aPHR test study guide - Compensation and Benefits (14%)

Kinds of Define- contribution plans available

- MONEY PURCHASE PLAN- The employer specifies a level of annual contributions. The contributions are invested, and when the employee retires, he or she is entitled to receive the amount of the contributions plus the investment earnings "Money purchase " refers to the fact that when employees retire, they often buy an annuity with the money, rather than taking it as a lump sum - PROFIT-SHARING AND EMPLOYEE STOCK OWNERSHIP PLANS- incentive pay may take the form of profit sharing and Employee Stock Ownership Plans ( ESOPs) These payments maybe set up so that the money goes to retirement plans - SECTION 401 (k) PLANS - employees contribute a percentage of their earnings, and employers may take matching contributions. The amount employees contribute is not taxed as part of their income until they receive it from the plan.

Types of pay for Organizational Performance

-Profit sharing - Stock Options - Employee Stock Ownership Plans ( ESOPs)

Separation Benefits

-Severance pay - Outplacement assistance - Resume Assistance - Benefits Continuation

Time Off Benefits

-lunch and Rest breaks - vacation - holidays - family leave - medical and sick leave - paid time off - military reserve time off - jury duty leave - personal business leave -

Processes that make incentives work

-participation in decisions- employees have hands-on knowledge about the kinds of behaviors that can help the organization perform well -communication-

Conditions workers must meet to receive unemployment insurance benefits

1- demonstrating they have been employed ( often 52 weeks or four quarters of work at a minimum level of pay ) 2- They are available for work 3- They are actively seeking work ( includes registering at the local unemployment office) 4- They were not discharge for cause ( such as willful misconduct ), did not quit voluntarily, and are not out of work because of a labor dispute ( such as a union member on strike)

Effective incentive plans meet the following requirements

1- performance measures are linked to the organization's goal 2- employees believe they can meet performance standards 3- the organization gives employees the resources they need to meet their goals 4- employees value the rewards given 5- employees believe the reward system is fair 6- the pay plan takes into account that employees may ignore any goals that are not rewarded.

Minimum Vesting schedules required

1- the employer may vest employees after five years and may provide 0 vesting until that time 2- the employer may vest employees over a three- to seven-year period, with at least 20% vesting in the third year and at least an additional 20% in each year after the third year

Bonus

A bonus is a lump sum payment to an employee in recognition of goal achievement.

Balanced Scorecard

A combination of performance measures directed toward the company's long-and-short term goals and used as the basis for awarding incentive pay

Unemployment Insurance

A federal mandated program to minimize the hardships of unemployment through payments to unemployed workers, help in finding new jobs, and incentives to stabilize employment

Scanlon Plan

A gainsharing program in which employees receive a bonus if the ratio of labor costs to the sales value of production is below a set standard

Pay policy line

A graphed line showing the mathematical relationship between job evaluation points and pay rate

Preferred Provider Organization (PPO)

A health care plan that contracts with health care professionals to provide services at a reduce fee and gives patients financial incentives to use network providers

Health Maintenance Organization (HMO)

A health care plan that requires patients to receive their medical care from the HMO's health care professionals, who are often paid a flat salary, and provides all services on a prepaid basis

Employee Wellness Program (EWP)

A set of communications, activities, and facilities designed to change health- related behaviors in ways that reduce health risks

Pay Range

A set of possible pay rates defined by a minimum, maximum, and midpoint of pay for employees holding a particular job or a job within a particular pay grade

Total Reward Statement

A statement displaying for each employee a personalized accounting of the employee's pay plus the value of each benefit he or she is receiving.

Stock Ownership

A stock ownership plan makes employees part owners of the organization.

Merit Pay

A system of linking pay increases to ratings on performance appraisals

Piecework Rates

A wage based on the amount workers produced

Pay Differential

Adjustments to a pay rate to reflect differences in working conditions or labor markets

Total Rewards / Returns

All returns to an employee, including financial compensation, benefits, oportunities for social interaccion, 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 utilize many of these returns

Job evaluation

An administrative procedure for measuring the relative internal worth of the organization's jobs

Employee Stock Ownership Plan ( ESOP)

An arrangement in which the organization distributes shares of stock to all its employees by placing it in a trust managed on the employees behalf

Standard Hour Plan

An incentive plan that pays workers extra for work done in less than a preset "standard time"

Employee benefits

Compensation in forms other than cash. Benefits contribute to attracting, retaining, and motivating employees.

