Compensation Administration
List the legal guidelines for the content of performance appraisals, the procedures used in the appraisal process, and the raters.
1. Conduct job analysis to ascertain characteristics necessary for successful job performance. 2. Incorporate theses characteristics into rating instrument. 3. Train supervisors to use the rating instrument properly 4. Several cases demonstrate that formal appeal mechanisms and review of ratings by upper-level personnel help make performance appraisal process more accurate and effective.
Describe eight limitations of merit pay programs.
1. Failure to Differentiate among Performers 2. Poor Performance Measures 3. Supervisor's Biased Ratings of Employee Job Performance 4. Lack of Open Communication between Management and Employees 5. Undesirable Social Structures 6. Mounting Costs - cost burden to companies 7. Factors other than Merit 8. Undesirable Competition
Describe six ways to strengthen the pay-for-performance link
1. Link performance appraisals to business goals 2. Analyze Jobs 3. Communicate 4. Establish Effective Appraisals 5. Empower Employees 6. Differentiate among Performers
Explain how the Civil Rights Act of 1991 overturned three court decisions.
1. The Supreme Court ruled that the plaintiffs (employees) must indicate which employment practice created disparate impact and demonstrate how the employment practice created disparate impact. 2.Allowed employees to challenge the use of seniority systems only within 180 days from the system's implementation date. 3. Federal job discrimination laws do not apply to U.S. citizens working for U.S. companies in foreign countries.
Describe the provisions of the Americans with Disabilities Act of 1990 and the Americans with Disabilities Amendment Act of 2008.
ADA of 1990 - Prohibits discrimination against individuals with mental or physical disabilities within and outside employment settings. Applies to all employers with 15 or more employees. Title I requires employers to provide reasonable accommodations. ADA of 2008 - Changes to the word Disabilities. The act retains the basic definition of disability as an impairment that substantially limits one or major life activities, a record of such impairment, or being regarded as having such impairment. However, it changes the way that these statutory terms should be interpreted. For example, it expands the definition of "major life activities" by including two non-exhaustive lists: First list includes many activities that the EEOC has recognized (walking) as well as activities EEOC has not specifically recognized. The Second list includes major bodily functions.
List the advantages and disadvantages of seniority pay.
Advantages of Seniority Pay - Employees are likely to perceived that they are treated fairly. Advantages to employers - seniority pay facilitates the administration of pay programs, and employers are less likely to offend some employees by showing favoritism. Disadvantages of Seniority Pay - Employees can count on receiving the same pay raises for average and exemplary performance.
Describe the provisions of the Bennett Amendment and the implications for employers.
Allows female employees to charge employers with Title VII violations regarding pay only when the employer has violated the Equal Pay Act of 1963.
Describe the steps in the factor comparison method of job evaluation
Benchmark jobs assigned Factors assigned monetary values based on market rates Pay for Benchmark positions are determined based on the total monetary value of the factor
Explain what bias errors are and list four common bias errors
Bias Errors - Happens when the rater evaluates the employee based on personal negative or positive opinion of the employee rather on the employee's actual performance. First-Impression Effect Positive or Negative Halo Effect - when a rater generalizes an employee's good or bad behavior on one aspect of the job to all aspects of the job. Similar-to-me Effect - refers to the tendency on the part of raters to judge favorably employees whom they perceive as similar to themselves. Illegal Discriminatory Bias - Wherein a supervisor rates members of his or her race, sex, nationality, or religion more favorable than members of other classes.
Explain what the Employment Cost Index (ECI) measures.
Change in Labor Cost
Explain what contrast errors are and list four common contrast errors. (one in the lecture)
Contrast Errors - When supervisor compares an employee with other employees rather than to specific, explicit performance standards. Errors of Central Tendency - When supervisors rate all employees as average or close to average Errors of Leniency - managers tend to appraise employees' performance more highly than they really rate compared with objective criteria. Errors of Strictness - When a supervisor rates an employees' performance lower than it would be if compared against objective criteria. Recency?
Describe the levels of strategic decision making.
Corporation - deciding what businesses the company would operate Business Level - How can we compete in our particular business? Functional Level - (accounting, operational, marketing) - compete on basis of differentiation or compete on low-cost or best value Departments - would form a plan that supports the functional plan that supports the business plan Strategies - Low-Cost, Differentiation, Focus, Best Value
List the ways base pay is commonly adjusted over time
Cost-of-living adjustments Seniority Pay Merit Pay Incentive Pay
Describe three types of behavioral performance appraisal systems.
Critical Incident Technique - requires job incumbents and their supervisors to identify performance incidents that distinguish successful performance from unsuccessful ones. BARS - write incidents as expectations to emphasize the fact that the employees does not have to demonstrate the exact behavior that is used as an anchor in order to be rated at that level. BOS - Measures behavior against levels of performance and also measures the frequency with which behaviors occur.
