Compensation & Benefits
The FLSA established requirements in five areas:
-it introduced a minimum wage for all covered employees - it identified the circumstances in which overtime payments are required and set the overtime rate at one and one half times the regular hourly wage. -it identified the criteria for determining what jobs are exempt from FLSA requirements. -it placed limitations on working conditions for children to protect them from exploitation -it identified the information employers must keep about employees and related payroll transactions
Total Rewards Philosophy
A high-level mission statement used to guide the development and implementation of compensation and benefit programs that attract, motivate, and retain employees.
Extrinsic Reward
A reward in which esteem is achieved from others, such as fulfillment from working with a talented team of peers.
Intrinsic Reward
A reward that encourages individual employee self esteem, such as satisfaction from challenging and exciting assignments.
An HR professional could breach their fiduciary responsibilities in what ways?
Acting in their own self-interest, conflicting duties, or profiting from your HR role.
Internal Conditions (affecting compensation philosophy)
Affect an organization's willingness and ability to pay. Examples include financial constraints, or poor business results prevent an organization from following through with a generous bonus program. Competing priorities in an organization impact its ability to introduce new rewards programs and maintain existing ones. Organizational culture combines with the types of products and services offered by the organization. Organizational Structure, for example organizations that answer to a parent company or corporate headquarters have additional constraints to consider when making total rewards decisions.
The FLSA covers what employees?
All employees except those identified in the law as exempt from the regulations. All other employees are considered nonexempt and must be paid in accordance with FLSA requirements.
Rest and meal periods
Although rest and meal periods aren't required by the FLSA, if they're provided, that time is subject to its requirements.
Fiduciary Responsibility
As one that requires confidence or trust. HR professionals who have responsibility for advising, managing, and/or administering total rewards programs Legally fiduciaries have one of the highest standards of care imposed on the individual acting on behalf of another individual or entity.
What is the challenge in developing a compensation philosophy?
Balancing the diverse conditions faced by the organization as a whole in a way that is consistent with the organizational culture.
Product Market Competition
Competitive product markets place financial pressure on an organization and challenge its ability to attract and retain qualified employees. Increased competition creates pressure to do everything faster, better and cheaper.
Indirect Compensation
Consists of any employee payments not associated with wages and salaries. This includes fringe benefits such as vacation, sick, and holiday pay; insurance premiums paid on behalf of employees; leaves of absence; 401(k) or other pension plans, and government-mandated benefits such as Social Security or FMLA, or other benefits.
The SEC reports include descriptions of various aspects of the executive compensation program including:
Description of compensation objectives, existence of employment contracts or severance agreements, equity grant practices and rewards, share ownership guidelines, descriptions of compensation philosophy and practices, annual compensation, information for the top five executives.
When did the government first begin regulating compensation practices?
During the Great Depression; these laws were defined to protect workers from unfair pay practices and other abuses by employers.
Economic Factors
Economic factors impact an organization's ability to find qualified employees. These factors include economic growth, inflation, interest rates, unemployment, and the comparative cost of living.
Explain the concept of organizational justice as it relates to the establishment of pay equity.
Equity in compensation ensures that what an employee brings to the job (inputs) and what the employee receives (outcomes) are fair and equitable when compared to both the internal factors and external conditions.
Additional requirements of the TR function
Executive compensation, The Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB)
What TR decisions are subject to additional reporting?
Executive compensation, stock options, employee stock ownership plans, and other performance-based executive compensation awards.
Fair Labor Standards Act (1938)
FLSA regulations apply to workers who aren't already covered by another law.
True or False: Positions are typically exempt from either all FLSA requirements, or nonexempt from all FLSA requirements.
False; positions may be exempt from one or all of the FLSA requirements.
Who is exempt from the Service Contract Act (SCA)?
Federal Contractors already subject to the requirements of the Davis-Bacon, Walsh-Healey or laws covering other federal contracts, such as public utility services or transportation of people or freight, are exempt from the SCA.
Nonmonetary Rewards
Include nontraditional work-life balance benefits such as telecommuting, on-site childcare, and flex time.
Monetary Compensation
Includes any costs the organization incurs for the benefit of employees, such as all forms of cash compensation, 401(k) matching, medical care premiums, pension plans, and paid time off. Other kinds of rewards include benefits that support the organization's culture such as stock options, Employee Stock Ownership Programs (ESOPs), and incentive plans.
Direct Compensation
Includes payments made to employees that are associated with wages and salaries. This includes pay, variable compensation, and pay for performance.
Name one example of how the labor market impacted organizations in the late 1990s.
Intense competition for software-engineering skills led to upwardly spiraling levels of pensation for individuals who possessed those skills. Because the US labor market wasn't producing enough college graduates to meet the demand for qualified candidates, the labor market expanded to include candidates from other countries. This resulted in an increase in the annual immigration quota for the year 2000 to meet the demand of U.S. based companies for employees with these technical skills.
Performance-Based Philosophy
Organizations with a performance-based philosophy use compensation to shape a key component of the corporate culture, employee behavior, by rewarding performance or behavior that moves the organization closer to achieving the goals established by its leaders.
Walsh-Healey Public Contracts Act (1936)
Requires government contractors with contracts exceeding $10,000 (for other than construction work) to pay their employees the prevailing wage for their local area as established by the Secretary of Labor.
