HR Exam 3
Types of pension plans (4)
contributory, noncontributory, defined benefit, and defined contribution plans
Types of incentive plans team compensation, scanlon plan, improshare
group
privacy rights: this type of test in private sectors is regulated by individual states states who are pro this type of testing permit testing, provided strict testing procedures are followed
drug testing
potentially more than 50 percent of the total payroll costs to employers
employee benefits
Retirement and savings make up about this of every dollar
4.5%
the name of benefits that employers have to give by law
statutory benefit
Wage payment for each employee is simple to compute Permits organizations to predict its labor costs with accuracy Since the costs are the same for each unit of output
benefits of piecework
Collapses many traditional salary grades into a few wide salary bands Help eliminate the obsession with grades Encourage employees to move to jobs in which they can develop in their careers and add value to the organization
broadbanding
plans allow employees to choose those benefits that best suit their needs an online system that allows employees to change beneficiaries or coverage they have and saves on administrative costs for employers (employee self service)
cafeteria plans
Compensation Alignment: internal factors, external factors, job evaluation systems
compensation design (pay mix)
3 kinds of pay equity: people compare themselves to peers in different jobs in the same organization
internal equity
individual incentive plans: Performance standards for sales employees are difficult to develop because performance is affected by external factors Sales volume may not be an accurate indicator of the effort salespeople have expended, hence salespeople are entitled to a degree of stability in their income
sales incentives
Relationship between Pay Equity and Motivation: my input/output ratio comparison to person's input/output ratio feelings of being paid fairly doing the same and receiving the same
equity
Enable individual employees to choose benefits best suited to their particular needs Prevent certain benefits from being wasted on employees who have no need for them Employees are offered core benefits package of life and health insurance, sick leave, and vacation Give certain amount of funds to purchase other benefits needed through the plan
flexible benefits plans
wage and salary surveys: Area from which employers obtain certain types of workers
labor market
Bases for compensation: Work paid according to the number of units produced
piecework
two of the most commonly use incentive plans for non-exempt/non-sales jobs
standard hour plan and piecework
Mandates that employers make health care coverage at the same rate the employer would pay Available to employees, their spouses, and their dependents on termination of employment, death, or divorce Coverage offered for 18 to 36 months depending on qualifying guidelines
COBRA insurance
Point system/hay system: Elements of a job that can be evaluated quantitatively
compensable factors
Provided to an elderly relative by an employee who remains actively at work
elder care
Types of incentive plans profit sharing, stock options, employee stock ownership plans (ESOPs)
enterprise
this linkage is high effort leads to high performance
expectancy
Team based incentive plans: Programs under which both employees and the organization share financial gains by a predetermined formula could lead to "free ride" effect or social loafing Reflects improved productivity and profitability Increase in productivity is gained when: Greater output is obtained with less or equal input and Equal production output is obtained with less input
gainsharing incentive plan
To reward employees' past performance To remain competitive in the labor market To maintain salary equity among employees To mesh employees' future performance with organizational goals To control the compensation budget To attract new employees To reduce unnecessary turnover
goals of strategic compensation policy
Measures whether an employee is alert enough to work Also called fitness-for-duty or performance-based testing Advantages: Focuses on workplace conduct rather than off-duty behavior and Identifies employees impaired because of fatigue, stress, and alcohol use
impairment testing
job protection rights: Occurs when a promise by the employer suggests some form of job security to employee This exception occurs when employees are discharged despite the employer's promise (expressed or implied) of job security or contrary to established termination procedures. An employer's oral or written statements may constitute a contractual obligation if they are communicated to employees and employees rely on them as conditions of employment.
implied contract
Exception to employment at will doctrine: this exception occurs when an employer has acted with a lack of good faith and fair dealing EX: an employer would be doing so if it were to terminate a salesperson simply to avoid having to pay him or her a commission- employer violated this
implied covenant
strategic reasons for incentive plans: Establish a performance threshold for employees to qualify for incentive payments Emphasize a shared focus on organizational objectives By broadening the opportunities for incentives to employees Creates an operating environment supporting shared commitment Through belief that every individual contributes to organizational performance and success
incentive pay plans
Grants of actual stock or phantom stock units. Value is contingent on both predetermined performance objectives over a specified period of time and the stock market.
performance shares
scanlon plan suggestion process: solicit suggestions, follow up on suggestions, discuss suggestions with employees, implement suggestions
production shop committee
3 compensation components: wages/salary, incentives, bonuses, commission
direct
retired judge
arbiter
Allows employer to make yearly contribution into employee's retirement savings account Based on percentage of employee's pay, typically four percent Benefits depend on employee's age and years of service with the company
cash balance pension plans
Floor it imposes makes it difficult for high school students and young adults to find jobs
child labor provisions
motivational value of compensation is determined by what?
employees' view of compensation
Justification of bonuses: Large financial incentives are a way to reward superior performance Business competition is pressure-filled and demanding Good executive talent is in great demand Effective executives create shareholder value Fact of business life, reflecting market compensation trends
executive compensation: ethics and accountability
Components: Base salary Short-term incentives or bonuses Long-term incentives or stock plans Benefits Perks
executive pay package
Predicts that one's level of motivation depends on the attractiveness of the rewards sought and the probability of obtaining those rewards Employees must believe that good performance is valued by their employer and will result in their receiving the expected reward
expectancy theory
this is the theory most often associated with incentive plans
expectancy theory
3 compensation components: benefits
indirect
Use of an impartial neutral to reach a compromise decision in employment disputes Flexible process that can be shaped to meet the demands of the parties In the labor agreement negotiations, the union and the organization were assisted by a neutral third party. Although the third party couldn't make a final decision in the case, he helped both the union and the organization see all the facts of both sides and come to an agreement together. is considered private and includes an impartial third party. And, step-review systems are patterned after the union grievance procedures.
