Comp and Benefits Final

Discuss the trends that are leading to the increased interest in variable pay.

- Traced to two trends. 1. Increasing competition from foreign producers (force US to cut cost and/or increase productivity) 2. Fast-paced business environment (workers must be willing to adjust what they do and how they do it) -these abilities come from an incentive plan that closely links workers interests with objectives of the company.

Briefly explain the concept of cafeteria-style or flexible compensation.

-based on the idea that the EE knows what package of rewards will work best for them. -based on the notion of different rewards having different dollar costs. Key is for the ER to do careful cost analysis to make sure the dollar cost of the plan package meets ER budgetary limits.

What are the behaviors the compensation ought to enforce?

1. Attraction 2. Retention 3. Develop Skills 4. Motivate EE's

What are the different dimensions of the structuring of wage packages?

1. The division between direct wages and employee benefits. -Voluntary benefits amount to 36.9% of total compensations for unionized firms and 27.8% for non. -Whether because of reduced management control, strong union-worker preference for benefits, or other reasons, unionized employees also have a greater percentage of their total wage bill allocated to employee benefits. 2. Evolution of Two-tired plans -Basically a phenomenon of the union sector, two-tier wage structures differentiate pay based upon hiring date. (some one with high-seniority will essentially get paid more than some one with less years doing the same or similar work) -tires used as cost control strategy to allow for expansion or as a cost-cutting device to allow economic survival. -This plan is at odds with the unions survival principle that everyone is equal. Inequality leads to dissatisfaction. -Unions are reluctant to accept a two-tier structure and may view it as a strategy of last resort. 3. Relationship between worker wages and supervisors wages. -Gap between workers and managers is 27% smaller in unionized firms. -The smaller gap is not caused because of less expanse. Managers in union firms are paid higher wages then managers in non. - The narrow of gap arises b/c worker wages go up faster than manager wages in unionized firms.

How can a proactive compensation manager influence the nature of regulations?

Compliance with laws are necessary, but sometimes it can be a constraint and/or an opportunity fir a compensation manager. A proactive manager can influence the nature of regulations and their interpretation. Astute professionals must be aware of legislative and judicial currents to protect employers' and employees' interests and ensure compliance. A compensation manager can do this in the following ways. (1) Join a professional association to stay informed on emerging issues and to act in convert to inform and influence public and legislative opinion. (2) constantly review compensation practices and their results. When interpretations of what is fair treatment differ, informed public discussion is required. Such discussion cannot occur without the input of informed managers.

What are the four major administration issues regarding setting up a benefit package?

1. Who should be protected of benefited? 2. How much choice should employees have among an array of benefits? 3.How should benefits be financed? 4. Are your benefits legally defensible?

Distinguish between access discrimination and valuation discrimination.

Access Discrimination: the denial of particular jobs, promotions, or training opportunities to qualified women or minorities. Valuation Discrimination: looks at the pay women and minorities receive for the jobs they perform. The Equal Pay Act makes it clear that it is discriminatory to pay women less than males when they are performing equal work. This definition of pay discrimination hinges on the standard of equal pay for equal work. Many believe that this definition of valuation discrimination does not go far enough. They believe that valuation discrimination can also occur when men and women hold entirely different jobs.

What is the spillover effect?

-The spillover of union won rewards into non-unionized departments of companies. -ER's seek to avoid unionization by offering workers the wages, benefits, and working conditions won in rival unionized firms. -Several studies document the existence of this phenomenon, although smaller as union power diminishes, providing further evidence of the continuing role played by unions in wage determination.

Compare defined benefit plans and defined contribution plans

Defined benefit plan: an employer agrees to provide a specific level of retirement pension, which is expressed as either a fixed dollar or a percentage-of-earnings amount that may vary (increase) with years of seniority in the company. Defined contribution plans: require specific contributions by an employer, but the final benefit that will be received by employees is unknown; it depends on the investment success of those charged with administering the pension fund

Why do companies prefer lump-sum pay over merit pay increases?

-Lump-sum is less expensive -Over a fixed period of time and increase in merit will be higher than it is under a lump-sum plan -Company is essentially freezing base therefore many cost conscious firms are moving to lump-sum bonus pay out.

How do you define a good appraisal format?

5 Dimensions (different Orgs attach different weights to each): 1. Employee development potential 2. Administrative ease 3. Personnel research potential 4. Cost 5. Validity

What are the reasons for the decline in unionization?

Four common reasons: 1. The structure of american industry is changing, and declining industries are most heavily unionized, while growing industries are less so. 2. Unionization may be declining b/c workers do not view unions as a solution to their problems. 3.There has been reduced intensity of union organizing efforts 4. Management is taking an increasingly hard stance against unions in general and union demands in particular.

Illustrate the issue of communication of benefits to the employee.

