Test 2 Compensation

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Which of the following is a characteristic of integrated paid time off policies?

Holiday, vacation, sick leave, and personal leave are combined

disadvantages of profit-sharing plans

However, they can undermine the economic security of employees bc of variable earnings which fluctuates their earnings- increased turnover for high performers. In addition, they may fail to motivate employees if they do not see a direct link between their efforts and corporate profits.

This is considered "at the heart" of person-focused pay programs.

Training

Job Family

Broadly similar jobs

behavioral systems

a type of performance appraisal method, requires that raters judge OBJECTIVE job behaviors to the extent to which employees display successful job performance behaviors. When done correctly, these results are relatively free of rater error and bias.

merit pay programs must be founded on

a well-designed PAS that accurately measures performance in order to be successful

Which of the following is a strategic purpose fulfilled by discretionary benefits?

accommodating a diverse workforce

profit sharing

add-on linked to group performance (team, division, total company) relative to exceeding some financial goal

Sorting Effect

addresses an employee's choice to stay versus leave their employer for another job presumably one without an incentive pay contingency. identifies, attracts, and retains the most capable employees. Different types of pay strategies may cause different types of people to apply to and stay with an organization.. highly skilled are likely to stay because they produce high quantities= higher pay.

why is it important to set up formal appeal mechanisms.

allows employees to voice their concerns over ratings they believe to be inaccurate. also allows them to give an explanation of certain circumstances.

Stock options describe

an employee's right to purchase company stock

Stock compensation plans is

an important type of deferred compensation for executives and is supposed to create a sense of ownership aligning the interests of the executive with those of the owners or shareholders of the company over the long term.

lump-sum bonus

as with merit pay, granted for individual performance. does not add into base pay, but is distributed as a one-time bonus

flexible compensation

based on the idea that only the individual employee knows what package of rewards would best suit personal needs

why do rating errors occur

because raters must always make subjective judgements

discretionary benefits

benefits that employers offer at their own choice. offered at will of company mgnt

This term refers to the percentage of the health bill the insured employee is required to pay.

coinsurance

typical performance measures for an entire company

company profits cost containment market share sales revenue

What type of pension plan commonly includes profit-sharing plans, stock bonus plans, and employee stock ownership plans?

defined contribution

core compensation

describes the monetary rewards employees receive. thereare six types: base pay, seniority, merit, incentive, cost-of-living adjustments and pay-for-knowledge and skill-based pay

requiring companies to be accountable to shareholders requires

direct measurement of employee job performance

team based pay plans should

emphasize cooperation between and within teams compensate for additional responsibilities that come along with working in a team encourage team members to attain predetermined objectives for the team

who determines the objectives in a MBO strategy

employees and supervisors

the greatest challenge for companies is to ensure that

employees are given the opportunity to perform at exemplary levels.

Seniority pay does not fit well with the competitive strategies because

employees can count on receiving the same pay raises regardless of whether or not companies are meeting their differentiation or cost goals.

merit programs are most appropriate when

employees control their perf and conditions outside employee control do not substantially affect their perf.

human capital theory

employees knowledge and skills generate productive capital known as human capital.

comparison system

evaluate a given employees performance against other employees

Merit increases award what?

excellent effort or results

extrinsic needs

external- outside of u

This consumer-driven health care option allows employees to contribute pre-tax wages annually to pay for qualified medical expenses, but they will lose the balance not used at year's end.

flexible spending accounts

scanlon vs. rucker

formula used to measure productivity, scanlon- lower ratio, rucker- want larger ratio

occurs when employees of lower ability, skill, and effort benefit equally as employees of higher ability, skill, and effort in group incentive plans.

free rider effect

the inherent objectivity of seniority pay systems should lead to

greater cooperation among coworkers

What are the two types of fee-for-service plans?

indemnity plans, self-funded plans

intrinsic needs

internal- inside of u intangible

reward managers for increasing market share or reducing their budgets without compromising the quality and quantity of output.

management incentive plans

empowering employees should lead to

more self-corrective actions rather than reactive courses of action to supervisors feedback

who still participates in base salary on seniority or length of employee service?

most unionized private sector and public sector organizations, though the number is steadily declining

leniency error

occur when raters appraise an employer's performance more highly than it really rates, compared with objective criteria (employees will expect higher pay)

errors of central tendency

occur when raters judge all employees as average or close to average

illegal discriminatory bias

occurs when a supervisor rates members of his or her race, gender, nationality, or religion more favorably than members of other classes.

employee stock ownership plans ESOPs

place company stock in trust accounts for employees

companies may reduce base pay by

placing the reduced portion at risk in an incentive plan

incentives for lower level employees are based on professional level-

short term long term

5 criteria that can be used to evaluate jobs are

skill responsibility mental aptitude physical application working conditions

preeligibility period

spans from the initial date of hire to eligibility for coverage in a disability insurance program.

merit increases are given to employees based on

subjective appraisal of employee performance

t/f it is important for companies to strengthen the pay for performance link

true

union/nonunion workers tend to participate more in benefit plans than do nonunion employees

union (also directly contributed to the rise in offerings)

Merit increases help employers retain

valued employees

organizational units that perform the work of the organization on an ongoing basis.

work teams (process teams)

jobs that influence public policy significantly (law judges) are in what category

Scientific and Professional (SP) positions

Teams that have members learn scheduling, coordinating, training, and leading others are emphasized in what type of work team?

Self-regulating work groups

jobs that require high levels of specialized education (physicist) are in what category

Senior Level (SL)

reward employees with periodic additions to base pay according to job tenure.

Seniority pay (automatic pay increases)

Four ways in which firms using merit pay systems can ensure nondiscriminatory PA practices are (four activities to promote nondiscriminatory performance appraisal practices.)

conduct job analyses to ascertain characteristics necessary for a content valid performance appraisal incorporate these characteristics into a rating instrument. train supervisors to use the rating instrument properly. set up formal appeal mechanisms.

displays connections between the measurable factors upon which the employee is being appraised and the job itself

content validity

2 reasons companies generally use incentive pay

control payroll costs (replacing annual merit or seniority increases or fixed salaries with incentive plans that award pay raises only when the company enjoys an offsetting rise in productivity, profits, or some other measurable business success. motivate employee productivity (base pay on performance)

type of behavioral approach that identifies successful and unsuccessful job performance behaviors by both the employee and supervisor.

critical incident technique

three main types of behavioral systems

critical incident technique behaviorally anchored rating scales behavioral observation scales

typical performance measures for a group

customer satisfaction labor cost savings (base pay, overtime pay, benefits) materials cost savings reduction in accidents services cost savings (utilities)

what kind of companies may benefit from including incentive component in the core compensation programs they offer

cyclical industries such as retail

a type of team based reward approach that distributes payments to team members based on their contributions to the goal, this type can hinder cooperative behavior (may focus on their own performance to enhance income)

differential incentive payments

a type of team based reward approach that rewards each group member in proportion to the ratio of each team members' base pay to the total base pay of the group. this approach assumes that employees with higher base pay contribute more so should be rewarded according

differential payments by ratio of base pay

Income protection programs include

disability insurance, life insurance, retirement programs, and health protection programs.

