Compensation Final
True
T/F - While ranking approaches are to comparison of others, Rating is to meeting standards
true
T/F -In order for a person to be exempt for minimum wage and overtime provisions you have to pass both tests; exemption and job duties test
True
T/F -The amount of union support for comparable worth appears to be related to its effects on the unions membership
Individual retirement accounts (IRA)
Tax favored retirement savings plan that individuals can establish themselves
Vesting
The length of time employee must work for employer before entitlement to employer payments.
Prevailing wage - (government defined)
The minimum wage that must be paid for work done uncovered government projects for purchases
Global performance measure
The use of a single score to reflect an individual employees overall performance is called?
Pension protection act of 2006
Its purpose was to protect employees retirement income as well as transfer some responsibility for retirement savings from the employer to the employee. A key provision of the law allows employees in publicly traded companies the freedom to sell off any employer stock purchased through deferrals or after tax contributions.
Defined contribution plans
- These type of plans are specific contributions by employer. - income tax deduction for the firm - problematic during recruitment of high talent executives
Financing
-Unemployment compensation is finance exclusively by employers that pay federal and state unemployment insurance tags and the majority of states -Federal tax amounts to 6.2% of the first $7000 earned by each worker -States additionally impose a tax above the $7000 figure -The extra amount a company pays depends on its experience rating
1.) Top down, in which top management determines the amount of money to be spent on pay and allocate it "down" to each sub unit for the plan year 2.) Bottom up, in which individual employees pay for the plan year is forecasted in some to create an organization wide salary budget.
Adjustments to average cash compensation level can be made into Waze, which are?
appraisal interview
An interview in which a manager discusses a subordinates performance record and explores areas of improvement and growth.
Compa ratio = average rate actual paid / by range-midpoint
Compa ratio formula
1.) begins with an estimate from top management of the pay increase budget for the entire organization 2.) once the total budget is determined, it is then allocated to each manager, who plans how to distribute it among subordinates.
Describe the budget controls from a top down perspective
1.) seniority 2.) merit or quality of performance 3.) Quality or quantity of production 4.) Some factor other than sex
Differences in pay between men and women doing equal work are legal if these differences are based on any one of four criteria, called an affirmative defense:
Behavioral control
Direct and controls are the worker does the task hired to do is called what type of control?
Expectancy theory of motivation
Expectancy. Instrumentality. Valence ^. ^. ^ Effort -> Performance -> outcome
Performance dimension training
Expose the supervisors to the performance dimensions to be used in rating
shift differentials, temporary assignments, bona fide training programs, differences based on ability, training, or experience, other reasons of "business necessity"
Factors other than sex include?
1) whether the gains through higher wages are greater than the losses of jobs and/or hours 2.) whether wage gains go primarily to workers from low income families rather than going to workers from families with higher incomes.
Factors to be considered in evaluating the effectiveness of a minimum wage law are?
type of relationship
Facts that show the parties type of relationship that includes writing contracts, provision of benefits, etc.
Compensatory time off
Federal registration has been proposed (but not yet passed) that would give employees and employers the option of training overtime pay for time off is called what?
Equal , identical
In legal terms, the equal work standard requires that only jobs be substantially _____ , not________.
Average cash compensation
Includes average salary (fixed payments) level plus variable compensation payments such as bonuses, gain sharing, stock plans, and/or profit sharing.
Portability
Issue for employees moving to new companies. -ERISA does not require mandatory portability of private pensions -And employer may voluntarily agree to permit portability
Skill, effort, responsibility
Jobs are considered equal if they require equal ______,_________, and ________ and are performed under similar working conditions.
Minimum wage
Legislation is intended to provide an income floor for workers and society's least productive jobs is called ___
Valuation discrimination
Looked at the pay women and men receive for the jobs they perform
-involves creating a compensation budget -Requires understanding the potential returns gained from the allocation
Managing, controlling labor cost involves and requires what?