Issue: many employees do not understand benefits. Most common: way to communicate benefits is through a benefit booklet. These should be accompanied by group meetings and videos explaining the benefits. Some orgs supplement initial meetings with refreshers but must use the one-on-one approach (Ex. helpline) for EE's to bring up personal questions.

What are some of the common cost-containment practices with regards to benefit administration?

Probationary periods: excluding EE from benefits until some term of employment is complete. Benefit limitations: limit disability income payment so some max percentage of income and to limit medical/dental coverage for specific procedures to a certain amount. Copay: EE pays a fixed amount or percentage of coverage cost. administrative cost containment: seeking competitive bids for program delivery.

Explain the coverage of FMLA

The 1993 FMLA Act applies to all employers having 50 or more employees and entitles all eligible employees to receive unpaid leave up to 12 weeks per year for specified family or medical reasons. To be eligible, an employee must have worked at least 1,250 hours for the employer in the previous year.

What is the Fair Labor Standards Act of 1938? What are its major provisions?

The Fair Labor Standards Act of 1938 (FLSA) covers all employees (with some exceptions) of companies engaged in interstate commerce or in the production of goods for interstate commerce. In spite of its age, this law remains a cornerstone of pay regulation in the United States. The FLSA's major provisions are: 1. Minimum wage 2. Hours of work 3. Child labor An additional provision requires that records be kept of employees, their hours worked, and their pay.

What are the tests that must be met to qualify for the executive employee exemption?

To qualify for the executive employee exemption, all of the following tests must be met: • The employee must be compensated on a salary basis (as defined in the regulations) at a rate not less than $455 per week; • The employee's primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise; • The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and • The employee 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.

What are the areas covered as apart of the no-fault insurance under worker's compensation?

Workers' compensation covers injuries and diseases that arise our of, and while in the course of, employment. Benefits provided: 1. Permanent total disability and temporary total disability 2. Permanent partial disability 3. Survivor benefits for fatal injuries 4. Medical expenses 5. Rehabilitastion

What are the three major ways by which wage adjustment during the term of the contract might be specified? Explain

1. Deferred wage increases: negotiated at the time of initial contract negotiations with the timing and amount specified in the contract. 2. Reopener clauses: specifies that wages, and sometimes such nonwage items as pension and benefits, will be renegotiated at a specified time or under certain conditions. 3.Cost-of-living or escalator clauses: (COLA's) involves periodic adjustments based typically on changes in the consumer price index.

Briefly summarize the impact of unions on general wages levels.

Although the best way to determine its impact is by finding exactly the same businesses with only union saturation differing, that is not possible. Currently the two ways to examine the impact is by finding two relatively similar companies in an industry with differing union saturation and examining the differences in general wage levels. The other way is to compare two different industries the vary dramatically in the level of unionization. Though, both stratigies suffer because to many other variables could impact the finidings. From a summary of 114 different studies about union vs nonunion wage differences two points emerge: 1. Unions do make a difference in wages, across all studies and all time periods. Union workers earn between 8.9 and 12.4 percent more than their nonunion counterparts. 2. The size of the gap varies from year to year. During periods of higher unemployment, the impact of unions is larger. During strong economies the union-nonunion gap is smaller. Part of the explanation for this time-based phenomenon is related to union resistance to wage cuts during recessions and the relatively slow response of unions to wage increases during inflationary periods.

Compare and contrast desperate treatment and disparate impact.

Disparate Treatment: Disparate or unequal treatment applies different standards to different employees: For example, asking women but not men if they plan to have children. In Japan, for example, women college students continue to report that recruiters ask them different questions than are asked of male college students. The mere fact of unequal treatment may be taken as evidence of the employer's intention to discriminate under U.S. law. Disparate Impact: Practices that have a differential effect on members of protected groups are illegal, unless the differences are work-related. Under disparate impact, whether or not the employer intended to discriminate is irrelevant. A personnel decision can, on its face, seem neutral, but if its results are unequal, the employer must demonstrate that the decision is work-related. The two standards of discrimination—disparate treatment versus disparate impact—remain difficult to apply to pay issues, since pay differences are legal for dissimilar work. It is still not clear what constitutes pay discrimination in dissimilar jobs in the United States.

What are the key suggestions for an effective performance appraisal process?

Key Elements: 1. Sound basis is required for establishing the performance appraisal dimensions and the scales associated with each dimension. 2. Employees need to be involved in every stage of developing performance dimensions and building scales to measure how well they perform on these dimensions. 3. Raters have to be trained in use of the appraisal system and that all employees understand how the system operates and what it will be used for. 4. Raters need to be motivated to rate accurately. One way to achieve this is to ensure that managers are rated on how well they utilize and develop human resources. 5. Raters should maintain a diary of employee performance, both as documentation and to jog the memory. 6. Raters should attempt a performance diagnosis to determine in advance if performance problems arise because of motivation, skill deficiency, or external environmental constraints.