Compensation Final

Cafeteria style comp

"flexible benefit plans" allow employees to customize their benefits package according to their personal preferences and needs - recognizes that a "one-size-fits-all" comp system may not be ideal for a diverse workforce w/varying needs - employees are provided w/certain number of benefit credits, which they can use to purchase different benefits from a menu of options

Comparable worth

"pay equity"- jobs requiring similar skills, effort, responsibility, and working conditions should be paid equally, even if the job titles and duties are different - aims to reduce wage disparities between male-dominated and female-dominated jobs

Equal Pay Act

(part of the FLSA) forbids wage discrimination on the basis of gender if employees perform equal work in the same establishment - Jobs are considered equal if they require equal skill, effort, and responsibility and are performed under similar working conditions

Exempt status

- Covered by FLSA protections - Entitled to overtime pay at 1.5 times their regular wage for hours worked over 40 per week - Paid hourly or salaried, but must earn below the exempt salary threshold - ex: Retail workers, administrative assistants, customer service representatives, and manual laborers

Reasons for differences in the gender "pay gap"

- Differences in the work/occupation and in work-related behaviors are central to understanding the remaining gender wage gaps. - Differences in qualifications and in occupations are important sources of the gaps for both Blacks and Hispanics compared to white men

employee/employer contributions for unemployment insurance

- Employers are typically responsible for paying unemployment insurance taxes - In most states, employees do not contribute to unemployment insurance

Non-exempt status

- Not entitled to overtime pay under FLSA - Must meet three criteria: 1. Salary Basis- Paid a fixed salary, not hourly wages 2. Salary Level - Must earn at least $684 per week ($35,568 per year) 3. Job Duties Test - Must perform executive, administrative, professional, computer-related, or outside sales work Common jobs: Managers, IT professionals, teachers, lawyers, and executives

Benefit administration issues

- Who should be protected or benefited? (e.g., full-time vs. part-time employees) - How much choice should employees have? (e.g., flexible or fixed benefit plans) - How should benefits be financed? (e.g., employer-paid, employee-paid, or shared costs) - Are the chosen benefits legally defensible?​

how do job dimensions help structure JA?

- allows for the grouping of tasks that share a common purpose to simplify job eval and analysis - by organizing specific tasks into meaningful categories that define the overall scope of a job

general guidelines of workers comp

- eligible for benefits even if their own actions caused the accident - cannot sue the employer for pain and suffering or recover beyond wages and medical care

essential elements in JDs

- fundamental job duties - Cannot Be Reassigned - Basis for ADA Compliance and Reasonable Accommodation - Impact of Technology and Job Stability

role of exec branch in comp

- govs influence comp through laws and regulations that ensure fair pay practices - regulatory environment includes federal, state, and local laws, with some states enforcing stricter policies than federal regulations

key characteristics of job family

- groups similar roles - supports career progression - aligns w/pay structure - enhances workforce planning

what is the difference between job-based and person-based structures?

- job-based focus on defined tasks and responsibilities - person-based considers skills and competencies for pay decisions

addressing discrepancies in JA

- resolving diffs in job data provides an opp to clarify job expectations and improve documentation - supervisors may not always be familiar with the evolving nature of job roles, leading to outdated or inaccurate JDs

Strengths and Weaknesses Associated with Variants of Internal Pay Structure

- strengths: fairness, simplicity, etc. - weaknesses: lack of motivation, rigidity, etc.

how is the ECI used in labor cost analysis?

- used by orgs to compare their comp costs against industry and all-industry averages - helps businesses track labor cost trends and evaluate their compensation strategies in response to external market changes​

worker acceptance in JA

1. Accuracy and Usefulness of Data 2. Employee and Supervisor Involvement 3. Transparency in the Process 4. Consistency and Fairness 5. Addressing Discrepancies in Job Data 6. Support from Top Management and Unions

8 steps in a point plan

1. Conduct job analysis 2. Determine compensable factors 3. Scale the factors 4. Weigh the factors according to importance 5. Select criterion pay structure 6. Communicate the plan and train users 7. Apply to nonbenchmark jobs 8. Develop online software support

Impact of offering choice of benefits: Advantages

1. Customization to Individual Needs 2. Adaptability to Workforce Changes: Flexible benefits help firms meet the changing needs of a diverse and evolving workforce 3. Enhanced Understanding of Benefits 4. Cost Management for New Benefits: Flexible plans make the introduction of new benefits less costly since new options are just added to the existing selection 5. Cost Containment: orgs can set a max dollar limit, allowing employees to choose within that constraint, which helps control costs​

best practices for scaling factors

1. Ensure that the number of degrees is necessary to distinguish among jobs 2. use understandable terminology 3. anchor degree definitions with benchmark- job titles and/or work behaviors 4. make it apparent how the degree applies to the job

what is the purpose of a JD?

1. Foundation for Job Evaluation & Pay Decisions: Helps determine job worth and internal equity in comp & ensures alignment between job responsibilities and pay structure 2. Legal Compliance & ADA Requirements: protects the organization against legal disputes by maintaining objective job criteria 3. Guides Recruitment & Selection 4. Supports Performance Management & Training: Used as a basis for setting employee expectations and evaluations

JD elements

1. Job Title and Identification: official title of the job, dept, reporting structure, and job classification details 2. Job Content (Tasks and Duties): detailed breakdown of the work performed in the role describing tasks in measurable and observable terms 3. Essential Functions and Responsibilities: core duties that define the job and differentiate it from other roles used to ensure compliance with legal requirements, such as the ADA 4. Work Environment and Conditions Specifies any physical, mental, or environmental demands related to the job. Helps in determining job accommodations for employees, when necessary.

Primary Data Sources in Job Analysis

1. Primary Sources (Direct Input from Individuals) a. Job Holders (Employees) Employees performing the job provide firsthand details about their tasks, responsibilities, and challenges. - They are the best source for understanding daily job functions and the required skills Supervisors 2. Supervisors oversee employees and provide insight into job expectations, performance standards, and how jobs fit within the organization. - especially valuable for understanding job duties from a management perspective 3. Two-Level-Up Supervisors (for Managerial/Professional Jobs) Higher-level managers offer a strategic perspective on job roles, ensuring that job analysis aligns with organizational objectives 4. Subordinates and Coworkers In some cases, feedback from team members and those who interact with the jobholder is useful, especially in collaborative or customer-facing roles

Impact of offering choice of benefits: Disadvantages

1. Risk of Poor Choices: Employees may make bad choices, leading to inadequate coverage for predictable emergencies. 2. Increased Administrative Burdens: The complexity of managing flexible benefit plans can lead to higher administrative costs and burdens. 3. Adverse Selection: Employees might select only the benefits they expect to use, potentially driving up costs due to high-benefit utilization. 4. Compliance Challenges: Flexible benefit plans are subject to nondiscrimination requirements under Section 125 of the Internal Revenue Code, adding a layer of legal complexity​

