compensation management test 2
what type of information is offered by the BLS?
-free salary results to the public -employment cost trends -national com -wages by area and occupation -earnings by demographic -earnings by industry -county wages
what is the market pay line ?
is representative of typical market pay rates relative to a company's job structure
is a job analysis legally required ?
no
what is pay compression ?
occurs whenever a company's pay spread between newly hired or less qualified employees and more qualified job incumbents is small
salary-plus-bonus plans
offers a set salary coupled with a bonus
what is pay structure ?
overall framework that recognizes the unequal jobs and PPS, different pay rates
what is the simple ranking method ?
plans order all jobs from lowest to highest according to a simple criteria
who frequently uses the classification method?
public sector organizations
what is central tendency ?
represents the fact that a set of data clusters or centers around a central point.
what are worker requirements?
represents the minimum qualifications and the knowledge, skills, and abilities that people must have to perform a particular job
what is a two-tier pay structure ?
reward newly hired employees less than established employees
how might a company prevent pay compression?
set competitive maximums rates, make regular adjustments to pay salary
what are advantages of individual incentives
advantages- 1. individual incentive plans can promote the relationship between pay and performance 2.individual incentive plans promote an equitable distribution of compensation within companies 3.individual incentive plans is their compatibility with such individualistic cultures such as the United States
what are the advantages of profit sharing?
advantages- 1.profit sharing plans enables employees to share in companies' fortunes 2.the enhanced employee productivity obviously is greater profits for companies that use profit sharing plans
how can equity theory explain how people react to certain levels of merit pay?
because they compare their performance to others in the company on the same pay rate levels raise by pay performance
what are green circle pay rates? why might we see these in an organization?
below minimum pay rates -when they do not meet the qualifications for the job
what is the BLS ?
bureau of labor statistics - federal government source of compensation survey information
how do sales compensation programs help organizations meet their objectives?
by aligning the financial self-interest of sales professionals with the company's marketing objectives
what type of sales incentive plan fits best with lowest-cost strategies? explain why.
commission or revenue because compensation varies with sales revenue
explain regression analysis
describes the linear relationship between two variables(simple regression) or between the linear composite of multiple variables and the other variable (multiple regression)
what are the disadvantages of profit sharing ?
disadvantages- 1.employees may leave due to the economic earnings of the company or profits and may leave to go to a competitor for better salary 2.the turnover of excellent performers certainly represents a significant disadvantage to companies.
what are the disadvantages of individual incentives
disadvantages- 1.individual incentive plans posses the potential to promote inflexibility 2.individual incentive programs pose measurement problems when management implements improved work method or equipment 3.individual incentive plans may encourage undesirable workplace behavior when these plans reward only one or a subset of dimensions that constitute employees' total job performance.
commission-plus-draw plans what is a draw ? what does it mean for a draw to be recoverable vs. nonrecoverable?
draw- subsistence pay component -recoverable ( required to be paid back) -nonrecoverable(not obligated to pay the loans back if they do not sell enough)
what is the major limitation of internally consistent pay systems ?
employees may engage in duties that extend beyond whats written in their job descriptions
referral plans
employees may receive monetary bonuses under referral plans for referring new customers or recruiting successful job applicants.
behavioral encouragement plans
employees receive payments for specific behavioral accomplishments (good attendance or safety records)
what does a comp-ratio of more than 1 mean?
exceeds the competitive pay rates for the job
describe three common pay structures. structure based on job family
executive, managerial, professional, technical, clerical, and craft jobs
what situations lead to pay compression ? what are its possible effects ?
failure to raise pay range minimums and maximums is a scarcity of qualified candidates for particular jobs -dysfunctional employee turnover
what is a major advantage of broad banding ?
gives it more flexibility and can be easier
what is variation ?
how spread out are data points
how can the following laws influence job analysis ? americans with disabilities act
make companies accommodate employees with disabilities but job analysis make sure they can still perform systematically with those accommodations
what is broadbanding?