Payment at one and a half times the standard for working more than 40 hours per week
Overtime provision of the FLSA requires:
Short term disability
Pizza percentage of an employee salary for temporary disability
Equal Pay Act of 1963
Prohibits wage discrimination on the basis of gender when employees perform equal work in the same establishment.
Range midpoints
Reflect the pay policy line of the employer in relationship to external competition is called what?
Prevailing wage
Sets pay for work done to produce goods and services contacted by the federal government
True
T/F - Cash balance plans are a hybrid of defined benefit and defined contribution plans
True
T/F - Employees rank pensions are one of the more important benefits
True
T/F - FLSA restricts hours and conditions of employment for minors
True
T/F - Supreme court determined pay difference is for the similar jobs may reflect discrimination
True
T/F - When developing performance measures your measures have to be valid.
True
T/F - Worker's Compensation covers disabilities that are work related
Fixed, variable
The _____ component is typically paid regardless of Business performance. In contrast, the _______ component of compensation, in theory, will rise and fall in line with business performance.
Financial control
The business controls the business aspect of the workers job is called what type of control?
Access discrimination
The denial of particular jobs, promotions, or training opportunities to qualified women or minorities
Performance dimension
The specific tasks and activities for which employees are responsible. The essential functions of the Job (from the job description) is called what?
Problem-solving interview
The type of performance appraisal interview where the manager stimulates growth and development by discussing the challenges, innovations, satisfactions, and dissatisfactions the employee has encountered since the last appraisal interview.
Broad bands
These are intended to offer managers greater flexibility compared to a grade range design. They may be more about career management and pay decisions.
Stock ownership or options
This is an award of stock shares or options. This is used in order to recruit top quality employees when organization has highly uncertain future. It is also used to address employee retention concerns.
Expectancy
This is the employees assessment of their ability to perform required job tasks. (E to P)
Instrumentality
This is the employees belief that higher dropper formants will be rewarded by the organization (P to O)
A compa-ratio of less than one
This means that on average, employees in a range are paid below the midpoint. That is, managers are paying less than the intended policy. This could be because of new or recent hires, poor performers, etc.
Merit pay
This system links increases in base pay to how highly employees are rated on a subjective performance evaluation.
broad-based option plans
This type of plan are stock grants and are versatile
Employee stock ownership plans
This type of plan has effects that are generally long-term, the foster employee willingness to participate in the decision making process, they have little impact on productivity a profit
Rucker plan
This type of plan is a ratio that is calculated that expresses the value of production required for each dollar of total wage bill
Scanlon plans
This type of plan is designed to lower labor costs without lowering the level of a firms activity
Compa ratio
To assess how managers actually pay employees in relation to the midpoint, an index called a _____ ____ is used.
• rate error training • performance dimension training • Performance standard training
Training raters to rate more accurately. What are the three types of rating training?
Disparate impact
UNINTENTIONAL DISCRIMINATION. Practices that have a differential effect on members of protected groups or legal, unless the differences are work related.
Executive, administrative, professional, computer in outside sales employees
Under the job duties tests for the FLSA who are exempt?
1.) cash profit sharing 2.) stock ownership or options 3.) balanced scorecard 4.) gain sharing 5.) Team incentives
What are five types of group incentive plans?
1.) positive impact on organization and individual performance of about 5 to 10% per year 2.) easier to develop performance than it is for individual plans 3.) signals at cooperation, both within and across groups, is a desired behavior. 4.) teamwork meets with enthusiastic support for most employees. 5.) May increase participation of employees in decision making process
What are some of the advantages of group incentive plans?
-expensive - Doesn't achieve the desired goal: improving corporate performance
What are some of the issues when it comes to merit pay?
-person under 18 cannot work in hazardous jobs -Persons under 16 cannot be employed in jobs involving interstate commerce except for non-hazardous work for a parent or guardian
What are the FLSA hours and conditions of employment for minors restrictions?
