compensation test 2
Wage Rate
. Employees are entitled to 1½ times their regular wage rate. The regular rate is the hourly pay rate plus some other forms of compensation received by the employee, such as a shift differential. Calculating overtime pay is straightforward for employees paid by the hour. For employees on a wage incentive plan, the base rate is average hourly earnings. Salaried employees' base rate is determined by (1) converting monthly to weekly salary (divide by 4 1/3) and (2) computing the hourly rate (divide by 40).
Child Labor
Ages 14 and younger can't work Ages 14 and 15 can work 3 hours on school nights 18 hours per week when school is in 40 hours per week when school is out Ages 16 and 17 No hourly restrictions Can't work in hazardous conditions
Four Constitutional Amendments
Article 1, Section 8 Scope of Congressional powers First Amendment Limits to Congressional power Fifth Amendment Individual Rights Fourteenth Amendment, Section 1 State governments' limitations
Compensatory Time
Comp time refers to time off granted to an employee for time worked beyond the work week but for which no overtime was paid. The use of comp time by private employers is illegal. However, it may be used in governmental jurisdictions. Employers may work an employee longer than his or her normal work day and then grant time off at the regular pay rate as long as the time off falls during the current work week.
FLSA Exempt Positions
Executive Administrative Learned professional Creative professional Computer positions Outside sales
Living wage
Noting that minimum wage increases have lagged behind changes in the cost of living, advocates are moving beyond the concept of a minimum wage to that of a living wage. A living wage is one at which employees can support their families above the federal poverty line. These companies claim that subscribing to a living wage results in the following benefits: • reduces turnover and absenteeism, thereby lowering recruitment and training costs • increases productivity • increases morale and commitment to the company • improves the community
OASDHI
The Old Age, Survivors, Disability and Health Insurance Program.More than nine out of ten workers are covered by OASDHI provisions, which form the base of most benefit programs. The only workers not covered are federal civilian employees in the federal retirement system (as of now), state and local government employees who have chosen not to participate, some agricultural and domestic workers, and employees of some nonprofit organizations who have not arranged coverage. The programs under this label provide retirement, survivors, and disability insurance; hospital and medical insurance for the aged and disabled; black-lung benefits for coal miners; supplementary security income; unemployment insurance; and public assistance and welfare services.
Walsh-Healy Act.
The Walsh-Healy Public Contracts Act of 1936 applies to employers that are a party to federal contracts for materials, supplies, and equipment in excess of $10,000. It requires these employers to pay prevailing wages in the industry as determined by the Secretary of Labor. Walsh-Healy also requires covered employers to pay overtime at one and a half times the base rate for all hours in excess of 8 in a day or 40 in one workweek, whichever is greater.
PREVAILING WAGE LAWS
The government uses this term when it wishes to ensure that workers are being paid the average of all workers in a job category. However, the government's use of this term is more like that of "minimum wage" than of an average wage. While the calculation is of the average wage, the requirement is that the employer must pay at least the prevailing wage. In this way, the prevailing wage is a floor below which the employer may not pay. In most cases, if the employer pays more for the job than the prevailing wage, this becomes the required wage.
Duties Test
The major groups of exempt employees are executives, administrative employees, professional employees, computer-related occupations and outside sales personnel whose jobs match the definitions provided by the Wage and Hour Division (WHD) of the Department of Labor. Placing people on salary does not by itself make them exempt, but where the match between an organization's job and the WHD definitions leaves some room for question, amount of weekly pay decides. Employers may seek permission to pay less than the minimum wage to apprentices, handicapped workers, or full-time students.
THE FAIR LABOR STANDARDS ACT
The oldest US labor law is the US Fair Labor Standards Act (FLSA), often called the wage and hour law. It has four provisions that affect compensation programs. It has four provisions that affect compensation programs. These provisions concern minimum wages, overtime pay, record keeping requirements, and equal pay. (We say "tired" because many of its dollar limits have not been changed in sixty years.)
Workweek
The workweek is defined as a period of 168 hours during seven consecutive 24-hour periods. An employer may arbitrarily decide the day and the hour the workweek begins. Hours cannot be shifted from one week to another. An exception to this rule is that a hospital may use 14-day work periods and an 80-hour breakpoint. Another exception is that some employers are permitted week-to-week balancing under a collectively bargained guaranteed-wage plan. States may have different definitions of the work week. Most significantly, many states require overtime for hours worked over eight in a single day.Determining hours worked is not always an easy thing. Generally, if the employee is required to be on the employer's premises, the employee is considered to be working. Break times must be included by law (OSHA) but meal times may be excluded. The latest problem is the determination of hours worked when employees are "on call."
• Disparate treatment.
Treating groups or individuals differently on the basis of the above-mentioned "protected groups."