Disadvantages of forced distribution

distortion of ratings actual distribution of perf may be substantially diff from rating bc of force to go into one group workers feel ratings are dictated by unreal models rather than by performance

when can the use of incentive pay can lower payroll costs

during lean periods and enhance the level of rewards when business activity picks back up

MBO can promote

effective communication

designing a pay for performance plan

efficiency, equity/fairness, compliance

Concept for paying for performance

efficient, fair, legal/ethical

the hallmark of the scanlon plan is its

emphasis on employee involvement

Information for PA can be ascertained from what five sources

employee employees supervisor employee coworkers employee supervisees (subordinates) employee customer or clients

Your company asked you to come up with a contribution plan that invests the contributions in company securities and distributes the payouts in stock instead of cash. Which plan would you suggest they use?

employee stock option plan (ESOP)

a type of company wide incentive where Companies grant employees right to purchase share of company.

employee stock options

2 basic kinds of stock plans

employee stock ownership plan ESOPs Stock compensation plans

disadvantages of group incentives

employee turnover-feelings of inequity bc of free rider effect discomfort- uncomfortable with the fact that other members perf influences their own

disadvantages to comparison systems

encourage subjective judgements (increase chance for rater errors and biases) small diff in performance may become exaggerated when supervisors feel compelled to distinguish among levels of employee performance.

service benefits

enhancements as tuition reimbursement and day care services to employees and their families

a type of team based reward approach that reinforces cooperation among team members except when team members perceive differences in member contributions or performance

equal incentives payment approach

three common distribution methods for profit sharing

equal payments, proportional payments based on annual salary, and proportional payments based on contribution to profits. (not very feasible bc difficult to isolate contributions)

Company stock shares represent

equity segments of equal value.

the amount of taxes each citizen pays is based on

established tax codes

Merit pay rewards

excellent effort or results and motivates future performance.

two advantages seniority pay has on employers

facilitates the administration of pay programs (pay increase amounts are set in advance) less likely to offend other employees by favoritism bc seniority is an objective basis for making awards.

Supervisors, HRM, and compensation professionals must address what 8 potential problems in regards to merit pay program

failure to differentiate among performers poor performance measures supervisors biased ratings of employee job performance lack of open communication btw mgnt and employees undesirable social structures factors other than merit undesirable competition little motivational value

t/f teams or groups do not receive incentive pay

false, incentive pay rewarded based on criteria like customer satisfaction, safety records, quality, and production records.

t/f seniority is a subjective standard.

false. objective.

employee retirement income security act

federal law that sets minimum standards for pension plans in a private industry. This does not require an employer to establish a pension plan, and only requires those who establish plans to meet minimum standards.

These types of insurance plans provide protection against health care expenses in the form of cash benefits paid to the insured, or directly to the provider after the services are rendered.

fee-for-service plans

four ways supervisors may bias evaluation results

first impression effects, positive and negative halo effects, similar-to-me effects, and illegal discriminatory bias

disadvantages of trait PAS

highly subjective because they are based on the assumption that every supervisors perception of a given trait is the same. (meaning of description may be diff to diff ppl) employees are rated on subjective personality factors rather than objective perf data employees may become defensive rather than trying to take corrective action

Which of the following is covered by Medicare Part A?

home health care

In regards to merit increases and inflation, employees are concerned about

how well merit increases raise purchasing power (whether they have been adjusted to inflation to increase their buyer power)

The rationale for a seniority pay system is based on

human capital theory

employee involvement is required in all but what GS plan?

improshare

gain sharing incentive program that focuses on providing employees with an incentive to finish products

improshare

type of program aimed at producing more products with fewer labor hours

improshare

Bonuses paid on a weekly basis based on a ratio of standard labor hours to actual labor hours in

improsharing

what gain sharing plan uses buy-back provision

improsharing

Improshare

improved productivity through sharing. measures productivity physically rather than in terms of dollar savings like those used in the scanlon and rucker plans. based on a labor hour ratio formula, a standard is determined by analyzing historical accounting data to find the number of labor hours needed to complete a product. Productivity is then measured as a ratio of standard labor hours and actual labor hours.

where do group incentive plans work best

in manufacturing and service delivery environments that rely on interdependent teams

rating errors

in performance appraisals reflect differences between human judgment processes versus objective, accurate assessments uncolored by bias, prejudice, or other subjective, extraneous influences.

2 advantages to companies who use piecework plans in manufacturing settings:

incentive effect and sorting effect

difference btw incentive pay and seniority/longevity or merit

incentive is one time ... seniority and merit are permanent

adds to base pay as a one-time payment. It is designed to control costs and motivate employee productivity.

incentive pay

provides benefits for extended periods of time anywhere between six months and life.

long term disability

Which pay based system is used for most government employees

longevity

General Schedule System for federal employees is called

longevity based pay

The fit of seniority pay practices with the two competitive strategies

lowest cost and differentiation

the goal of a work team is

maintain consistency in performance quality and output

could be the most effective PAS

management by objectives MBO

an approach that may help reduce supervisors arbitrary decisions about merit increases by clarifying the standards against which employees performance are judged.

matching employees performance to job description criteria

individual incentive

measures of performance are objective

work teams are effective when

members are cross trained to perform team members work when one is absent

the traditional U.S. business practice sets employees' base pay on

merit

a widely used form of performance-based pay in U.S. companies.

merit pay

program that does little to integrate workforce members

merit pay program- focus fundamentally on individual employees.

the absence of favoritism allows supervisors and managers to

motivate employees to perform their jobs

employees earn more/less under a piecework system than they would a standard hourly pay system

much less

example of public sector

municipal, state, and fed gov't organizations

for a merit pay program to succeed it must

must know efforts will be rewarded with pay raises requirements must be realistic employees must have skills and abilities to meet goals and requirements employees must perceive a strong relationship between performance and pay

what kind of direction do teams follow? supervisor??

no specific orders from a supervisor but they must initiate plans for achieving their teams production.

employees assigned to work on a specific task in addition to normal work duties, operate on a temporary basis until reaches a recommendation to top mgnt, voluntary basis or are appointed, not compensated in many cases for extra work

parallel teams (or task forces)

How is Medicare Part A financed?

payroll taxes paid by both employers and employees

provide income to employees and their beneficiaries during some or all of their retirement.

pension programs

successful merit pay programs depend equally on

perf appraisal approach as professional skills in designing and implementing such plans

individual incentive plans are most appropriate when

performance can be measured objectively (units produced) when employees have sufficient control over work outcomes (equipment breakdown) do not create a level of unhealthy competition among workers that ultimately leads to poor quality. (may sacrifice quality to achieve quantity- results in rewards)

Supervisors periodically review employees' job performance compared to

performance standards and goals.

serve as guidelines for establishing performance targets

performance standards listed within job descriptions

In merit pay plans, permanent pay increases are based on

performance.

