MGMT 44431

Four Policy Choices

1. internal alignment 2. external competitiveness 3. employee contributions 4. management of the pay systems

International Compensation Variations

1. social contracts, including the legal framework and regulation 2. cultures 3. trade unions 4. ownership and financial markets 5. managers' autonomy

Correlation Coefficient

A common measure of association that indicates how changes in one variable are related to changes in another.

National Systems: Comparative Mind-Set

A national system mind-set assumes most employers adopt similar pay practices. This overlooks variations among organizations within each nation -the text refers to the national systems as the 'traditional system' -to emphasize that this is one of several models in each country.

Comparable Worth

A policy that women performing jobs judged to be equal on some measure of inherent worth should be paid the same as men, excepting allowable differences, such as seniority, merit, production-based pay plans, and other non-sex-related factors. Objective is to eliminate use of the market in setting wages for jobs held by women.

Compliance: A Proactive Approach

A proactive compensation manager can: Join professional associations -stay informed on emerging issues Constantly review compensation practices and their results -consult with legal counsel Fair treatment of all employees is the goal of a good pay system and good legislation.

The Social Contract (The Global Context)

A relationship of trust between corps and society corps can only exist as legal persons b/c society allowed it to happen society enacts and enforces legal norms and institutions that protect private property, including capital and profits The employment relationship includes society, government, biz owners, and employees. The relationships and expectations of these parties form the social contract Managing compensation requires understanding the country's social contract The social contract evolves over time, sometimes very quickly. Government expanded its role in: automotive industry, and financial services. The social contract in the US is known for the small role of government and lack of a relationship between government, employees, and employers, has changed in these industries.

Flat Rate

A single rate, rather than a range of rates, for all individuals performing a certain job. Ignores seniority and performance differences.

SEC rule change on executive disclosure (2006)

Adopts enhanced executive compensation disclosure requirements

Stockholders

Also called shareholders, have a particular interest in executive pay. Shareholders can influence executive compensation decisions in a variety of ways.

Ability

An individual's capability to engage in a specific behavior.

Motivation

An individual's willingness to engage in some behavior. Primarily concerned with (1) what energizes human behavior, (2) what directs or channels such behavior, and (3) how this behavior is maintained or sustained.

Disparate Treatment

Applying different standards to different employees because of the membership in a protected class. (requiring a women to have higher performance than a man to be promoted to a higher paying job) Adverse Treatment

Merit Bonuses

Are based on a performance rating but, unlike merit increases, are paid in the form of limp sum rather than becoming (a permanent) part of the base salary. Merit bonuses may now be more important than traditional merit increases.

Compliance

As a pay objective, conforming to federal and state compensation laws and regulations.

Japanese Traditional National Systems

Base pay is based on combination of employee characteristics: Career category: -five career categories prevail in Japan Years of service: -pay reaches peak at age 50 and then reduces by 10% per year Skill/performance level: -each skill is defined by its class and rank -employees advance in rank through evaluation Bonuses provide an additional one to five months of salary, depending on level Bonuses are an expectable additional payment made twice a year -calculated using a multiplier Bonuses are variable pay that control employer's cash flow and labor costs.

Elements of Expatriate Compensation

Base salary plus incentives determined by job evaluation or 'job leveling' Tax equalization deducts wages up to the amount of taxes required in home country Expatriate colonies often form when employers group their expatriates Allowances and premiums range in size due to expected hardship and hazards

Total Cash Compensation

Base wage plus cash bonus; does not include benefits or stock options.

Antitrust Issues

Between 2005-2009, 64,000 former software engineers at Apple, Google, Intel, and Adobe Systems alleged said firms agreed not to hire away employees from each other Good for whom? Employees wage stagnate or increase slowly due to fewer competition Settle out of court for at least $380 million

Japanese Traditional National Systems

Common allowances are: -family allowance, commuting allowance, and housing allowances Legally mandated benefits in Japan include: -social security, unemployment, and workers' compensation

Employee Contributions

Comparisons among individuals doing the same job for the same organization.

Fair Labor Standards Act of 1938 (FSLA)

Covers all employees of companies engaged in interstate commerce or in the production of goods for interstate commerce. Major provisions include: minimum wage, hours of work, and child labor. records must be kept of employees, their hours worked, and their pay.