Salary basis test
Requires that salaried employees receive a predetermined amount of payment on a regularly set schedule, that the employee's compensation cannot be reduced because of the variations in the quantity or quality of work, and the employee must be paid for a full salary for a week in any work is performed.
Entitlement Philosophy
Rewards seniority or employee longevity. When pay is based on seniority, performance will be secondary to time with the company or time in a particular job. Rewarding seniority creates loyalty to the company; ideally, benefits such as pension plans, stock options, and vacation accrual can reinforce the importance of seniority.
on call time
The FLSA doesn't require employees who are on call away from the worksite to be paid for time they spend waiting to be called. These employees may be required to provide the employer with contact information. If, however, the employer places other constraints on the employee's activities, the time could be considered compensable.
How does the Labor Market impact organizations in relation to employees?
The combination of supply and demand for a certain skill set in the labor market impacts what the employers competing for those skills must pay to individuals who possess them.
What impact do economic factors have on an organization in relation to employees?
The cost of labor, the cost to attract and retain individuals with the skills needed by the organization to achieve its goals.
Davis-Bacon Act (1931)
The first federal legislation to regulate minimum wages. This act required that construction contractors and their subcontractors pay at least the prevailing wage for the local area in which they're operating if they receive federal funds. Employers with federal construction contracts of $2,000 or more must adhere to the Davis-Bacon Act.
Labor market
The labor market is made up of any sources from which an organization recruits new employees; a single organization may find itself recruiting from several different labor markets depending on the availability of skills for different positions.
Procedural Justice
This is how far the internal process and procedures in determining pay scales are perceived to be. Considerations include how pay rates are determined, how bonuses are distributed, and who is responsible for making those decisions.
Pay Openness
This refers to the degree of secrecy that exists around pay issues. In some states, it's illegal to prohibit employees from disclosing their pay rates or amounts of increases.
Distributive Justice
This relates to how closely pay reflects actual performance. If, for example, an employee with a high rate of productivity is paid at the same hourly rate as an employee with a lower level of productivity, the perception of the pay system will be that it's unfair.
External Conditions (affecting compensation philosophy)
This strategy is a key element in the organization's TR philosophy because it identifies the equity conditions that must be considered in the development of salary structures, merit budgets, bonus programs, benefit offerings, and other total rewards programs. (Lead the market versus lag the market = different approaches)
Waiting time
Time spent by nonexempt employees waiting for work is compensable if it meets the FLSA definition of engaged to wait, which means that employees have been asked to wait for an assignment.
What is the minimum an exempt employee can make in a salary?
To be classified as exempt, an employee must be paid a minimum salary of $455 per week or $23,660 per year.
Line of sight
Used in a performance-based culture. Occurs when employees know that their performance, good or bad, impacts their pay. This provides an increased consciousness for associating behavior with a reward.
Compensation Strategy
Used to determine how the resources available for rewards programs can be used to best advantage in attracting, motivating, and retaining employees.
Total Rewards
an exchange of payment from an employer for the services provided by its employees.
Enterprise Coverage
applies to businesses employing at least two employees with at least $500,000 in annual sales and to hospitals, schools, and government agencies.
Individual Coverage
applies to organizations whose daily work involves interstate commerce.
Information for the top five executives include
cash compensation: base salary and bonuses, long-term performance awards, deferred compensation, executive pensions
What are the two categories of employers that are subject to the requirements of the FLSA?
enterprise and individual
overtime
for nonexempt employees as one and one half times the regular hourly wage rate for all compensable time worked that exceeds 40 hours in a work week
Interstate commerce
includes those who have regular contact by telephone with out-of-state customers, vendors, or suppliers; on that basis, it covers virtually all employers in the United States.
Regional Pay structures allow a company to..
reflect the market conditions of the different areas in which they have business locations.
Service Contract Act (1965)
requires any federal service contractor with a contract exceeding $2,500 to pay its employees the prevailing wage and fringe benefits for the geographic area in which it operates, provide safe and sanitary working conditions, and notify employees of the minimum allowable wage for each job classification, as well as the equivalent federal employee classification and wage rate for similar jobs. The SCA expands the requirements of the Davis Bacon and Walsh Healey acts to services including garbage removal, custodial services, food and lodging, and the maintenance and operation of electronic equipment.
Organizational Culture
rooted in the values and beliefs advocated by an organization's leadership and the ways in which members of the organization behave.
breaks
short periods of rest lasting less than 20 minutes are considered compensable time
Tax and accounting
the IRS affects compensation and benefits issues through its enforcement of federal tax legislation, such as Social Security and Medicare taxes, pension regulation, and enforcement rules about some benefit programs.
Laws regarding compensation practices are regulated by
the Wage and Hour division of the Department of Labor, Employment Standards Administration
Compensable time
the time an employee works that is "suffered or permitted" by the employer.
When an organization wants to make changes to compensation or benefits programs, why is it beneficial to connect with the IRS first?
to find out how the IRS will view the changes it may be beneficial to request a private letter ruling from the IRS before the changes are made. These rulings apply only to the specific taxpayer and circumstances included in the request and are used to find out what the tax implications of a complex or unusual financial transaction will be.
True or false: meal breaks lasting 30 minutes or longer aren't compensable time unless the employee is required to continue working while eating.
true