Compensation Test 2 (Chapter 4,5,8,13)

Defined Benefit Plans

A benefit option or package in which the employer agrees to give the specified benefit without regard to cost maximum. Opposite of defined contribution plan.

Defined Contribution Plans

A benefit option or package in which the employer negotiates a dollar maximum payout. Any change in benefit costs over time reduces the amount of coverage unless new dollar limits are negotiated.

Vesting

A benefit plan provision that guarantees that participants will, after meeting certain requirements, retain a right to the benefits they have accrued, or some portion of them, even if employment under their plan terminates before retirement.

"Qualified" Deferred Compensation Plan

A deferred compensation program that qualifies for tax exemption. It must provide contributions or benefits for employees other than executives that are proportionate to contributions provided to executives.

Job Family

A group of jobs involving work of the same nature but requiring different skill and responsibility levels (e.g., computing and account recording are a job family; bookkeeper, accounting clerk, and teller are jobs within that family).

Contingent Workers (Employees)

A growing workforce that includes flexible workers, temporaries, part-time employees, and independent contractors whose employment is of a limited duration.

Point (Factor) Method of Job Evaluation

A job evaluation method that employs (1) compensable factors, (2) factor degrees numerically scaled, and (3) weights reflecting the relative importance of each factor. Once scaled degrees and weights are established for each factor, each job is measured against each compensable factor and a total score is calculated for each job. The total points assigned to a job determine the job's relative value and hence its location in the pay structure.

Alternation Ranking

A job evaluation method that involves ordering the job description alternately at each extreme. All the jobs are considered. Agreement is reached on which is the most valuable and then the least valuable. Evaluators alternate between the next most valued and next least valued and so on until the jobs have been ordered.

Bureau of Labor Statistics (BLS)

A major source of publicly available pay data. It also calculates the consumer price index.

Consumer Price Index (CPI)

A measure of the changes in prices in a fixed market basket of goods and services purchased by a hypothetical average family. Not an absolute measure of living costs; rather, a measure of how fast costs are changing. Published by the Bureau of Labor Statistics, U.S. Department of Labor.

Central Tendency

A midpoint in a group of measures.

Interval Scaling

A particular numerical point difference has the same meaning on all parts of a scale.

Criterion Pay Structure

A pay structure to be duplicated with a point plan.

Profit-Sharing Plan

A plan that focuses on profitability as the standard for group incentive. These plans typically involve one of three distributions: (1) Cash or current distribution plans provide full payment to participants soon after profits have been determined (quarterly or annually); (2) deferred plans have a portion of current profits credited to employee accounts, with cash payments made at time of retirement, disability, severance, or death; and (3) combination plans that incorporate aspects of both current and deferred options.

401(k) Plan

A plan, so named for the section of the Internal Revenue Code describing the requirements, is a savings plan in which employees are allowed to defer pretax income.

National Metal Trades Association (NMTA)

A point factor job evaluation plan for productions, maintenance, and service personnel.

National Electrical Manufacturers Association (NEMA) Plan

A point factor job evaluation system that evolved into the National Position Evaluation Plan sponsored by NMTA associates.

Hay Job Evaluation System

A point factor system that evaluates jobs with respect to know-how, problem solving, and accountability. It is used primarily for exempt (managerial/professional) jobs.

Point-of-Service Plan (POS)

A point-of-service plan is a hybrid plan combining health maintenance organization (HMO) and preferred provider organization (PPO) benefits.

Benchmark (Key) Jobs

A prototypical job, or group of jobs, used as a reference point for making pay comparisons within or without the organization. Benchmark jobs have well-known and stable contents; their current pay rates are generally acceptable, and the pay differentials among them are relatively stable. A group of benchmark jobs, taken together, contains the entire range of compensable factors and is accepted in the external labor market for setting wages.

Paired Comparison

A ranking job evaluation method that involves comparing all possible pairs of jobs under study.

Employee Stock Ownership Plan (ESOP)

A retirement plan in which the company contributes its stock as the retirement benefit.

Regression

A statistical technique for relating present-pay differentials to some criterion, that is, pay rates in the external market, rates for jobs held predominantly by men, or factor weights that duplicate present rates for all jobs in the organization.

Position Analysis Questionnaire (PAQ)

A structured job analysis technique that classifies job information into seven basic factors: information input, mental processes, work output, relationships with other persons, job context , other job characteristics, and general dimensions. The PAQ analyzes jobs in terms of worker-oriented data.

Job Description

A summary of the most important features of a job. It identifies the job and describes the general nature of the work, specific task responsibilities, outcomes, and the employee characteristics required to perform the job.

