7. Total hours worked each workweek; 8. Basis on which employee's wages are paid (hourly, weekly, piecework, etc.); 9. Regular hourly pay rate; 10. Total daily or weekly straight-time earnings; 11. Total overtime earnings for the workweek; 12. All additions to or deductions from the employee's wages; 13. Total wages paid each pay period; 14. Date of payment and the pay period.

Computing Withholding from Pay Record retention

The IRS requires employers to keep payroll records for all current employees, and for a minimum of six years after employment ends

Direct compensation - Base pay

The basic compensation an employee receives, usually as a wage or salary

Safe Harbor for Exempt Level Employees

The exemption will not be lost even when improper deductions are made, if the employer: - Has a "clearly communicated" policy prohibiting improper deductions which includes a complaint mechanism; - Reimburses employees for any improper deductions; and, - Makes a good faith commitment to comply in the future

Older Workers Benefit Protection Act (OWBPA) 1990

This is an Amendment to the Age Discrimination in Employment Act (ADEA) - Employers must provide workers over 40 years of age with benefits equal to those offered to younger employees unless there is greater cost for providing the benefits to older workers - Employer cannot stop or lower contributions to employee retirement plans when reach a certain age

Employer Compensation Philosophies - Entitlement

Traditional compensation philosophy believes that employees should be rewarded for the length of service. Automatic salary increases based on: - Seniority - Cost of living allowances (COLA)

Pension plans: Defined Benefits Plans

Traditional pension plan Cash balance Plan

FLSA Salary Tests for determining exempt status

UNDER $23,660/year ($455/wk) = definitely non-exempt EXCEPTION: If employee receives non-discretionary bonuses and incentive payments (including commissions). This extra payment may only be used to satisfy up to 10% of the standard salary level. These are usually bonuses for productivity and profitability. These payments must be paid on a quarterly or more frequently basis. "Super salary" test for highly-compensated employees IF PAID AT LEAST $100,000/year, most likely exempt, especially if customarily and regularly perform at least one of the duties of an exempt executive, administrative or professional employee.

Flexible Benefit Plans - Premium only plans

Used to pay for employee contributions to health insurance with pre-tax dollars Section 125 of the IRS code

External equity

Uses market information to develop pay ranges

Voluntary Paid Time Off (not federally required) Personal absences

Usually provided for absence beyond the employee's control Jury duty, bereavement leave, military duty

Job evaluation methods: hay profile

Variation on the factor comparison and point factor methods Uses knowledge, mental activity, and accountability to evaluate executive and managerial positions

Professional Exemption to FLSA - Creative Professional

Work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor.

Direct compensation - Piecework

Workers are paid for each unit produced based on a predetermined standard Straight v. differential

Government Mandated Benefits

social security, unemployment insurance, workers compensation

Exempt Level Employees Exceptions to the "no pay docking" rule - need not be paid for:

(1) Any full workweek when no work is performed (2) Absence from work for one or more full days for personal reasons other than sickness or disability (3) Absence from work for one or more full days due to sickness of disability if the deductions are made under a bona fide plan, policy, or practice of providing wage replacement benefits for these types of absneces and the employee has used all accrued paid leave (4) To offset any amounts received as payment for jury fees, witness fees, or military pay (5) Penalties imposed for violating safety rules of "major significance" (6) Unpaid disciplinary suspension of one or mmore full days imposed for violations of workplace conduct rules (7) Unpaid leave taken pursuant to the Family and Medical Leave Act (8) Proportionate part of an employee's full salary may be paid for time actually worked in the first and last weeks of employment

Independent Contractors - Facts that provide evidence of the degree of control and independence fall into three categories:

(1) Behavioral: does the company control or have the right to control what the worker does and how the worker does his or her job? (2) Financial: are the business aspects of the worker's job controlled by the payer (these include things like how the worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.) (3) Type of Relationship: are there written contracts or employee benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

Special minimum wage for youth

- $4.25 per hour - Employees under age twenty - First 90 consecutive calendar days of employment with an employer - Must pay full federal minimum wage after 90 days, or when worker reaches age 20 (whichever comes first) - Worker must not displace other workers entitled to standard minimum wage

Developing and establishing pay ranges - Range spread (width of the range)

- Minimum and maximum of each range is determined from the midpoint - Usually expressed as a percentage of the different between the minimum and the maximum divided by the minimum - Range for top level jobs usually broader than for lower level jobs

Job evaluation methods: point factor method

Allocate points to each job based on compensable factors to determine its relative worth Knowledge, skills, responsibility, effort, working conditions, etc.

Portal to Portal Act (1947)

Amendment to the Fair Labor Standards Act Defines the start and end of the workday for non-exempt employees Provides guidelines for: - Waiting and on-call - Rest and Meal periods - Training time - Travel time

Special Exemption of Business Owners to FLSA

An employee who owns at least a bona fide 20% equity interest in the enterprise in which employed, and who is actively engaged in its management, is considered a bona fide exempt executive.