Merit pay increases are permanent/temporary

permanent

cost of living adjustments

permanent increases to base pay

4 common types of individual incentive plans

piecework plans management incentive plans behavioral encouragement plans referral plans

what drives the prevalence (commonness) of public sector seniority pay ? why?

political pressures because a seniority system specifies the amount of pay raise an employee will receive according to his or her seniority- its automatic. These politically automatic pay adjustments protect public sector employees from the quirks of election year politics. Fed, state, and local gov't can avoid direct responsibility for pay raises so employees can receive fair pay without political objections.

factors that can inhibit effective gain sharing programs

poor communication highly competitive product markets companies that experience variable profits

two waiting periods of short term disability

preeligibility period and elimination period

3 features of short term disability plans

preexisting condition clause two waiting periods exclusions of particular health conditions

Which of the following is a feature of short-term disability plans?

preexisting conditions

pay a portion of company profits to employees, separate from base pay, cost-of-living adjustments, or permanent merit pay increases.

profit sharing plans

Types of companywide incentive plans include

profit sharing plans and employee stock option plans.

a type of team that usually works across such functions as engineering, product development, and marketing to ensure the market demands (Toyota ___ team would ensure excellent gas milage)

project team

a group of people assigned to complete a one-time project, well defined roles, may work on specific phases of the project

project teams

what type of companies are shielded from competitive pressures

public utilities

5 types of performance criteria for incentive pay decisions

quality output dependability cooperation ideas

the main perf standards for merit pay include

quality, quantity, and timeliness of work

the measures used to appraise performance should be

quantifiable and accessible

typical performance measures for an individual

quantity of work output quality of work output monthly sales work safety record work attendance

central tendency errors are most often committed when

raters are required to justify extreme ratings with written explanations (therefore they try to avoid doing so by rating everyone as average)

In the scanlon plan, formulas are designed to suit the individual needs of the company. these formulas are usually based on

ratio of labor costs and sales value of production (SVOP).

when merit increases are based on factors other than merit, this

reduces the emphasis on job performance

job control unionism

refers to a union's success in negotiating formal contracts with employees and establishing quasi judicial grievance procedures to adjudicate disputes between union members and employers

human capital

refers to employees' knowledge and skills, enabling them to be productive

just meaningful pay increase

refers to the minimum pay increase that employees will see as making a substantial change in compensation

just-meaningful pay increase

refers to the minimum pay increase that employees will see as making a substantial change in compensation

similar to me effect

refers to the tendency on the part of the raters to judge employees favorably that they perceive as similar to themselves

seniority pay rewards employees overtime because employees do what

refine existing skills or acquire new ones that enable them to work more productively

the NLRA was established to

regulated companies and establish an appropriate balance of power between parties. This law accommodates employers and employees with partially conflicting and partially shared goals.

where pay level is an indicator of status, permanent merit increases may

reinforce an undesirable social structure (salary differentials prevail each time)

characteristics of well-designed group incentive plans

reinforce teamwork cultivate loyalty to the company increase productivity

how can HR prof prevent central tendency error

require justification for ratings at every level of the scale not just extremes

cross functional areas of team members

research and development marketing finance manufacturing

as a result of increased global competition, employers are using compensation programs that emphasize

rewards according to performance attainment.

the tendency for supervisors to rate most employees as excellent performers arises from

self-promotion motives

in unionized workplaces, what is the deciding factor in nearly all job scheduling, transfer, layoff, compensation, and promotional decisions?

seniority

Designed to award job tenure Set base pay with time-designated increases Employees perceive that they are treated fairly Facilitates administration of pay Avoids perception of favoritism Poor fit with most competitive strategies

seniority pay

what two things reward employees with periodic additions to base pay according to employees' length of service in performing their jobs.

seniority pay and longevity pay

Discretionary benefits are generally divided into which three categories?

services, paid time-off, protection programs

rule of thumb to distinguish btw short term goals and long term

short term- 5 years or less

disability plans that consider disability as an inability to perform any and every duty of the disabled persons occupation such as recovering from injuries, surgery, hospitalization, pregnancy

short-term disability

human capital theory

states that employees' knowledge and skills generate productive capital known as human capital; employees can develop knowledge and skills from formal education or on the job experience

competitive strategies

strategies that strongly position the company against competitors and that give the company the strongest possible strategic advantage

measurements of performance (sales, units produced, absenteeism) assessments tend to be objective/subjective? why?

subjective (based on or influenced by personal feelings, tastes, or opinions) because accurate job performance measurements are very difficult to obtain.

used to evaluate existing systems and processes, to select new technology, and to improve existing products

task forces (parallel)

a small group of employees that share a financial reward when a specific objective is met

team-based or small-group incentive plan

What is the most common type of life insurance policy offered by companies?

term life insurance

Smaller Scanlon ratios indicate

that labor costs are lower relative to SVOP. (strive for lower ratios)

Larger Rucker ratio indicates

that the value added is greater than the total employment costs. (used to determine whether bonuses will be awarded) (companies prefer a larger ratio)

Federal employees are subject to longevity pay via

the General Schedule (GS) system

jobs that require executive decision making are classified into what category?

the Senior Executive Service (SES)

company politics assumes that the value of an employees contributions depends on

the agenda, or goals, or the supervisor rather than employee contributions

the knowledge and skill sets required to contribute effectively to the work of a process team can be acquired with

the assistance of person-focused pay

Base pay

the basic cash compensation that an employer pays for the work performed. Tends to reflect the value of the work itself and ignore differences in individual contributions

nonunion companies fashion their employment practices after union companies as a tactic to minimize

the chance that their employees will seek union representation (may offer comparable benefits to the ones in union shops)

weights of criterion are indicative of

the degree of risk to an employee this is on an incentive plan

Disadvantages of BARS

the difficulty of developing and maintaining the volume of data necessary to make it effective requires companies to maintain distinct appraisal documents for each job as jobs change, documentation must be updated

criteria used to judge the appropriateness of an information source

the evaluator should be aware of the objectives of the employees job evaluator should frequently have occasion to observe the employee on the job evaluator should be capable of determining whether the employees performance is satisfactory

when using merit pay and writing job descriptions, HR prof must ensure that

the job requirements provide a useful measurement standard for evaluation

human capital

the knowledge and skills that workers acquire through education, training, and experience that enables them to be productive.

threshold of money

the limit to which you absolutely need to get paid to take a job (everyone is different)

exclusion provisions

the particular conditions that are ineligible for coverage; for example, most disability insurance plans do not provide coverage for disabilities that result from self inflicted injuries

Merit pay programs occur most often in what sector

the private FOR PROFIT sector rather than state or local governments.

for merit pay, there must be explicit perf standards that specify

the procedures or outcomes against which employees job perf can be clearly evaluated.

trait systems are common in companies that focus on

the quality of interactions with customers

studies show that the extent to which supervisors like the employees the supervise determines

the size of pay raises in a merit pay program

in unionized workplaces, collective bargaining agreements may determine

the specific type of seniority system used

Group incentives reward employees for

their collective performance.

In a forced distribution method, supervisors often provide positive PR to most of their employees because

they do not want to alienate them

With a seniority based pay system, employees perceive that they are treated fairly when

they earn pay increases by an objective standard instead of supervisory judgment.

how do traditional pay programs such as merit, seniority, or individual incentives affect team performance?

they undermine the ability of teams to function effectively. they do not encourage team behaviors and limit team effectiveness.

disadvantages of MBO are

time consuming requires constant flow of information btw employees and employers focus only on attainment of specific goals which often excludes other imp outcomes

what type of individual incentive plan should be used when

time to produce a unit is relatively short, usually less than 15 min and the cycle repeats continuously. usually found in manufacturing industries such as textile and apparel.

Company stock represents

total equity or worth of a company.

Traditional vs. incentive pay plans

traditional: based on fixed hourly wage or annual salary and increased periodically on a seniority or merit basis (past performance). merit- amount not known until afterwards of assessments of performance incentive- award amounts communicated in advance for certain performance levels

4 types of performance appraisals

trait systems comparison systems behavioral systems goal-oriented systems

a type of PAS that focuses on employees rather than employee performance

trait-oriented

a type of PAS where one is scored using descriptors ranging from unsatisfactory (poor) to outstanding

trait-oriented

Piecework plans

typically production employees- an individual incentive pay program, rewards employees based on their individual hourly production against an objective output standard, determined by the pace at which manufacturing equipment operates. (an employees compensation depends on the # of units she or he produces over a given period)

establish workers rights and obligations and participate in describing and delineating jobs.

union shops

annual merit pay increase amounts that are

usually total no more than a small percentage of base pay 2-6%

the difference between the value of the sales price of a product and the value of materials purchased to make the product

value added (the amount of value one adds to a product production process)

Rucker ratio can be calculated using

value added formula: measures productivity by dividing value added by total employment costs.