mediation
individual incentive plans: Merit pay Used for awarding merit raises that are tied to performance objectives
merit guidelines
Executive pay package: Special nonmonetary benefits given to executives Means of demonstrating the executive's importance to the organization Cost is weighed against the added efficiency and managerial effectiveness generated as facilitates in company's productivity
perks or perquisites
Grant of units equal in value to the fair market value or book value of a share of stock; on a specified date, the executive will be paid the appreciation in the value of the units up to that time.
phantom stock
applies to federal agencies and to organizations supplying goods or services to the federal government; gives individuals the right to examine the references regarding employment decisions; allows employees to review their personnel records for accuracy. Employers who willfully violate the act are subject to civil suits.
privacy act
Application of corrective measures by increasing degrees When applied properly, employees: Always know where they stand regarding offenses, Know what improvement is expected of them, and Understand what will happen next if improvement is not made intended to nip the problem in the bud by using just enough corrective action to remedy the shortcoming is steps are taken in order to try and correct employee behavior. The first step of the four-step process is to give an employee an oral warning
progressive discipline
Identify important organizational metrics encouraging employee behavior Involve employees Incentive programs should seem fair to employees Find the right incentive payout Payout formulas should be simple and understandable Establish a clear link between performance and payout
requirements for all successful incentive plans
Grant of stock or stock units at a reduced price with the condition that the stock not be transferred or sold (by risk of forfeiture) before a specified employment date.
restricted stock
No law mandating retirement age in United States Factors that influences an employee to retire: Personal/financial condition, Health, Family obligations, Satisfaction from work, Ability to meet changing job demands
retirement programs
payment for time not worked: Paid (or unpaid) time away from a job for four or more weeks employees take off to renew themselves before returning to work
sabbaticals
an employers first and most often used reason for monitoring employees' social media
trade secrets/intellectual property
employee benefits required by law: Protects workers who lose their jobs through no fault of their own Eligible workers: Submit an application for unemployment compensation with state employment agencies and Register for available work Willing to accept any suitable employment that may be offered to them
unemployment insurance
3 compensation components:
indirect, direct, nonfinancial
Relationship between Pay Equity and Motivation: my input/output ratio comparison to person's input/output ratio feeling of being underpaid- doing more and receiving less
inequity
the notion that compensation has this...that high performance has, indeed, brought rewards that are valued by the employees.
instrumentality
Factors affecting the pay mix: compensation strategy of organization, worth of job, employees's relative worth, employer's ability to pay
internal factors
Point system: Handbook that contains a description of the compensable factors and the degrees to which these factors may exist within the jobs Used for comparing job descriptions and job specifications
point manual
Individual incentive plans: Used to recognize productivity gains, special contributions or achievements, and service to the organization Tangible awards presented with the right message and style can make employees feel appreciated Simultaneously underscoring a company
award
3 kinds of pay equity: people compare themselves to others in their organization with the same job
individual equity
Types of incentive plans (3)
individual, group, enterprise
Types of pension plans: contributions are made solely by the employer
noncontributory plans
3 compensation components: recognition programs, rewarding work, organizational support, work environment, flexibility
nonfinancial
Scanlon plan suggestion process: evaluate suggestions affecting several departments, review performance to determine bonus or deficit, oversee entire program, keep top management informed
organization screening committee
is the reduction of differences between job classes
wage rate compression
Requires that managers be more strategic about their compensation decisions Formalized compensation goals serve as guidelines for managers to ensure that wage and benefit policies achieve their intended purpose Reward employees on the basis of their individual competencies or work contributions toward organizational objectives
linking compensation to organization objectives
Compensation of employees in ways that enhance motivation and growth Aligns employee's efforts with the objectives of the organization Links the compensation to the organization's mission and general business objectives Serves to mesh the monetary payments made to employees with HR initiatives
strategic compensation
Assessing the effectiveness of compensation system is important to linking compensation with strategy Measures: Help the company detect potential compensation problems, Make compensation decisions more transparent, Improve the alignment of compensation decisions with organizational objectives
compensation assessment
other benefits and services: Serve financial needs of employees and attract potential employees a nonprofit-making money cooperative whose members can borrow from pooled deposits at low interest rates.
credit unions
Types of sales incentive plans: permits sales people to be paid for performing various duties that are not reflected immediately in their sales volume
straight salary plan
Avoid complex language when describing benefits Explain purpose of a benefit, its value for employees, and pros and cons of different benefit plans Use graphics to make information understandable at a glance Provide numerous examples illustrating how a benefit choice might affect different types of employees
designing benefits information
Individual incentive plans: Piecework Employees whose production exceeds the standard amount of output receive a higher rate for their work than the rate paid to those who do not exceed the standard amount EX: Brython is paid $1 for the first 100 toys he makes and then $1. 50 for any additional toys he makes during his shift.
differential piece rate
Many forces are weighed and kept in balance for benefits programs to succeed Needs of employees are considered as they can differ from firm to firm
elements of a successful benefits program
containing medical benefits costs: HMO and PPO are couple with tax advantaged accounts Used by employees to pay for health-related expenses
flexible spending account (FSA)
Types of incentive plans piecework, standard hour plan, bonuses, merit pay, lump sum merit pay, incentive awards, sales incentives, professional employee incentive plans, executive incentive plans
individual
This provision grants to an employer the ownership of an idea, invention or process, or work of authorship developed by the employee during the time of employment. Such an agreement expressly states that the employer retains all rights, titles, and interests in ideas that are subject to patent laws and developed during the employee's period of hire.