Ranking (Format) Method of Job Evaluation

A type of performance appraisal format that requires that the rater compare employees against each other to determine the relative ordering of the group on some performance measure.

Pension Benefit Guarantee Corporation (PBGC)

Agency to which employers are required to pay insurance premiums to protect individuals from bankrupt companies (and pension plans!). In turn, the PBGC guarantees payment of vested benefits to employees formerly covered by terminated pension plans.

Cost Containment

An attempt made by organizations to contain benefit consists, such as imposing deductibles and coinsurance on health benefits or replacing defined benefit pension plans with defined contribution plans.

Long-Term Disability Plans

An insurance plan that provides payments to replace income lost through inability to work that is not covered by other legally required disability income plans.

Supply Chain Analysis

As applied to work flow analysis, supply chain analysis looks at how an organization does its work: activities pursued to accomplish specific objectives for specific customers.

Salary Continuation Plans

Benefit options that provide some form of protection for disability. Some are legally required, such as worker's compensation provisions for work-related disability and social security disability income provisions for those who qualify.

Broad Banding

Collapsing a number of salary grades into a smaller number of broad grades with wide ranges.

Committee a Priori Judgment (Approach)

Compensable factor importance weights are assigned by a committee based on judgement.

Policy Capturing

Compensable factor importance weights are inferred using statistical methods such as regression analysis.

Scaling

Determining the intervals on a measurement instrument.

Pay Discrimination

Discrimination usually defined as including (1) access discrimination, which occurs when qualified women and minorities are denied access to particular jobs, promotions, or training opportunities; and (2) valuation discrimination, which takes places when minorities or women are paid less than white males for performing substantially equal work. Both types of discrimination are illegal under Title VII of the Civil Rights Act of 1964. Some argue that valuation discrimination can also occur when men and women hold entirely different jobs (in content or results) that are of comparable worth to the employer. Existing federal laws do not support the "equal pay for work of comparable worth" standard.

Paid-Time-Off (PTO) Plans

Eliminates the distinction between sick days and other paid days off, thus eliminating the incentive to "fake" illness.

Job Evaluation Committee

Group that may be charged with the responsibility of (1) selecting a job evaluation system, (2) carrying out or at least supervising the process of job evaluation, and (3) evaluating the success with which the job evaluation has been conducted. Its role may vary among organizations, but its members usually represent all important constituencies within the organization.

Task (Work) Data

Information on the elemental units of work (tasks), with emphasis on the purpose of each task, collected for job analysis. Work data describes the job in terms of actual tasks performed and their output.

Job Content

Information that describes a job. May include responsibility assumed and/or the task performed.

Quantitative Job Analysis (QJA)

Job analysis method that relies on scaled questionnaires and inventories that produce job-related data that are documentable, can be statistically analyzed, and may be more objective than other analyses.

Compensable Factors

Job attributes that provide the basis for evaluating the relative worth of jobs inside an organization. A compensable factor must be work-related, business-related, and acceptable to the parties involved.

Classification Method of Job Evaluation

Job evaluation method that involves slotting job descriptions into a series of classes or grades that cover the ranged of jobs and that serve as a standard against which the job descriptions are compared.

Hierarchy (Job Structures)

Jobs ordered according to their relative content and/or value.

Americans With Disabilities Act (ADA)

Legislation passed in 1990 that requires that reasonable accommodations be provided to permit employees with disabilities ot perform the essential elements of a job.

Family and Medical Leave Act

Legislation passed in 1993 that entitles eligible employees to receive unpaid leave up to 12 weeks per year for specified family or medical reasons, such as caring for ill family members or adopting a child.

Factor Weight

Measures that indicated the importance of each compensable factor in a job evaluation system. Weights can be derived through either a committee judgement or a statistical analysis.

Factor Scales

Measures that reflect different degrees within each compensable factor. Most commonly five to seven degrees are defined. Each degree may be anchored by typical skills, tasks and behaviors, or key job titles.

Appeals Process

Mechanisms are created to handle pay disagreements. They provide a forum for employees and managers to voice their complaints and receive a hearing.

Conventional Job Analysis

Methods (e.g., functional job analysis) that typically involve an analyst using a questionnaire in conjunction with structured interviews of job incumbents and supervisors. The methods place considerable reliance on analysts' ability to understand the work performed and to accurately describe it.

Offshoring

Offshoring refers to the movement of jobs to locations beyond a country's borders.

Pay Grades

One of the classes, levels, or groups into which jobs of the same or similar values are grouped for compensation purposes. All jobs in a pay grade have the same pay range -- maximum, minimum, and midpoint.

