HRM 460
Design the survey: What information to collect? ***FIVE TYPES OF INFORMATION/DATA THAT COMPENSATION MANAGERS OR EXTERNAL CONSULTANTS COLLECT FOR SURVEY***
Organization data includes financial data and reporting relationships, turnover and revenues. Total compensation data includes base pay, total cash, and total compensation
what is the hybrid pay policy?
incorporates the motivating advantages of sales/profits metrics and the flexibility of discretionary bonuses
What is a market line? ***
it links a company's benchmark jobs on the horizontal axis with market rates paid by competitors on the vertical axis
How to calculate pay level and labor cost?
labor costs= number of employees x pay level
What shapes external competitiveness?
labor market factors: nature of demand and supply product market factors: degree of competition, level of product demand organization factors: industry, strategy, size, individual manager
Categorization of employee benefits: #3
life insurance and death benefits
what is the lead pay policy?
maximizes the ability to attract and retain quality employees and minimize dissatisfaction with pay linked to reduced turnover, quit rates and absenteeism negative effects include the need to increase current employees wages and it may mask negative job attributes
What are combination plans?
mixing individual and group plans, variable pay depends on individual performance and company performance; long term incentive plans
Straight piecework system***
most frequently implemented incentive system
What determines the relevant labor market?
occupation (skill/knowledge required), geography(willingness to relocate, commute, or become virtual employees), and competitors (other employers in the same product/service and labor markets)
What are the benefits under social security? *BENEFITS UNDER SOCIAL SECURITY FALL INTO FOUR CATEGORIES*
old age or disability benefits, benefits for dependents, benefits for surviving family members, and lump-sum death payments
Categorization of employee benefits: #5
paid rest periods, coffee breaks, lunch periods, wash up time, travel time, clothes change time, get ready time, etc
What plans are companies switching from traditional time off plans to?
paid time off plans
what is the lag pay policy?
paying below market rates may not attract employees unless coupled with higher future returns combination may: increase employee commitment and foster teamwork which may increase productivity
Product market conditions determine what an organization can afford to pay:
product demand: caps maximum pay level degree of competition: highly competitive markets are less able to raise prices
Long term incentive plans:
reward system designed to improve employees' long-term performance by providing rewards that may not be tied to the company's share price
What is a 401 (k) plan?
savings plan where employees can defer pretax income, employers match at 50 cents on the dollar
What is the profit sharing plan? ***
similar to a DC pension plan if the distribution of profits are delayed until retirement, driven by financial earnings or return measures use financial measures (profitability)
what are self funding plans?
specifies that payouts only occur after the company reaches a certain profit target
What are broad-based option plans?
stock grants and versatile, long-term incentive plans
what is the match pay policy?
the data from product market competitors (as opposed to labor market competitors) are likely to receive more weight when: -employee skills are specific to the product market -labor costs are a large share of total costs -product demand is responsive to price changes -the supply of labor is not responsive to changes in pay
What is aging or trending?
the process of updating pay data to forecast the competitive rates for the future when pay decisions will be implemented
Relevant labor markets include employers who compete in one or more areas:
the same occupations or skills, employees within the same geographic area, or the same products and services
Relevant markets include employers who compete in one or more areas... what are the three areas?
the same occupations or skills, employees within the same geographic area, the same products and services
Reason behind popularity for defined contribution pension plans?****
they allow employers to forecast and control pension costs
What is the purpose of a survey?
to adjust the pay level relative to competitors, to set the mix of pay forms relative to competitors, to establish or price a pay structure, to analyze pay related problems, to estimate the labor costs of competitors
What are the purposes of a compensation survey?
to determine the median or average compensation paid to employees in one or more jobs
Reason behind define benefit plans losing popularity?****
unable to aid employers to forecast and control pension costs
What are gain-sharing plans?**
use operating measures to gauge performance (productivity, quality, spending, service)
Payment for time not worked includes:
vacations and holidays, paid sick leave, and other payments such as jury duty
How do you qualify for social security benefits?
working in covered employment or earning a specified amount per quarter
What are the three popular forms of defined contribution plans?****
401(k) plan, employee stock ownership plan, profit sharing plan
_____ of workers have access to pension coverage, only ______ participate
64%, 49%
What are the advantages of individualized incentive plans?***
1) substantial impact that raises productivity, lowers production costs, and increases earnings of works 2) less direct supervision is required to maintain reasonable levels of output than under payment by time 3) In most cases, systems of payment by results, if accompanied by improved organizational and work measurement, enable labor costs to be estimated more accurately than under payment by time. this helps costing and budgetary control
Components of a Total reward system:
1. compensation 2.benefits 3.social interaction 4.security 5.status/recognition 6.work variety 7.workload 8.work importance 9.authority/control/autonomy 10.advancement 11.feedback 12.work conditions 13.development opportunity
What are the objectives of pay level and pay mix?
