Compensation

differences between incentives and merit increases:

A difference between incentives and merit increases is that incentives are temporary. When an employee receives another kind of pay for performance, that pay is temporary. The bonus received by a salesperson for meeting his sales quota for the quarter is applicable only for that quarter.; Incentives also tie pay increases to performance.51 However, incentives differ from merit adjustments. First, incentives are tied to objective performance measures (e.g., sales) usually in a formula-based way, whereas a merit increase program typically relies on a subjective performance rating. There is also some subjectivity in the size of the pay increase awarded for a particular rating. Second, incentives do not increase the base wage and so must be re-earned each pay period. Third, the potential size of the incentive payment will generally be known (given the use of a formula) beforehand. Whereas merit pay programs evaluate past performance of an individual and then decide on the size of the increase, what must happen in order to receive the incentive payment is called out very specifically ahead of time

merit pay

A reward that recognizes 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.;94% of US firms use merit pay increases, nearly 100% private sectors use merit pay, Merit payments are based on an assessment (or rating) of recent past performance made (with or without a formal performance evaluation). In recent years, merit increase budgets (or average merit increases) have been around 3 percent; Merit increases are given as increments to base pay and are based on performance (with or without a formal performance evaluation); Finally, companies increasingly use merit bonuses. As with merit increases, merit bonuses are based on a performance rating but, unlike merit increases, are paid in the form of a lump sum rather than becoming (a permanent) part of the base salary

Troubled Asset Relief Program

Also known as TARP, it includes restrictions on executive pay and discouraged executives from taking "unnecessary and excessive risks"

Employee Contributions

Comparisons among individuals doing the same job for the same organization; or nature of the pay mix is a key decision.; Make the external competitiveness and employee contribution decision jointly.; The fairness objective calls for fair treatment for all employees by recognizing both employee contributions (e.g., higher pay for greater performance, experience, or training) and employee needs (e.g., a fair wage as well as fair procedures); The emphasis to place on employee contributions (or nature of pay mix) is an important policy decision because it directly affects employees' attitudes and work behaviors.

Entitlement

Employee belief that returns and/or rewards are due regardless of individual or company performance, as an entitlement for being employee of organization.

Which form of pay does NOT permanently increase labor costs?

Incentives

variable pay may also be called?

Incentives

Know which of a number of statements is true of incentives

Incentives also tie pay increases to performance but differ from merit adjustments.; Incentive programs use objective measures of performance.; Incentives do not increase base wage and must be re-earned; Incentive payment is known beforehand - such as a commission.; Incentives try to influence future behavior and merit rewards past behavior - a matter of timing.; Because incentives are a one-time payment, they are frequently referred to as variable pay.; Incentives may be short- or long-term.; Long-term incentives are in the form of stock ownership or options.

differences between merit increases and merit bonuses:

Merit increases are given as performance-based increments to the base pay., Merit bonuses are also based on performance rating but are paid in one lump sum rather than a permanent change to base pay.

recognize fundamental objectives versus a policy of the pay model

Policies: Internal Alignment (refers to comparisons among jobs or skill levels inside an organization. Pay relationships affect all four compensation objectives; efficiency, fairness, compliance, ethics) Competitiveness (refers to pay comparisons with competitors and affect objectives in two ways. 1: Employees must perceive their pay as competitive, or they may leave. 2: Controlling labor costs keeps the company's products competitive) Contributions (or nature of the pay mix is a key decision; Make the external competitiveness and employee contribution decision jointly) and Management (means ensuring the right people get the right pay for achieving the right objectives in the right way.) Fundamental Objectives: (Performance, Quality, Customer and Stockholder, Cost), Fairness, Compliance, Ethics; Efficiency; Fairness (sometimes called equity) is a fundamental objective of pay systems

from descriptions be able to recognize which company is taking efforts to improve the work/life balance of its employees:

Programs that help employees integrate their work and life responsibilities include: time away from work (vacations, jury duty, referrals for child and elder care); access to services to meet specific needs (drug counseling, financial planning); and flexible work arrangements (telecommuting, nontraditional schedules, nonpaid time off).; book example: Medtronic, for example, touts its Total Well-Being Program that seeks to provide "resources for growth—mind, body, heart, and spirit

Examples of a relational return:

Recognition and status, employment security, challenging work, learning opportunities, personal satisfaction from successfully facing new challenges, teaming with great coworkers, receiving new uniforms; Such factors are part of the total return, broader than total compensation.

internal alignment:

The pay relationships among jobs or skill levels within a single organization; 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.

Incentives do not permanently increase labor costs because?

They are one-time payments

if a company wants to restructure its pay plan without increasing labor costs in the long run and while retaining its top employees which of the following examples would be the best strategy:

increasing incentive pay and decreasing base pay

Reasons why the great majority of the uninsured in the United States are from working families

people who are under the age of 65 and not below the poverty line obtain health insurance through their employers, but small employers, which account for a substantial share of employment, are much less likely than larger employers to offer health insurance to their employees.

which of the following is often the largest component in an executive pay package?

stock options

incentive effect

the degree to which pay influences individual and aggregate motivation among the employees we have at any point in time; First, and perhaps most obviously, pay can affect the motivational intensity, direction, and persistence of current employees. Motivation, together with employee ability and work/organizational design (which can help or hinder employee performance), determines employee behaviors such as performance.