Steps in designing a pay policy

1. Specify Competitive Pay Policy 2. Define the Purpose of a Compensation Survey 3. Select Relevant Market Competitors 4. Design the Compensation Survey 5. Interpret Survey Results and Construct a Market Pay Line 6. Construct a Pay Policy Line 7. Balance Competitiveness with Internal Alignment 8. From Policy to Practice: Establishing Grades and Ranges 9. Consider Broad Banding for Flexibility 10. Reconciling Market Data with Internal Structures

steps in interpretation in pay surveys

1. Verify Data Accuracy: Check job matches to ensure internal roles align with survey descriptions 2. Analyze Pay Measures: Surveys may report base pay, total cash, and total compensation, each of which tells a different story​ 3. Identify Market Trends: Look for trends in total compensation, bonuses, stock options, and incentives 4. Construct Market Pay Line: Use stat analysis (e.g., regression, frequency distributions, percentiles) to create a market pay line

Factors influencing external competitiveness in comp

1. competition in the labor market for people with various skills 2. competition in the product and service markets, affecting the financial condition of the organization 3. characteristics unique to each org and its employees, such as its business strat, tech, and the productivity and experience of its workforce

Recommended sequence in job eval

1. establish the purpose(s) 2. decide on single versus multiple plans 3. choose among alt methods 4. obtain involvement of relevant stakeholders 5. eval the usefulness of the result

Components of the pay model

1. policies: int alignment, competitiveness, contributions, mgmt 2. techniques: int structure, pay structure, pay for perf, eval 3. objectives: efficiency- perf/ quality/ customer and stockholder/ cost, fairness, compliance, ethics

why is job analysis important?

1. provides underlying information of an internal structure. Identifies the content of the job, which in turn serves as input for job descriptions, job evaluation, and job structure. 2. Supports internal fairness and alignment: A job structure based on job-related information provides managers and employees with a rationale for pay differences, ensuring fairness. 3. Provides a basis for compensation decision: Serves as underlying basis for job descriptions, job evaluation, and job structure, all critical to setting compensation. 4. Affects HR Functions: supports multiple HR functions such as recruitment, selection, training, performance evaluation, and career development. 5. Ensures Compliance with legal requirements: The Americans with disabilities act (ADA) requires that essential job elements be identified to ensure fair hiring and accommodations. 6. Supports Organizational Flexibility: Generic job descriptions allow for greater flexibility in job roles, facilitating movement between tasks without adjusting pay structures. 7. Works force Planning and Development: JA collects information on job duties and employee characteristics, helping in workforce planing and training initiatives. 8. Facilitates Job documentation and communication: Job descriptions summarize key job tasks, responsibilities, and required skills, serving as a communication tool between employees and management. 9. Adapts to changes in work: helps organizations adjust to changes due to globalization, automation, and shifts in work processes. 10. Enhances Reliability and Validity of HR Decisions: job analysis ensures that HR decisions are based on reliable and valid data, increasing the credibility of job structures and pay policies.

Lily Ledbetter Fair Pay Act

2009 law that strengthens protections against pay discrimination a. extended filing period: Each paycheck that reflects discriminatory pay is considered a new violation, resetting the 180-day (or 300-day in some states) statute of limitations for filing a complaint b. applies to all protected classes: Covers sex, race, color, national origin, religion, age, and disability-based pay discrimination c. retroactive app: Allows individuals who were affected by past pay discrimination to seek legal remedies if they file within the extended period - enacted to overturn a Supreme Court decision that limited the time frame for filing wage discrimination lawsuits

affordable care act

2010 law that aimed to expand healthcare coverage w/o changing the fundamental structure of healthcare delivery - introduced both an individual mandate (now repealed) and an employer mandate for organizations with 50 or more employees to provide qualifying health insurance or face financial penalties​

Deferred Profit-Sharing Plans (DPSPs)

Allocate a portion of the profits to a retirement or savings account for the employee

Who Must Comply with OFCCP Regulations?

Any company that does business with the federal government and has: + Contracts of $10,000 or more (basic non-discrimination compliance) + 50+ employees & contracts of $50,000+ (must create an Affirmative Action Plan)

weaknesses of point method as a job eval methodology

Can become bureaucratic and rule-bound

strengths of classification as a job eval methodology

Can group a wide range of work together in one system - greater specificity of the class definition improves the reliability of eval

Hierarchical Pay Structure def

Clearly defined levels with specific job roles and pay differentials- pay structure that creates significant diffs in pay levels based on job rank, responsibility, or seniority - typical of traditional orgs w/distinct mgmt levels

union preferences in comp

Collective bargaining preferences often emphasize wage increases, benefits, and job security

Factors for evaluating worth of jobs in orgs

Compensable factors are the characteristics of jobs that an organization values and is willing to pay for. These may include required skills, responsibilities, effort, and working conditions. The selection of these factors should align with the organization's strategy and values

strengths of point method as a job eval methodology

Compensable factors call out basis for comparisons. Compensable factors communicate what is valued

costs/financing of social security

Contributions from employees, employers, and self-employed individuals during their working years - Tax Rates: As of 2021, the Social Security Tax is 7.65% of earnings - Self-employed individuals pay 15.3% directly

Values

Core principles and beliefs that guide the behavior of an organization and its employees where pay system reflects the values that guide an employer's behavior and underlie its treatment of employees - Example: A company that values work-life balance may offer flexible work schedules and generous paid time off as part of its compensation strategy

weaknesses of ranking as a job eval methodology

Cumbersome as number of jobs increases. Basis for comparisons is not called out. can create problems that require difficult and potentially expensive solutions because it doesn't tell employees and managers what it is about their jobs that is important - criteria on which the jobs are ranked are usually so poorly defined, if they are specified at all, that the evaluations become subjective opinions that are impossible to justify in strategic and work-related terms - evaluators must be knowledgeable about every single job under study

weaknesses of classification as a job eval methodology

Descriptions may leave too much room for manipulation - limits the variety of jobs that can easily be classified - trying to include a diverse set of jobs in one class can result in vagueness of job descriptions, leaving a lot of room for "judgment"

Benefit planning process

Determine the Role of Benefits in the Compensation Strategy, Evaluate Other Compensation Tools, Ensure External Competitiveness, Assess Benefit Adequacy, Analyze Cost Effectiveness, Address Legal Compliance, Benefit Administration Issues, Communicate the Benefits to Employees, Ongoing Evaluation and Adjustments

Employee factors of benefit choice

Equity, Personal Needs of Employees, Demographic Differences, Perceived Value of Benefits, Flexibility and Choice