1.) raises productivity, lowers costs, and increases worker earnings 2.) less direct supervision required 3.) Supports budgeting and cost control
What are the advantages of piecework incentive plans
• Option awards have minimal impact on the financial statements of the company at the time they are granted • If properly communicated, can have powerful impact on employee behavior • Text deferral to employee
What are the advantages of stock ownership or options?
-Old age or disability benefits -benefits for dependents of retired or disabled workers -benefits for surviving family members of a deceased worker -Lump sum death payments
What are the benefits under Social Security?
• indirect pay/performance link • Employees may be required to put up money to exercise grants
What are the disadvantages of stock ownership or options?
Current years rise, ability to pay, competitive market pressures, turnover effects, and cost of living
What are the factors influencing decision on the increase of the average pay level for the next period in a top down salary level management?
-ask -link to your firm strategic objectives -set complete standards -make sure the program is motivational • have clear standards • be attainable • be easy to understand • provide meaningful incentives -Be scientific (evaluation components)
What are the five building blocks of affective pay for performance plans?
1.) Who should be protected or benefited 2.) How much choice should employees have a monkey in array of benefits? (Standard or flexible) 3.) How is your benefits be finance? (non-contributory, contributory, or employee financed) 4.) Are the benefits legally defensible?
What are the four major issues in setting up a benefits package?
1.) improving the format 2.) selecting the right raters 3.) understanding the way raters process information 4.)Training raters to improve rating skills
What are the four strategies for better measuring performance?
-behavioral control -Financial control -type of relationship
What are the general classification criteria to determine if a worker is an employee or an independent contractor?
1.) Defining the Job and Performance Criteria - Identifying the Performance Dimensions - Developing Performance Measures 2.) Evaluating or Appraising Employee Performance 3.) Providing Feedback
What are the steps in the performance management process?
Tell and sell interview, tell and listen interview, problem-solving interview
What are the three types of interviews when providing feedback?
Salary basis test, and job duties test
What are the two exemption test?
Defined benefit plans and defined contribution plans
What are the two generic types of pension plans?
-access discrimination -Valuation discrimination
What are the two types of discrimination in employment law recognizes?
401(k) plan, ESOP, profit sharing plan
What are three popular forms of defined contribution plans?
Defined benefit plan
• Employer provides a specific pension level defined in terms of: fixed dollar amount or percentage of earnings amount which varies with seniority • Employer finances this obligation by: following an actuarially determined benefit formula and by making current payments that will yield the future pension benefit for a retiring employee
Unemployment insurance
• financing • Weekly benefit amount • controlling unemployment taxes • coverage • duration
****Pg. 406 for types of errors ****
****Pg. 406 for types of errors ****
Improshare (improved productivity through sharing)
- Standard is developed that identifies expected hours required to produce an acceptable level of output - Any savings arising from production of agreed-upon output in fewer than expected hours of shared by firm and workers - easy to administer and to communicate What type of game sharing plan is this?
Duration
-Until 1958, the maximum number of weeks any claimant could collect UI was 26 weeks. -During the recession of 2008 through 2010, the rise in unemployment was staggering following huge layoffs by several prominent employers.
Workers compensation
-form of no-fault insurance: meaning employees are eligible even if their actions caused the accident. Coverage work related injuries, diseases. Covered by state, and federal laws.
Merrick multiple piece rate system
A multiple piece rate incentive plan is designed to reward efficient workers and penalize inefficient workers. The rates separate the workers into three groups: High for production exceeding 100% of standard, medium for production between 83 and 100% of standard, love for production less than 83% of standard
Tell and Sell interview
A type of performance appraisal interview where the manager has the ability to persuade an employee to change.
Fair labor standards act of 1938
Covers all employees (with some expectations) of companies engaged in interstate commerce or in the production of goods for interstate commerce.