The giving of one's time to support a meaningful cause is better known as this.

volunteerism

merit pay

wage increase granted to employee as function of some assessment of employee performance. add on to base pay in subsequent years

How often will Jill receive an unemployment check?

weekly

when is gain sharing most appropriate in the workplace

when workplace technology does not constrain productivity improvements (ex: assembly line workers ability to improve productivity is limited)

a type of team incentive program where membership is relatively permanent, focus on performance sharing instead of on set of tasks, and members work full time

work teams (process teams)

Types of teams for team incentive plans are

work teams (process teams), project teams, and parallel teams.

HR dept should provide all supervisors and raters with

written definitive standards

a performance appraisal method relied on to reduce the costs of recruiting and hiring new employees

360 (formulates a judgement on input from multiple sources)

This performance appraisal system relies on many appropriate sources of information and works well for team-based work teams.

360-degree performance appraisal

In 2007, about how many non-fatal injuries and illnesses, in private workplaces, were reported?

4 million

As of March 2009, how much did U.S. companies spend per employee on average to provide legally required benefits?

$4,400

Benchmark Jobs in Job Classification NQ Job Evaluations

-Contents are well know, relatively stable, and agreed to by the ER. -Represent the entire range of jobs to be evaluated. -A sizable portion of the workforce is employed in these jobs, and the jobs are common across a number of different employers. - External pay rates for the jobs are an acceptable basis for setting wages.

Rewards can be allocated in one of three ways:

-The first method is equal incentive payments to all team members. -The second method is differential payments to team members based on their contributions to the goal. -The last method is differential payments determined by a ratio of each team members' base pay to the total base pay of the group.

There are three components of Scanlon plan:

-an emphasis on teamwork to reduce costs, assisted by management-supplied information on production concerns. -suggestion systems that route cost-saving ideas from the workforce through a labor-mgnt committee that evaluates and acts on accepted decisions. -Monetary rewards for productivity improvements to encourage employee involvement

main advantages of group incentives

-companies can more easily develop performance measures for group plans than individual plans. (fewer groups in a company than indiv) -greater group cohesion.

2 types of piecework plans

-hourly production against an output standard (each hour, workers receive piecework incentives for every item produced over the designated production standard) also guaranteed a hourly pay rate. -establishment of individual perf. standards that include both objective (units produced) and subjective (quality) criteria

Regarding gov't employees, What three types of positions are exceptions to longevity pay and are classified into separate categories when determining pay

-jobs that require high levels of specialized education (physicist) -influence public policy significantly (law judges) -require executive decision making

Seniority pay and longevity pay assume that (basis for seniority and longevity pay)

1. Employees become more valuable over time 2. Good employees may leave if not compensated fairly

Corporate Strategy

An organization's plan for how it will achieve its goals

most commonly used compensation method in the U.S.

Merit pay (Fits well with U.S. culture of rewarding individual achievement)

factors of performance plan

1. base line, 2. measurement, 3. control, 4. incentive intensity, 5. cutoff, 6. Distribution format, 7. time, 8. understanding, 9. Risk

Correlation Coefficient

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

Low-Cost Corporate Strategy

A corporate strategy that depends on providing low-cost products or services to a broad range of customers

Focused Low-Cost Corporate Strategy

A corporate strategy that depends on providing low-cost products or services to a narrow range of customers

Differentiator Corporate Strategy

A corporate strategy that depends on providing unique products or services to a broad range of customers

Focused Differentiator Corporate Strategy

A corporate strategy that depends on providing unique products or services to a narrow range of customers

Coordination and Departmentation

A dimension of organization structure that describes the methods used to coordinate the work of individual employees and subunits in an organization

Decision-Making and Leadership Structure

A dimension of organization structure that describes the nature of the decision-making and leadership processes used in an organization

Communication and Information Structure

A dimension of organization structure that describes the nature of the processes for communication in an organization

Control Structure

A dimension of organization structure that describes the nature of the processes used to control employee behaviour in an organization

Job Design

A dimension or organization structure that describes the manner in which the total task of an organization is divided into separate jobs

Reliability

A measure of the consistency of results among various analysts, various methods, various sources of data, or over time.

preexisting condition

A mental or physical disability that existed before an insurance policy was purchased.

an entity such as an arbitrator or tribunal board, generally of a public administrative agency, which has powers and procedures resembling those of a court of law or judge, and which is obligated to objectively determine facts and draw conclusions from them so as to provide the basis of an official action.

A quasi-judicial body

Classification Method of Job Evaluation

A series of classes covers the range of jobs.

example of a project team

A team of engineers working on the construction of a bridge can be given as an example of project teams

Contingency Approach to Organizational Design

An approach to organization design based on the premise that the best type of structure for an organization depends on the key contingencies (contextual variables) associated with that organization

Classical Managerial Strategy

An approach to management that assumes most employees inherently dislike work but can be induced to work in order to satisfy their economic needs

Human Relations Managerial Strategy

An approach to management that assumes most employees inherently dislike work but can be induced to work in order to satisfy their social needs

High-Involvement Managerial Strategy

An approach to management that assumes that work can be intrinsically motivating if the organization is structured properly

Ability

An employees skill level

Compensable Factors

Are based on the strategic direction of the business and how the work contributes to these objectives and strategy

According to the job characteristics theory, this core characteristic refers to the amount of freedom, independence, and discretion the employee enjoys in determining how to do the job.

Autonomy

performance appraisals

Away of telling employees what is expected of them in their jobs and how well they are meeting those expectations. An evaluation that measures employee performance against established standards in order to make decisions about promotions, compensation, training or termination

a PAS in which scores from each job dimension are averaged to provide an overall rating of performance.

BOS

how do BOS and BARS differ

BOS incorporates only positive perf. behaviors

why must supervisors be trained to use the rating instrument properly

Because the UNIFORM application of standards is extremely important. they need to know how to apply PAS when they make judgements. they should also be aware of common rater errors.

Which type of individual incentive plan focuses on accomplishments such as improving attendance or safety records?

Behavior encouragement plans

PAS based on 8-10 expected job behaviors. based on actual observable job behaviors. encourages all raters to make evaluations in similar ways.

Behaviorally-anchored rating scales (BARS)

Hay Job Evaluation System

Claims that job evaluation establishes the relative value of jobs based on their content, independent of a link to the market.

3 main reasons U.S. business are using 360 degree PA

Company downsizes reduces hierarchy so supervisors are becoming responsible for more workers making it harder to observe a single employees performance the 360 PAM is consistent with the increased prevalence of work teams in companies companies placing great emphasis on customer satisfaction as competition for a limited set of customers increases.

reward employees when the company exceeds minimally acceptable performance standards.

Company-wide incentive programs

technique for comparative PAS

Comparison systems forced distribution paired comparison

Pay-for-knowledge and skill-based pay are two types of person-focused pay programs that fall under this pay category.