Secondary Data Sources in Job Analysis

Existing Doc and External Data 1. JDs and org charts: Reviewing existing job descriptions, workflow charts, and company policies helps confirm tasks and responsibilities 2. Industry Standards and Gov Data: Data from sources like the U.S. Department of Labor's Occupational Information Network (O*NET) provide benchmarks for JDs across industries 3. Performance Evaluations and Training Materials: docs outlining performance expectations and required skills help refine job analysis findings

Determinants of Perception of Fairness in Compensation

Factors influencing how employees perceive fairness in compensation, such as equity, transparency, and consistency

strengths of ranking as a job eval methodology

Fast, simple, easy to explain - simple, fast, and easy to understand and explain to employees - least expensive method, at least initially

OFCCP

Federal Contract Compliance Programs is part of DOL responsible for ensuring that federal contractors and subcontractors comply with equal employment opp and affirmative action requirements a. Enforcing Non-Discrimination Requirements b. Affirmative Action Compliance c. Conducting Compliance Reviews & Audits d. Promoting Equal Pay & Pay Transparency e. Protecting Veterans & Individuals with Disabilities

broad-banded structures

Fewer job levels w/wider salary bands for flexibility, encouraging cross-functional roles and skill-based growth

Maslow's theory

Hierarchy of Needs outlines how human needs are prioritized and can explain how orgs can design reward systems to meet employee needs and enhance perf 1. Physiological Needs (Basic Survival Needs) - base salary, health benefits 2. Safety and Security Needs - pension plans, life insurance 3. Social Needs (Belongingness and Love) - social events, wellness programs 4. Esteem Needs (Recognition and Achievement) - annual bonuses/promos 5. Self-Actualization (Fulfillment and Growth) - leadership training, sabbaticals a. early career- physiological & safety needs through higher pay and job security b. mid career- esteem needs through promos/recognition c. late career- self-actualization needs through personal growth and opps to mentor others

Herzberg's two-factor theory

Hygiene/maintenance factors (e.g., pay) prevent dissatisfaction, but do not motivate or cause satisfaction, where Hygiene factors are pay, help w/basic living needs, security, and fair treatment - Satisfiers/motivators: recognition, promo, and achievement, motivate perf - Base pay must be set high enough to provide individuals with the economic means to meet hygiene needs, but it alone cannot motivate performance - performance- based pay is motivating to the extent it is connected with meeting employees' needs for recognition, attainment, achievement - Low pay will cause dissatisfaction but high pay by itself will not motivate (only motivates if it is instrumental in achieving higher-level needs)

eligibility criteria for unemployment insurance

Involuntary Job Loss, Work and Earnings History, Ability and Availability to Work (Claimants must be actively seeking work)

Example of a Position vs. Job

Job Title: Accountant Position 1: John Smith - Prepares financial statements for the Southeast region Position 2: Jane Doe - Manages accounts payable for the Northeast region

benefits of workers comp

Medical Care, Temporary Disability Benefits, Permanent Disability Payments, Survivor Death Benefits, Rehabilitation and Training

Benefit financing

Noncontributory Plans, Contributory Plans, Employee-Financed Plans

benefits of social security

Old-Age (Retirement) or Disability Benefits, Benefits for Dependents, Survivor Benefits, Lump-Sum Death Payments

types of time off

Paid Time Off (PTO) During Working Hours, Paid Time Off (PTO) During Working Hours (Paid Vacations, Holiday Pay, Sick Leave, Parental Leave, Other Leaves(reserve duty, jury duty, voting, family death)

Impact of pay on turnover

Pay directly affects employee turnover - competitive comp can help retain employees - insufficient pay may lead to higher turnover rates as employees seek better-paying opps elsewhere

Relationship between pay levels and other business metrics

Pay levels influence key business outcomes such as employee retention, productivity, and organizational performance a. Competitive pay can attract top talent and improve motivation b. inadequate pay can lead to high turnover and low job satisfaction - both pay-level and pay-mix decisions focus on two objectives: control costs and increase revenues & attract and retain employees

Distributive Justice

Perception of fairness based on the outcome or distribution of rewards, such as pay or bonuses

PAQ

Position Analysis Questionnaire- worker-oriented job analysis method that classifies jobs based on common characteristics rather than specific tasks unique to each job, evaluates jobs using 194 standardized items to measure job requirements and work behaviors

cost containment strategies

Probationary Periods, Benefit Limitations, Copayments, Deductibles, Administrative Cost Containment, Denying Service or Charging More for Preexisting Conditions, Claims Processing, Negotiating Lower Fees with Providers, Wellness Programs, Outsourcing Benefits and Administration, Self-Insuring, Return-to-Work Programs a. outsourcing- of biggest recent trends where specialized companies may not only handle benefits admin more cheaply but also more effectively due to their expertise

title VII

Prohibits employers from discriminating in hiring, pay, promotions, and other employment practices - Applies to employers with 15 or more employees (including private businesses, government agencies, and labor unions)

Cash Profit-Sharing Plans

Provide employees with a direct cash payout, usually on an annual basis

Skinner's Reinforcement theory

Rewards reinforce (motivate and sustain) performance and are most effective when they follow directly after behaviors to be reinforced - Behaviors that are not rewarded will be discontinued (extinction) - Performance-based payments work best when they closely follow performance - Withholding payouts discourages unwanted behaviors - Rewards tightly coupled to desired performance objectives generate higher effort

Trends in benefits cost

Rising Costs Over Time, Increased Share of Total Compensation, Health Insurance Costs, Pension Liabilities, Public Sector Pension Challenges

Goals

Specific, measurable objectives that an organization aims to achieve, often driving compensation decisions tied to perf

Drivers of benefits costs

Wage and Price Controls, Unions, Employer Impetus, Cost (Including Tax) Effectiveness of Benefits, Government Impetus

Goal Congruence

When individual goals align with the org's goals, often facilitated through comp structures

what regulatory agencies are key in comp oversight?

a. Department of Labor (DOL) - Enforces wage and hour laws b. Equal Employment Opportunity Commission (EEOC) - Handles pay discrimination cases c. Occupational Safety and Health Administration (OSHA) - Regulates workplace safety conditions