intellectual property agreement
Settles grievances that identifies various levels of management above the immediate supervisor for employee contact Problems: Managers do not like to listen honestly to employee complaints, Fails to guarantee consistent decision making, Lacks credibility with employees Working out grievances with immediate supervisors can make this policy work better
open door policy
Cover or offset cost of seeing an optometrist once or twice a year, cost of contacts lenses and glasses purchased periodically
optical benefits
Payment for time not worked: One-time payment sometimes given to an employee who is being involuntarily terminated
severance pay
Types of sales incentive plans: pays a salary plus a bonus achieved by reaching targeted sales goals
sales plus bonus plan
variations of gainsharing plans: bonus incentive plan using employee and management committees to gain cost-reduction improvements
scanlon plan
When designing benefit programs, company can: Purchase detailed compensation data, Hire outside firms to aid in the designing process, Involve employees' participation, Conduct opinion survey,Establish committees to over look the program
selecting benefits
Types of pension plans: contributions are made jointly by employees and employers
contributory plan
other benefits and services: Proactive employers view educational assistance programs Also called tuition aid Business tool that supports talent management as critical human capital investment
educational assistance
The two most important factors to consider when administering benefits are:
eligibility and vesting
groups of jobs within a particular class that are paid the same rate
pay grades
What are these examples of: Vacations with pay Paid holidays Sick leave Sabbaticals
payment for time not worked
Program can be costly and time consuming Managing the benefits program on an online platform becomes easier Online benefits system is called employee self-service (ESS) Results in significant cost savings Feedback of different online systems being trialed, can be obtained
administering benefits
Provide patients and their caregivers with information on monitoring and treating medical conditions Coordinating communication between them, their health care providers, employers, and insurers
disease management programs
job protection rights: Right of an employer to fire an employee without giving a reason and the right of an employee to quit when he or she chooses Basic rule dominating the private-sector employment relationship
employment-at-will principle
What are the two benefits that employees rank as the most important?- also most expensive
health/welfare and retirement benefits
Paid-leave given as part of the discipline process to an employee to allow the employee time off work to decide whether he or she wishes to continue working for the organization is referred to as
decision-making leave
3 kinds of pay equity:
external, internal, individual
these are examples of what?: Camera surveillance Phone conversations and text communications E-mail, internet, and computer use Searches Access to personnel files Off-duty employee conduct Off-duty employee speech Workplace romances Body art, grooming, and attire
electronic surveillance
Services provided by employers to help workers cope with a wide variety of problems that interfere with the way they perform their jobs Provides diagnosis, counseling, and referral for advice or treatment related to: Alcohol or drug abuse Emotional difficulties Financial or family difficulties Counselling services are provided by some companies
employee assistance programs
Types of sales incentive plans: based on percentage of sales
straight commission plan
Do's and Don't of these measurements of incentive plans: do's: measure when work is group interdependent, measure in a way that shows a relationship between work and performance don'ts: measure without considering contributions of other teams, measure unless there is a mechanism for teams to discipline their "slackers"
group pay
what Acts grants employees the right to switch their medical insurance from a former employer to a current employer health care plan
HIPPA
wage and salary surveys: Survey Finder has a database of hundreds of compensation surveys offered by more than fifty independent vendors
HIRS and salary surveys
To motivate performance implying that poor performance must go unrewarded Annual salary budgets to be large enough to reward and reinforce exceptional performance Determination of overhead costs associated with plan implementation and administration Thorough planning must be combined with a cautious approach
administering incentive plans
Not an effective motivator work paid for according to the amount produced Desire for peer approval outweighs the desire for more money Difficult to distinguish or measure individual contributions Not applicable to highly mechanized work where employee has little control over output Works against organizational culture as it can infringe on employee's time, productivity, and total pay earned
disadvantages of piecework
common disciplinary problems include: theft, falsifying employment application, willfully damaging organizational property, punching another employee's time card, falsifying work records
dishonesty and related problems
job protection rights: Formal written (signed) agreements grant to employees and employers agreed-upon employment benefits and privileges
explicit contract
Factors affecting the pay mix: conditions of the labor market, area pay rates, cost of living, collective bargaining, legal requirements
external factos
Program that allows its employees to gradually cut their hours before retiring
phased retirement
System that focuses on early correction of employee misconduct, with the employee taking total responsibility for correcting the problem Implementation: Conference between the employee and the supervisor to find a solution to the problem, Second conference to determine why the solution agreed to in the first conference did not work, and One-day decision-making leave given to the employee to decide whether he or she wishes to continue working is based on the idea that employees will assume responsibility for their job performance. Once employees and managers have discussed a performance problem twice, the employee is given a day of paid leave to think about whether he or she wants to continue working for the organization. The process starts when employees and managers meet to discuss ways to resolve performance problems. has employees assuming responsibility for their own personal conduct and job performance is
positive or nonpunitive discipline
Freedom from unwarranted government or business intrusion into one's personal affairs Involves the individual's right to be given personal autonomy and left alone
privacy rights
Individual team members may perceive that their efforts contribute little to team success or to the attainment of the incentive reward Intergroup social problems Complex payout formulas or insufficient payout reward
problems associated with team compensation
this principle guides when and how employers can collect and retrieve information about their employees
reasonable expectation of privacy
Payment for time not worked: Plan that enables an employee who is laid off to draw, in addition to state unemployment compensation, weekly benefits from the employer that are paid from a fund created for this purpose
supplemental unemployment benefits (SUBs)
this linkage is valued monetary rewards leads to pay satisfaction
value
individual incentive plans: Conduit that shows employees that the company appreciates their efforts, their unique gifts, and their contributions
recognition
common disciplinary problems include: failing to complete work assignments, producing substandard products or services, failing to meet established production requirements
work performance problems
Motivation theory that explains how people respond to situations in which they feel they have received less/more than they deserve
distributive fairness
this act allows employers to automatically enroll employees in defined contribution plans Permits higher contribution limits for 401(k) plans Enables workers to build larger retirement holdings Gives workers greater control over how their accounts are invested
pension protection act
Grants analogous to an annual bonus except that the measurement period exceeds one year. The value of the grant can be expressed as a flat dollar amount or converted to a number of "units" of equivalent aggregate value.