Legal Requirements for pay

EEO- the goal is to employers to provide "equal pay for equal work" Minimum Wage- the lowest amount that employers may pay under Federal or state law, stated as an amount of pay per hour FLSA- fair labor standard act establishes a minimum wage Overtime Pay- applies to the hours worked beyond 40 in one week

Government requirements for vesting and communication

ERISA guarantees employees that when they become participants in a pension and work a specified number of years, they earn a right to a pension upon retirement. These rights are called vesting rights. Employees whose contributions are vested have met the requirements ( enrolling and lengths of service) to receive a pension at retirement age, regardless of whether they remained with the employer until that time.

Flexible Spending Account

Employee-controlled pretax earnings set aside to pay for certain eligible expenses such as health care expenses, during the same year

Nonexempt employees

Employees covered by the FLSA requirements for overtime pay.

Disability insurance

Employees risk loosing their incomes if a disability makes them unable to work. disability ins Provides protection against this loss of income

Life insurance

Employers may provide life insurance to employees or offer the opportunity to buy coverage at low group rates. With a term life insurance policy, if the employee dies during the term of the policy, the employees beneficiaries receive a payment called the death benefit.

(FMLA) Family and Medical Leave Act

Federal law requiring organization's with 50 or more employees to provide up to 12 weeks of unpaid leave after childbirth or adoption; to care for a seriously ill family member, or for an employee's own serious illness; or to take care of urgent needs that arise when a spouse, child, or parent in the National Guard or Reserve is called to active Duty

Incentive pay

Forms of pay linked to an employee performance as an individual, group member, or organization member. This form of pay is specifically designed to energize, direct, or control employee behavior

Group bonuses and Team awards

Group Bonuses reward the members of s group for attaining a specific goal, usually measured in terms of physical outputs. Team Awards are similar but they are more likely to use a broad range of performance measures, such as cost savings, successful completion of a project, or even meeting deadlines

Gainsharing

Group incentive programs that measures improvements in productivity and effectiveness and distributes a portion of each gain to employees

Sales Commissions

Incentive pay calculated as a percentage of sales

Profit Sharing

Incentive pay in which payments are a percentage of the organization's profits and do not become a part of the employees' Base salary

Straight Piecework Plan

Incentive pay in which the employer pays the same rate per piece, no matter how much the worker produces.

Differential Piece Rates (also called rising and falling differentials)

Incentive pay in which the piece rate is higher when a greater amount is produced

Pay for Organizational performance

Incentive pay tied to organizational performance

Family-friendly Benefits

Include policies like family leave, child care, college saving ( like 529 saving plans) elder care,

Long -Term Disability Insurance

Insurance that pays a percentage of a disabled employee's salary after an initial period and potentially for the rest of the employees life

Short-Term Disability Insurance

Insurance that pays a percentage of a disabled employee's salary as benefits to the employee for six months or less

Retention bonuses

Is common for organization's involved in an acquisition to pay retention bonuses---one-time incentives paid in exchange for remaining with the company --- to top managers, engineers, top-performing sales people, and information technology specialists

Regular Rate

Is determined by dividing total earnings in the work week by the total numbers of hours worked in the workweek. Not included : gifts,npaymentsvforbtimebnotbworked, reimbursement for expenses, discretionary bonuses, profit sharing plans,retirement and insurance plans, overtime payments, stock options

Social security

Is the Federal Old age, Survivors, Disability, and Health Insurance (OASDHI) program, which combines old age ( retirement) insurance, survivors insurance, disability insurance, hospital insurance ( Medicare Part A) and supplementary medical insurance ( Medicare Part B) for the elderly

Performance Bonuses

Like merit pay, performance bonuses reward individual performance, but bonuses are not rolled into base pay. The employee must re-earn them during each performance period

Exempt employees

Managers, outside sales-people, and any other employee not covered by the FLSA requirement for overtime pay ( executive, professional, administrative, and highly compensated white- collar employees. Depends on the employee's job responsibilities,salary level ( at least $455 per week ), and salary basis ( The emplome is paid a given amount regardless of the number off hours worked or quality of the work )

Retirement Plans

May be contributory plans or noncontributory plans

Group insurance

Medical, life, and disability insurance

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 midpoint

Pay for Individual performance

Organization's may reward individual performance with a variety of incentives -Piecework Rates - Standard Hour Plans - Merit Pay - individual Bonuses - Sales commissions

Optional benefits Programs

Other types of benefits are optional. These include various types of insurance, retirement plans, and paid leave,

Skill-based pay systems

Pay structures that set pay according to the employees' level of skills or knowledge and what they are capable of doing

Variable pay

Pay tied to productivity or some measure tha can vary with the firm's profitability

Payroll

Payroll is the process by which employers pay an employee for the work they have done.