Compensatory Time in Lieu of Overtime Pay

An hour and 1/2 off at some later date for every hour worked over 40 per week, instead of paying overtime. Also called "comp time". Generally illegal for private employers. May offset time within same work week - work less one day to offset excess hours worked another day. Federal, state, and local governments can offer comp time, in certain circumstances. - up to 240 hours (30 days)/year; police/fire 480 hours (60 days)/year

Executive compensation

Base pay guaranteed, usually by employment contract with the executive Incentive pay at risk - based on over-all success of the organization; usually large portion of total compensation; long term - deferred compensation, rolling incentives plans, want long term success, not short term thinking Perquisites (PERKS) - special benefits, golden golden parachutes, silver parachutes

Direct compensation - Salaried (exempt)

Consistent payments made each pay period regardless of number of hours worked Paid for the job, not for the time Exempt from the provisions of the FLSA - overtime pay not required

Developing Job Grades - Broadbanding

Consolidates a large number of pay grades into fewer extended grades Enhances career development Employees can learn new skills, move into other job areas within their grade However, fewer promotional opportunities - may use "in band promotions" to recognize increased skilled/experience Creates broad pay ranges - Problem: organization may be paying larger salaries than necessary for some jobs

Pay Increases - types

Cost of Living Allowance Seniority Automatic step-rate Merit (pay for performance) Lump sum increases Skill-based pay

Incentive pay Group Gainsharing Plans - Scanlon Plan

Employees share in greater-than-expected gains in profits and/or productivity Focus on completing production in less labor hours A formula determines the employees' share of cost savings

Incentive pay Group Gainsharing Plans - Improshare Plan

Employees share in greater-than-expected gains in profits and/or productivity Improved Productivity through Sharing Non-production employees also share in the profits of increased productivity resulting from a reduction in production time

Incentive pay Group Gainsharing Plans

Employees share in greater-than-expected gains in profits and/or productivity Scanlon Plan Rucker Plan Improshare Plan

Incentive pay Group Gainsharing Plans - Rucker Plan

Employees share in greater-than-expected gains in profits and/or productivity Similar to Scanlon Plan, but ties incentives to a wide variety of savings including materials, supplies, and services

Federal Insurance Contribution Act (FICA)

Employment tax imposed in an equal amount on employees and employers to pay for Social Security and Medicare benefits

Employer Compensation Philosophies

Entitlement Contribution (merit) Organizational pay policy

Fair Labor Standards Act, FLSA (1938)

Establishes a minimum wage, overtime provision, and child labor regulations. Enforced by the Wage and Hour Division of the Department of Labor. Applies to most non-managerial employees in a private industry.

Overtime

For hours worked in excess of a 40-hour workweek, covered employees must be paid at least time and a half their hourly rate of pay. Includes all "pay", including bonus, shift differential, etc. Shift differential refers to the extra compensation a staff member receives for hours worked that are outside the hours of 8:00 a.m. to 5:00 p.m., Monday through Sunday. A typical shift differential schedule would consist of hours worked between 5:00 p.m. and 8:00 a.m., Monday through Sunday. Does not include paid time off.

Developing and establishing pay ranges - Market line (or wage curve)

Graph showing the relationship between job evaluation points and market rates determines by salary surveys - Using the least squares regression method - Plots the intersecting points on a graph to determine the midpoint pay rate for each benchmark position - Line then used to determine midpoint pay rates for organization's jobs not found in market

Nursing mothers (addition to FLSA) 2010

Guarantees "reasonable" unpaid breaks to nursing mothers who need time to express milk Also requires employers to provide a private place for mothers, other than a bathroom, for up to one year after a nursing child's birth

Incentive pay Organization Plans

Incentives are paid based on meeting financial business objectives. Profit-sharing Employee stock ownership plans

Determining Individual Pay - Green Circle

Individual paid below the minimum of salary range

Determining Individual Pay - Red Circle

Individual paid over the maximum of salary range

Independent Contractors

Individuals who contract with employers to perform specific projects or tasks. They are: - Not employees of the organization - Not covered by the FLSA

Establishing pay rates: Internal equity

Job Evaluation - determining the internal worth of one job to others in the organization Compensable factors: essential, compensable elements of a job, typically include: - Skills - the proficiency required or developed through training or experience - Effort - the use of physical or mental energy required to perform; - Responsibility - the obligation to perform certain tasks or duties; and - Work Conditions - indoor, outdoor, hot, cold, dangerous, stressful, etc. Specific factors may be different for each organization

Job evaluation methods: job classification system

Jobs are classified and grouped using a series of predetermined grade definitions Used by the federal government

Employer Compensation Philosophies - Organizational pay policy

Lead the labor market - Employer establishes pay structures and targets pay above the market median - Sets salary range mid-points above or ahead of the market Match the labor market - Sets pay structures and target pay to meet the market - Pay ranges set to meet the market Lag the labor market - Set pay structures lower than/behind competitors - Midpoint set below market levels

Goals of a compensation plan

Linked to strategic goals - Supports organization philosophy and culture Internally equitable - Perceived as fair Externally competitve - Ability to recruit and retain employees Efficient to administer

Davis Bacon Act (1931)

Minimum wages and benefits workers on federal projects are to be paid are established based on what other workers doing the same job are paid in the geographic area - Covers workers on a federal construction projects worth more than $2,000 - TO prove they are paying prevailing wages, contractors must submit weekly certified payroll reports along with signed statements of compliance