Employer factors of benefit choice

a. Relationship to Total Compensation Costs: evaluate whether a benefit is the best use of funds compared to other compensation components b. Costs Relative to Benefits: assess the costs and advantages of specific benefits in isolation, w/o considering the total comp package or projecting future costs c. Competitor Offerings: external equity, organizations must consider what benefits competitors are offering - often involves conducting benefit surveys to determine whether to lead, lag, or match the market in benefit offerings

compensation and org design

a. centralized vs decentralized comp - centralized: decisions are made at the corporate level, ensuring consistency org-wide -- hierarchical/tightly controlled environments - decentralized: business units have autonomy to set comp practices based on local conditions and strategic priorities b. aligning comp w/business strat - cost leadership strat: controlling labor costs - differentiation strat: encourages innovation, most likely to include performance-based incentives, stock options, and long-term rewards - innovation-focused companies: combo of team-based incentives, flexible benefits, and equity-based compensation to attract and retain creative talent c. functional and project-based roles - functional (HR, finance, etc): comp based on int job value and market rates - project-based: incentives tied to project milestones/results d. broad-banding - common in flatter orgs to create wider salary ranges to give employees more growth opps w/o needing promos, supporting lateral movement

Characteristics of benchmark job

a. contents are well known and relatively stable over time. b. job is common across a number of different employers. It is not unique to a particular employer. c. a reasonable proportion of the workforce is employed in this job

what objectives do pay model policies try to achieve through their respective techniques?

a. efficiency - perf - quality - customer and stockholder - cost b. fairness c. compliance d. ethics

Purpose of job eval

a. supports org strat b. supports workflow c. fair to employees d. motivates behavior toward org objectives

Marginal product of labor

additional output associated w/ the employment of 1 addl person, w/other production factors held constant

Objectives of the pay model

aims to achieve several key objectives- attracting and retaining employees, ensuring internal equity and external competitiveness, motivating employees, and aligning compensation with org goals

org design and comp

alignment of comp strategies w/ organizational structure to support business goals

workers comp trends

approx $99 billion annually, with $33 billion covering premiums, deductibles, and administrative costs, and $66 billion in worker benefits

internal job structure

arrangement of jobs within an org based on their content, value, and relationships - ensures int pay equity where employees perceive fairness in pay dist, reducing disputes - influences career progression/promos - guides pay structure/comp decisions - supports legal compliance and org strat

pay structure

array of pay rates for different work or skills within a single organization- number of levels, the differentials in pay between the levels, and the criteria used to determine those differences

behavior= f(A,M,O)

behavior is a function of ability, motivation, and opportunity

what type of business would benefit from a loosely coupled int structure?

business strat requires constant product innovation and short product-design-to-market cycle times where pay structures are more loosely linked to the org in order to provide flexibility - No steps at all are laid out - ex: The 3M competitive environment is turbulent and unpredictable.

Relationship between pay policy and work satisfaction

by shaping employees' perceptions of fairness, recognition, and financial security - competitive and equitable pay structures generally lead to higher employee satisfaction and engagement

Strategic compensation aims

choosing the org's fundamental directions to achieve competitive advantage What business should we be in? - At the business unit level, the choice shifts to: How do we gain and sustain competitive advantage in this business? - At the functional level the strategic choice is: How should total compensation help this business gain and sustain competitive advantage?

job dimensions

cluster of related tasks that together represent a significant aspect of a job's overall responsibilities - broad categories of job responsibilities that group together similar tasks

job family

collection of different but related jobs that share common functions, skills, and responsibilities - jobs typically have progressive levels of complexity and responsibility, allowing for career growth within the same domain

task inventory

collection of task-based data that describes job-related activities, often gathered through JA questionnaires and details specific tasks performed in a role and emphasizes both the task itself and its objective - comprehensive list of job tasks - emphasis on task objectives - tailored to specific job categories - supports job eval and workforce planning

in what conditions are group incentives important?

common in industries like manufacturing, where group output is critical

Impact of pay on profits

comp affects a company's bottom-line but the relationships between pay and profits is more complex- a. Well-designed comp systems can motivate employees, leading to higher productivity and ultimately increased profits b. excessive comp costs may erode profits

​interest of managers in compensation

comp as a tool to motivate employees, control costs, and align employee behavior with org goals

interest of employees in compensation

comp as a way to meet personal and family needs, feel valued, and achieve financial security

Incentive pay

comp designed to motivate employees to achieve specific performance goals - bonuses, commissions, or performance-related bonuses, often tied to measurable outcomes

Hybrid pay policy

comp strat that combines elements of lead, lag, and match policies based on business needs, industry trends, and workforce characteristics

Performance-based pay

comp strategy that ties pay to an employee's individual or team perf, often through bonuses, commissions, or incentive programs - affects fairness, in that employees need to understand the basis for judging performance in order to believe that their pay is fair

Skill-based pay

comp structure where employees are paid based on the skills they acquire and can apply, rather than on their job title or position - links pay to the depth or breadth of an employee's skills, abilities, and knowledge - employees are compensated for the skills they are certified to have, not necessarily for the job they are currently performing - SBP is widely used in manufacturing, particularly where flexibility, teamwork, and multi-skilling are crucial

Merit pay

comp that rewards individual perf - those who perform well/exceed expectations receive salary increases or bonuses based on their achievements

performance pay

comp tied directly to individual, group, or organizational performance, often through bonuses, incentives, or commissions

Tournament Theory

competition for higher pay levels drives motivation, especially in hierarchical orgs

interest of society in comp

concerned with ensuring fairness, equity, and justice in comp systems, including issues like income inequality and living wages

Broad banding

consolidates 4-5 traditional grades into a single band with 1 min and 1 max so wider salary ranges are created

Common ways to collect job information

conventional and quantitative methods a. conventional- Traditional job analysis techniques involve direct interactions with jobholders and supervisors to gather job-related data - questionnaires - interviews - direct observation b. quantitative- Modern orgs increasingly use systematic and data-driven approaches - web-based questionnaires - quantitative JA: structured point-based approach to analyze jobs based on compensable factors, typical of lrg orgs where job comparisons are essential

advantages of job analysis: conventional methods

conventional methods- questionnaires, interviews, and observation a. Employee Involvement: Employees and supervisors participate in the process, increasing their understanding and acceptance of the job analysis results b. Depth of Data: Interviews and direct observations allow for a more in-depth understanding of job responsibilities and nuances that may not be captured through other methods c. Clarification and Validation: Analysts can clarify ambiguous responses and validate findings through direct discussions

limitations of job analysis: conventional methods

conventional methods- questionnaires, interviews, and observation a. Time-Consuming: Collecting and verifying data through interviews and observation requires significant time and resources b. Subjective Responses: Employees and supervisors may have different perceptions, leading to inconsistencies in job descriptions c. Potential Bias: Favoritism or misunderstanding of job roles can influence the accuracy of data collected

pay model: mgmt policy

cost + comm + change = eval

contributory benefit financing

costs are shared between employer and employee

role of safety programs in workers comp

costs have remained fairly stable and, when adjusted for employment and wage growth, have declined - attributed to the success of employer safety programs and a decrease in fatal accidents