Securities Exchange Act (1934)

Created the Securities and Exchange Commission (SEC) The U.S. Securities and Exchange Commission (SEC) is an independent federal government regulatory agency responsible for protecting investors, maintaining fair and orderly functioning of the securities markets, and facilitating capital formation. It was created by Congress in 1934 as the first federal regulator of the securities markets. The SEC promotes full public disclosure, protects investors against fraudulent and manipulative practices in the market, and monitors corporate takeover actions in the United States.

International Pay Systems

Decentralized pay-setting competitive forces have changed how people work and how they get paid. -75% of new jobs in US firms are overseas Global acquisitions change pay systems Some firms in Japan and China (iron rice bowl) have removed seniority-based pay

Pay Discrimination: Access discrimination

Denial of particular jobs, promotions, or training opportunities to qualified women or minorities.

Title VII of the Civil Rights Act of 1964 and Related Laws

Differences in pay that occur because of sex violate the EPA and/or Title VII of the Civil Rights Act of 1964. Compensation differences based on race, color, religion, national origin, age, disability, genetic information, and/or retaliation also violate laws enforced by EEOC.

Executive Order 13665 (2014)

Directs regulators to develop financial industry specific rules

Definition of skills, effor, responsibilities, working conditions: Case Law

For an employer to support a claim of unequal work, the following must be met: -The effort/skill/responsibility must be substantially greater in one of the jobs compared -The tasks involving the extra effort/skill/responsibility must consume a significant amount of time for all employees whose additional wages are in question. -extra effort/skill/responsibility must have a value commensurate with the questioned pay differential (commensurate: corresponding in size or degree, in proportion)

Japanese Traditional National Systems

Emphasizes: -the person rather than the job -seniority and skills rather than work performed. -internal alignment over competitors' market rates -promotions based on evaluation and performance -employment security based on the performance of the organization and the individual.

Entitlement

Employee belief that returns and/or rewards are due regardless of individual or company performance.

Financial Accounting Standards Board (FASB) Statement 123 R (2004)

Employee stock options must be expensed on financial statements

Disparate Impact

Employee tests that are applied equally are prohibited because 1) they had the consequence of excluding a protected group disproportionately and 2) the tests are not related to the jobs in question (Griggs v. Duke Power (1971)

Lilly Ledbetter Fair Pay Act (2009)

Employers liable for pay loss resulting from discrimination

Merit Increases

Given as increments to base pay and are based on performance.

Troubled Asset Relief Program (TARP), American Recovery and Reinvestment Act (ARRA) (2009)

Financial institutions receiving TARP funds must meet all restrictions on compensation, prohibits several pay programs

Expatriate Systems: Objectives

International compensation is complex -taxes, exchange rates, housing, etc. Pay systems emphasize maintaining purchasing power -but lack attention to aligning pay with organization objectives Beyond objectives are employees preferences Europeans view working in another country as normal, while US workers do not. -US workers may worry the experience may sidetrack rather than enhance their career.

Disparate Impact: Four-Fifths Rule

Is a percentage of minorities selected equal to at least 80 percent of percentage of non-minorities selected? Yes, no evidence of of disparate impact No, evidence of disparate impact

Culture

Is a shared mental programming which is rooted in the values, beliefs, and assumptions help in common by a group of people and which influences how information is processes. The job of global managers is to identify the national characteristics that influence pay systems.

Comparing Costs

Labor costs and productivity: -substantial differences in average labor costs exist. -companies may look to move or grow in lower cost countries. -companies have to do their own analysis on pros and cons of where to locate employment. Cost of living and purchasing power: -comparing living costs and standards across borders is complex. -companies need such data to adjust pay for employees transferring among countries. -the objective is to maintain the same level of purchasing power.

Davis-Bacon Act (1931)

Laborers on public construction must be paid "prevailing wage"

Salaries

Pay given to employees who are exempt from regulations of the Fair Labor Standards Act and hence do not receive overtime pay (ex. managers and professionals). Exempt pay is calculated at an annual or monthly rate rather than hourly.

Variable Pay

Pay tied to productivity or some measure that can vary with the firm's profitability.

Commission

Payment tied directly to achievement of performance standards. Commissions are directly tied to a profit index (sales, production level) and employee costs; thus, they rise and fall in line with revenues.

Pay Discrimination and Dissimilar Jobs

Questions from cases in book: Is the judge's level of confidence in the "objectivity of the market" justified? It's a judgement call in defining which market is relevant in an external competitiveness analysis How a relevant market is defined could impact outcome.