Walsh-Healy Public Contract Act (1936)

Minimum wages and benefits workers on federal projects are to be paid are established based on what other workers doing the same job are paid in the geographic area - Government contracts for supplies, equipment, and materials over $10,000

McNamara-O'Hara Service Contract Act (1965)

Minimum wages and benefits workers on federal projects are to be paid are established based on what other workers doing the same job are paid in the geographic area - Government services contracts over $2,500

Defense Authorization Bill (1986)

Minimum wages and benefits workers on federal projects are to be paid are established based on what other workers doing the same job are paid in the geographic area - Now federal contractors may pay overtime after 40 hour week (not 8 hour day)

Determining Individual Pay - Pay Compression

Occurs when employees with clearly different capabilities paid very similar wages Example: due to inability to hire for certain skills or occupations, new hires are paid close to or more than current employee salaries

Computer related occupations

Overtime pay not required if paid $27.63/hour on salary basis (approximately $58,000/year); and primary duties include: - The application of systems analysis techniques and procedures, including consulting with users; or - The design, development, documentation, analysis, creation, testing or modification of computer systems or programs.

Direct compensation - piecework - straight

Paid for each unit completed

Direct compensation - Piecework - differential

Paid more for each unit after standard number of unit completed; or Paid more for all units completed after the standard number is completed

Direct compensation - Competency based

Pay based on ability to influence and direct others behavior

Direct compensation - Knowledge-based pay

Pay based on education and experience Increases given when new knowledge is obtained May be combination of knowledge and seniority

Direct compensation - Skill based

Pay based on skills mastered

Pay Increases - Merit (pay for performance)

Pay increased based on past effort and performance

Pay Increases - Automatic step-rate

Pay increased by a pre-determined time table - May be combined with performance based increase - May skip steps

Professional Exemption to FLSA - Learned Professional

Performs work requiring advanced knowledge, predominately intellectual requiring consistent exercise of discretion and judgment. Advanced knowledge customarily acquired by a prolonged course of specialized instruction - i.e., 4-year college degree. The exemption does not apply to occupations in which most employees acquire skill by experience.

Child Labor

Permissible jobs: -- 18 years or older - any job, hazardous or not; considered an adult -- 16 and 17 years - any non-hazardous job; limited driving -- 14 and 15 years - may work outside of school hours in non-manufacturing, non-mining, non-hazardous -- Youth at any age - deliver newspapers; perform in radio, television, movies, or theatrical productions; work in parent-owned business (except mining, manufacturing, or hazardous jobs); work as home-worker to gather evergreens and make evergreen wreaths Different age requirements apply to youth employed in agriculture

Job evaluation methods: ranking

Place each job in order of relative worth to the organization

Job evaluation methods: market-based evaluation

Price jobs by comparing them to the outside market wages

Administrative Exemption to FLSA

Primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer's customers; and Exercises "discretion and independent judgment" with respect to matters of significance

Outside Salespersons to FLSA

Primary duty must be making sales; and Must be customarily and regularly engaged away from the employer's place or places of business Inside sales persons are non-exempt

Federal and Medical Leave Act, FMLA (1993)

Provides up to 12 weeks of unpaid leave during a 12 month period for: - Birth, adoption, or foster-care placement - Care of a spouse, child, or parent with a serious health condition - Serious health condition of employee - Leave may be intermittent - Must be employed 12 months with 1,250 hours worked in previous 12 months - Employers covered if have a combined total of 50 or more employees in a 75-mile radius - Employer, generally, required to restore returning employee to same, or comparable, position 2008 Amendment - National Defense Authorization Act

Direct compensation - Single Rate (flat rate)

Same pay for each job - Union rate - Elected jobs in government

Developing Job Grades - Determine natural breaks between jobs

Skills and responsibility levels Example: supervisor and subordinates are not in the same grade

Federal Benefit Laws

Social Security Act (1935) Federal Insurance Contribution Act (FICA) Federal and Medical Leave Act, FMLA (1993) Employee Retirement Income Security Act, ERISA (1974)

Executive compensation - Perquisites (PERKS)

Special benefits (usually non-cash items, so usually not taxed) for executives - Examples: private club memberships, first class travel, company cars Golden parachutes: enhanced severance pay if executive loses position through merger or acquisition Silver parachutes: severance benefit for mid-level managers in the even they lose their job through a merger or acquisition; not as "rich" a benefit as golden parachutes

Federal minimum wage

The current federal minimum wage is $7.25 per hour, and has not increased since July 2009 Tipped employees may be paid $2.13/hour, however wages plus tips must equal at least minimum wage. State minimum wage requirements may be higher. WA state: 12.00 USD per hour Jan 1, 2019

Establishing pay rates: job analysis

The process of determining the skills and duties required of a job - Job descriptions: written duties and responsibilities of a job - Job specifications: knowledge, skills, and abilities required for a job

Strategic Compensation Objectives

Total Rewards: (1) Compensation - direct pay (2) Benefits - indirect (3) The work experience - intangible rewards important to employees