Lag pay policy

coupled w/the promise of higher future returns (e.g., stock ownership in a high-tech startup firm) to increase employee commitment and foster teamwork, which may increase productivity

Bases for Determining Internal Structures

criteria used to create a pay structure within the organization, such as job evaluation, market comparisons, and legal reqs

gov interest in comp policy

crucial role in shaping policy to ensure fairness, compliance, and worker protection by enforcing minimum wage laws, overtime regulations, and pay transparency reqs - provide safety nets such as unemployment benefits, Social Security, and workers' compensation to support employees who are unemployed or unable to work

group of firms in pay surveys

defining the relevant labor market is crucial and depends on: - Industry competitors: Firms hiring similar talent. - Geographic considerations: Salaries vary greatly by location (e.g., a programmer in Mississippi earns significantly less than in Silicon Valley). - Skill-Specific markets: Some firms focus on specialized skills rather than industry when selecting competitors

Internal alignment

degree of internal hierarchy-- comparisons among jobs/skill levels inside a single org - jobs and people's skills are compared in terms of their relative contributions to the organization's business objectives - how much does pay differ among job levels and how well does compensation support career growth? - both SAS and Microsoft use pay to support flexible work design and promotions. But pay differences at SAS, whose philosophy is "Everyone is part of the SAS family," are smaller than at Microsoft, where differences in pay are seen as returns for superior performance

employee contributions

degree of perf-based pay (individual and/or company)

Line of Sight

degree to which employees can see a direct connection between their efforts and the rewards they receive

DOL

dept of labor- federal agency responsible for enforcing labor laws, protecting workers' rights, and ensuring fair employment practices - oversees wages, workplace safety, unemployment benefits, and labor standards a. enforcing wage & hour laws b. OSH regulations c. unemployment and workers comp d. employee benefits and retirement protections e. workforce development and training f. regulating union and labor relations

Strategic compensation definition

designing pay systems that support the organization's overall strategy

Sorting effect on compensation

diff types of pay strategies may cause different types of people to apply to and stay with (i.e., self-select into) an org - higher pay levels help orgs attract more high-quality applicants, allowing them to be more selective - higher pay levels may improve employee retention

Trends in the "pay gap"

differences in earnings between different demographic groups, most notably the gender pay gap and racial/ethnic pay disparities - still persists due to mult factors, including occupation choices, experience, discrimination, and societal norms a. men v women b. asian men's earnings have risen over time to now be higher (by 25%) than those of white men c. Black to white men's earnings ratios vary between 68 and 79% d. ratio of Hispanic to white men's earnings varied from 55 to 72% e. When comparing earnings of Asian, Black, and Hispanic women to white women, there is a pattern similar to that of the men: asian women earn the most, gap between Black and white women is less than the gap between Black and white men

Total cash compensation

direct financial earnings an employee receives- wages plus bonuses - includes Base Pay (fixed salary or hourly wage) and Short-term incentives such as bonuses and profit-sharing payments - does NOT include benefits or long-term incentives like stock options

levels in pay structure

distinct pay grades that reflect diffs in job responsibilities, skills, and experience within the org

point method

each job's relative value, and hence its location in the pay structure, is determined by the total points assigned to it 1. compensable factors 2. w/factor degrees numerically scaled 3. weights reflecting the relative importance of each factor - common in US and EUR

human capital

edu, experience, knowledge, abilities, and skills required to perform the work that are a major influence on int structures

Cost-cutter

efficiency-focused strategy stresses doing more with less by minimizing costs, encouraging productivity increases, and specifying in greater detail exactly how jobs should be performed

just wage doctrine

effort to end the economic and social chaos resulting from the death of 1/3 of the pop from plague- trying to change societal judgments about what wage is just

employee-financed benefit financing

employee pays total costs for some benefits—by law the org must bear the cost for certain benefits

Expectancy theory

employees are motivated when they believe that their efforts will lead to desirable outcomes a. expectancy: effort will lead to better perf b. instrumentality: performing well will lead to a specific reward c. valence: value employee places on the reward

Stock options

employees have the right to buy company stock at a specific price in the future - used as a long-term incentive, aligning employee interests with company perf

noncontributory benefit financing

employer pays total costs

employee/employer contributions for social security

employers and employees each contribute 6.2% to Social Security and 1.45% to Medicare - self-employed individuals contribute the full 15.3% themselves

Signaling

employers deliberately design pay levels and pay mix as part of a strategy that signals to both prospective and current employees the kinds of behaviors that are sought - underlies the sorting effect - how much to pay and what forms of pay are offered establishes a "brand" that sends a message to prospective employees, just like brands of competing products and services

EEOC

equal employment opportunity commission- federal agency that enforces laws against workplace discrimination based on race, color, religion, sex, sexual orientation, gender identity, national origin, age, disability, or genetic information a. investigating discrimination claims b. enforcing federal anti-discrimination laws c. litigating cases and issuing penalties d. providing guidance and training e. monitoring and reporting workplace diversity

Pay ranges

establish the min, mid, and max pay for a specific job/grade within an org - ensure internal equity by grouping jobs of similar value within the same range - provide ext competitiveness by aligning internal pay levels with market rates

interest of customers in comp

expect comp systems that help attract and retain skilled employees, which in turn enhances product/service quality and customer satisfaction

Compensating differentials

explain the presence of various pay rates in the market - the notion is appealing, it is hard to document, due to the difficulties in measuring and controlling all the factors that go into a net-advantage calculation

compensable factors

explicit criteria for evaluating jobs based on the strategic direction of the business and how the work contributes to these objectives and strat - scaled to reflect the degree to which they are present in each job and weighted to reflect their overall importance to the org - pts attached to each factor weight

FLSA

fair labor standards act is 1938 law establishing minimum wage, overtime pay, recordkeeping, and child labor standards - applies to most private and public sector employers engaged in interstate commerce - Under 18: Prohibited from hazardous jobs. - Under 16: Limited work hours and types of jobs. - Recordkeeping - Employers must maintain records of wages, hours worked, and job classifications.

Procedural Justice

fairness of the processes used to determine comp decisions, such as promotions, raises, or bonuses

egalitarian int structure

fewer levels and/or smaller differentials between adjacent levels and between the highest-and lowest-paid workers

base pay

fixed cash comp that an employer pays an employee for work performed

Motivational effect on compensation

focuses on how comp strategies can inspire employees to achieve org goals, boost perf, and stay engaged in their work

workers comp

form of no-fault insurance that provides benefits to employees who suffer injuries or illnesses arising out of and during employment

in what conditions is base pay important?

foundation for all comp packages and crucial in roles where performance is not easily measured-- admin/support functions

costs/financing of unemployment insurance

funded primarily through federal and state employer payroll taxes - Federal Unemployment Tax Act (FUTA) tax is 6% on the first $7,000 of each employee's wages

Weighted means

gives equal weight to each individual employee's wage - Captures size of supply and demand in market - If have only company-wide measures (rather than individual measures), the rate for each company is multiplied by the number of employees in that company. Total of all rates is divided by total number of employees.