Social Security also imposes
imposes some record keeping and reporting requirements on employers: amounts and dates of wage payments; amount of tips received; name, address, occupation, periods of employment; and Social Security number of each employee receiving wages. The W-2 form that each employer must provide each employee by January 31 for the previous calendar year is a requirement of Social Security.
FLSA Coverage
the minimum wage provisions cover almost all employers. Formally, covered employers are those with at least two employees engaged in interstate commerce, producing goods for interstate commerce, or having employees who handle, sell, or otherwise work on goods or materials produced for or moved in interstate commerce.
Comparable worth
Comparable worth is an undeveloped legal concept that has become an important issue. It flows from the observation that women are paid less than men. More specifically, advocates of comparable worth call for equal pay for jobs of equal value. Note that this is different than equal pay, under which the jobs must be substantially equal. Equal pay concepts generally require similar duties, responsibilities, skill, and working conditions, that is, equal jobs. Comparable worth calls for equal pay for jobs of comparable value within an organization.
Compensation Law Themes
Income continuity, safety, and work hours Pay discrimination Accommodating disabilities and family needs Prevailing wage laws
Discretionary Benefits
Internal Revenue Code Employee Retirement Income Security Act Pension Protection Act
Legally-Required Benefits
Social Security Act Workers' compensation Family and Medical Leave Act Patient Protection and Affordable Care Act Consolidated Omnibus Budget Reconciliation Act Health Insurance Portability and Accountability Act
Paycheck Fairness Act
Strengthens the remedies available to put sex-based pay discrimination on par with race-based pay discrimination Prohibits employers from retaliating against employees who share salary information with their coworkers
Exempt.
, these are employees who are not subject to the requirements of the FLSA. Such employees are considered salaried and are generally paid a fixed salary regardless of hours worked.
Salary Level Test.
. Employees who are paid less than $23,600 a year ($455 a week) are generally nonexempt. Those paid over $100,000 a year are exempt provided they perform at least one of the duties of the executive administrative or professional categories below (this is referred to as the highly compensated exemption or HCE). In 2016 the salary level tests were changed to $47, 476 a year ($913 a week) for generally nonexempt employees and $134,004 a year for HCEs.
Immigrant Wages
A major feature of these acts is that they require the employer to pay the prevailing wage.The purpose of these requirements is to ensure that immigrants under these programs are paid as much as workers who are "similarly employed in the area of intended employment." This term is defined as substantially comparable jobs in the occupational category in the area of intended employment, except that if no such workers are employed by employers other than the employer applicant in the area of intended employment, "similarly employed" means 1. Having jobs requiring a substantially similar level of skills within the area of intended employment; or 2. If there are no substantially comparable jobs in the area of intended employment, having substantially comparable jobs with employers outside of the area of intended employment.
Salary Basis Test
A salary is a predetermined amount of pay that constitutes all or part of the employee's compensation for the pay period. This predetermined amount is a fixed amount and may not be reduced based on the quality or quantity of the work performed. A salary is generally expressed as an amount paid per week, per month or per year., if the exempt employee performs any work during the workweek, he or she must be paid the full salary amount. An employer may not make deductions from an exempt employee's pay for absences caused by the employer or by the operating requirements of the business. If the exempt employee is ready, willing and able to work, deductions from the employee's pay may not be made when no work is available.
Affirmative Action.
AA programs call for positive steps to correct the results of past discrimination. Government contractors are the major group required to have AA programs.AA programs are very controversial as they involve corrective steps in which minorities are given special treatment in order to make up for past discrimination. Proponents see this as eminently fair, but opponents view it as a form of reverse discrimination. In general, courts have recently taken a hard line on programs that give minorities an advantage in selection plans intended to increase the ratio of minorities in employment and education. This is making it harder for organizations, such as universities, that see advantages to having a diverse group.
Occupation
An occupation is a group of jobs, found at more than one company, characterized by a: Common set of tasks, and related in terms of Similar objectives Methodologies Materials Products Worker actions Worker characteristics
Occupational Wage Differentials: Job Content
Between occupational differences Differences in the complexity of KSAs such as The building and grounds cleaning and maintenance occupations Computer and mathematical occupations Within occupational differences Differences in KSAs within an occupational group Pharmacy technician Pharmacist
Equal Employment Opportunity
EEO programs prohibit discrimination based on race, color, gender, religion, age, or national origin in any of the terms of employment stipulated by employers, employment agencies, or labor unions. The Equal Employment Opportunity Commission issues guides for employer actions, record keeping, and reports that represent compliance with EEO. Court cases have developed the following two types of discrimination
Effects of Wage Floors
Economic theory shows that wage floors may reduce employment by in effect prohibiting the employment of individuals not worth the floor. Economic theory also suggests that such floors may contribute to inflation by providing targets against which non-covered employers may be compared and by restoring customary relationships when they are raised. A contrary view is that wage floors reduce poverty by keeping wages above subsistence levels. It is also argued that wage floors prevent exploitation of employees and may in fact improve employer utilization of labor training programs to make employees worth what they must be paid
Equal Pay V. Paycheck Fairness
Essentially, the Paycheck Fairness Act adds to the Equal Pay Act. While the Equal Pay Act prohibits gender-based wage discrimination, the Paycheck Fairness Act enforces that prohibition by requiring employers to be transparent about wage discrepancies, protecting employees who question wage gaps from workplace retaliation and helping to resolve wage disputes effectively and efficiently. Simply put, the Equal Pay Act makes discrimination illegal and the Paycheck Fairness Act makes sure that employers follow the law.