Payroll

Payroll is the process by which employers pay an employee for the work they have done. A

Defined-Benefit Plan

Pension plan that guarantees a specified level of retirement income . Usually the amount of this defined benefit is calculated for each employee based on the employee's years of service, age, and earning levels. Define-Benefit plans must meet the funding requirements of the EMPLOYEE RETIREMENT INCOME SECURITY ACT ( ERISA)

Hourly wage

Rate of pay for each hour worked

Piecework Rate

Rate of pay for each unite produced

Salary

Rate of pay for each week, month, or year worked

Delayering

Reducing the number of levels in the organization's job structure

Compensation

Refers to all forms of financial returns and tangible services and benefits employees receive as part of an employment relationship

Summary Plan Description

Report that describes a pension plan's funding, eligibility requirements, risks, and other details. The employees must receive this report within 90 days of entering a plan.

Noncontributory Plan

Retirement plan funded entirely by contributions from the employer

Cash Balance Plans

Retirement plan in which the employer sets up an individual account for each employee and contributes a percentage of the employee's salary; the account earns interest at a predefined rate. The difference between this one and a 401(k) is that all the contributions come from the employer. If employees change jobs, they generally can roll over the balance into an individual retirement account ( IRA) It's an increasingly popular way of combine the advantages of defined-benefit plans and defined-contribution plans

Defined-contribution Plan

Retirement plan in which the employer sets up an individual account for each employee and specifies the size of the investment into that account

Contributory plan

Retirement plans funded by contributions from the employer and employee

Stock Options

Rights to by a certain number of shares of stock at a specified price purchasing the stock is called "exercising the option"

Salary threshold

Salary below which employees must be paid 1.5 times their regular rate of pay when they work 40 hours a week

Employee benefits required by law

Social security, Unemployment insurance, Worker's Compensation Insurance, Family and Medical Leave, Health Care

Worker's Compensation

State programs that provide benefits to workers who suffer work related injuries or illnesses, or to their survivors

Child labor

The FLSA restricts the use of child labor with the aims of protecting children's health, safety, and educational opportunities. The restriction apply to children younger than 18 years. Children 16 and 17 may not be employed in hazardous occupations defined by the Department of Labor, such as mining, meatpacking, and certain kind of manufacturing using heavy machinery. Children aged 14 and 15 May work only outside schoolhouse in jobs defined as nonhazardous and for limited time periods

Tax Treatment of benefits

The IRS provide more favorable tax treatment of benefits classified as "qualified plans". The details vary from one type of benefit to another. In the case of retirement plans, The advantages include the ability for employees to to immediately take a tax deduction for the funds they contribute to the plans, no immediate tax in employees for the amount the employer contributes, and tax free earnings on the money in the retirement fund .

Pay level

The average amount (including wages, salaries, and bonuses) the organization pays for a particular job

Paid Leave

The mayor category of paid leave are : Vacations, holidays, sick leave. Employers also should establish policies for other situations that may require time off. Org often provide for paid leave for jury duty, funerals of family members, and military duty. Time off to vote, or donate blood.

Experience Rating

The number of employees a company has laid off in the past and the cost of providing them with unemployment benefits The size of the unemployment insurance tax imposed on each employer depends on the employer's experience rating

Overtime rate

The overtime rate under the FLSA is one and a half times the employee's usual hourly rate , including any bonuses and piece -rate payments ( amounts paid per item produced)

Pay structure

The pay policy resulting from job structure and pay-level decisions. Helps the organization achieve goals relate to employee motivation, cost control, and the ability to attract and retain talented human resources. Establishing a pay structure simplifies the process of making decisions about individual employees' pay by grouping together employees with similar jobs Human resource professionals develop this pay structure based on legal requirements, market forces, and organization's goals

Medical Insurance

The policies typically cover three basic types of medical expenses: hospital expenses, surgical expenses, and visits to physicians . Some employers offer additional coverage, such as dental vCard, vision care, birthing centers, and prescription drugs programs . Employers that offer medical insurance must meet the requirements of the Consolidated Omnibus Budget Reconciliation Act ( COBRA). This federal law requires employers to permit employees to extend their health insurance coverage at group rates for up to 36 months following a qualifying event ( termination, except for gross misconduct, a reduction in hours, and the employee death

Job structure

The relative pay for different jobs within the organization

Long -Term Care Insurance

These policies provide benefits toward the cost of long-term care and related medical expenses

Pay for Group performance

To win group incentives, employees must cooperate and share knowledge so that the entire group can meet its performance targets

Prevailing wages

Two additional federal laws , the Davis-bacon act of 1931 and the Walsh-Healy Public Contracts Act of 1936, govern pay policies of federal contractors . Under these laws, federal contractors must pay their employees at rates at least equal to the prevailing wages in the area. The calculation or prevailing rates must be based on 30% of the lisa labor force. Davis-Bacon covers construction contractors that receives more than $2000 in federal money and Walsh-Healy covers all government contractors receiving $10000 or more in federal funds