List the steps in the job analysis process.
Determine a job analysis program Select and train analysts Direct job analysts orientation Conduct the study: data collection methods and sources of data Summarize the results: writing job descriptions
List five sources that can provide appraisal information.
Employee Employee's supervisor Employee's coworkers Employee's supervisees Employee's customers or clients
Briefly describe three contextual influences that affect company compensation.
Employees (Unions) Employers Government
Explain what benchmark jobs are and how they are selected.
HR professionals rely on benchmark jobs as a reference points for setting pay level. Key to conducting job evaluations.
List the limitations of trait appraisals.
Highly subjective because they are based on the assumption that every supervisor's perception of a given trait is the same. Also, rates on employees instead of job performance. Also, the systems rate individuals on subjectively personality factors rather than objective job performance data.
Be prepared to use the guidelines from the Portal-to-Portal Act to determine if time is compensable work activities or not.
Hours Worked - On-Call, Waiting Time, Rest and Meal Periods
Explain the weaknesses in the 360 degree approach to appraisals
Information is very sensitive, and, in the wrong hands, could impact careers. Damages Morale
Describe the three main goals of a compensation department/function.
Internal Consistency - defines the value of each job among all jobs in a company Market Competitiveness - plays an important part in attracting and keeping qualified employees Recognition of Individual Contribution - represented by pay structures, differences in pay based on knowledge, skills, and abilities
Explain what is meant by intrinsic compensation and explain the differences between intrinsic and extrinsic compensation.
Intrinsic Compensation - experiencing a great feeling from the belief that one's work matters in the lives of others. Intrinsic is an internal form of reward, more qualitative, while extrinsic is more outside rewards including health packages and bonuses, it is more quantitative
Describe the five sections commonly found in job descriptions.
Job Title Job Summary Job Duties Job Specifications Worker Specification - KSA's, education
Explain how to determine if job functions are essential.
Job analysis helps HR professionals discern whether substantive differences in job functions exist. Under Equal Pay Act, companies must justify pay differences between men and women who perform equal work using differences in job functions.
Describe three generic strategies and the compensation implications of each.
Low-Cost - gain competitive advantage by being the lowest-cost producer Differentiation - developing products or services that are unique from those of their competitors Focus Strategy
Distinguish between whole job methods of job evaluation and component methods
Market-based Evaluation - use market data to determine difference in job worth Job-Consent Evaluation - Emphasize the company's internal value system by establishing a hierarchy of internal job worth based on each job's function in company strategy
Explain the limitations of internally consistent compensation systems.
May reduce a company's flexibility to respond to changes in competitors' pay practices because job analysis leads to structured job descriptions and job structures
Explain the Equal Pay Act of 1963 including the compensable factors that are used to determine if pay is equal
Men and women should receive equal pay for performing equal work. Compensable factors - Skill, Effort, Responsibility, Working Conditions
Explain how job design is related to merit pay.
Merit Pay Programs - The increases reward excellent effort or result, motivate future performance, and help employers retain valued employees. Employees must know that their efforts in meeting production quotas or quality standards will lead to pay raises.
Describe the three major provisions of the Fair Labor Standards Act of 1938
Minimum Wage - minimally acceptable standard of living for workers Overtime Pay - employers pay workers time and a half if they work over 40 hours in a week Child Labor Provisions - protect children from being over worked
Describe the minimum wage provisions and list and describe the exemptions to minimum wage.
Minimum wage exemptions - permit employers to pay some workers less than the minimum wage . For instance, students employed in retail or service businesses, on farms, or in institutions of higher education.
Describe the components of extrinsic compensation and identify monetary and nonmonetary rewards.
Monetary Rewards - rewards employees according to their job seniority, performance levels, or for learning job-related knowledge or skills. Nonmonetary Rewards - referred to as employee benefits
Explain the provisions of the Lillie Ledbetter Fair Pay Act and the implications for companies.
Pay discrimination charge must be filed within 180 days of discriminatory paycheck.
Describe the links between compensation and other HR functions, e.g., performance appraisal, training, career development, labor-management relations, and terminations.
Performance Appraisal - accurate performance appraisals are integral to effective merit pay programs. Training - Successful pay-for-knowledge programs depend on a company's ability to develop and implement systematic training programs. Career Development - Most employees expect to experience career development within their present companies. lateral or vertical moves in a company. Labor-Management Relations - Collective bargaining agreements describe the terms of employment (pay and work hours) reached between management and the union. Terminations - Employment terminations take place when an employee's agreement to perform work is terminated. Involuntary or voluntary. Some companies may choose to sever severance pay, following involuntary termination. Some offer pension programs following retirement (voluntary).
Explain how the classification method of job evaluation is used.
Place jobs into categories based on compensable factors
Describe the provisions of the Pregnancy Discrimination Act of 1978. Use the handout on the Sakai website.