Procedural Fairness

Refers to the process used to make pay decisions. It suggests that the way a pay decision is made may be equally important to employees as the results of the decision (distributive fairness).

Financial Accounting Standards Board (FASB)

Rules governing executive and employee compensation

Prevailing Wage Laws

Set pay for work done to produce goods and services contracted by the federal government. Set by DoL based on location, cost of living, type of labor, and nature of work. Prevents non-union employers from gaining an unfair advantage in the bidding process by paying wages below the union rate. Government-defined prevailing wage: -The minimum wage that must be paid for work done on covered state or local government projects.

Fair Labor Standards Act FSLA (1938)

Sets minimum wage, hours worked, overtime, prohibits child labor

DoL Definitions:

Skill: Experience, training, education, and ability as measured by job performance requirements of a particular job Effort: Mental or physical, the degree of effort actually performed on the job Responsibility: The degree of accountability required tin the job performance Working Conditions: the physical surrounding and hazards of a job; inside or outside work, heat, cold, and poor ventilation. Time of Day: Working a night shift does not equal different working conditions.

The Global Context

Social contracts Cultures Trade unions Ownership and financial markets Managers' autonomy (5 contextual factors are especially relevant in international compensation. These 5 factors overlap and interact with each other)

Borderless World

Some 'globally integrated enterprises' create cadres of globalists: -managers who operate anywhere in the world Focusing on expatriate compensation may blind companies -to the issues of appropriate pay for employees seeking global career opportunities

Compensation

Something that counterbalances, offsets, or makes up for something else. Refers to all forms of financial returns and tangible services and benefits employees receive as part of an employment relationship.

Iron Rice Bowl (Japan and China)

State owned enterprises Every single enterprise was state owned, there was no private enterprises. Employees never got fired, employees know they had job security for life, meal rations, and benefits. Now a days there has been an increase in private owned enterprises.

Frank Dobbin - Harvard

Studies how corporate affirmative action officers become diversity managers in response to non-enforcement of Affirmative Action laws. Shows that mentoring programs, diversity task forces, and special recruitment programs have helped to promote diversity by engaging managers Diversity training and diversity performance evals have thwarted progress by stigmatizing managers.

Global Approach

Substitution of a particular skill and experience level for job descriptions in determining external market rates. Includes rates for all individuals who possess that skill.

The Equal Pay Act (1963)

The Equal Pay Act (1963) prohibits sex-based wage discrimination between men and women in the same establishment who perform jobs that require substantially equal skill, effort, and responsibility under similar working conditions. Wages can include more than just hourly or annual pay Wages include bonuses, company cars, expense accounts, insurance etc. An employer cannot lower the wages of some employees to make wages equal

Definition of "Equal"

The Supreme Court in Schultz v. Wheaton Glass (1970) rules that: the equal work standard required only that jobs be substantially equal, not identical. In other cases where jobs descriptions differed from actual employee duties, the courts held that -the actual work performed must be used to decide whether jobs are substantially equal.

Base Wage

The cash compensation that an employer pays for the work performed. Tends to reflect the value of the work or skills and generally ignores differences attributable to individual employees. Some pay systems set base wage as a function of the skill or education an employee possesses.

Total Compensations

The complete pay package for employees, including all forms of money, bonuses, benefits, services, and stock.

Managerial Autonomy

The degree of discretion managers have to make total compensation a strategic tool. -inversely related to the degree of centralization and regulatory intensity Governments, trade unions, and corporate policies limit managerial autonomy.

Incentive Effect

The degree to which pay influences individual and aggregate motivation among employees at any point in time.

Sorting Effect

The effect that pay can have on the composition of the workforce. Different types of pay strategies may cause different types of people to apply to and stay with an organization.

Culture

The informal rules, rituals, and value systems that influence how people behave.

Relational Returns

The nonquantifiable returns employees get from employment, such as social satisfaction, friendship, feeling of belonging, or accomplishment.

Internal Alignment

The pay relationship among jobs and skill levels within a single organization; focuses attention on employee and management acceptance of those relationships. It involves establishing equal pay for jobs of equal worth and acceptable pay differentials for jobs of unequal worth.

External Competitiveness

The pay relationships among organizations; focuses attention on the competitive positions reflected in these relationships.