performance units
This provision forbids employees from revealing proprietary information outside the company, either during or following their employment. Courts widely enforce these agreements.
disclosure of information agreement
Do's and Don't of these measurements of incentive plans: Do's: measure when work is organizationally interdependent, measure results that employees can control, measure in a way that shows relationship between work and performance Don'ts: measure unless employees can see how their work actually contributes to the enterprise, measure without considering effects of the environment (EX: economic downturns)
enterprise pay
Executive pay package: Benefits package offered to executives can be parallel to other groups of employees Include programs for health insurance, life insurance, retirement plans, and vacations Are broader in coverage and free of charge Gives financial assistance in the form of trusts for estate planning, payment of mortgage interest, and legal help
executive benefits
Executive pay package: Offered in the form of stock options Stock options serves to retain key executive personnel Objected for the magnitude of rewards Pay for performance option can be undermined when executives are granted additional options Though company stock prices fall or performance indexes decline
executive long-term incentives
Bases for compensation: are defined as employees who, based on duties performed and manner of compensation, shall be free from from the Fair Labor Standards Act (FLSA) minimum wage and overtime provisions. Not covered by the overtime provisions of the FLSA U.S. Department of Labor (DOL) imposes a narrow definition of these
exempt employees
Permits job applicants and employees to know of the existence and context of any credit files maintained on them. Employees have the right to know of the existence and nature of an investigative consumer report compiled by the employer.
fair credit reporting act
Private pension plans are subject to federal regulation under Employee Retirement Income Security Act (ERISA) and vesting
federal regulation of pension plans
cost containing medical benefits: this and this serve as vehicles for reducing costs because of the offer discounted rates and are couple with tax advantaged accounts are groups of physicians who establish an organization or a network of doctors that guarantees lower costs to the employer through lower service charges or agreed-on utilization controls
health maintenance organizations (HMO) and preferred provider organization (PPOs)
Quantitative job evaluation procedure that determines the relative value of a job by the total points assigned to it- compensable factors to set pay rates or salary ranges EX: Provides a more refined method of making judgments
point system/ hay system
employee benefits required by law: Protect workers against the loss of earnings resulting from old age and unemployment Amended to include disability or dependents, incase of death of the worker supporting them Together known as Old Age, Survivors, and Disability Insurance (OASDI) is supported by means of a tax levied against employee's earnings that also must be matched by the employer in each pay period Matched by employer in each pay period Tax revenues are used to pay major benefits: Retirement Disability Survivors' Medicare
social security insurance
employee benefits required by federal law: (3)
social security insurance, unemployment insurance, workers' compensation insurance, medicare
The greater the perceived disparity between my input/output ratio and the comparison person's input/output ratio, the greater the motivation to reduce the inequity: true or false?
true
ideas for minimizing problems: true or false? Reward high performance and merit-worthy employees with large pay increases Design the pay structure to allow a wide spread between hourly and supervisory employees Prepare high-performing employees for promotions to jobs with higher salary levels Provide equity adjustments for selected employees hardest hit by pay compression
true
privacy rights: this type of test in private sectors is regulated by individual states
drug testing
Support moving to new positions without red tape.
provide faster promotions
Requires employees to be informed about their pension and other benefits in a understandable manner retirement plan Allows suing of employers for misleading about health and welfare benefits Using multiple media techniques Firms mail out printed benefit statements with detailed explanation of an employee's benefits
ERISA
cost containing medical benefits: Organizations of physicians and health care professionals that provide a wide range of services to subscribers and dependents on a PREPAID basis co-pays and deductibles may be higher
HMO (health maintenance organization)
his provision prevents ex-employees from either becoming a competitor or working for a competitor for a designated period, for example, 1 or 2 years. are designed to protect confidential information, customer relations, and other valuable assets. However, they are often challenged in courts. Some states, including California, Oklahoma, Montana, and North Dakota, prohibit them. Other states, including Colorado, allow them only for high-level employees such as executives and managers.