Gain-sharing plans

group-based incentive programs designed to improve org performance by sharing the financial benefits of increased productivity or cost savings with employees - focuses on operational performance improvements at a more localized level—typically within departments, units, or plants, differing from profit-sharing plans that distribute a portion of overall company profits - focus on group perf, predefined perf measures, regular payouts

Efficiency wages

high wages may increase efficiency and actually lower labor costs if they: a. attract higher-quality applicants b. lower turnover c. increase worker effort

in what conditions are large incentives important?

high-stakes roles where outcomes are easy to measure, like sales positions or exec

what is the importance of market surveys in identifying relevant labor markets?

how employers benchmark pay against relevant competitors - help define competitive pay strategy by identifying how many employers to include, the types of jobs to compare, and the specific pay data to collect​

Demand side of labor markets

how employers determine the number and type of workers they need, influenced by tech, industry growth, and the marginal productivity of workers

External alignment

how well a company's comp system aligns w/ext factors such as the labor market, competitor pay practices, and legal regulations - Example: A tech company offering higher salaries than its competitors in order to attract top talent in a competitive labor market like Silicon Valley.

worker acceptance

how well employees accept and perceive the JA process and its outcomes as fair, accurate, and relevant - essential because JA credibility affects employee satisfaction w/ job structures and comp decisions

in what conditions is job security important?

in uncertain environments or industries experiencing frequent layoffs - provided through contracts, tenure policies, or long-term employment guarantees

COLA

increase in an employee's pay to account for inflation or increased cost of living - ensures that the employee's purchasing power remains the same despite rising prices

what are the 7 job factors analyzed in a PAQ?

info input mental processes work output relationships w/others job context job complexity broad work-related attributes

interest of stockholders in comp

interested in comp strategies that drive org perf, which can increase profits and stock value

who provides the info for JA?

job holders and supervisors are the primary sources, but managerial roles may require input from higher-level execs - diffs in perceptions between jobholders and supervisors may create discrepancies in data

Reservation wage

job seekers have a reservation wage level below which they will not accept a job offer, no matter how attractive the other job attributes - if pay level does not meet their minimum standard, no other job attributes can make up for this inadequacy

"Fuzzy Market"

labor markets that do not fit neatly into traditional industry or job categories - when job roles extend beyond a single industry or sector​

Market pay line

links a company's benchmark job evaluation points on the horizontal axis (internal structure) with market rates paid by competitors (market survey) on the vertical axis - summarizes the dist of going rates paid by competitors in the market

job specification

list of knowledge, skills, abilities, and other characteristics that are necessary for an individual to have to perform the job

job description (JD)

list of tasks, duties, and responsibilities that make up a job

closely tailored int structure

low-cost, customer-focused business strat where jobs are well defined with detailed tasks or steps to follow - Differences in pay among jobs are very small - ex: McDonald's, Walmart

Minimum wage

lowest legal hourly pay that employers must provide to workers, as mandated by federal, state, or local laws - aims to protect workers from unfairly low pay and ensure a basic standard of living - States and local governments can set a higher minimum wage- If state and federal laws differ, the higher wage applies - Tipped employees have a lower minimum wage ($2.13 per hour federally) but must earn at least the regular minimum wage when tips are included

how does low-high pay work?

lowest-paid and highest-paid benchmark jobs that have similar responsibilities are selected - Employers then use a proportional estimation to derive an approx pay range for the job in question - advantages: flexibility, customization, bridging pay gaps limitations: subjectivity in benchmark selection, potential pay compression, data dependence

how many surveys should you use in pay surveys?

many use at least 3 - diff consulting firms (e.g., Korn Ferry, Mercer, Willis Towers Watson, Aon) provide varying pay results, which suggests firms must compare multiple sources - survey weighting methods differ, and no standard exists for reconciling discrepancies between different surveys

pay model: competitiveness policy

market defs + surveys + policy lines = pay structure

Low-high pay

market pricing method used to determine appropriate pay levels when no exact job match exists in comp surveys - helps in estimating market rates for a role by using the lowest and highest paid comparable jobs within a survey dataset - particularly useful when dealing w/hybrid jobs, newly created roles, or jobs that span mult functions​

Lead pay policy

maximizes the ability to attract and retain quality employees and minimizes employee dissatisfaction w/pay

how does the median differ from the mean in comp?

mean can be skewed by extremely high or low salaries, whereas the median provides a more accurate reflection of typical pay levels

Median

midpoint of a dataset- half of the salaries are above it, and half are below it

Living wage

minimum income necessary for a worker to afford basic needs, such as housing, food, healthcare, and transportation, without gov assistance - higher than the federal minimum wage and varies based on cost of living in different regions

institutional model

model suggesting that orgs design comp systems to conform to industry norms and societal expectations - sees firms as responding/conforming to normative pressures in their environments so as to gain legitimacy and to reduce risk - predicts that very few firms are "first movers": most firms copy innovative practices after innovators have learned how to make the practices work

Standard deviation

most common stat measure of variation which shows how tightly all the rates are clustered around the mean - tells how similar or dissimilar the market rates are from each other - small SD means they are tightly bunched at center - lrg SD means rates are more spread out

eligibility criteria for social security

must have 40 quarters of coverage, with a specified earnings threshold ($1,470 per quarter in 2021) - full benefits avail at age 67 for those born in 1960 or later, with reduced benefits available starting at age 62

HMO

network of healthcare providers, including hospitals and doctors, who agree to provide services at negotiated rates, on demand

how many firms should you include in pay surveys?

no firm rules on how many employers should be included in a pay survey - lrg firms w/a lead pay policy may only exchange data with 6-10 key competitors - national surveys conducted by consulting firms can include 100+ employers, often with customized reports by industry, region, or pay levels​

Relational returns

non-monetary rewards that employees receive from their job- job satisfaction, recognition, career development, and work-life balance

Cost of benefits as percentage of payroll

now represent 31.7% of total comp - increase is attributed to rising healthcare costs, pension liabilities, and the expansion of benefit offerings over the decades

Strategy map

offers a picture of a company's comp strat and can clarify the message that the company is trying to deliver with its comp system

PPO

offers more flexibility by allowing employees to choose from a list of preferred providers who have agreed to offer discounts. Employees can use out-of-network providers, but at a higher out-of-pocket cost

financial wellness

on-site child care, Family Leave Policies, Flexible Work Arrangements, elder care assistance