Competency-based

Compliance

Conforming to federal and state compensation laws and regulations

examples of work teams include

Customer service teams, assembly teams on production lines

plans place cash awards in trust accounts for employees. These trusts are set aside on employees' behalf as a source of retirement income.

Deferred profit sharing (not taxed until employee begins drawing upon retirement)

This term refers to the level of specialization or expertise an employee possesses in a particular job.

Depth of skills

Domain

Describes the specific products or services offered by a given organization

the General Schedule

Determines the pay range of a government employee, (employees receive raises regardless of performance) Classifies federal gov't jobs into 15 classifications based on such factors as skill, education, and experience levels. In the past, GS personnel were generally paid the same amount regardless of where they worked. The intent of the GS is to keep federal salaries equitable among various occupations and between men and women ("equal pay for equal work").

disadvantages of BOS

Difficult and time consuming to develop and maintain raters must be able to observe employees closely and regularly to assure an accurate appraisal (hard if supervise a lot of people)

Objectives

Part of compensation policies and objectives. (e.g. efficiency, fairness, and compliance)

Long-Linked Technology

Divides the total task of producing a product or service into a series of small sequential steps performed by differential employees

Advantages of trait PAS

Easy to construct easy to use applies to a wide range of jobs easy to quantify for merit pay purposes

drives organizational productivity and includes improvement suggestions and problem-solving ideas.

Employee involvement

Qualitative Job Analysis (QJA)

Employees are directed to a website where they complete a questionnaire.Such an approach allows statistical analysis of the results.

Exempt Status

Employees who are are exempt from regulations of the Fair Labor Standards Act (FLSA) and hence do not receive overtime pay. Salaried workers fall under this category.

This type of appraisal error takes place when managers rate employee's performance more highly than they should compared with objective criteria.

Errors of leniency

Market Based Evaluations

Evaluating jobs on the basis of their market values can develop a job worth hierarchy. Prevailing rates are used as the relative worth of the jobs. Once a hierarchy is developed around benchmarek market rates, the remainder of the jobs are typically placed into the hierarchy based on whole job comparisons to benchmark jobs. Decide the point of reference for comparison. Compare duties, scope and reporting relationships NOT TITLES.

Position Analysis Questionnaire (PAQ)

Groups information into seven basic factors: information input mental processes, work output, relationships with other persons, job context, other job characteristics, and general dimensions

t/f The Fed gov't has modified its current pay system (the GS)

FALSE. considered but has not yet.

Factor Comparison in Quantitative job evaluation

Factor Comparison (job to job comparison) more complex than ranking or classification and is rarely used. identifies dollar values for each level. Best used with stable wages and a flat rate for each job. Sometimes used as part of a labor contract.

Contextual Variables

Factors in the firm's context that indicate the most appropriate managerial strategy and organizational structure

Pay Objectives

Guide the design of the pay system.

Identifying Compensable Factors

Hay Plan, of Guide Chart Profile method - know-how, problem solving, and accountability. Factor Evaluation System - knowledge required, supervisory controls, guidelines, complexity, scope and effect, personal contracts, purpose, of contacts, purpose of contacts, physical demands, and the work environment.

Craft Technology

Few exceptions are inherent in the production process, but there is no standardized way to deal with them when they do occur

Routine Technology

Few exceptions occur during the production process, and those exceptions that do occur can be dealt with in a standardized way

Defender Corporate Strategy

Focuses on dominating a narrow product or service marker segment

Analyzer Corporate Strategy

Focuses on exploiting new opportunities at a relatively early stage while maintaining a base of traditional products or services

rewards employees for partially or completely attaining a predetermined work objective. It is compensation, which fluctuates according to a pre-established formula, individual or group goals, and company earnings.

Incentive pay (variable pay)

Variable Pay

Incentives. Tied to the performance of an individual employee, a team of employees, a total business unit, or some combination

Total Compensation

Includes pay received as cash and indirectly as benefits (e.g. pensions, medical insurance, uniforms)

Motivation

Intensity, direction, and persistence of an employee.

Validity

Is the analysis and accurate portrait of the work?

Why did the Federal Employees Pay Comparability Act never get implemented?

It introduced a "locality pay adjustment" component to the GS salary structure. The methodology used to compute locality adjustments did not result in equal pay for equal work and the high projected cost of closing the pay gap (as determined by FEPCA) between federal salaries and those in the private sector. As a result, FEPCA has never been fully implemented.

NQ Job Evaluations: Ranking and Classification

Job Classification (Job to predetermined standard comparison) grouping jobs into grads, each having a class description to use for job comparisons. = General Schedule system by federal government. Classes may be described further by naming BENCHMARK JOBS. Good to use in grouping a large number of jobs. Difficult to use with groups having overlapping jobs.

NQ Job Evaluations: Ranking and Classification

Job Ranking (job to job comparison) a hierarchy of jobs from lowest to highest of importance. Whole job, comparing one job to another.

Nonquantitative Job Evaluation

Job Ranking (job to job comparison) a hierarchy of jobs from lowest to highest of importance. Whole job, comparing one job to another. Job Classification (Job to predetermined standard comparison) grouping jobs into grads, each having a class description to use for job comparisons. = General Schedule system by fed.gov. Ofter referred to as whole-job methods, as they evaluated the entire job and place different jobs in order w/o a number value being assigned to each job. As a result, one can tell that Job A is more important than Job B but not how much more important.

disability plan where one is unable to engage in any occupation for which the individual is qualified by reason of training, education, or experience.

Long term disability

Supply Chain Analysis

Looks at how an organization does its work: activities pursued to accomplish specific objectives for specific consumers.

a type of PAS used mainly for managerial and professional employees and typically evaluates employees progress toward strategic planning objectives

MBO

best know management incentive plan is

MBO (outcome oriented performance appraisal technique for merit pay systems)

Which performance appraisal tool is most often used with managers and professional employees?

Management by objectives

Which type of individual incentive plan requires the achievement of multiple, complex objectives without compromising the quality and quantity of output that is generated by employees?

Management incentive plans

award bonuses to managers when they meet or exceed objectives based on sales, profit, production, or other measures for their division

Management incentive plans piecework (one specific objective) Management incentive (multiple complex objectives)

Nonroutine Technology

Many exceptions are inherent in the production process, and there is no standardized way to deal with these exceptions

Engineering Technology

Many exceptions occur in the production of service or delivery process, but there are standardized ways of dealing with them

a collective bargaining agreement is designed to

Negotiate labor contracts Provide grievance procedures

Team Incentives

Offers higher pay if the team performance warrants it

Managerial Strategy

One of three main patterns or combinations of structural variables that can be adopted by an organization, namely classical, human relations, or high involvement

Alternation Ranking

Orders job descriptions alternately at each extreme

the amount for merit pay increase should reflect

PRIOR job performance levels and motivate employees to strive for exemplary perf.

Which type of individual incentive plan rewards employees based on their individual hourly production against an output standard?

Piecework plans

Quantitative job evaluation Point Factor method and Factor Comparison method

Point Factor - involves using specific Compensable factors to evaluate relative job worth. Compensable factors reflect the dimensions along which jobs are perceived to add value to the org.

Technology

Procedures and resources used by an organization to transform inputs into outputs

Relational Returns

Psychological benefits. (e.g. learning opportunities, status, challenging work, and so on)

Quantitative Job Evaluation

Quantitative methods try to establish how much more one job is worth compared to another job by using a scaling system. Evaluates specific factors, use a scale and proved a score that indicates how valuable one job is compared to another. Point-factor method (Job to predetermined standard comparison.) Factor Comparison (job to job comparison) more complex than ranking or classificion and is rarely used. identifiies dollar values for each level.