Reverse discrimination
Discrimination against the majority group - The group penalized is white males
Coverage
Eligibility requirements: -must meet state requirements for wages earned or time worked during an established one year period of time referred to as a base period. -must be determined to be unemployed through no fault of your own and meet other eligibility requirements of state law
1.) The effort/skill/responsibility must be substantially greater in one of the jobs compared 2.) The tasks involving the extra effort/skills/responsibility must consume a significant amount of time for all employees whose additional wages are in question 3.) The extra effort/skills/responsibility must have a value commensurate with the questioned pay differential.
For an employer to support a claim of unequal work, the following conditions must be met:
-communicate about the benefits program -claims processing -Cost containment
How do you administer the benefits program?
Disparate treatment
INTENTIONAL DISCRIMINATION. Applies different standards to different employees. The effort/skill/responsibility must be substantially greater in one of the jobs compared
Red circle rates
If employees are paid above the range maximum, these are called?
Green circle rates
Pay below minimum. May occur if outstanding employees receive rapid promotions and pay increases have not kept up.
Performance standard training
Provides raters with a standard or frame of reference for making appraisals
True
T/F - FLSA specifies one and a half times pay for overtime.
True
T/F - Financial planning is integral to managing compensation
True
T/F - Prevailing wage laws prevent contractors from using their size drive down wages
True
T/F - Ranges at the maximum and minimum dollars to be paid for specific work.
True
T/F - Social Security has provisions for disability income to those who qualify
True
T/F - The equal pay act of 1963 is part of the FLSA.
False - Time of day does not constitute dissimilar working conditions.
T/F - Time of day does constitute similar working conditions.
True
T/F - When selecting the right raters one needs to focus on who might conduct the ratings and which of these sources is more likely to be accurate.
Embedded controls
This way is another way to control managers pay decisions. Controls on managers pay decisions come from two different aspects of the compensation process: controls that are inherent in the design of the techniques and the formal budgeting process
- need for early investment - disproportionate cost increases - Unfavorable accounting rules
What are some reasons for declines of defined benefit plans?
Employee stock ownership plans, performance plans, broad-based option plans
What are some types of long-term incentive plans?
Straight piece rate, Taylor, Merrick
What are some types of piecework incentive plans?
- "Do you what you get paid for" syndrome - unethical behaviors - adversely affects cooperation - lack of control - difficulties in measuring performance - Job dissatisfaction and stress - Potential reduction of intrinsic drives
What are the challenges to pay-for-performance plans?
Workers compensation, Social Security, unemployment compensation
What are the legally required benefits?
-adopt a single job evaluation plan for all jobs within a unit -all jobs with equal job evaluation results should be paid the same -Identify general representation (percentage male and female employees) in each job group -Wage to job evaluation point ratio should be based on the wages paid for male dominated jobs
What are the steps to establishing a comparable worth plan?
Scanlan plans, Rucker plan, Improshare
What are the three types of gain sharing plans?
• motivate employees to change their demand for healthcare via changes in design or administration of policies • change structure of healthcare delivery systems and participate in business coalitions - consumer driven health plans and hide adoptable plans shift cost onto employees - HMO versus PPOs • Promote preventive health programs
What are three general strategies available to benefit managers for controlling the rapidly escalating cost of healthcare?
Employee salary continuation plans and long-term disability plans
What are two private sources of disability income?
Use of market data and jobs of comparable worth
What do courts use to figure out the proof of discrimination?
Tell and Listen interview
A type of performance appraisal interview where initially, the manager communicates the strong and weak point of the job performance. The second part, the employees feelings about the appraisal are thoroughly explored.
Rate error training
Goal is to reduce psychometric errors by familiarizing raters with their existence
Comparable worth
If jobs require a comparable skill, effort, and responsibility, the pain must be comparable, no matter how the summer the job content may be is called what?
The higher rate prevails
If state and federal legislation cover the same job _____
- You calculate the average earnings over the last 3 to 5 years for a perspective retiree -You offer a pension that is about 1/2 (between 30-80%) of this amount adjusted for years of seniority
In a defined benefit plan how do you determine the benefit levels?