Employment Cost Index

one of four types of salary surveys published regularly by the U.S. Department of Labor that measures quarterly changes in employer costs for compensation, including wages, salaries, and benefits - often used alongside other pay surveys to help organizations define their pay structures in competitive labor markets - especially useful in estimating competitors' labor costs, which is a crucial factor in setting pay policy

Lump-sum bonuses

one-time payment given to an employee, typically at the end of a perf period, in recognition of achieving specific goals or exceptional perf - do not build into base salary - flexible and cost-effective for employers

"Transparency" (in compensation)

openness and communication about pay

Alternation ranking

orders job descriptions alternately at each extreme where evaluators reach agreement on which jobs are the most and least valuable

Match pay policy

org aligns its pay levels w/the market average to maintain competitiveness while controlling costs

Differentiator

org sets itself apart by how the pay system is managed - the way programs fit together and fit the overall organization that is hard to copy

Mission

overarching purpose or goal of an organization, which guides decision-making, including comp decisions

External Competitiveness

pay comparisons with competitors- how much our competitors are paying and what forms of pay are they using - includes importance of work/life balance achieved via benefits

Competitive advantage and strategy

pay strategy should be aligned, differentiated (from competitors'), and adds value

egalitarian pay structure def

pay structure that seeks to reduce pay diffs between employees, promoting fairness and equality

Motivation triangle

perf mgmt, culture, and comp

Compensation and behavioral goals

perf-based pay reinforces behaviors aligned with org objectives, helping achieve desired outcomes - To narrow down employee preferences, there is flexible compensation: based on the idea that only the individual employee knows what package of rewards would best suit their personal needs where the key ingredient is careful cost analysis

POS

point-of-service plan- type of health insurance plan that combines elements of both Health Maintenance Organizations (HMO) and Preferred Provider Organizations (PPO), offering flexibility and choice to participants

Union preferences

preferences for diff forms of pay and job security affect pay strat i.e. merit pay plan, programs negotiating pay until services are needed again, etc.

Market rate pay

prevailing wage level for a specific job in the external labor market, based on industry standards, location, and competition for talent

1964 Civil Rights Act

prohibits discrimination based on race, color, religion, sex, or national origin in various aspects of life, including employment, education, and public accommodations

equal pay act

prohibits wage discrimination based on gender, requiring men and women be paid equally for performing substantially equal work in the same workplace - Applies to private companies, government agencies, and labor organizations

benefits of unemployment insurance

provides temporary financial assistance to workers who have lost their jobs through no fault of their own in the form of the individual's previous earnings, typically around 50-70% of wages

social security

providing financial stability to retirees, disabled individuals, and survivors of deceased workers, but it faces challenges related to funding and long-term sustainability

living wage laws

provisions that are not part of the FLSA and provide a min wage tailored to living costs in an area - narrower coverage than minimum wage laws, as they cover only city (or state) employees and/or employers that do business with the city (i.e., contractors and subcontractors) - Sometimes they cover only base wages, but more frequently they require health insurance, vacations, sick pay, job security, and provide incentives to unionize

equity theory

psychological theory that emphasizes fairness in the distribution of rewards based on input-output relationships

advantages of job analysis: quantitative methods

quantitative methods- web-based and statistical surveys a. Efficiency and Scalability: Employees can complete standardized surveys online, reducing the time and effort required for manual data collection b. Statistical Analysis: Data collected can be analyzed quantitatively, making comparisons and trend identification more objective c. Consistency Across Jobs: Standardized surveys ensure a uniform approach to job analysis across departments and locations

limitations of job analysis: quantitative methods

quantitative methods- web-based and statistical surveys a. Limited Depth: Surveys may not capture job nuances as effectively as direct observation or interviews b. Requires Employee Cooperation: Employees must accurately complete the surveys, and low response rates or rushed responses can impact data quality c. Costs of Implementation: Developing tailored job analysis surveys and conducting statistical analysis can be costly

Factor weights

reflect the relative importance of each factor to the overall value of the job

Present value

reflects the current value of future cash flows- salary/benefits & helps orgs assess long-term financial impact of comp decisions

Agency theory

relationship between principals (employer/shareholder) and agents (employees/execs) where both seek the most favorable exchange possible and will act opportunistically if given a chance - Performance-based pay can be used to direct and induce employee performance

Prevailing Wage Law

require employers on government-funded projects to pay workers a wage that is at least equal to the standard wages and benefits in the local labor market for similar work - help prevent undercutting wages in public contracts and ensure fair comp

defined contribution

retirement savings plan where the employer, employee, or both make contributions to an individual account set up for each participating employee - Increasingly popular due to their flexibility, lower risk for employers, and the potential for employees to build substantial retirement savings, albeit with some risk - ex: 401(k) Plans, 403(b) Plans, Profit-Sharing Plans, Employee Stock Ownership Plans (ESOPs)

in what conditions are small incentives important?

roles w/less quantifiable outputs but where recognition is still critical​

Factor scales

scales reflecting the different degrees (i.e., levels) within each factor are constructed from 4-8 degrees - each degree can be anchored by the typical skills, tasks, and behaviors taken from the benchmark jobs

Ability triangle

selection, recruitment, and training

Independent Contractor status

self-employed worker who provides services to a business under a contract but is not classified as an employee, where status affects taxes, benefits, and labor law protections a. responsible for own taxes b. no benefits or OT

pay model: contributions policy

senority based + incentives + merit guidelines = pay for perf

classification

series of classes covers the range of jobs where class descriptions are the labels, capturing sufficient work detail yet is general enough to cause little difficulty in slotting a job description onto its appropriate "shelf" or class

position

set of tasks and responsibilities assigned to a single worker- while mult employees may hold the same job title, each person has their own position within the org

delayered int structure

several levels of job titles are removed so that all employees at all levels become responsible for a broader range of tasks but also have greater freedom (w/less close supervision) to determine how best to accomplish what is expected of them

Executive order 11246

signed by President Lyndon B. Johnson in 1965 to promote equal employment opportunity (EEO) in federal contracting - prohibits discrimination based on race, color, religion, sex, sexual orientation, gender identity, or national origin by employers who do business with the federal gov

ranking method

simply orders the job descriptions from highest to lowest, based on a global definition of relative value or contribution to the organization's success

task

specific statement of what a person does in a job, typically described using action verbs - smallest unit of analysis in JA, representing a specific action or activity that an employee performs as part of their job - fundamental bldg block of job content and is used to define job responsibilities, job descriptions, and performance expectations - related tasks are grouped into broader categories of responsibility

Base pay

standard salary/hourly wage an employee receives for performing their job - usually set based on the job's responsibilities and market conditions