1. control costs and increase revenues 2. attract and retain employees
Categorization of employee benefits: retirement and savings plan payments (employers' share only)
1. defined benefit pension plan contributions 2. defined contribution plan payments 3. profit sharing 4. stock bonus and employee stock ownership plan 5. pension plan premium under insurance and annuity contracts 6. administrative and other costs
Categorization of employee benefits: miscellaneous benefit payments
1. discounts on goods and services purchased from company by employees 2. employee meals furnished by company 3. employee education expenditures 4. child care 5. other
What are the disadvantages of individualized incentive plans?***
1. greater conflict may emerge between employees seeking to maximize output and managers concerned about deteriorating quality levels 2. attempts to introduce new technology may be resisted by employees concerned about the impact of production standards 3. reduced willingness of employees to suggest new production methods for fear of subsequent increases in production standards 4. increased complaints that equipment is poorly maintained, hindering employees efforts to earn large incentives 5. increased turnover among new employees discouraged by the unwillingness of experienced workers to cooperate in on-the-job training 6. elevated levels of mistrust between workers and management
Categorization of employee benefits: Medical and medical related benefit payments *FOUR TYPES OF MEDICAL AND MEDICAL-RELATED BENEFIT PAYMENTS*
1. hospital, surgical, medical, and major medical insurance premiums 2. retiree hospital, surgical, medical, and major medical insurance premiums 3. short term disability, sickness, or accident insurance 4. long term disability or wage continuation 5. dental insurance premiums 6. other- vision care, physical and mental fitness benefits for former employees
Categorization of employee benefits: legally required payments (employers' share only) *FOUR TYPES OF LEGALLY REQUIRED PAYMENT*
1. old-age, survivors, disability, and health insurance and railroad retirement tax 2. unemployment compensation 3.workers' compensation 4. state sickness benefit insurance
Categorization of employee benefits: payments for time not worked *THREE TYPES OF PAYMENTS FOR TIME NOT WORKED*
1. payments for or in lieu of vacations 2. payments for or in lieu of holidays 3. sick leave pay 4. parental leave (maternity and paternity leave payments) 5. other
how is external competitiveness expressed?
1. setting a pay level that is above, below, or equal to that of competitors 2. determining the pay mix relative to those of competitors
What are the major decisions involved in setting externally competitive pay and designing the corresponding pay structure?
1. specific its competitive pay policy 2. defining the purpose of the survey 3. selecting relevant market competitors 4.designing the survey 5. interpreting survey results and constructing the market line 6.constructing a pay policy line that reflects external pay policy 7. balancing competitiveness with internal alignment through the use of ranges, flat rates, and/or bands
One similarity and one difference between gain sharing and profit sharing plan
Both types of programs aim to give employees a stake in the success of the company, but with gainsharing, bonuses can be more closely tied to the performance of specific employees or groups of employees
What are the benefits to employers of a define contribution pension plan?
The employee assumes the risks associated with changes in inflation and interest rates which affect costs the employer costs are known or defined up front
What are the major benefits to employers of a defined contribution pension plan?
The employee assumes the risks associated with changes in inflation and interest rates which affect costs; employer costs are known or defined up front
What is workers' compensation? ****
a form of no-fault insurance, covers injuries/diseases arising from employment
What is rate determination?
based on units of production per time period, and wages vary directly as a function of production level
Design the survey: which jobs to include?
benchmark job approach: benchmark jobs have stable job content are common and include sizable numbers of employees, low-high approach: wages of lowest and highest paid benchmark jobs used as anchors for skill based structures, benchmark conversion/survey leveling: differences are quantified when job content does not sufficiently match survey jobs
What are the pros and cons of merit pay?****
cons: expensive, does not achieve desired goal pros: has a small but significant impact on performance
In Defined contribution plans, when an employee retires, what is the pension based on?
contributions, employer contributions, and any gains/losses in stock investments
What are two generic pension plans?
defined benefit plans and define contribution plans
What is the major advantage of straight piecework system?***
easily understood by workers and is more readily accepted than some of the other incentive systems
What is the ESOP?
employer makes a tax deductible contribution of stock shares or cash to a trust, the trust allocates stock to employees based on earnings, generate long-term effects
What happens in a defined contribution plans?*
employer sets up an investment account for each participating employee
In defined benefit plans, how do employers provide pension?*
fixed dollar, percentage of earnings, or seniority
What are large group incentive plans?
gain-sharing plans and profit sharing plans
What are standard hour plans?***
generic term for plans setting the incentive rate based on completion of a task in some expected time period; more practical than straight piecework plans for long-cycle operations and jobs that are non-reptitive and require numerous skill for completion
How to manage merit pay?
improve accuracy of performance ratings, allocate enough money to truly reward performance, make sure the size of the merit increase differentiates across performance levels