Noncompete agreements
cost containing medical benefits: Network of physicians who establish an organization that guarantees lower health care costs to employers and their employees don't have to have a referral, you have a general physician and need a specialist then you just go
PPO (preferred provider organization)
common disciplinary problems include: unexcused absence, chronic absenteeism, unexcused or excessive tardiness, leaving without permission
attendance problems
federal regulation of pension plans: the conveying to an employee of unconditional entitlement to a share in a pension fund. Guarantee of accrued pension benefits to participants at retirement age, regardless of their employment status at that time Prevents companies from laying off employees before they retire, so they are unable to collect their pensions According to ERISA: Pension plans must provide employees with these rights to their accrued benefits after they meet a certain minimum years of service and Minimum funding standards should be followed to ensure availability of pension benefits to employees upon retiring
vesting
payment rates above the maximum of the pay range
red circle rates
Job evaluation system that seeks to measure a job's worth through its value to the organization Work is measured through standards that come directly from business goals Process ends with a work hierarchy that is an array of work by value to the organization EX: Direct compensation to work pivotal to company goals, that work should be valued relative to the business goals of the organization rather than by an internally applied point-factor job evaluation system.
work valuation
Organizations seek to create a work/life organizational climate that allows employees to balance work with personal needs Organization are adapting work-life programs to accommodate the entrance of Generation Y employees into the workplace
work-life discretionary benefits
employee benefits required by law: State-mandated insurance provided to workers to defray the loss of income and cost of treatment due to work-related injuries or illness Covers: Injuries on the job Work-related illnesses
workers' compensation insurance
job protection rights: Discharge, or termination, of an employee that is illegal Suits challenge an employer's right under the employment-at-will to unilaterally terminate employees Exceptions to the employment-at-will doctrine: Violation of public policy, Implied contract, Implied covenant
wrongful discharge
Allows employees to save through payroll deductions Reduces taxable income and have their contributions matched by the employer Depends on: Money that goes into the plan Rate of return on investments purchased, Stock-funded plans, Price of the company's stock Shortcomings: Employees need not participate in the plans, Leaves them short on retirement income aside from social security after they retire, Employees lack investing experience and do not know the best way to invest the money in these Congress passed the Pension Protection Act in 2006
401K savings plan
A sense of belongingness supersedes pay.
Provide greater sense of personal involvement
It has high growth opportunities but is risky.
Provide stock options in high growth environments
wage and salary surveys: Bureau of Labor Statistics (BLS) publishes wage and salary data States conduct surveys on either a municipal or county basis and make them available to employers Special surveys are conducted by the trade groups Problems with published surveys: Not always compatible with the user's jobs, User cannot specify what specific data to collect
collective survey data
Types of sales incentive plans: includes a straight salary and commission
combination salary and commission pay
Compensation Alignment: salary surveys, wage curve pay grades, rate ranges, compensation based pay
compensation implementation (pay tools)
Based on hourly wage rates that would otherwise be paid for the type of work being performed
computing the piece rate
3 kinds of pay equity: people in similar jobs compare themselves to what others are making in different organization
external equity
Employees select benefits of greatest value to them Employers manage benefits costs by limiting the dollars being spent Employees are compensated by funds for other benefits Prepaid legal services: Financial planning Dental insurance Long-term care insurance
advantages of flexible benefits
Term applied to different employee complaint or dispute resolution methods that do not involve going to court Used in nonunion organizations these agreements are signed by employees when they receive their offer letters or handbooks Must be fair and equitable to employees and employers EX: arbitration, mediation, peer review boards and management review boards
alternative dispute resolution (ADR)
job protection rights: Employee's voluntary termination of his or her employment because of harsh, unreasonable employment conditions placed on the individual by the employer Discharge as a result of retaliation Discharges and WARN Act an employee voluntarily terminates his or her employment because of unreasonable employment conditions
constructive discharge
Do's and Don't of these measurements of incentive plans: Do's: measure things that are quantitative and simple, measure work that is independent of others' contributions, measure in a way that shows a relationship between work and performance Don'ts: measure based on who you like and dislike, measure based on personalities, measure based on political preferences, measure without considering contributions of peers
individual pay
Relationship between Pay Equity and Motivation: my input/output ratio comparison to person's input/output ratio feeling of being overpaid doing less and receiving more
inequity
when establishing pay strategy, employers have these three choices with regard to external equity, which affects ability to attract and retain employees
lead, meet, or lag pay strategies
Compression of pay between new and experienced employees caused by the higher starting salaries of new employees Differential between hourly workers and their managers ` Reasons for pay compression are market based than government based
pay rate compression
Generates distrust in the compensation system Reduces employee motivation Inhibits organizational effectiveness Cover up inequities existing within the internal pay structure
pay secrecy
System of reviewing employee complaints that utilizes a group composed of equal numbers of employee representatives and management appointees Group weighs evidence, considers arguments and, after deliberation, votes to render a final decision Sole method for resolving employee complaints, or in conjunction with step-review system Benefit: Creates a sense of justice among employees
peer-review system
Prohibits educational institutions from supplying information about students without prior consent. Students have the right to inspect their educational records.
Family Education Rights and Privacy Act—The Buckley Amendment
One employee may value bonuses over base pay.