This type of individual incentive plan rewards employees who recruit new customers or new employees. they rely on referral bonuses to enhance recruitment or highly qualified employees.

Referral plans

Incentive Effect

Refers to a worker's willingness to work diligently to produce more quality output than simply attending work without putting in the effort.

Compensation

Refers to all forms of financial returns and tangible services and benefits employees receive as part of an employment relationship

External Competitiveness

Refers to pay comparisons with competitors

job control unionism

Refers to union's success in negotiating formal contracts with employees and establishing quasi-judicial grievance procedures to adjudicate disputes between union members and employers.

Content

Refers to what work is performed and how gets done

Intensive Technology

Requires that each item or case be dealt with individually, depending on the specific nature of each

Americans with Disabilities Act (ADA)

Requires that essential elements of a job must be specified for jobs covered by the legislation

This term refers to the degree to which the job requires the person to do different tasks that involves the use of a number of different skills, abilities and talents.

Skill variety

Task Data

Reveals the actual work performed and its purpose or outcome

Incentive Plans

Reward people for developing "innovative" new financial investment vehicles and for taking risks to earn themselves and their firms a lot money.

Which gain sharing plan focuses on lowering the percentage of labor costs using a value-added formula?

Rucker Plan

emphasizes employee involvement and provides monetary incentives. It uses a value-added formula to measure productivity.

Rucker Plan

The sum of sales revenue plus the value of goods in inventory.

Sales value of production SVOP

A form of gain sharing that believed employees will exercise self-direction and self-control if they are committed to company objectives and that employees will accept and seek out responsibility if given the opportunity

Scanlon Plan

Three most common forms of gain sharing plans are

Scanlon plan, Rucker plan, and Improshare. (employers today generally modify one of these traditional plans to meet their needs or adopt hybrid plans)

what is the basis for savings for each GS plan?

Scanlon- labor rucker- labor, raw, services improshare- hours of production

paid time off

Some employers have paid time off programs in which vacation time, holidays and sick leave for each employee

What are the waiting periods within the longevity step process

Steps 1-3: 1 year Steps 4-6: 2 years Steps 7-9: 3 years

Organizations

Systems that apply to procedures to a set of resources to transform inputs into valued outputs

This term refers to the degree to which the job enables the employee to work on it from start to finish.

Task identity

Conventional Job Analysis

The U.S. Government's step-by-step approach to job analysis.

Organization Structure

The means through which an organization generates the behaviours necessary to execute its corporate strategy

elimination period

The period of time after the beginning of an insurance policy for which no benefits are payable. exlude insignificant illness or few day injuries

Task Environment

The portion of the general environment that has direct relevance to a given organization

Job Evaluation

The process of systematically determining the relative worth of jobs to create a job structure for the organization. The evaluation is based on a combination of job content, skills required, value to the organization.

Essential Elements

Those that cannot be reassigned to other workers

Organizational Culture

The set of core values and understandings shared by members of an organization

Job Analysis

The systematic process of collecting information that identifies similarities and differences in the work

advantages of profit-sharing plans

These plans enable employees to share in companies' profits and allow companies greater financial flexibility.

Paired Comparison

Uses a matrix to compare all possible pairs of jobs

Mediating Technology

Uses standardized transactions to connect parties wishing a mutually beneficial relationship

Employees would need to learn these types of skills in order to develop self-managed work teams

Vertical

Total Cash Compensation

Wages + Bonuses

merit pay programs

reward employees with permanent increases to base pay according to differences in job performance.

Benchmark (key) Jobs

Would be identified for as many of the levels in the structure and groups of related jobs as possible

Job Description

Written Summary of the job. It contains info. on the tasks, people, and things included

merit pay programs dont work well with teams because

a company budget for pay increases causes them to compete for the same share of money. this merit pay programs are best suited for jobs where employees work independently. (clerical) (accounting)

Commission

a fee for services rendered based on a percentage of an amount received or collected or agreed to be paid (as distinguished from a salary)

Disadvantages of individual incentive programs

promote inflexibility (not likely to increase their performance beyond reward compensation maximum of 15% above perf standard for no more than 500 a month) Unrealistic standards may hamper employee motivation Setting performance standards is time consuming/ measurement problems exist when management implements improved work methods or equipment because it will take time to become proficient, thus employees may resist new methods. may encourage undesirable workplace behavior such as neglecting other dimensions of work when rewarded for output (such as neglecting quality) Factors beyond employee's control may affect outcomes

3 advantages of individual incentive pay plans

promote the relationship between pay and performance promote an equitable distribution of compensation within companies compatibility with an individualistic culture in U.S. also helps retain the best performers

discretionary benefits fall into three broad categories:

protection programs, paid time off, and services

protection programs

provide family benefits, promote health, and guard against income loss caused by catastrophic factors like unemployment, disability, or serious illness wage or salary

most common source of PA information source

supervisor

seniority pay

systems reward employees with permanent additions to base pay periodically, according to employees' lelngth of service performing their jobs.

longevity pay

systems reward with permanent additions to base pay those employees who have reached pay grade maximums and who are not likely to move into higher pay grades

There are two major group incentive plans

team-based or small group, and gain sharing

This type of flexible work schedule allows employees to work four 10-hour days a week.

compressed work week

current profit sharing plans

award cash to employees as part of their regular core compensation, typically on a quarterly or annual basis. (thus subject to IRS taxation)

the level of risk tends to be greater among

higher level employees than lower (goals are harder to achieve for higher level employees.)

How many step pay increases are employees eligible for under longevity pay?

10

To be fully insured under OASDI, Simone would have to work at least how long?

10 years

Presently, how long does it take employees to progress from step 1 to step 10?

18 years

employee bonuses typically range between

5 and 10% of an employees base annual pay

national labor relations act

A 1935 law, also known as the Wagner Act, that protects workers rights, predicted on a fundamental but limited conflict of interest between workers and employers. Establishment of a collective bargaining system nationwide that sets down rules to protect unions and organizers, and created the National Labor Relations Board to regulate labor management relations.

structure of the Scanlon suggestion program

A two-tiered cost-savings suggestion system has two levels such as production-level committees and companywide screening committees. Workers make suggestions, production level committee accept or reject (with explanation) suggestion, production committee then forwards suggestions to a company wide screening committee (serve as a communication link btw management and employees) if accepted then suggestion is fully implemented (usually receive bonuses on a monthly basis)

Cost of Living

Adjustments in pay given to everyone, regardless of performance. This is done to help balance work and life

Disability insurance

An insurance plan that makes regular payments to replace income lost when illness or injury prevents the insured from working

what two factors to consider BEFORE deciding to use merit pay

commitment from top management (must be willing to take on the task of measuring employee perf) design of jobs (must be designed in a way that perf can be measured accurately)

Among the various performance appraisal techniques, this appraisal system is the most defensible in court because it is based on actual observable job performance behaviors

Behaviorally-anchored rating scales BARS

Which of the following is a reason many European and Japanese employees are better skilled and able to work more productively than American workers?

Both European and Japanese economies provide a higher quality of academic preparation and workplace learning for the non-college portions of their work forces.