Government Units
Federal oversees the entire United States and its territories State enacts and enforces laws that pertain exclusively to their respective regions Local enacts and enforces laws that are most pertinent to smaller geographic regions
Lilly Ledbetter Fair Pay Act
Help close the pay gap for women
Labor Union Influence on Pay
In general, workers represented by unions earn more, on average, than non-union workers: $970/week vs $763/week in 2014 The collective efforts of labor, organized through labor unions, have led to higher pay than in settings where pay rate negotiation is conducted between individual employees and the employer.The spillover effect suggests that non union employers tend to pay higher than they might otherwise pay in order to avoid unionization
• Disparate impact.
In this case, the effect of discrimination is examined. Discrimination may be assumed if a protected group is not represented in a job category as much as it's expected the group should be. A common test for adverse impact is the four-fifths rule, which states that the selection rate for any protected group must be no less than four-fifths or eighty percent of the selection rate for the group with the highest selection rate.
Explaining Occupational Wage Differentials
Job content based on knowledge, skills, and abilities (KSAs) Labor supply relative to employer demand for labor
Some of the Causes for Decline in Union Representation
Legislation prohibits unions from intimidating workers to become members Right-to-work laws prohibit requiring workers to join unions as a condition of employment Relocation of manufacturing operations from the United States to other countries with fewer labor laws
The Family Leave and Medical Act
Passed in 1993, the purpose of the act is to provide all eligible employees with leave of up to 12 weeks per year for specified family and medical reasons. Leave may be paid if the employee has earned paid time off. If the employee doesn't have earned paid time off, leave will be unpaid. Such leave may be for: • the birth of and care of a child • adoption of a child • care of a family member with a serious health condition • the employee's own serious health condition The employee is to give 30 days' notice before taking such leave (when practical). The employee retains all benefits during the leave and is entitled to return to the same position or an equivalent one.
Legal Pay Differentials
Payments made pursuant to a: Seniority system Merit system Earnings measured by quantity or quality of production Differentials not based on gender
Geographic Pay Differentials
Relative pay differentials are often expressed as the percentage difference between a specific location and the national average.Pay rate differentials are expressed in dollars as annual or hourly pay differences for occupations based on particular geographic regions and the nation overall Cost-of-living differences between geographic locations influence pay.Consistency in the direction of the relative pay and pay rate differentials, but the magnitude often differs Differences in calculation method accounts for these differences
ASSURANCE OF PAYMENT
State legislation typically specifies that wages be paid at regular intervals (one week or two) and that they be paid in cash or its equivalent. Payment in scrip (private currency) is usually prohibited, as is paying employees in barrooms. These laws also specify immediate payment if an employee is discharged.
Consolidated Omnibus Budget Reconciliation Act.
The Consolidated Omnibus Budget Reconciliation Act (COBRA) entitles all eligible employees and their spouses and dependents to extend their group health benefits for up to 18 months upon leaving the employment of the employer covering them.
Davis-Bacon Act.
The Davis-Bacon Act of 1931 requires the Secretary of Labor to determine prevailing rates applicable to government construction contracts in excess of $2,000. The law is controversial primarily because the Secretary has used union rates in the geographical area as the prevailing rate. Employers argue that the law does not require the Secretary to use union rates and that doing so raises wages and government expenditures. Labor leaders argue that changes in administration of the law would weaken unions and union contractors.
Equal Pay Act of 1963
The Equal Pay Act of 1963 was passed as an amendment to the FLSA. It prohibits wage differentials between men and women employed by the same establishment in jobs that require equal skill, effort, and responsibility, and that are performed under similar working conditions. The act requires that all three factors (skill, effort, and responsibility) must be substantially equal for the jobs to be adjudged equal. Likewise, working conditions must differ significantly if pay differentials are to be justified
Overtime
The FLSA requires that nonexempt employees be paid 150 percent of regular pay for all hours worked in excess of 40 per week. The rationale for this was originally to help spread work out among more workers during the depression by making it more expensive to give a worker more hours than it would be to hire an additional worker. This argument is not as valid today as it was then. Today hiring another worker may well exceed the cost of paying a current worker overtime wages, given the recruitment and training costs of skilled workers, plus their benefits
Service Contract Act
The McNamara-O'Hara Service Contract Act of 1965 extends Davis Bacon concepts to government contracts for services. Contractors holding service contracts of $2,500 or less must not pay service employees less than the minimum wage. Contractors holding service contracts in excess of $2,500 must pay employees no less than the wage rates and benefits found by the Department of Labor to be prevailing in the area, or no less than the compensation (pay and benefits) found in the previous contractor's collective-bargaining agreement.