Regulation

The social contract also relates to the legal and regulatory environment for HR decisions. -Countries differ on regulatory restrictions. Maximum hours worked + hiring and firing. Benefits The social contract in Europe at a cost. -Generous worker protection may/may not undermine worker incentive. -The tax burden is 60% higher than US to help insulate workers from unemployment.

Ownership and Financial Markets

These differ widely around the world, this are important to international pay. 50% of Americans own stock. Six Korean family-owned conglomerates control a significant portion of the economy. German Bundesbank (government bank) and a small number of other influential banks have ownership interests in most major firms.

Government and Legal Issues in Compensation

Three branches of US federal government: 1) legislative branch- Congress 2) executive branch - President + The Cabinet 3) judicial branch - the courts State and local laws impact regulations: -cover employers exempt from federal laws, or -include requirements that go beyond federal law

Incentives

Tie pay increases to performance. Incentives do not increase base wage and so must be re-earned each pay period. The potential size of the incentive payment will generally be known beforehand.

Title VII of the Civil Rights Act of 1964 and Related Laws

Title VII prohibits discrimination based on sex, race, color, religion, or national origin in any employment condition, including hiring, firing, promotion, transfer, compensation, and admission to training programs. Related: -Age Discrimination in Employment Act (1967) -Americans with Disabilities Act (1990)

Executive Exemption

To qualify, an employee must meet all of the following: -compensated by salary not less than $455 per week -primary duty must be managing -directs the work of at least two full-time employees Must have authority to hire or fire other employees

Administrative Exemption

To qualify, employee must meet all of the following: -compensated by salary not less than $455 per week -primary duty is office or non-manual work -uses discretion and independent judgment in the job

Computer Employee Exemption

To qualify, employee must meet all of the following: -compensated either $455/week salary, or $27.63/hour -employed as a skilled worker in the computer field Primary duty consists of: -application of systems analysis techniques/procedures -Design, development, testing, etc. of systems/programs -design, testing, etc. of machine operating systems programs -a combination of these duties

Professional Exemption

To qualify, employee must meet all of the following: -compensated on salary/fee of not less tan $455/week -primary duty is work requiring advanced knowledge -knowledge must be in a field of science or learning -knowledge gained by specialized instruction

Outside Sales Exemption

To qualify, employee must meet all of the following: -primary duty is making sales or obtaining orders -customarily engaged away from employer's business

Creative Professional Exemption

To qualify, employee must meet: -compensated on salary/fee of not less than $455/week -primary duty is requiring invention or original talent

Japanese Traditional National Systems

Traditionally, Japan's employment relationships were supported by 'three pillars: 1. Lifetime security within the company 2. Seniority-based pay and promotion systems (job for life, give life to job). 3. Enterprise unions- decentralized unions represent workers within a single company

noncompete agreements

agree not to work for a competitor

Economic (international context)

competitive market dynamics capital flows/ownership taxes

Employee (international context)

demographics knowledge/skills attitudes/preferences

How people get paid around the world depends on:

economic, institutional, organizational, and employee characteristics.

Government and Legal Issues in Compensation

ending the practice of paying different wages based on race and ethnicity compliance and fairness are objectives of the Pay Model the legislative process can be used to solve social problems by proposing and passing laws that are designed to solve such problems Laws are enforced by federal and state agencies through: -rulings -regulations -inspections -investigations Firms respond by: -altering their practices -defending their practices before the courts -lobbying for legislative change favorable to firms

Federal Trade Commision

enforces antitrust laws

SEC

executive compensation rules

Other Exemption Information

highly compensated employees who earn $100,000/year are exempt blue-collar workers and first responders are not exempt must comply with state laws if they are more strict than federal law

International Compensation Systems

organization success and fair treatment of employees understanding international compensations begins with recognizing differences and similarities and figuring out how to manage them *economic, institutional, organizational, employee)

Challenges of Japanese model

slow economic growth birthrate at 1.4 per woman (2017) controlling labor costs lowering labor cost in other Asian countries changes in the traditional model -long-time employment rather than lifetime -increasing use performance based pay to reward younger workers

IRS

tax and rules for executive pay

Organizational (international context)

technology innovation work roles strategic intent managerial autonomy information flows

Expatriate Pay: LCN Advantages

they know local conditions and have relationships with locals no relocation expenses avoids employee adaptation concerns pleases local community rarely are LCNs inappropriate

Arbitration

to resolve individual disputes

Institutional (international context)

trade unions employer federations social contract and regulation culture/politics

The Equal Pay Act

"Patterns of practices" + Factors for equal pay, other than sex: -shift differentials or temporary assignments -Bona fide training programs -Differences based on ability, training, or experience -Other reasons for "business necessity" -Because most cases are settled out of court, no legal definition of a "factor other than sex" has emerged. Are the other factors besides sex that lead to different pay levels? Explanations for different pay.