The scanlon plan assumes that

companies will be able to offer higher pay to workers generate increased profit for stockholders lower prices for customers

for incentive pay programs, common measures of employee performance are

company profits, sales revenue, # of units produced by a business unit

a PAS best suited for small groups of employees who perform the same or similar jobs

comparative methods

a PAS in which employees are ranked from best performer to poorest performer and establish a performance hierarchy where the employee with the best perf receives the highest ranking

comparison systems

greatest disadvantage of seniority pay systems

Employees do not have any incentive to improve their skills or take risks bc they get a raise regardless.. employees receive raises for average and exemplary performance also, employees receive raises whether the company is meeting its competitive objectives or not.

Prospector Corporate Strategy

Focuses on identifying and exploiting new opportunities quickly

This group incentive system was designed to provide PARTICIPATING employees with financial incentives for productivity gains such as increasing customer satisfaction, increasing productivity, lowering costs, or improving safety and are shared by employees within the group.

Gain sharing

which type of PAS is often a component of a broader development program that can help employees achieve career goals

Goal oriented systems

Management by objective is part of which type of performance appraisal system?

Goal-Oriented system

Customer satisfaction, labor cost savings, materials cost savings, and reduction in accidents were listed as typical performance measures to which type of incentive plan?

Group

rate and rank performance of employees and pay increases are based on ranking

comparison systems

Effective incentive pay systems are based on three assumptions:

Individual employees and work teams differ in how much they contribute to the company, and in how well they do it. The company's overall performance depends on the performance of its employees. To attract, retain, and motivate high performers and to be fair to all employees, a company needs to reward employees on the basis of their relative performance.

3 categories of incentive pay

Individual incentive plans reward employees whose work is performed independently. Group incentive plans promote supportive, collaborative behavior among employees. Company-wide incentive plans tie employee compensation to a company's performance over a short time frame. 3 month-5 yr

essential for the content to be valid in a PAS

Job analysis

Skill variety, task identity, autonomy, and feedback are the elements that make up this theory.

Job characteristics

collective bargaining agreements led to

Job control unionism Collective bargaining units Union shops

This term reflects an approach to job design that results in the development of more intrinsically motivating and interesting work.

Job enrichment

This Medicare Plan was established with the passage of the Balanced Budget Act of 1997 as an alternative to the original program (parts A&B).

Medicare Advantage

Longevity is designed to

Pay grade maximum for length of service To reduce employee turnover Reward employees for continuous years of service

provides income benefits for limited periods of time, usually less than 6 months (26 wks)

Short-term disability

Compensable factors in Equal Pay Act and Title VII of the Civil Rights Act include

Skill - Responsibility - Effort - Working conditions - Supervision of Others Compensable factors should: -Reflect actual work being done -Be supported by documentation such as job descriptions -Reinforce the Org's strategic plan and culture -Be valued by all affected parties (stakeholders) -Be reviewed annually Once analysis complete for all compensable factors, the result gives the complete range of points related to the factors. The fewest points a job can be worth is determined by adding the points. The most points a job can be worth is 1100 determined by adding the max # of points for each factor.

affordable care act

The Affordable Care Act (ACA) was passed in 2010, Title 1 eliminates lifetime limits on covered insurance benefits, and it is phasing out the annual limits that companies can impose on coverage. The ACA also improves access to health insurance for children, young adults, and people with a pre-existing condition.

If an employee is rated as outstanding on her leadership ability she was probably rated using which appraisal system?

Trait system

Salary

Working for a fixed amount of annual or monthly pay regardless of hours worked.

Wages

Working for hourly wages rather than fixed (e.g. annual) salaries

gain sharing bonuses are usually based on

a formula that measures productivity that employees perceive as fair and that the employer believes will result in improvements in company performance.

across-the-board increase

a general adjustment that provides equal increases to all employees

success-sharing plans

a generic category of pay add-on which is tied to some measure of group performance, not individual performance

management by objectives

a goal oriented performance appraisal method, requires that supervisors and employees determine objectives for employees to meet during the rating period, then writes a report with progress toward objectives, and then the supervisor appraises how well they have achieved their objectives.

when considering the Level of risk, it increases as incentive pay represents

a greater proportion of total core compensation

common principle underlying the 3 best known gainsharing programs is

a group incentive system that provides ass or most employees a bonus payment based on improved company performance

emphasizes cooperation and rewards its members for the additional responsibilities they must take on being in a team as well as the skills and knowledge they must acquire.

a pay plan for teams (skill and knowledge based pay plans can address the additional responsibilities)

in a seniority based pay structure, employers award raises according to

a pay schedule

For exempt employees, merit increases are usually expressed as

a percentage of annual salaries

For non-exempt employees, merit increases are usually expressed as

a percentage of hourly wages

The only factors other than job performance that exceptions that employers can award merit pay increases without it potentially resulting in charges of illegal pay discrimination according to the EPA are

a seniority system merit system quality or quantity of production any factor BESIDES sex

behavioral observation scale

a specific kind of behavioral system, displays illustrations of positive incidents (or behaviors) of job performance for various job dimensions; the evaluator rates the employee on each behavior according to the extent to which the employee performs in a manner consistent with each behavioral description

behaviorally anchored rating scales

a specific kind of behavioral system, is based on the critical incident technique and these scales are developed in the same fashion with one exception; for the CIT, a critical incident would be written as, "the incumbent completed the task in a timely fashion." For the BARS format, this incident would be written as, "the incumbent is expected to complete the task in a timely fashion." incidents are identified as expectations and emphasize the fact that the employee does not have to demonstrate the exact behavior

critical incident technique

a specific kind of behavioral system, requires job incumbents and their supervisors to identify performance incidents - on the job behaviors and behavioral outcomes - that distinguish successful performance from unsuccessful performance; the supervisor then observes the employees and records their performance on these critical job aspects. They are often rated on how often they display the behaviors described in each critical incident

paired comparisons

a specific kind of comparison method for appraising job performance; supervisors compare each employee to every other employee, identifying the better performer in each pair. the employees are then ranked according to the # of times there were identified as being the better perf.

forced distribution

a specific kind of comparison performance appraisal system in which raters (ex: supervisors) assign employees to groups that represent the entire range of performance. (best perf, moderate perf, worst perf)

In order for a merit pay program to be effective, employees must perceive

a strong relationship between attaining performance standards and pay increases.

brito v zia company

a supreme court ruling, deemed that the zia company violated Title VII of the civil rights act of 1964 when a disproportionate number of protected class individuals were laid off on the basis of low performance appraisal scores; zia company's action was a violation of title vii because the use of the performance appraisal system in determining layoffs was indeed an employment test; in addition, the court rule that the zia co had not demonstrated that its performance appraisal instrument was valid (did not assess any job related criteria)

the concept of just-meaningful pay increase is

a trivial pay increase will not motivate for future performance

comparison systems

a type of performance appraisal method, require that raters (ex: supervisors) evaluate a given employee's performance against other employees' performance attainments; employees are ranked from the best performer to the poorest performer

trait systems

a type of performance appraisal method, requires raters (ex: supervisors or customers) to evaluate each employee's traits or characteristics (ex: quality of work, quantity of work, appearance, dependability, cooperation, initiative, judgment, leadership responsibility, decision making ability, and creativity).

