Compensation test one
Scientific Management gave rise to the use of piecework plans,Welfare Program represent the forerunner of modern discretionary employee benefit practices, in the 1960s the government instituted major legislation aimed at protecting individual rights to fair treatment in the workplace, During the 1980s personnel administration was transformed from a purely administrative function to a competitive resource in many organizations. ( pressures: Technology transformation & Globalization, Competitive advantages)
Historical Perspective on Compensation
employees become more valuable over time
Human capital theory is based on the assumption that ________.
staff employees
Human resource professionals are considered ________.
Fair Labor Standard Act ¡ Minimum Wage ¡ Overtime Pay ¡ Child Labor Provisions ¡ Paycheck deductions ¡ Requires businesses to keep certain records showing the pay and hours of their workers
Income continuity, safety, and work hours Legislation
Piecework Plans- awards based on individual performance standards using objective and subjective criteria Management incentive plans- individual bonus towards managers Behavior encouragement plans- employees receive payments for specific behavioral accomplishment Referral plans- monetary bonuses for referring new customers or recruiting successful job applicants
Individual Incentive Plans
all hours worked in excess of 40 hours within a period of 7 consecutive days
The FLSA requires that workers be paid overtime pay for ________.
Bias errors including: First impression, Halos and Horns, Similar to me Contrast errors Errors in distribution including: Leniency bias, strictness bias, central tendency
Types of Rating Errors
Compensation professionals are responsible for compliance with all U.S. government employment legislation.
Why is the U.S. government considered a stakeholder in compensation?
Differential incentive payments
With the group incentive plan, different payments are made to group members based on their contribution to the team's performance. What are these payments called?
Management felt workers would be less likely to challenge management practices if profits were shared.
Historically, what led to management instituting company-wide incentive plans?
a cost-of-living adjustment
Mario, a manager with Birdwell Enterprises, is being transferred by the firm from Fargo, North Dakota, to New York City. Although Mario's job tasks and title will remain the same, his salary will be higher. The salary change is most likely due to ________
C. Lowest-cost strategy
Ryanair, an airline based in Ireland, offers only one toilet on the airplane and requires passengers to carry their luggage to the airplane to reduce service costs. Ryanair is following which of the following strategies?
the government to consider whether its seniority pay system is effective
White-collar public sector employees in the future can likely expect ________.
R2
• Explains variations in market pay rates via job structure (JS) Ranges from 0.0-1.0 - 0.0 - 0.0-.30 - .31-.70 - .71-.99 - 1.0 = 0%duetoJS = small variation = average variation = large variation = all variations
Competitors' Pay Practices
• Base pay • Incentive awards structure • Mix and level of discretionary benefits
ECI Data
• Changes in pay and benefits • Data on all workers and separately • Compensation changes by categories • Are seasonally adjusted • Historical changes in labor costs • Uses fixed weights
Market Competitive Pay Systems
• Conduct strategic analyses • Assess competitors' practices • Integrate internal job structures with external market pay rates • Determine compensation policies
Quartile
• Dispersion by % below a set value • Quartile 1 = 25% • Quartile 2 = 50% • Quartile 3 = 75% • Quartile 4 = 100%
Compensation Cost Trends
• Employment cost trends are measured by two quarterly indexes: -Employment Cost Index -Employer Costs for Employee Compensation
Published Survey Sources
• Federal government - BLS • Professional associations - E.g. SHRM, WorldatWork, etc. • Industry associations - E.g. SIOP • Consulting firms - The Hay, Hewitt, etc.
Consumer Price Index (CPI)
• Indexes monthly price changes in goods and services • Most commonly used method for tracking cost changes in U.S. • CPI published monthly by the BLS in "The CPI Detailed Report"
ECEC Compensation Costs Categories
• Major occupation • Industry type and size • Region • Union status • Employment status
Pay-Level Policies
• Market lead - Levels above market pay lines - Best for differentiation strategies • Market lag - Levels below market pay lines - Best for lowest-cost strategies • Market match - Pay according to market pay line - Appropriate with differentiation strategy
Survey Data Characteristics
• They contain a lot of data • Outdated data due to lag time • Statistical analysis needed to integrate internal job structures with external market
Regression Analysis
• • Statistical procedure designed to find the best-fitting line between two variables Formula: Yˆ =a+bX - Yˆ=predicted salary - X = job evaluation points - a=Y intercept (X=0) - b = the slope
Variation
• • • Standard deviation - Refer to the mean distance of each figure from the mean Quartile - Percentile of figures below a point based on four groupings Percentile - Percentage of figures below a point based on 100 groupings
Variation
- Represents the amount of spread or dispersion in a data set • Standard Deviation • Quartiles • Percentiles
Central tendency
- Represents the fact that a set of data center around a central point - Mean/Average vs. Median
Cost-of-Living adjustments (COLAs), Seniority Pay, Merit Pay, Incentive Pay, Pay-for-Knowledge plans, Skill-based pay)
Adjustments to Core Compensation
Pay increases based on performance
Merit Pay Plans
office support occupations
A file clerk, a department secretary, and an administrative assistant are jobs that would be classified as ________.
incentive pay
All of the following are examples of non-monetary compensation EXCEPT ________.