Sick Leave Pay

Paid time when an employee is not working due to illness or injury.

Traditional Time-Off Plans (TTO)

Paid vacations, holidays (or pay if worked), sick leave, and personal leave, tracked separately.

Deferred Compensation

Pay approach that provides income to an employee at some future time as compensation for work performed now, Types of deferred compensation programs include stock option plans and pension plan.

Benchmark Conversion

Process of matching survey jobs by applying the employer's plan to the external jobs and then comparing the worth of the external job with its internal "match".

Human Resource Planning System

Put in place by the benefit administrator to make realistic estimates of human resource needs and avoid a pattern of hasty hiring and morale-breaking terminations.

Zones

Ranges of pay used as controls or guidelines within pay bands that can keep the system more structurally intact. Maximums, midpoints, and minimums provide guides to appropriate pay for certain levels of work. Without zones employees may float to the maximum pay, which for many jobs in the band is higher than market value.

Experience Rating

Rating system in which insurance premiums vary directly with the number of claims filed. An experience rating is applied to unemployment insurance and workers' compensation and may be applied to commercial health insurance premiums. In a community rating system, insurance rates are based on the medical experience of the entire community.

Job Structure

Relationship among jobs inside an organization, based on work content and each job's relative contribution to achieving the organization's objectives.

Pay-Policy Line

Representation of the organization's pay-level policy relative to what competitors pay for similar jobs.

The Medicare Prescription Drug, Improvement and Modernization Act of 2003

Seniors must choose among a variety of plans written in bureaucratic hieroglyphics.

Market Pricing

Setting pay structures almost exclusively through matching pay for a very large percentage of jobs with the rates paid in the external market.

Unemployment Benefits (Unemployment Insurance (UI))

State-administered program that provides financial security for workers during periods of joblessness.

Job-Based Structure

Structure that relies on work content -- tasks, behaviors, responsibilities.

Individual Retirement Account (IRA)

Tax-favored retirement savings plans that individuals can establish themselves.

Pay Structure(s)

The array of pay rates for different jobs within a single organization; they focus attention on differential compensation paid for work of equal worth.

Competitive Intelligence

The collection and analysis of information about external conditions and competitors that will enable an organization to be more competitive.

Reliability

The consistency of the results obtained, that is, the extent to which any measuring procedure yields the same results on repeated trials. Reliable job information does not mean that it is accurate (valid), comprehensive, or free from bias.

Perquisites (Perks)

The extras bestowed on top management, such as private dining rooms, company cars, and first-class airfare.

Job Specification

The job specifications that can be used as a basis for hiring are knowledge, skills, and abilities required to adequately perform the tasks.

Essential Elements

The parts of a job that cannot be assigned to another employee. The Americans with Disabilities Act requires that if applicants with disabilities can perform the essential elements of a job, reasonable accommodations must then be made to enable the qualified individuals to perform the job.

Usefulness

The practicality of the information collected.

Ranges (Pay Ranges)

The range of pay rates from minimum to maximum set for a a pay grade or class. It puts limits on the rates an employer will pay for a particular job.

Pay Ranges

The range of pay rates from minimum to maximum set for a pay grade or class. It puts limits on the rates an employer will pay for a particular job.

Relative Value (of jobs)

The relative contribution of jobs to organizational goals, to their external market rates, or to some other agreed-upon rates.

Range Midpoint

The salary midway between the minimum and maximum rates of a salary range. The midpoint rate for each range is usually set to correspond to the pay-policy line and represents the rate paid for satisfactory performance on the job.

Job Analysis

The systematic process of collecting information related to the nature of a specific job. It provides the knowledge needed to define jobs and conduct job evaluation.

Content

The work performed in a job and how it gets done (tasks, behaviors, knowledge required, etc.).

Portability

Transferability of pension benefits for employees moving to a new organization. ERISA does not require mandatory portability or private pensions. On a voluntary basis, the employer may agree to let an employee's pension benefit transfer to an individual retirement account (IRA) or, in a reciprocating arrangement, to the new employer.

Market Pay Line

Using key/benchmark jobs, a market pay policy line can be constructed that shows external market pay survey data as a function of internal job evaluation points. In many cases, the market pay policy line is obtained by using regression analysis, which yields an equation of the form "market pay = intercept + slope x job evaluation points." By plugging the job evaluation points for any job (both benchmark and non-benchmark jobs) into the equation, the predicted pay for each job can be obtained.

Short-Term Disability (STD)

Workers' compensation

Validity

the accuracy of the results obtained; that is, the extent to which any measuring device measures what it purports to measure.