makes the pay grades and ranges into fewer and wider pay grades
which pay policy best fits a company using a cost leadership strategy?
market lag
which pay policy best fits a company using a differentiation strategy?
market lead
describe three common pay structures. structure based on geography
may establish pay structures based on going rates in different geographic regions because local conditions may influence pay levels (cost-of-living)
what are some sources of published compensation survey data? why would a company want to use more than one source ?
professional associations, industry association, consulting firms, federal government -to get a broader view of info
what is a pay mix policy ?
refers to the combination of core compensation and employee benefits components that make up an employee's total compensation package
what is the relative labor market ?
represent the fields of potentially qualified candidates for particular jobs
what is a compensation plan?
represent the selection and implementation of pay level and pay mix policies over a specific time period
what are pay ranges ?
represent the vertical dimension (pay rates)
explain employee stock option plan?
represents a long-term company-wide incentive plan that provide employees with stock options
piecework plans
rewards employees based on their individual hourly production against an objective output standard and are determined by the pace at which manufacturing equipment operates. the second type of piecework incentive plan establishes individual performance standards that include both objective and subjective criteria
what type of sales incentive plan fits best with differentiation? explain why?
sales plans with salary component, it guarantees pay
what are the universal compensable factors ?
skill, effort, responsibility, and working conditions
why is it important for the job analyst to be trained ?
so that they can conduct a effective job analysis
what is a job description ?
summarizes job's purpose and lists its task,duties, and responsibilities as well as the KSA's necessary to perform the job at a minimum level.
what are job summary statements?
summarizes the job with two to four descriptive statements
what is the paired comparison method?
supervisors compare each employee to every other employee, identifying the better performer in each pair
what is job evaluation and how does it differ from job analysis?
systematically recognizes differences in the relative worth among a set of jobs and establishes pay differentials and it differs because it focuses on how well performance is rather than job descriptions
what is job evaluation?
systematically recognizes the difference in the relative worth among a set of jobs and establishes pay differentials accordingly
what is R^2
tells you how much of the variation in Y is explained by the variation in X change in X does not explain change in Y
companywide incentive plans
these plans tie employee compensation to a company's performance over a short time frame, usually from one-month period to a five-month period
what are some things companies hope to gain from compensation surveys ?
they hope to find realistic views of competitors pay practice and something about preferences for alternative forms of compensation due to economic changes
why is it important to have market-competitive pay systems ?
to attract and retain the most qualified employees
how is a benchmark job used?
to develop factors and their definitions to select jobs to represent the entire range of jobs in the company
what are red circle pay rates? why might we see these in an organization?
when they pay more than the maximum -to keep valuable employees from competitor job offers
what are the alternatives to job evaluation?
worth of job in market place
is incentive pay used alone or can it be used with traditional base pay ?
yes it can be used with base pay
What is gainsharing?
describes group incentive systems that provide participating employees an incentive payment based on improved company performance, whether for increased productivity, increased customer satisfaction, lower costs, or better safety records
what is job content?
describes job duties and tasks as well as such pertinent factors as the skill and effort needed to perform the job adequately
what are job duties ?
describes the major work activities and pertinent supervisory responsibilities
what are the disadvantages of group incentives
disadvantages- 1. the main disadvantages is employee turnover
what does a compa-ratio of 1 mean?
employees pay rate equals the pay range mid-point
how is a compa-ratio calculated?
employees pay rate/pay range mid-point
what does a compa-ratio of less than 1 mean?
falls below the competitive pay rate for the job
salary-only plans
fixed base compensation, doesn't vary
what are job titles?
indicate the name of each job within a company's job structure.
what are worker specifications ?
list the education, KSA's and other qualifications individuals must possess to perform the job adequately
salary-plus-commission plans
makes salary plus commission of whatever they sale
what are classification plans ?
particular methods of job evaluation, place jobs into categories based on compensable factors
individual incentive plans
rewards employees whose work is performed independently
what is a compensation survey ?
the collection and subsequent analysis of competitors data pay
what are pay grades?
the group jobs for pay policy application
group incentive plans
these plans promote supportive collaborative behavior among employees
what are compensable factors?
they are the salient job characteristics by which companies establish relative pay rates
what are the advantages of group incentives
advantages- 1. companies can more easily develop performance measures for group incentive plans than they can for individual incentive plans. 2.greater group cohesion is the second advantage
how do pay structures based on merit differ from sales compensation?