Customer-focused

stresses delighting customers and bases employee pay on how well they do this

Innovator

stresses new products and short response time to market trends- supporting comp approach places less emphasis on evaluating skills and jobs and more emphasis on incentives designed to encourage innovations

family-friendly policies

support employees in managing their personal lives but also enhance organizational performance by promoting employee loyalty, commitment, and reduced turnover - ex: 12-16 weeks of paid family leave after a birth, adoption, or foster care situations

National Compensation Survey

survey conducted to collect data on wages, benefits, and working conditions across various occupations and regions - provides valuable info for orgs to compare their pay structures w/market trends

job analysis

systematic method that produces a JD (focuses on the job) and job specification (focuses on the person)

job content

the actual work performed, the skills required, and the responsibilities associated with a job - tasks/duties, skill requirements, decision-making authority, interpersonal and reporting relationships

Incentive effect on compensation

the degree to which pay influences individual and aggregate motivation among the employees we have at any pt in time - the way comp systems (especially performance-based pay) motivate employees to perform at higher levels - incentives designed to align employee effort w/org objectives

"Skin in the game"

the idea that employees or managers have a financial stake in the company's perf- personally invested in its success - Example: Offering stock options or performance-based bonuses to executives to ensure their interests align with the company's long-term growth

"Prominence" (in compensation)

the measure of how important total compensation is in the overall HR strategy - ex: catalyst- playing a lead role vs a less important supporting character to other HR programs - ex: At Microsoft, compensation is rated highly prominent, whereas at SAS it is more supportive

"Say on Pay"

the practice where shareholders are given the opportunity to vote on exec comp packages, especially for top execs, to ensure alignment w/company performance and shareholder interests

"Ownership" (in compensation)

the role non-HR managers play in making pay decisions

how are lump-sum bonuses different from merit pay increases?

they do not build into base salary

why are lump-sum bonuses a popular tool for perf-based comp?

they do not build into base salary

who is ineligible for unemployment insurance?

those who quit w/o a good cause, were terminated for misconduct, or are not actively looking for work typically do not qualify

who collects the info for JA (job analysis)?

traditionally assigned to HR generalists, supervisors, or trained analysts - If job analysis is conducted by individuals unfamiliar with the organization, the accuracy and relevance of findings may be compromised

defined benefit

type of retirement plan in which an employer promises to provide a specific level of retirement pension, known as the "defined benefit" a. fixed dollar amnt b. % of earnings, which often increases with years of seniority within the company

Profit sharing

type of variable pay plan where employees receive a share of the company's profits in addition to their regular salary - goal: align employees' interests with the org's success, motivating them to contribute to overall performance and productivity a. direct link to company perf b. group incentive plan c. no fixed costs

market-based, or customer-driven, health care (high deductible)

typically involves high-deductible health plans (HDHPs) where employees pay all health care costs up to a predetermined deductible amount of $3,000-$6,000 - past this threshold, employee pays a coinsurance rate of 10% to 35% for addl med services - employers often set an out-of-pocket maximum of $6,000-$12,000 a. employee cost sensitivity: encourages employees to shop for lower-cost medical services, promoting a more cost-conscious approach b. cost variability: employees have an incentive to seek cost-effective providers c. employer savings: employers benefit from reduced premium costs, which can drop as low as $100/mo d. risk to employees: financial risks to employees who might delay necessary med treatments due to out-of-pocket costs

employer mandate

under ACA requires certain employers to provide health insurance to their employees or face financial penalties - Employers with 50 or more full-time employees 30+hrs or 50 or more full-time equivalents (FTEs) are subject to the mandate - Requirement is to Provide Affordable and Minimum Value Health Insurance - Exemptions and Credits- Small businesses with fewer than 25 FTEs and average annual wages of less than $54,000 are not required to provide health insurance but may be eligible for a tax credit if they do

Disparate impact

unintentional discrimination that occurs when an employment policy or practice disproportionately affects a protected group, even if the policy appears neutral - Unlike disparate treatment, which involves intentional discrimination, disparate impact focuses on outcomes rather than intent

anomalies in pay surveys

unusual data points that deviate from normal market trends - checking for anomalies: 1. one employer dominating the survey (e.g., a company skewing the pay avg) 2. pay practices that differ significantly from others in the market 3. outliers in pay data, such as extreme high or low salaries

Quartiles

used to analyze salary distributions within an org by 4 equal parts - 1st quartile: 25% of salaries fall below this point, while 75% are above - 2nd quartile: midpoint where half of salaries are above and half are below - 3rd quartile: 75% of salaries are below this point, and 25% are above - 4th quartile: highest-paid employees fall in this range

Identification of relevant labor market

useful for making informed decisions about pay levels, pay mix, and structures and achieved through identifying employers that compete in at least one of the following areas: same occupations/skills, geographic area, or same products/services​ - some orgs define their market based on industry-specific skills (e.g., actuaries in the insurance sector) - some orgs consider geographic limitations, with higher-skilled positions often being recruited on a national or international scale, while lower-skilled jobs tend to be more local or regional - some orgs prioritize product-market competitors because labor costs can significantly impact overall pricing and cost structures

paired-comparison ranking

uses a matrix to compare all possible pairs of jobs

whose responsibility are pay surveys?

usually comp manager because comp expenses significantly impact profitability - outside consulting firms are often used to ensure compliance with antitrust laws, such as the Sherman Act, which prohibits price-fixing through direct exchange of pay data

ECI limitations

value may be limited because industry avgs might not accurately reflect relevant competitors in a particular market

Factors Explaining Pay Differences

variations in job characteristics, industry standards, geographic location, individual qualifications, market demand, company size, and org strat

Benchmark jobs

well-known, stable position that is commonly found across mult orgs and used for making pay comparisons- serve as reference pts for setting pay structures within an org - used to align internal pay structures w/external market rates and develop pay grades and structures​

when do fuzzy markets arise

when orgs blend diff industries, requiring diverse skills that do not align with standard comp surveys​

pay model: int alignment policy

work analysis + descriptions + eval/cert = int structure

Supply side of labor markets

workers' willingness to offer their labor at different wage levels, influenced by edu, skills, alt job opps, and personal preferences a. upward-sloping supply assumes that as pay increases, more people are willing to take a job b. if unemployment rates are low, offers of higher pay may not increase supply—everyone who wants to work is already working c. if competitors quickly match a higher offer, the employer may face a higher pay level but no increase in supply - some firms find lowering the job requirements and hiring less-skilled workers a better choice than raising wages, this choice incurs increased training costs

Identification of terms in regression equation y=a+bx

y= dep variable- estimated value, often representing pay or salary in compensation analysis a= intercept- starting salary when job eval points are 0 x= indep variable- predictor variable, typically job eval points in comp studies b= slope- how much pay increases per addl job eval pt