Employee Benefits
That part of the total compensation package, other than pay for time worked, provided to employees in the whole or in part by employer payments (e.g., Life insurance, pension, Worker's Compensation, vacation)
Health Insurance Portability and Accountability Act (HIPAA)
The key provisions include lessons and employers ability to deny coverage for a pre-existing condition and prohibits discrimination on the basis of health related status
Outcome based rating approaches; MANAGEMENT BY OBJECTIVES
This type of rating approach is based on the goal setting theory, it emphasizes participatively set goals that are tangible, verifiable, and measurable. -goal specificity -participative decision-making -An explicit time period - Performance feedback
Errors in observation (attention), in storage and recall (remember certain things), and in the actual evaluation, Factors that lead raters to give an accurate appraisals
What are the common errors in performance appraisal?
1.) line of sight may be lessened, that is employees may find it more difficult to see how their individual performance affects their incentive payouts. 2.) May lead to increased turnover among top individual performers who are discouraged because they must share with lesser contributors. 3.)Increases compensation risk to employees because of lower income stability. May influence some applicants to apply for jobs in firms were based pay is a larger compensation component.
What are the disadvantages of group incentive plans?
1.) easy approach to design and implement 2.) Can be used effectively for administrative purposes
What are the key advantages of ranking approaches?
Pension benefit guarantee corporation
Provide some protection of benefits In the event a severe financial difficulty that force the company to terminate or reduce employee pension benefits. Makes sure pension is insured just in case.
Merit bonuses a.k.a. lump sum bonuses
This bonus differs from merit pay increases in that employees receive an end-of-year bonus it does not build into base pay. Employees must earn this increase every year, that is why it is viewed as less as an entitlement than as merit pay. Can be considerably less expensive than merit pay over the long run.
Planned pay level rise
This is a typical top down budgeting. It is simply the percentage increase in average pay for the unit that is planned to occur.
Valance
This is the value employees attached to the organization rewards received for job performance.
Balanced scorecard approach
This looks at what contributes value in an organization. Under this approach managers focus on: 1.) customer satisfaction 2.) employee internal growth and commitment 3.) Operational efficiency in internal processes 4.) Financial measures
A compa ratio greater than one
This means that on average, the rates exceed the intended policy. The reason for this or this means that on average, the rates exceed the intended policy. The reasons for this could be that the majority of workers have high seniority, high-performance, low turnover, a few new hires, or low promotional rates
Piecework incentive plans
This plan offers a promise to pay for some objective, pre-established level of performance.
Long term disability
This plan takes over when short term plans expire. Usually under written by insurance, provides 60 to 70% of Pay for two years, up to life.
Group incentive plans
This type of incentive plan can be described by common features such as the size of the group that participates in the plan, the standard against which performance compared, and the payout schedule
Performance plans (performance share and performance unit)
This type of plan is driven by financial earnings or return measures and they pay out for meeting or exceeding specific goals
Pay for performance plan
This type of plan signals a movement away from entitlements. It also means that pay will vary with some measure of individual, team, or organizational performance.
Attribute-based approaches
This type of rating approach asks managers to make judgments about worker characteristics
Behavior-based approaches
This type of rating approach examines the extent to which employees actually display certain behaviors on the job.
1.). Quality can suffer 2.) employee resistance to new technology/methods 3.) increased complaints about poorly maintained equipment 4.) increased turnover buy new employees 5.) Elevated miss trust with management
What are the disadvantages of piecework incentive plans?
Traditional coverage, health maintenance organization, preferred provider organization, point of service plan
What are the four underlying structure of healthcare delivery?
-separating evaluation from development -targeting behaviors or outcomes rather than the individual -being balance in your appraisal -Encouraging employee participation
What are the guidelines for conducting the feedback meeting in the manager perspective?