Tailor the pay mix to individual employee needs and wants
Pay based on an employee's skill level, variety of skills possessed, or increased job knowledge Systems represent fundamental change in the attitude of management regarding: How work should be organized and How employees should be paid for their work efforts Encourages employees to acquire training when new or updated skills are needed by an organization
competence based pay
failure to do this can undermine a firm's efforts to deal with the behavior these records are considered business documents: Admissible evidence in arbitration hearings, administrative proceedings, and courts of law significant cause of this causes managers to not know what constitutes good documentation
documenting misconduct
Employers are granting benefits to employees who establish domestic partnerships Can consist of both same-sex and unmarried opposite-sex couples Require employees to sign an Affidavit of Domestic Partnership
domestic partner benefits
Procedures that constitute fair treatment, such as allowing an employee to tell his or her story about an alleged infraction and defend against it Ensures that a full and fair investigation of employee misconduct occurs Provided through the employer's appeals procedure is an employee's right to present his or her position during disciplinary action
due process
Enterprise incentive plan: Stock plans in which an organization contributes shares of its stock to an established trust for the purpose of stock purchases by its employees Employer establishes an ESOP trust that qualifies as a tax-exempt employee trust under Section 401(a) of the Internal Revenue Code Stock allocations are based on employee wages or seniority Employees leaving or retiring can sell their stock back to the organization, or sell it on the open market if traded publicly Advantages: Usage is encouraged by favorable federal income tax provisions, Provides retirement benefits for the employees, Employers can provide retirement benefits to the employees at relatively low cost, Increases employees' pride of ownership in the organization Disadvantages: Privately held companies are incapable to pay back the stock of employees when they retire, Pensioner becomes dependent on the price of company stock, Future retirees are vulnerable to stock market fluctuations and management mistakes, Not guaranteed by federally established Pension Benefit Guaranty Corporation
employee stock ownership plans (ESOPs)
Logical person to apply the company's disciplinary procedures and monitor the employee's improvement
employee's immediate supervisor
is responsible to provide a safe workplace for employees while guaranteeing safe, quality goods and services to consumers they have to exercise reasonable care while: hiring, training, and assignments of employees to jobs failure to honor the rights of employees can result in: costly lawsuits, damaging the organization's reputation, and hurting employee morale failure to protect the safety and welfare of employees or consumer interests can invite litigation from both groups
employer responsiblities
Internal Revenue Service (IRS) makes executive pay a part of every corporate audit Securities and Exchange Commission issued pay disclosure rules requiring companies listed on the New York Stock Exchange and NASDAQ to disclose the true size of their top executive pay packages Financial Accounting Standards Board (FASB) requires stock options to be recognized as an expense on income statements Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. L. 111-203) was signed into effect giving share holders say on pay Voting shareholders of a company must ultimately approve of its executive salaries
executive compensation reform
Exception to employment at will doctrine: This exception occurs when an employer has acted with a lack of good faith and fair dealing. For example, an employer would be doing so if it were to terminate a salesperson simply to avoid having to pay him or her a commission. By inflicting harm without justification, the employer violated the implied covenant between the two parties.
implied covenant
variations of gainsharing plans: gainsharing program where bonuses are based on overall productivity of the work team
improshare
Should be conducted to make sure the employee is fully aware of the organization's rules and he or she has not followed them Should concentrate on how the offense violated the performance and behavior standards expected Employee must be given a full opportunity to explain his or her side of the issue Employees do not have the right to have an attorney present during an investigative interview
investigative interview
System of job evaluation in which jobs are classified and grouped according to a series of predetermined wage grades Successive grades require increasing amounts of job responsibility, skill, knowledge, ability, or other factors selected to compare jobs EX: Jobs grouped according to grades-type of job evaluation system is widely used by the federal, state, and municipal governments
job classification system
Provides: Death benefits to beneficiaries and Accidental death and dismemberment benefits Premium costs are paid by employer Face value of the this is equal to two times yearly wages of the employee
life insurance
Standard by which managers tie compensation to employee effort and performance Refers to a wide range of compensation options Includes merit-based pay, bonuses, salary commissions, job and pay banding, team/group incentives, and gainsharing programs
pay for performance standard
Money available for merit increases may be inadequate to satisfactorily raise all employees' base pay Managers may have no guidance in how to define and measure performance Employees may not believe that compensation is tied to effort and performance Unable to differentiate between merit pay and other types of pay increases Employees and managers may hold different views of the factors contributing to job success Creates feelings of pay inequity
problems with merit raises
Job protection rights: Expectations of a fair exchange of employment obligations between an employee and employer Led to the development of legal principles about the security of one's job
psychological contract
individual incentive plans: Sets rates based on the completion of a job in a predetermined standard time Popular in service departments in automobile dealerships Equipment maintenance and product quality can be at risk as employees strive to work faster to earn additional income
standard hour plan
Opportunities for executives to purchase shares of their organization's stock valued at full market or a discount price, often with the organization providing financial assistance.
stock purchase
Group incentive plans: All team members receive an incentive bonus payment when production or service standards are met or exceeded Advantages: Establishes a psychological climate that fosters cooperation and a collective desire to fulfill organizational goals and objectives, and Promotes a pay-for-performance philosophy
team incentive plans
strategic reasons for incentive plans: consist of bonuses, incentives, or recognition for good work; they allow organizations to reward employees for continued contributions. Tying pay to some measure of individual, group, or organizational performance Attached to fixed costs allowing flexibility to increase, decrease, or maintain future payments to employees as business conditions warrant Allows the organization to align its employees' interests and outcomes with the organization
variable pay
Exception to employment at will doctrine: This exception occurs when an employee is terminated for refusing to commit a crime; for reporting criminal activity to government authorities; for disclosing illegal, unethical, or unsafe practices of the employer; or for exercising employment rights.