The Health Insurance Portability and Accountability Act of 1996 (HIPAA)
The goal of the legislation was to provide coverage security for those currently insured. It guarantees the availability of insurance to all small employers (with 2 or more employees) and assures that individuals who leave employment are able to maintain health insurance coverage. Thus HIPAA ensures access to insurance for some employer groups and individuals who previously were unable to purchase health insurance or unable to purchase adequate coverage. HIPAA contains many provisions, including administrative rules intended to reduce the costs and administrative burdens of health care by making possible the standardized, electronic transmission of many administrative and financial transactions that are or were carried out manually on paper. Most importantly, it allows states to pass legislation affecting employer medical plans as long as those laws are more beneficial than federal law.
Interindustry Wage Differentials
The pattern of pay and benefits associated with characteristics of industries Factors leading to interindustry wage differentials Industry's product market: Where there is little competition (e.g., mining, utilities), there is greater flexibility for providing higher wages Capital intensity: The extent to which companies' operations are based on the use of large-scale equipment, and capital intensity is associated with higher wages Industry profitability: Presumably, employee higher levels of knowledge, skills and abilities contribute to company profitability, which, in turn, is associated with higher wages Unionization of the workforce: More highly unionized industries pay more highly, in part, because the collective bargaining process gives labor greater leverage for negotiating higher wages and benefits
Nonexempt.
These are employees who are subject to the minimum wage and overtime provisions of the FLSA. They must be paid at time and a half for all hours worked over forty in any one week.
Older Workers Benefit Protection Act
Under particular circumstances, employers may require older employees to pay more for health care, disability, or life insurance This is the case because these benefits cost more for older workers (e.g., an older worker may be more likely to become ill) Charging more cannot be a condition of employment Older workers could choose lower, less costly levels of coverage
Record keeping
Under the FLSA, employers must collect and keep certain wage and hour information on nonexempt employees. In general, the purpose of these record-keeping requirements is to permit the Wage and Hour Division to enforce the minimum-wage and overtime provisions of the FLSA. Such information as the following is required: employee's name, address, occupation, gender; definition of workweek; total hours worked each workday and workweek; basic pay; regular hourly rate; overtime pay; deductions and additions to pay; total wages for period; pay date and period; and special information - estimated tips, payments in kind.
Occupational Wage Differentials: Supply and Demand
When labor supply < employer demand, companies compete for limited talent Wages are typically greater when labor supply < employer demand Cybersecurity experts are in high demand given the continued upward trends in cyberattacks Fast food restaurant workers are in high demand since economic conditions improved, creating higher paying alternatives, necessitating that many restaurants pay higher wages
Collective bargaining
bargaining is a method of determining compensation (as well as other terms and conditions of employment) and is used where employees have chosen to be represented by a union
determing the FSLA status
for determining an employee's exempt status and are meant to reduce litigation costs. The determination of whether a specific job is exempt or nonexempt depends on (a) how much they are paid, (b) how they are paid, and (c) what kind of work they do.
Unemployment insurance (UI)
is funded by a tax levied by states on employers. In a few states, employees also contribute to unemployment insurance. The employer's tax depends on benefit levels in the state and the employer's record.
Minimum-wage
provisions set a floor on the amount of pay an employee must receive.Most states have enacted their own minimum wage laws. All but five states have their own minimum wage, most of them higher than the national minimum. These state minimum wage rates prevail if they are higher than the national rate.Advocates claim that some minimum wage is required in society because of the imbalance of power between the employer and employee. This is particularly true in the lower levels of the economy. By having a minimum wage, the country is reducing the dependence of some people on the "safety net" of society and thus lowering the cost of government. Opponents of the minimum wage claim that it creates unemployment in the lowest level of workers and puts a hard burden on small businesses.
Executives.
the employee's primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise; • The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and • The employee must have the authority to hire or fire other employees, or the employee's suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.
There are four acts that affect health and medical benefits that employers provide:
• Patient Protection and Affordable Care Act (PPACA or ACA for short) • Family and Medical Leave Act (FMLA) • Consolidated Omnibus Budget Reconciliation Act (COBRA) • Health Insurance Portability and Accountability Act (HIPAA)
Administrative
• The employee's primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer's customers; and • The employee's primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.