ch 11 (final)

job evaluation

A ________ system is composed of compensable factors and a weighting scheme based on the importance of each compensable factor to the organization.

Fair Labor Standards Act

According to the ________, employees should be paid at the rate of one and a half times their hourly rate for overtime worked beyond 40 hours in a week.

Considerations other than labor costs

CHALLENGES: Competitiveness of the U.S. Labor Force _______: ◦Being close to customers ◦Product development speed ◦Inventory levels -->Labor costs should not be the only determinant in the decision to move production to a foreign location

Instability of country differences in labor costs

CHALLENGES: Competitiveness of the U.S. Labor Force _______: ◦Relative labor costs are very unstable over time (see table on next slide) ◦Influence of exchange rate fluctuations, exchange rate hedging, proximity to U.S. market

productivity

CHALLENGES: Competitiveness of the U.S. Labor Force _______: ◦Unit labor costs (labor cost per hour / productivity per hour worked) ◦Gross domestic product per person (see graph)

Skill levels

CHALLENGES: Competitiveness of the U.S. Labor Force _______: ◦Variations in the quality and productivity of national labor forces ◦Lower labor costs may reflect the lower average skill level of the workforce

CEO pay ratio

Comparison of CEO pay to median or average worker pay

Market survey data, Pay policy line, Pay grades

Compensation decisions are based on both internal and external comparisons, but priority placed on one over the other may vary by employer 3 approaches to developing pay structures are ..?

range of discretion

Developing Pay Levels: ◦Product market competition and labor market competition create a ________ for pay

Product market competition, Labor market competition

Developing Pay Levels: Market pressures

labor market competition

Developing Pay Levels: Market pressures ___________ ◦Number of available workers, relative to the number of available jobs ◦Competition includes companies with similar products and companies in other product markets hiring similar types of workers ◦Worker shortage puts upward pressure on wages and salaries (e.g., in the tech industry) ◦________places a lower bound on pay levels

Product market competition

Developing Pay Levels: Market pressures ___________ ◦Price as an important dimension on which companies compete ◦Cost of labor is reflected in product and service pricing ◦________ places an upper bound on labor costs and compensation

fewer opportunities for promotion

Disadvantages: Delayering and banding offer ________ -->challenge the motivation of high performers

Broad bands

Disadvantages: _________ can lead to weaker budgetary control and rising labor cost

market pay surveys

External alignment: _______ provide information on ongoing rates of pay among competing organizations ◦Benchmarking against product market and labor market competitors ◦Which employers should be included in the survey?(industry, geography, etc.) ◦ ◦Which jobs should be included in the survey?(similar content, representative of product, function, and level) ◦How are rates of pay from multiple surveys weighted and combined? (depends on whether surveys are tailored to product or labor market; different reports also may have different sources, so biases and measurement errors need to be taken into account)

rate ranges

External alignment: Market pay surveys _________ ◦Different employees in the same job may have different pay rates ◦Recognize differences in employee performance, seniority, training, etc. ◦Use of market rate as a midpoint of pay ranges, minimums, or maximums

key (jobs)

External alignment: Market pay surveys _________ jobs are benchmark jobs, which are used in pay surveys ◦Relatively stable content ◦Common to many organizations

nonkey (jobs)

External alignment: Market pay surveys _________ jobs cannot be directly valued or compared through market surveys ◦Unique to organizations

Gig workers

Fair Labor Standards Act (FLSA), 1938: _______ are often considered independent contractors and thus not covered

nonexempt (employees)

Fair Labor Standards Act (FLSA), 1938: _______ employees: ◦Includes most hourly jobs ◦Must be paid a minimum wage of $7.25 per hour (but state and local laws may be stricter) ◦Tipped minimum wage is $2.13 per hour if that amount combined with the tips received equals at least the federal minimum wage ◦Youth minimum wage is $4.25 per hour for employees under 20 years for the first 90 calendar days after they are first employed ◦Receive overtime pay for each hour worked beyond 40 hours in a week (1.5x regular pay)

exempt

Fair Labor Standards Act (FLSA), 1938: _______ employees: ◦Status depends on salary and job responsibilities ◦U.S. Department of Labor issued a new rule that went into effect January 1, 2020: ◦Must be paid a salary level of no less than $35,568 annually ($684 per week, $27.63 per hour) ◦Highly compensated employees must be paid at least $107,432 annually

job evaluation

Internal alignment: Developing a job structure ________: Consists of compensable factors and a weighing scheme ◦Compensable factors are characteristics of jobs that an organization values and chooses to pay for (e.g., job complexity, working conditions, required education, required experience, responsibility)

point factor system

Internal alignment: Developing a job structure ________:yields job evaluation points for each compensable factor ◦A priori weights using expert judgments about the importance of each factor ◦Empirically-based weights in accordance to importance of each factor for determining pay in the labor market

Executive Order 13665

Legality of pay secrecy policies: ________: federal contractors cannot retaliate against employees who inquire about, discuss, or disclose compensation information

National Labor Relations Act of 1935

Legality of pay secrecy policies: ________: private-sector employees have the right to engage in "concerted activities for the purpose of collective bargaining or other mutual aid or protection"

delayering

Online Solutions, a software company, changed its pay structure from 3,400 job titles and 14 pay grades to a simpler structure with 1,000 jobs and 7 pay grades. The managers were then asked to choose pay levels that were based on the market. This is an example of

job evaluation, market pay survey

Organizations typically develop a market pay policy line based on the key jobs (for which there are both _____ & ______ data available). -The data can be plotted with a line of best fit estimated

above

Paying above, at, or below the market average: ◦Paying _______ market can help attract and retain top talent and generate positive job attitudes, but also adds cost ◦It is warranted when decentralized decision-making is emphasized -->higher-caliber employees are required for high-autonomy jobs ◦It is warranted when observing and monitoring employee performance is difficult

skill (based pay)