violation of public policy
Survey of the wages paid to employees of other employers in the surveying organization's relevant labor market
wage and salary surveys
Compensation Alignment: linking compensation to objectives, pay for performance, bases for compensation
compensation strategy
Set performance measures upon which incentive payments are based Determine the size of the incentive bonus Create a payout formula and should be explained to employees in detail
approaches in establishing team incentive payments
Provided to a child by an employee who remains actively at work
child care
individual incentive plans: Links an increase in base pay to how successfully an employee performs his or her job Becomes part of base pay once issued regardless of future performance Serves as motivator to employees perceiving a raise to be related to the performance required to earn it
merit pay
minimum level of performance an employee must attain before qualifying for any associated variable pay (bonus or stock)
quota/performance threshold
range of rates for each pay grade that may be the same for each grad or proportionately greater for each successive grade
rate ranges
Focus on more than cost-cutting Look at medical care their employees use and need Target benefits and health programs based on those requirements
value based health initiatives
Types of pension plans: amount an employee is to receive on retirement is specifically set forth
defined benefits plan
Help pay for dental care costs Encourage employees to receive regular dental attention
dental plans
Failure to provide reasonable care when such failure results in injury to consumers or other employees lawsuits have forced managers to take extra care in the employment and management
negligent hiring
Should distinguish between individual and group contributions Should avoid biases based on likes and dislikes, different personalities, and political agendas Should distinguish between one group's contribution over another
setting performance measures
individual incentive plans: bonus Unplanned bonus given for employee effort unrelated to an established performance measure Useful for retention and motivation of overburdened employees, during lean financial times
spot bonus
individual incentive plan: Supplemental to the base wage Provides employees with more pay for exerting greater effort along with having the security of basic wage Acts as tool to increase future performance
bonus
Displays the results for all the measures that a company uses to monitor and compare compensation among internal departments or units Creates a comparative tool within the organization that can reinforce desired outcomes that are unique to the company's strategy
compensation scorecard
Designated individual from whom employees may seek counsel for resolution of their complaints Listens to an employee's complaint and attempts to resolve it by seeking an equitable solution, Works cooperatively with both sides to reach a settlement, Must be able to operate in an atmosphere of confidentiality uses a problem-solving approach to ensure cooperation among both sides of an issue In this process, an individual works cooperatively with both sides to reach a fair settlement, often employing a problem-solving approach to the issue. This person's priority is to ensure a fair process of conflict resolution, not to be an advocate for one side or the other.
ombudsman
federal regulation of pension plans: Ensures that if a plan is terminated, guaranteed minimum benefits are paid to participants
pension benefit guaranty corporation
enterprise incentive plan Method of motivating and compensating hourly employees, salaried and executive personnel Advantages: Implemented as part of an employee benefit plan or as part of a corporate culture, Links employee effort to stock performance, Boosts morale of disenfranchised employees in budget cuts and downsizing Disadvantage: Extravagance of executive stock option plans and dubious corporate accounting procedures
stock option
Rights granted to executives to purchase shares of their organization's stock at an established price for a fixed period of time. Stock price is usually set at market value at the time the option is granted
stock options
Individual incentive plans: Piecework Incentive plan under which employees receive a certain rate for each unit produce
straight piecework
Containing additional costs: true or false? To combat obesity and related problems, companies offer lower health care premiums Firms are penalizing employees for unhealthy habits such as smoking, by charging them higher health care premiums Companies are waiving deductibles and copays if employees are travelling abroad for medical procedures
true
Reward employees for their years of service by providing them with income when they retire Categorized based on: Contributions made by employer and Amount of pension benefits to be paid
pension plans
this benefit is required of employers who have more than 50 employees and has to do with protecting positions while eligible individuals take up to 26 weeks unpaid leave Birth of and care for a newborn child Adoption or foster care placement of a child Care for an immediate family member Serious health condition of the employee On return from leave, employee must be restored to his original job or to an equivalent job
FMLA (family and medical leave act)
Provide mentoring with top management.
Provide frequent contact to top management
Focus employees on specific Performance targets Incentive payouts are variable costs linked to the achievement of results Base salaries are fixed costs unrelated to output Directly related to operating performance Encourage teamwork when payments are related to team results Distribute success among those related to producing that success Increase equity and justice Means to reward or top performers when salary budgets are low
advantages of incentive pay programs
System in which employee and employer present their cases to an arbiter and then he or she makes a decision that the parties have agreed to be bound by Resolves discrimination suits related to: Age, Gender, Sexual harassment, and Race
arbitration
Employer provides or subsidizes temporary care for its employee's elders or children when their regular arrangements fall through
backup care programs
Compensation Alignment: compensation scorecard
compensation assessment
Compensation Alignment: (4) there are governmental regulation factors across the bottom
compensation strategy, design (pay mix), implementation (pay tools), assessment
high-deductible insurance policies tied to a limited personal healthcare spending account funded by the employer
consumer driven health care
Important Terms in Pay Mix Measure of the average change in prices over time in a fixed market basket of goods and services
consumer price index (CPI)
Overuse of costly health care services have lead firms turn to Health savings accounts High deductible health insurance plans Amounts contributed is deducted from their earnings when paying income taxes
containing medical benefits costs
Firms require employees to pay part of the cost of their benefits Increase amounts paid for benefits in the form of premiums, copays, and deductibles Large companies cut health care plans, formerly provided to retirees
cost containment strategies
Requires major financial lifestyle adjustment Seminars are conducted to create awareness of kinds of adjustments required when employees retire
preretirement
Differences between benefit plans: traditional pension- one big fund contributions are made on behalf of each employee by the employees-public and private sectors in public sector- pensions are contributory meaning that employees also contribute to the plan out of their own paychecks investments: contributions for all employees are pooled, and invested by professional asset managers in diversified portfolio of assets (stocks, bonds, real estate, etc.) amount of money in retirement: monthly benefit is determined by a set calculation (2/3 monthly payment based on what you were making), usually based on years of service and pay at the end of one's career lifetime income: payouts are provided as a monthly income stream that is guaranteed for the remainder of the retiree's life supplemental benefits: spousal protections, disability benefits, and cost of living adjustments are common
defined benefit plan
Differences between benefit plans: a retirement plan in which a certain amount or percentage of money is set aside each year by a company for the benefit of each of its employees. contributions: employees make their own contributions to their savings account at whatever rate they choose. In private sectors, employers will often make a certain match EX: $0.50 on the dollar up to 6% of pay, but they are not required to contribute. In public sector, employees that offer a choice between these benefit plans often contribute to those same accounts as to accruals investments: portfolios consist of individual accounts for each employee. Employees make all investment decisions, themselves and can choose from a range of investment options offered amount of money in retirement: money available in retirement is the amount that one has accumulated in the savings plan, through contributions and investment earnings lifetime income: plans are not required to offer a lifetime income option, and often pay out benefits as one-time lump sum supplemental benefits: not applicable and not available. If provided, they require an extra contributions to some structure outside of this plan EX: 401K, 403b, 457
defined contribution plan
Types of pension plans: establishes basis on which an employer will contribute to the pension fund
defined contribution plans
employees: Have to be undertaken only after a deliberate and thoughtful review of the situation In cases of lack of fair treatment by management, an employee has a right to file these guidelines are applied to determine if a firm had a just cause for termination: The employee should not have been treated differently than other employees, The employee should be forewarned, The employee's performance should be documented.