Forced distribution
Although popular with many prestigious firms, which appraisal system seems to be unpopular with many managers?
the supervisor's biased rating of employee performance
Ash has worked hard and is expecting a merit pay increase at the end of the year. However, his supervisor Kaylie has never "clicked" with him, and Ash may not receive the merit pay he expects. In this scenario, the problem can be attributed to ________.
Individual employees and work teams differ in how much they contribute to the company. The company's overall performance depends to a large degree on the performance of individuals and groups. 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.
Assumptions
National Compensation Survey
Average hourly wages for over 800 occupations in approximately 80 metropolitan and nonmetropolitan locations Weekly and annual earnings and hours for full-time workers Data at three levels: Localities, broad regions, and the Nation Private, local, and state employees
employees within their business processes
A firm's compensation professionals can most likely help the CEO and CFO understand the importance of ________.
Elements of Core Compensation(
Base Pay (hourly and annual salary) and base pay adjustments ( seniority pay, COLAs, Merit pay, Skill-based pay, incentive pay, Person-focused pay)
take on a coach's role
By empowering employees, supervisors can strengthen the pay-for-performance link. In order for supervisors to empower employees, they need to ________.
It leads to workers who meet production quotas being intimidated by workers who do not.
Companies often award incentive pay based on the volume of production. What is a common issue associated with incentive pay based on this type of measure?
rewards employees when company meets performance standards
Companywide Incentives
C. reward performance results
Compensation professionals use merit pay programs to ________.
What Is Compensation?
Compensation represents both the intrinsic and extrinsic rewards employees receive for performing their jobs.
Lowest Cost Strategy: Focus on being lowest cost producer/ seller of goods or services Differentiation Strategy: Focus on offering unique goods or service to the public
Competitive Strategy Choices
On a quarterly or annual basis
Current profit-sharing plans pay cash awards to employees. Typically, how often are these awarded?
Performance appraisal systems that rely on many appropriate sources of information
Degree Performance Appraisal
Employee stock ownership plan (ESOPs)- an arrangement in which the organization distributes share of stock to all its employees by placing it in a trust. The most common is employee ownership
ESOPs:
Legally Required Benefits (social Security Act, Workers' Compensation Laws, Family & Medical leave act, Health Insurance) and Discretionary Benefits( Protection Programs, PTO, Services)
Employee Benefits
Trait systems- ask raters to evaluate each employee's traits or characteristics Comparison systems- evaluate a given employee's performance against the performance of other employees Behavioral systems- rate employees on the extent to which they display successful job performance behaviors Goal-oriented systems- used mainly for managerial and professional employees and typically evaluate employees' progress toward strategic planning objectives
Four Categories of Performance Appraisal Systems
Article 1, Section 8 ¡ Congressional powers First Amendment ¡ What Congress can't do Fifth Amendment ¡ Individual's rights Fourteenth Amendment, Section 1 ¡ State governments' limita
Four Constitutional Amendments
employees feel in control of their performances and outside conditions have little impact
From the perspective of most employees, merit pay programs are appropriate when ________.
Levels ¡ Federal -> oversees the entire United States and its territories ¡ State -> enact and enforce laws that pertain exclusively to their respective regions ¡ Local -> enact and enforce laws that are most pertinent to smaller geographic regions • Branches ¡ Executive -> enforces laws ¡ Legislative—makes laws ¡ Judicial—interprets
Government Makeup
Gain sharing Scanlon Plan Rucker Plan Improshare Team based or Small group
Group Incentive Plans
lose motivation to work hard
If employees do not trust the merit pay system, they will most likely ________.
are cross-trained to perform each other's work
In order for team-based incentives to work appropriately, work teams must be effective. Work teams are most effective when team members ________.
is given instead of annual increases, and only when the company enjoys some measure of success
Incentive pay helps cut payroll costs for companies. This is because incentive pay ________.
employee who works on the assembly line in a shoe factory
It would be easiest for an employer to award individual incentive pay to a(n) ________.
Pay Policy Alternatives
Lead: Pay above market Match: Pay with market Lag: Pay below market Others: Hybrid, Employer of Choice
Rewards long-service employees for their continued contributions without regularly paying more than the job is worth based on KSAOs
Longevity Pay
The company's achievement of business objectives
Management most often and typically relies on what measurement to determine incentive pay?
Spillover effect
Many nonunion companies offer wages and benefits somewhat higher than those offered by unionized companies in an effort to discourage employees from seeking union representation. Which term is used to describe the nature of this union influence?