Responses to problems with job-based pay structures ◦Pay for skill, knowledge, and competency _______ -based pay: Pay based on the skills employees acquire and are capable of using ◦Increased worker flexibility ◦Decentralization of decision-making to those who are most knowledgeable ◦Climate of learning and adaptability, giving employees a broader view of how the organization functions

competency (based pay)

Responses to problems with job-based pay structures ◦Pay for skill, knowledge, and competency _______ -based pay: ◦Pay structures for exempt employees based on individual characteristics (i.e., a broader set of KSAOs) ◦Encourage learning and increased flexibility

Disadvantages

Responses to problems with job-based pay structures ◦Pay for skill, knowledge, and competency ________: ◦Could increase labor costs with little payoff (if not planned well) ◦If pay growth is based entirely on skill acquisition, employees may top out too quickly ◦Could generate a large bureaucracy due to the need for training and certification test development, skill description, measurement and valuation ◦Obtaining benchmarking data to price skills is difficult

banding

Responses to problems with job-based pay structures: ______: Establish broader groupings of jobs, increase spread between minimum and maximum pay

delayering

Responses to problems with job-based pay structures: ______: Reduce the number of job levels within the organization

<

Sometimes market survey pay falls significantly above or below the pay policy line: ◦Market survey pay _____ job evaluation points -->relatively high labor supply requires lower pay

>

Sometimes market survey pay falls significantly above or below the pay policy line: ◦Market survey pay______ job evaluation points -->relatively low labor supply requires higher pay

crowding

The ________ hypotheses argues that women were historically restricted to entering a small number of occupations and, as a result, the supply of workers far exceeded demand, resulting in lower pay for such occupations?

compa-ratio

The ________ is an index of the correspondence between actual and intended pay.

benchmarking

To compete for talent, organizations use _____, a procedure in which an organization compares its own practices against those of the competition. In compensation management, ________ against product market and labor market competitors is typically accomplished through the use of one or more pay surveys, which provide information on going rates of pay among competing organizations.

pay secrecy

_______ policies prohibit employees from disclosing how much they earn to colleagues

Efficiency wage theory

_______ states that workers are more reluctant to shirk because they wish to retain their jobs

delayering

________ is the process of reducing the number of job levels to achieve more flexibility in job assignments and in assigning merit increases

pay policy line

approaches to develop a pay structure: ________: Combines internal and external equity ◦Use of market survey data and job evaluation to establish pay for key and nonkey jobs

pay grade(s)

approaches to develop a pay structure: ________: Groups jobs with more emphasis on internal equity ◦Jobs of similar worth or content are grouped together for pay administration purposes ◦Each job within a grade has the same rate range ◦Range spread may be larger at higher levels to account for a greater organizational impact of performance differences

market survey data

approaches to develop a pay structure: _________: Emphasis is mainly on external equity ◦Pay for key jobs is directly based on market survey data ◦Pay for nonkey jobs is established using a pay policy line

reducing one's own inputs, increasing one's own outcomes, or leaving the situation

equity theory & fairness: In the case of perceived inequity, the person is expected to change their attitudes or behaviors in an effort to restore equity. -This is done either by _______, _______, or ________.

overreward inequity

equity theory & fairness: If p's ratio (Op/Ip) is larger than the comparison other's ratio (Oo/Io), then ____________ results.

underreward inequity

equity theory & fairness: If p's ratio (Op/Ip) is smaller than the comparison other's ratio (Oo/Io), then ____________ results.

effort, ability, experience

equity theory & fairness: Inputs include

pay, benefits, working conditions

equity theory & fairness: Outcomes include

fairness

equity theory & fairness: People evaluate the _______ of their situations by comparing them with those of other people.

external equity, internal equity

equity theory & fairness: Relevant social comparisons

referent other

equity theory & fairness: ratio of perceived outcomes to perceived inputs Oo / Io

self

equity theory & fairness: ratio of perceived outcomes to perceived inputs Os / Is

external equity

equity theory & fairness: Relevant social comparisons: _________: ◦Comparing to pay of employees doing the same work in other organizations ◦Use of market pay surveys to determine pay levels in the organization ◦Equity perceptions lead to external employee movement, labor costs, employee attitudes

internal equity

equity theory & fairness: Relevant social comparisons: _________: ◦Comparing to pay of employees within the organization (lower, same, and higher levels) ◦Use of job evaluations to design job structures in the organization ◦Equity perceptions lead to internal employee movement, cooperation among employees, employee attitudes

pay structure

is the relative pay of different jobs (job structure) and how much they are paid (pay level)

pay level

pay structure: ________: is the average pay of jobs in an organization (incl. wages, salaries, bonuses)

job structure

pay structure: ________: refers to the relative pay of jobs in an organization

($) 7.25 (per hour)

what is the federal minimum wage?

each hour worked over 40 hours, 1.5x regular pay

when is overtime pay required & how is it calculated?

Problems with job-based pay structures

◦May encourage bureaucracy -->May lead to lack of flexibility and initiative ◦Reinforces top-down decision making and information flow as well as status differentials ◦Can create a barrier to change due to the required bureaucracy ◦May not reward desired behaviors ◦Discourage lateral employee movement due to the emphasis on job levels and status differentials