Incentive

Inducement offered in advance to influence future performance (ex. sales commissions).

The Lilly Ledbetter Fair Pay Act (2009)

Each paycheck that contains discriminatory compensation is a separate violation regardless of when the discrimination began. Retroactivity provision (taking effect from a date in the past) Workers challenging practices that resulted in discriminatory compensation can benefit from the Act's passage. These practices may include employer decisions about base pay or wages, job classifications, career ladder, promotion denials, tenure denials, raise denials.

Employer or Independent Contractor?

Employers must pay -social security, unemployment and workers compensation taxes on wages and salaries -unless the worker is an independent contractor How to classify? -tax law and ERISA are relevant. Two general criteria: 1) How much control does the firm exercise? 2) The type of permanence of the relationship You are not an independent contractor if you perform services that can be controlled by an employer (what will be done and how it will be done). This applies even if you are given freedom of action. -what matters is that the employer has the legal right to control the details of how the services are performed. -If an employer-employee relationship exists (regardless of what the relationship is called), you are not an IC.

Management

Ensuring that the right people get the right pay for achieving the right objectives in the right way.

EEOC Ledbetter Act

Equal Wages: must be pain the the same form. For example, an employer cannot pay a higher hourly wage to a male employee and then attempt to equalize the difference by periodically paying a bonus to a female employee. The word equal does not require that the jobs be identical, only that they are substantially equal in comparing two jobs for purposes of the EPA, consideration should be given to the actual job duties, not job titles or classifications. The EEOC looks at whether both jobs are the same skill, effort, and responsibility.

Equal Pay Act (1963)

Equal pay for men and women doing "substantially similar" work

Trade Unions and Employee Involvement

Europe remains highly unionized Asia is less unionized Some countries set pay by collective agreement even without unions In addition to unions, some countries allow works councils, which must be involved in any changes to a pay plan.

Sarbanes-Oxley Act (2002)

Executives cannot retain bonuses or stock if they mislead the public

Expatriate Pay

Expatriates are employees temporarily working and living in a foreign country: -parent country nationals (PCNs): Citizens of employer's home country, working in another country. -Third-country nationals (TNCs): citizens of neither employer's country not country in which they work. -Local country nationals (LCNs): citizens of a foreign country where the parent employer operates.

The Balance Sheet Approach

Expatriates should have the same spending power as they would at home. The objective is to: -ensure cost-effective mobility of workers -ensure expats neither gain nor lose financially -minimize required adjustments --none of these objectives link to performance Equalizing pay may not motivate employees -most companies pay relocation bonuses If gaining international experience leads to promotions, bonuses should be reduces -unless experience is not transferable -near-term promotions are lost -future payoff is uncertain

Walsh-Healey Public Contracts Act (1936)

Extends prevailing wage to suppliers of government contracts

Overtime and Hours of Work

FLSA requires pay at 1.5x the standard pay for more than 40 hours/week -objective: make hiring additional workers less costly than scheduling overtime so that more people are employed Conditions have changed and today, employers face: -a skilled workforce + higher training costs -higher benefit cost fixed per employee

Pay Discrimination and Dissimilar Jobs

Gunther v. County of Washington (1981) -Jain matrons vs. male guards -Supreme Court determined pay differences for dissimilar jobs may reflect discrimination -Supreme Court said a claim of wage discrimination could also be brought under Title VII where the jobs were not the same.

Pay Discrimination: Valuation Discrimination

Impacts the pay women and minorities receive for the jobs they perform-- equal pay for equal work. In tennis, since 2007, all four Grand Slam tournaments have awarded men and women equal prize money. In basketball, where the NBA pays its players between 49-51% of the league's revenue, WNBA players take home a maximum of 22.8%.