1.) not helpful for developmental purposes (global ratings) 2.) Forces managers to identify differences among workers where none truly exist 3.) More difficult to do as the business grows in size
What are the key disadvantages of ranking approaches?
-Davis bacon act -Walsh Healey public contracts act -Service contract act -National Foundation for the Arts & Humanities Act
What are the main prevailing wage laws?
1.) minimum wage 2.) hours of work (including overtime) 3.) Child labor
What are the major provisions of the fair labor standards act
-employees at least 21 years old -Employers may require 12 months of service as a precondition for participation.
What are the requirements/eligibility for employee retirement income security act (ERISA)
-improve accuracy of performance ratings -allocate enough money to truly reward performance -Make sure size of merit increase differentiates across performance levels
What are the steps to managing merit pay?
-any contributions made by the employee to a pension fund are immediately and irrevocably vested -Employer's contribution must vest using one of the two formulas: • Four of us staying after three years (down from five years previously) • 20% after two years (down from three years) and 20% each year thereafter, resulting in full vesting after six years (down from seven years)
What are the two components of vesting?
Ranking and rating approaches
What are the two types of formats for appraisals?
Straight ranking, alternation ranking,. Comparisons, and forced distributions
What are the types of ranking approaches?
- it is an important cost control - represents the highest value of the organization places on the output of the work - represents the maximum worth to an organization of work performed in a particular job
What does a maximum range represent?
The worker economic opportunity act, but 1000 I meant to FLS a, allows stock options and bonuses to be exempt from inclusion in overtime pay calculations
What income is covered in the FLSA?
Attributes predict the persons potential to perform well rather than their actual performance
What is a disadvantage of attribute-based approaches?
Relies on a variety of performance dimensions instead of one
What is an advantage of attribute-based approaches?
Thorndike's law of effect
What is positive reinforcement law is a behavior with favorable consequences that is repeated, behavior with unfavorable consequences disappear.
Number of retired workers is rising without a corresponding increase in number of contributors to offset costs
What is the key issue of Social Security?
Labor costs = number of workers and hours worked X average cash compensation + average benefit cost
What is the labor costs formula?
Disparate treatment and disparate impact
What is the two theories of discrimination behavior under title VII?
Determination of organization strategy and goals/performance planning -> Ongoing feedback -> employee input -> performance evaluation -> performance review -> back yo first one
What is the typical performance management process?
-Occupational safety and health administration (OSHA) legislation specifies the number of breaks it must be provided in an eight hour workday -Portal-to-Portal Act provides that time spent on activities before beginning the "principal activity" is generally not compensable
What time is covered in the FLSA?
Tax law in force by the IRS and the employee retirement income security act (ERISA)
What two things are enforced by the Department of Labor that are relevant and classify the worker as an employee or independent contractor?
-if yes, then measures are valid. -If no, then measures are either deficient or contaminated.
When asked "Does your performance measures reflect the actual performance of your employees?" What is assumed?
Clear/specific performance measurement standards
When developing performance measures what is important measurement standards?
Social Security
Which legally required benefit provides a foundation of basic security for US workers and their families, Money comes from contributions made by employees, their employers, and self-employed people during working years?
Taylor differential piece rate system
Which piecework incentive plan establishes to piecework rates?
360 feedback process
• Assesses employee performance from five points of use; supervisor, peer, self, customer, subordinate • is flexible • improve employee understanding and self-awareness • promotes communication between supervisors and staff • promotes better performance and results What is this?
COBRA (Consolidated Omnibus Budget Reconciliation Act)
• Coverage: employers with 20 or more employees • eligibility: current and former employees and their spouses and dependents • qualifying events: specified event such as layoffs • qualifying event coverage: 18 to 36 months, depending on category of event
Family and Medical Leave Act (FMLA)
• coverage: employers with 50 or more employees • eligibility: must have worked at least 1250 hours for the employer in the previous year • qualifying events: specified family and medical reasons • qualifying event coverage: unpaid leave up to 12 weeks per year