Mean
Outliers can distort values Understated means occur with extremely small outliers - May set salaries too low Overstated means occur with extremely large outliers - May set salaries too high
represent a company's way of telling employees what is expected of them in their jobs and how well they are meeting those expectations. Typically require supervisors to monitor employees' performance, complete performance appraisals forms about the employees, and hold discussions with employees about their performance.
Performance Appraisal
Pay a portion of company profits to employees, separate from: base pay, cost-of-living adjustments, & permanent merit pay increases
Profit Sharing
Equal Pay Act Title VII Civil Rights Act of 1964 Bennett Amendment to Title VII Executive Orders 11246 and 11141 Age Discrimination in Employment Older Workers' Benefit Protection Act Civil Rights Act of 1991
Relevant Employment Laws
Rewards employees with periodic additions to base pay according to employees' length of service in performing their jobs.
Seniority Pay
the demand for qualified candidates falls short of supply
Signing bonuses are useful to companies when ________.
Individuals or entities directly affected by compensation practices, like: Employees, line managers, executives, unions, U.S. Government
Stakeholders of the Compensation System
stock Options: rights to buy a certain number of shares of stock at a specified price Traditionally, stock options have been granted to executives Some companies are trying to push eligibility for options further down the organization's structure
Stock Compensation Plans:
Strategic Analysis
Strategic analysis entails an examination of a company's external market context and internal factors. - External market context: Industry profile, information on competition, long-term prospects - Internal factors: Financial condition, functional capabilities
Compensation Professionals promote effective compensation systems by meeting three important goals: Internal Consistency, Market Competitiveness, Recognizing Individual Contributions.
The Compensation MGT's Main Goals
compare employee performance against the job criteria based on job descriptions
The best way supervisors can avoid arbitrary decisions regarding merit pay is to ________.
complexity of knowledge, skills, and abilities required to do the job
The difference in pay between occupations can be explained best by the ________.
Civil Rights Act of 1964
Title VII of which act is designed to promote equal employment opportunities for underrepresented minorities?
base pay and base pay adjustments over time This is the correct answer.B.
The two categories of core compensation are ________.
A. To reinforce excellent performance
Why do compensation professionals offer merit pay programs?
Trait systems are subjective.
What is the chief limitation of the trait systems of appraisal?
Hourly wage and annual salary
What two forms of core compensation are the most common types of pay used in a traditional pay system?
The degree of worker safety required in an industry causes wages to be different in different industries.
Which of the following is NOT a cause for interindustry wage differentials?
Merit pay is given on both subjective and objective measures, but most supervisors, as a rule, rely on subjective measures.
Which of the following is a true statement regarding merit pay?
A. Companies in profitable industries typically pay higher wages. Your answer is correct.B. Most highly unionized companies are not capital-intensive. C. On average, capital-intensive industries pay lower wages than those that are not capital-intensive. D. Companies in profitable industries often pay low wages. E. Companies in highly unionized industries pay low wages
Which of the following statements is correct?
A. Currently about 10% of all U.S. states have right-to-work laws in effect. B. Large companies with highly unionized workforces are increasingly moving away from states where unionization rates are higher. Your answer is not correct.C. The influence of labor unions in the United States has been increasing since the 1950s. D. Currently, unions often intimidate employees to become members. E. The globalization of business has contributed to declining union membership.
Which of the following statements is true?
Job structures, pay structures, and structures that recognize employee contributions
Which of the following three elements support the compensation building blocks?
A. After a particularly sluggish year, a restaurant owner decides to provide her customers an incentive to visit more often. She slashes prices on the menu by an average of 15% and offers a loyalty card that entitles card bearers a free meal after purchasing 10 meals. B. A toy store manager decides to give her employees a holiday bonus on the first of the year because of the scheduling flexibility they showed during the busy holiday season. C. A pizza shop owner raises his employees' hourly wage by 50 cents in an effort to encourage them to increase their speed of service. D. At the annual sales convention held by a large marketing organization, the president of the organization announces that there will be a new policy. Each year, the five top-selling sales representatives will each win a week-long vacation for two in the Bahamas. In addition, each will be given $2,500 in spending money for the trip. E. A lawn care service owner pays his two salespeople a salary of $25,000 per year. On February 1, he informs them that for every 15 new clients one of them signs, that salesperson will earn a $200 bonus. Also, if the company's profits for the year increase by 15%, they each will be given $1,000 of the profit increase.
Which of the following would be considered an example of incentive pay?
A. The difference in pay rate differentials depends on relative rate differentials. B. Compensation professionals consider relative rate differentials, but not pay rate differentials. C. Pay rate differentials fully match relative pay differentials. D. Relative pay differentials are pay differences between different geographical areas. Your answer is correct.E. Compensation professionals are not concerned with pay rate and pay rate differentials.
Which statement is true?
Customers, superiors, peers, subordinates, & yourself
Who Appraise Performance?
Use of An Existing Survey
••Lack of employees qualified to undertake the survey ••External data not readily accessible
Custom Development
••Preferred ••Quality can be monitored by employer