Dodd-Frank Wall Street Reform and Consumer Protection Act (2010)

Increases SEC requirements on stock and executive compensation

Civil Rights Act of 1991

Increases burden of proof on employers' covers international

Strategic Market Mind-Set

Localizer: "think global, act local" Localizers operate independently of the corporate headquarters. Exporter: "headquarters knows best" Exporters are virtual opposites of localizers. Exporters design a total pay system at headquarters and "export" it worldwide for implementation at all locations. Communicates consistent objectives worldwide. Common software is used to support compensation decisions and deployed around the world makes uniform policies and practices feasible. Globalizer: "think and act globally and locally" Globalizers seek a common system that can be used as part of the "glue" to support consistency across all global locations. Headquarters and the operating units are heavily networked to share ideas and knowledge.

Reenginerring

Making changes in the way work is designed to include external customer focus. Usually includes organizational delayering and job restructuring.

Pay Discrimination: What is it?

Many believe valuation discrimination is defined too narrowly: -Should include when men and women hold different jobs, with the same comparable worth. --Hinges on equal pay for comparable worth --Different job classes holding comparable worth to employer --Also called pay equity or gender pay equity --Not supported by federal law but several state laws require a comparable worth standard.

Expats or TNCs

May allow select employees an international perspective confidentiality of the position required skill unavailable in local labor pool high cost must be offset by the employee's contributions

Disparate Treatment: How to make a prima facie case:

McDonnell Douglas v. Green, 411 U.S. 792 (1973) -Individual is a member of a protected class -Was qualified for and applied for job (or other employment opportunity) -Was rejected -Someone else got job or employer continued to seek applicants

Pay Techniques

Mechanisms or technologies of compensation management, such as job analysis, job descriptions, market surveys, job evaluation, and the like, that tie the four basic pay policies to the pay objectives.

Mental Health Act (1997)

Mental illness covered the same as other medical conditions

Americans with Disabilities Act (ADA) 1990

Must accommodate a person able to fulfill "essential elements" of a job

Alternatives to Balance Sheet Approach

Negotiation -employer and employee find agreement Localization, or local plus -ties salary to host country scales and provides cost-of-living allowances Modified balance sheet -ties salary to a region Lump-sum/cafeteria approach -offers expats many choices Use fewer expats and more local country nationals -lower cost, unique familiarity to the country -can be combined with a strategy of greater integration of talent into the system -greater use of TCNs also fits this strategy --can be less expensive if from a country with lower compensation levels

Overtime and Hours Worked

OSHA specifies breaks in an 8-hour workday The Portal-to-Portal Act declares -time spent on activities before beginning the 'principle activity' is not compensable The Worker Economic Opportunity Act -exempts stock options and bonuses from overtime pay calculations (good for employees or employers?) Federal legislation may soon allow an option to trade overtime pay for time off.

The Total Pay Model: Strategic Choices

Objectives of pay systems External competitiveness Internal alignment Employee contributions Management

Comparing Compensation Systems

Objectives of pay systems External competitiveness Internal alignment Employee contributions Management (the basic choices in a pay system seem universal, the results are not.)

Pay Mix

Or pay forms. Relative emphasis among compensation components such as base pay, merit, incentives, and benefits.

The Global Context

Organizations must first determine the degree to which each contextual factor constrains their compensation packages Orgs must decide how their compensation practices will be similar to and differ from other orgs. Orgs may weigh the home and local country context differently for different jobs.

Worker Economic Opportunity (2000)

Overtime pay does not have to include stock plan income

The Equal Pay Act (1963)

Part of FLSA Forbids wage discrimination on the basis of gender if performing equal work in the same firm Jobs are considered equal if requiring -equal skill, effort, and responsibility, performed under the same conditions. Pay differences between men and women legal if based on any of four affirmative defenses: 1) Seniority 2) Merit or quality of performance 3) Quality or quantity of production 4) Some factor other than sex

Wage

Pay given to employees who are covered by overtime and reporting provisions of the Fair Labor Standards Act. Pay for workers who are nonexempt usually is calculated at an hourly rate rather than a monthly or annual rate.