What specifies the rate at which participants accumulate benefits?

accrual rules

What is they key to an effective merit pay program

accurate performance appraisals

cost-of-living

actual individual expenditures on goods and services. The only way to measure it accurately is to examine the expense budget of each employee

Longevity pay is used by state and local governments as

an incentive reduce employee turnover.

expectancy theory

argues that people behave as if they cognitively evaluate what behaviors are possible in relation to the value of rewards offered in exchange

While merit pay perf standards aim to be measurable and objective, incentive levels tend to be

based on even more OBJECTIVE criteria, such as quantity of items an employee produces per production pd.

why may it be difficult to establish appropriate perf goals

bc many companies simply do not fully describe the scope of these positions

why must appraisals be based on job related factors and not on any discriminatory factors?

because negative PA can affect an individuals employment status which is protected by the law

How is the CIT's strength also its weakness?

because the significant amount of documentation and continuous and close observation requirements can become overly burdensome to some supervisors.

companies should make adjustments to base pay according to changes in the cost of living or inflation before/after awarding merit pay raises

before (same with seniority pay)

major types of rating errors include

bias errors contrast errors errors of central tendency errors of leniency or strictness

awarded when actual productivity exceeds targeted productivity levels

bonuses (typically earned on a monthly basis)

a common trend for companies is to combine typical gain sharing plans with other approaches to

boost productivity and cost savings to an even greater degree than ever before.

employee involvement systems use

broadly based suggestion systems

management typically relies on _____________ to determine incentive pay levels.

business objectives

a maximum productivity improvement pay out level that is placed on productivity gains. any bones money above the maximum is placed in a reserve, if maximum is excessively repeated, the firm buys back the amount of productivity improvement over he maximum with a one time payment to employees (usually equal to the amount in reserve), standards are then adjusted so that a high level of productivity is set.

buy-back provision

how can HR dept help raters minimize errors

by carefully choosing the rating systems and to recognize and avoid common errors

what trend are companies going to upon obtaining PA information

calling on as many sources as possible to gain a more complete picture of employee job performance

These types of insurance plans are set up to cover things like dental care, vision care, and prescription drugs.

carve-out plans

has forced companies to reconsider their approach to employee compensation

changes in the global market place

Which of these is NOT covered under workers' compensation?

chronic unemployment

general schedule

classified federal government jobs into 15 classifications (GS-1 through GS-15) based on such factors as skill, education, and experience levels; in addition, jobs that require high levels of specialized education (ex: a physicist), significantly influence public policy (ex: law judges), or require executive decision making are classified in 3 additional categories: senior level, scientific & professional positions, and the senior executive service

internally consistent compensation systems

clearly define the relative value of each job among all jobs within a company; this ordered set of jobs represents the job structure or hierarchy; companies rely on a simple, yet fundamental, principle for building internally consistent compensation systems: jobs that require greater qualifications, more responsibilities, and more complex duties should be paid more highly than jobs that require lesser qualifications, fewer responsibilities, and less complex job duties.

IRS is responsible for

collecting taxes from U.S. citizens (it does not compete against any other business for tax payers; it exists to serve the public rather than make profits)

The formulas for profit-sharing

fixed first-dollar-of profits, graduated first-dollar-of profits, and profitability threshold formulas. Fixed first-dollar-of profits formula is based on a specific percentage of either pre- or post-tax annual profits. Graduated first-dollar-of-profits formula is based on percentages of pre- or post-tax profits and the percentage increases as profits increase. Profitability threshold formulas fund profit sharing pools when profits fall within predetermined minimum and maximum levels.

results at any cost

focus only on attainment of specific goals which often excludes other imp outcomes

seniority and longevity pay plans are likely to disappear from

for-profit companies in increasingly competitive markets.

a PAS in which the rater is forced to place a specific number of people for each performance category.

forced distribution

a PAS used to minimize the tendency for supervisors to rate most employees as excellent performers

forced distribution

The human capital theory suggests that employees can develop knowledge and skills from

formal education or on the job experiences.

These incentive plans reflect management philosophy that emphasizes employee involvement and suggestions.

gain sharing

compensation took used as an incentive program that was developed so that all employees could benefit financially from productivity improvements resulting from the suggestion system.

gain sharing

risk sharing plans

generic category of pay add-on (variable pay) that differs from success sharing in the employee not only shares in the successes but also is penalized during poor performance years. penalty is in form of lower total compensation in poor corporate performance years. reward, through, is typically higher than that for success-sharing programs in high performance years

welfare practices

generous endeavors undertaken by some employers for the comfort and improvement, intellectual and social, over and above wages paid. used to promote good mgnt and enhance worker productivity. motivated in part to minimize employees desire for union representation

what two things should supervisors discuss during PA meetings

goals for future performance and employee career paths

reward employees for their collective performance, rather than for each employee's individual performance. (contribution does not have to be equal as long as all group members have some impact on achieving the goal)

group incentive programs

bias errors

happen in the performance evaluation process when the rater evaluates the employee based on the rater's negative or positive opinion of the employee rather than on the employee's actual performance.

This type of consumer driven health care program allows employees to carry-over the unused funds still in their account.

health savings account

Companies use incentive pay to reward

individual employees, teams of employees, or whole companies based on their performance.

categories of incentive programs

individual, company wide, group plans

how are incentive rewards typically distributed to team members

individually

team based job design promotes

innovation in the workplace

This policy allows employees to schedule time-off without having to justify the reasons, and is more effective in controlling absenteeism than other types of absence control policies.

integrated paid time off

employees seniority is/is not easily indexed? why?

is because time on the job is relatively straight forward and concrete

an activity to promote nondiscriminatory PAP where companies define jobs and the discover what employee behaviors are necessary to perform the jobs.

job analysis

is vital to companies that wish to establish an internally consisten compensation system

job analysis

collective bargaining led to

job control unionism

a product of a job analysis that can be used to create objective performance measures

job descriptions (note the duties, requirements, and relative importance of a job within the company)

often give the most relevant input on whether content of PAS are valid

job holders, supervisors, and clients

refers to a cooperative organizational climate that promotes high levels of trust, open communication, and participation

leadership philosophy

The three components of gain sharing programs are

leadership philosophy, employee involvement systems, and bonuses.

protects employees' families by paying a specified amount to an employee's beneficiaries upon the employee's death. It may also include accidental death and dismemberment benefits.

life insurance

in what ways may a company strengthen the pay for performance link

link PA to business goals analyze jobs communicate establish effective appraisals empower employees differentiate among performers

Merit increases are based on

objective and subjective indicators of an employee's job performance.

contrast errors

occur when a rater compares an employee to other employees rather than to specific explicit performance standards. (error bc other employees are required to perform only at a minimum acceptable standard)

strictness errors

occur when raters judge employee performance to be less than what it is when compared against objective criteria (employees may receive small pay raises than deserved) this erodes employee belief that performance is related to pay raises.

positive halo effect

occurs when a rater (ex: supervisor) generalizes employees' positive behavior on one aspect of the job to all aspects of the job

first impression effect

occurs when a rater (ex: supervisor) makes an initial favorable or unfavorable judgment about an employee and then ignores of distorts the employee's actual performance based on this impression

negative halo effect

occurs when a rater generalizes an employee's negative behavior one one aspect of the job to all aspects of the job

external influences such as global competition, rapid technological advancement, and skill deficits of new and current members of the workforce, will probably force companies to establish was type of compensation tactics?

ones that reward their employees for learning job-relevant knowledge and skills and for making tangible contributions toward companies quests for CA. Seniority pay meets neither goal.

Problem with seniority and longevity pay with the baby boomer generation

only a small segment are approaching retirement age so the large amount of employees are continually increasing in pay due to the two pay processes many baby boom employees are delaying the start of retirement out of financial necessity.

in a comparison system, employees may be ranked on

overall perf or various traits


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