Prohibits disparate impact against all pregnant women for all employment practices
Describe the provisions of the Age Discrimination in Employment Act of 1967 and the amendments.
Protected workers 40 and older from illegal discrimination.
Describe the child labor provisions of the FLSA. Use the Department of Labor handouts on the Sakai website.
Protects the child from being overworked, working in potential hazardous settings, and having their education jeopardized due to excessive work hours. Children under 14 cannot be employed Children from ages 14 to 15 may work in safe occupations outside school hours and cannot exceed three hours a day Children 16 to 17 do not have hourly restrictions
Describe the content of the National Compensation Survey (NCS) for both pay and benefits.
Provides comprehensive measures of occupational earnings: compensation cost trends, benefit incidence, and detailed plan provisions
Describe methods of gathering job analysis information.
Questionnaires Observations
Describe three whole methods of job evaluation.
Ranking Classification Factor Comparison or Point Marketing
Describe three comparison systems of performance appraisal.
Ranking - Ranking employee from best to worst Forced Distribution - assigns employees to a certain groups that represent the entire range of performance. Paired Comparison - Supervisors compare each employee to every other employee, identifying the better performance in each pair.
Demonstrate how job evaluation points are combined with market pay rates in regression analysis to create the market pay line.
Regression Analysis - enable compensation professionals to establish pay rates for a set of jobs that are consistent with typical pay rates for jobs in the external market.
Explain how managers define the relevant labor markets for jobs in the company.
Relevant Labor Market - represents the fields of potentially qualified candidates for particular jobs. Companies collect compensation surveys data from the appropriate relevant labor market. Are defined on the basis of occupational classification, geography, and product or service market competitors.
Explain why job analysis must be reliable and valid.
Reliable Job Analysis Method - yields consistent results under similar conditions Valid Job Analysis Method - accurately assesses each job's duties or content
Describe the steps in the point factor method of job evaluation.
Select Benchmark Jobs - provide reference points against which jobs within the company are judged Choose Compensable Factors Based on Benchmark Jobs Define Factor Degrees - evaluators must divide each factor into a sufficient number of degrees to identify the level of a factor present in each job Determine the Weight of Each Factor Determine the Point Values of Each Compensable Factors Verify Factor Degrees and Point Value Evaluate All Jobs
Distinguish between seniority pay and longevity pay.
Seniority Pay - Reward job tenure or employees' time as members of a company explicitly through permanent increases to base salary. Longevity Pay - Rewards employees who have reached pay range maximums and who are not likely to move into higher pay grades
Explain why 360 degree appraisals are becoming more popular.
Software is available to permit managers to give the rating more quickly and conveniently, and gives a fair view of the employee's performance
List the limitations of comparison appraisal systems.
Subjective judgment which increases the chance for rate errors and biases. Best suited for small groups of employees
Compare and contrast the four categories of performance appraisals.
Trait System - Asks raters to evaluate each employee's traits or characteristics. Highly subjective because they are based on the assumption that every supervisor's perception of a given trait is the same. Also, rates on employees instead of job performance. Comparison System - Subjective.evaluates a given employee's performance against another employee. Forced Distribution - alternative approach, assigns employees to a certain groups that represent the entire range of performance. To minimize the tendency for supervisors to rate most employees as excellent performers. Some believe it fosters a cutthroat, paranoia, and generally ill will, and destroys employee loyalty. Behavioral System - Rate employees on the extent to which they display successful job performance behaviors. Rate objective job behaviors. Goal-Oriented System - MBO - Most effective because supervisors and employees determine objectives for employees to meet during the rating period and employees appraise how well they have achieved their objectives. Objectively. Promotes effective communication between employees and their supervisors. Downside is it is time consuming and requires a constant flow of information.
List the four legally required benefits for all employees.
Unemployment Insurance Workers Comp Family and Medical Leave Disability Insurance
Differentiate between a company's vision and its mission.
Vision Statement - sets direction for the company Mission Statement - what the company is about, how the company is going to complete the vision
Explain how a company's competitive strategy must be consistent with its compensation strategy.
Well-designed and executed surveys provide compensation professionals with sufficient data about other companies' pay rate and practices to begin establishing competitive pay policies that are focused on pay level and pay mix
List the two preliminary considerations taken before conducting compensation surveys.
What companies hope to gain from compensation survey. Custom development versus use of an existing compensation survey
List and describe the six categories of data contained in the O*NET database.
Worker Characteristics - ability, occupational interests, work values Worker Requirements - KSA Experience Requirements Occupational Requirements - work activities Workforce Characteristics - Labor Market Information Occupation Specific Information - Tools, Tasks and Technology
Describe the FairPay Rules 2004 (criteria) for determining if jobs are exempt or non-exempt.
Workers earning less than $23,660 a year - or $455 a week - are guaranteed overtime protection