Government as Part of the Employment Relationship

People, and countries, differ in their view of what role government should play Governments can impact: -Minimum wage + Equal or unequal pay for equal work - two-tier wage system at Kohler and the Big Three -(Non-)Enforcement of anti-discrimination laws -Safety nets for the unemployed -protecting employees from exploitation Demand: -federal government employs 2.73 million -state and local government: 19.3 million -Overall, government employees 16% of US labor force -Indirectly affects labor demand through purchases and policy Supply: -Workplace law impacts labor supply -Licensing requirements (entry barriers) restrict labor supply -Immigration policy impacts labor supply -Agricultural and STEM sectors

The Pay Model

Policies: -Internal alignment -Competitiveness -Contributions -Management Techniques: -Work analysis (internal structure) -Competitiveness (pay structure) -Seniority Based (pay for performance) -Cost (evaluation) Objectives: -Efficiency (performance, quality, customer/stockholder, cost) -Fairness -Compliance -Ethics

Pregnancy Discrimination Act (PDA) 1990

Pregnancy must be covered as a medical condition

Title VII of Civil Rights Act of 1964

Prohibits discrimination on basis of race, sex, color, religion, or national origin

Executive Order 11246 - Gov Contracts

Prohibits discrimination on the basis of race, color, religion, sex, or national origin. Requires government contractors to file affirmative action plans, with three parts -Utilization analysis compares contractor's workforce to external workforce. -Goals and timetables to achieve affirmative action -Action steps for achieving goals and timetables

Executive Order 11246 (1965)

Prohibits federal contractors from discriminating on the same basis as above

Age Discrimination in Employment Act (ADEA) 1967

Protects employees 40 and older from age discrimination

Minimum Wage

Provides a baseline income for workers. -higher rate prevails if state and federal laws cover the same jobs Changes in minimum wage -directly impacts workers -employers must comply if the wage is raised, some experts fear this will decrease labor demand as it increases cost

Hofstede National Culture Dimensions and Scores for Four Countries

US: Power Distance: low Uncertainty Avoidance: low Individualism: high Masculinity vs Femininity: high Long-term vs Short-term: low Germany: Power Distance: low Uncertainty Avoidance: medium Individualism: high Masculinity vs femininity: high Long-term vs Short-term: medium China: Power Distance: high Uncertainty Avoidance: medium Individualism: low Masculinity vs Femininity: medium Long-term vs Short-term: high Japan: Power Distance: medium Uncertainty Avoidance: high Individualism: medium Masculinity vs Femininity: high long-term vs short-term: high

Child Labor

Under 18 cannot work hazardous jobs Under 16 cannot work jobs involving interstate commerce, except for a parent. -additional exceptions and limitations exist Unions publicize child labor overseas -child labor is declining, particularly in Latin America - part of supply chain

Centralized or Decentralized Pay-Setting

Understanding differences in wage bargaining levels is important but recognize the fluidity of the situation Differences across countries in the degree of pay-setting centralization translate, into differences in wage flexibility Flexibility is desirable to employers who do not want to be 'locked in' to a wage level when product market conditions are in flux.

Family and Medical Leave Act (FMLA) 1993

Up to 12 weeks of unpaid leave for family/medical emergencies

Is National Culture a Major Constraint on Compensation?

Variance between individuals within countries is far larger than variance between countries (Gerhart) National culture is useful if thought of as an average of attitudes and beliefs in the area. -overreliance on the 'average' can mislead.

Living Wage

Wage tailored to living costs at local levels to help workers meet minimum standards of living. -sometimes the laws only cover a city or a state Popular, backed by unions and churches Living wage for Disney workers Social inequality: wealth gap

Pay Discrimination and Dissimilar Jobs

We need a standard to compare the value of jobs The standard must do two things: 1) It must permit dissimilar jobs to be declared equal or "in some sense comparable" 2) It must permit pay differences for dissimilar jobs that are not comparable Point-based job evaluation has become that standard AFSCME v State of WA: If an employers own job evaluation study shows that jobs of dissimilar content are of equal value to the employer (earning the same job evaluation points), then isn't failure to pay them equally proof of intent to discriminate?

Pay objectives

What an organization seeks to achieve through its compensation strategy. Basic objectives are efficiency, fairness, ethics, and compliance with laws and regulations.

Sources of Earnings Gaps

Work/occupation differences: -responsibilities -effort required -skill/knowledge required -working conditions Qualifications differences: -education -experience Work-related behavior differences: -Career/life tradeoffs -Turnover -Performance -Hours of work Union Differences: -power -interest Discrimination Labor Market Differences: -Demand/supply for specific skills Firm/Industry differences: -size -technology -pay strategy