-base rewards on someone else's (employee supervisors) -composed of incentives
describe the two different ways to time merit pay
-common review date -common review period
market lead policy market lag policy market match policy
-compensate PPS more highly than competitors -compensation less than comp -match their competitors
what are the reasons companies choose not to develop and implement their own compensation surveys?
1.most companies lack pps qualification for tasks 2.custom survey development can be costly
describe three common pay structures. exempt&non-exempt
-exempt jobs are not subject to the overtime pay provisions act -non-exempt jobs are subject to the overtime pay provisions of the act
commission-only plans straight graduated commissions multiple-tiered commissions
-fixed percentages of the sale price of the product or service -increases for more sales -increases for more sales but can be topped by selling more
what types of internal and external information should job analysts review before beginning specific job analysis and techniques ?
-organizational charts, listing of job titles, classification of each position to be analyzed, job incumbent names and pay rates -the standard occupational classification system, trade associations, professional society and trade unions
what are the two options for a job analysis program ?
-use an established system -develop its own system tailored to specific requirements
upon what three assumptions is it based ?
1. individual employees and work teams differ in how much they contribute to the company, both in what they do as well as in how well they do it 2. the company's overall performance depends to a large degree on the performance of individuals and groups within the company 3. 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
what is market-based evaluation ?
plans use market data to determine differences in job worth
why update survey data ?
because price change and cost of living changes also
why is the level of risk important to consider when designing incentive pay plans ?
because the level of risk determines what employees are willing to accept in their overall compensation package
what two sets of information are needed before performing regression analysis to establish pay rates?
X- internal worth of jobs Y-external market pay rate
what is a strategic analysis ?
an examination of a company's external market context and internal factors
what are compensation budgets ?
are blue prints that describe the allocation of monetary resources to fund pay structures
what are working conditions ?
are the social context or physical environment where work will be performed
management incentive plans
award bonuses to managers when they meet or exceed objectives based on sales, profit, production, or other measures for their division, department, or unit
how are jobs grouped into pay grades?
based on compensable factors and value
what is incentive pay ( variable pay)? how does it differ from merit pay ?
incentive pay rewards employees for partially or completely attaining a predetermined work objective. incentive pay is a one time payment where merit pay is permanent
what is a compa-ratio?
index the relative competitiveness of internal pay rates based on pay range mid points
what is the consumer price index ?
indicator of inflation and increase in cost of services (products)
what are the most common methods/sources of data collection ?
interviewing, questionnaires, job incumbents, supervisors, and the job analyst
what is the point method ?
is a job-content valuation technique that uses quantitive methodology
what is a job analysis?
is a systematic process for gathering, documenting, and analyzing information in order to describe jobs
what is the range spread ?
is the difference between the maximum and minimum pay rates of a given pay grade
what is the midpoint pay value?
is the half way mark between the range minimum and maximum rates
what is an internally consistent compensation system?
it clearly defines the relative value of each job among all jobs within a company (more complex jobs are valued more)
what is a major limitation of broad banding ?
it could be more expensive
how can the following laws influence job analysis? equal pay act
it makes them give a good reason between pay differences between men and women and a job analysis helps them pay accordingly
how can the following laws influence job analysis? fair labor standards act
job analysis helps to determine whether employees are exempt or nonexempt
explain profit sharing?
pay a portion of company profits to employees separate from base pay, cost of living adjustments, or permanent merit pay increases.
what is job-content evaluation?
plans emphasizes the company's internal value system by establishing a hierarchy of internal job worth based on each job's function in company strategy