discharge employees
what type of model: organizational discipline policy, definition of discipline, violation of organizational rules, investigation of employee offense, disciplinary interview, progressive discipline, due process, just cause, discharge
disciplinary model
Tool, used to correct and mould the practices of employees to help them perform better so they conform to acceptable standards these actions should be taken only for justifiable reasons employees should be treated fairly and consistently
discipline
Prohibits the interception, recording, or disclosure of wire, electronic, and aural communications through any electronic, mechanical, or other device. An interception takes place when an employer monitors a telephone call while it is occurring. Permits employer monitoring for legitimate business reasons.
electronic communications act
Guarantees of fair treatment that become rights when they are granted to employees by the courts, legislatures, or employers include rights of: Protest unfair disciplinary actions, Question genetic testing, Have access to their personal files, Challenge employer searches and monitoring, Be free from employer discipline for off-duty conduct Federal and state courts view the privacy rights of employees as minimal
employee rights
wage and salary surveys: Employers have to select the jobs to be used in the survey and identify the organizations with whom they actually compete for employees Using key jobs, survey data are tabulated and the compensation structure is completed
employer-initiated surveys
this is the theory most often associated with base salary concerned about internal and external factors
equity theory
Important Terms in Pay Mix Labor agreements clauses that provide for quarterly cost-of-living adjustments in wages, basing the adjustments on changes in the CPI
escalator clauses
Set of standards of conduct and moral judgments that help to determine right and wrong behavior Focus attention on an organization's ethical values Provide basis for managers to evaluate plans and actions Goals of this training: Avoid unethical behavior and adverse publicity, Gain strategic advantage, and Treat employees in a fair and equitable manner
ethics
Represents 30 or 40 percent of total annual compensation Largest portion is received in long-term incentive rewards and bonuses Influenced by levels of competitive salaries in the job market
executive base salaries
executive pay package: Annual bonuses form the main element Bonus payment in form of cash or stock and may be paid immediately, deferred for a short time, or deferred until retirement Paid in cash, keeping with their pay-for-performance strategy Based on: Percentage of company's total profits, Percentage of profits in excess of a specific return on stockholders' investments, Annual profit plan where the amount is determined by the extent to which an agreed-upon profit level is exceeded
executive short-term incentive
Job evaluation technique to evaluate executive and managerial positions which uses: Knowledge, Mental activity, Accountability EX: For evaluating executives, managers, and professionals
hay profile method
containing medical benefits costs: HMO and PPO are couple with tax advantaged accounts Allows employees to be reimbursed by their companies for their out-of-pocket expenses
health reimbursement account (HRA)
containing medical benefits costs: Insurance plan characterized by high deductibles and low premiums Disadvantages: On receiving a treatment, employee has to pay a deductible and Percentage of the employee's care or all of it until a high threshold is met health care spending account along with this:Employers and employees contribute to on a pretax basis Advantage - Funds belonging to the employee remain in the account until the end of the year, even if he or she leaves the company
high deductible health insurance plans
what are the three exceptions to employment at will doctrine?
implied contract, implied covenant, and violation of public policy
Professional employees: For many professions, the primary incentive system is based on an up or out model Junior professionals are hired and are given a set amount of time to make valuable contributions to become a partner Motivation is influenced by their increased mobility across companies Can receive compensation beyond base pay
incentives for employees
Systematic process of determining the relative worth of jobs in order to establish which jobs should be paid more than others within an organization Methods of comparison: Rank the value of jobs from highest to lowest, Classify jobs so they can be benchmarked internally and externally, Award points to each job based on how much they are linked to organizational objectives
job evaluation
Simplest and oldest system of job evaluation by which jobs are arrayed on the basis of their relative worth Disadvantages: Does not provide a very precise measure of each job's worth, Final ranking of jobs indicates the relative importance of the job and not the differences in the degree of importance, Effective only with a small number of jobs EX: Does not provide a precise measure of the job's worth
job ranking system
Designed to pay for nursing home and other medical-related costs during old age Strategic benefit to attract and retain employees Workers caring for older parents and relatives Advantage: Enrolled employees receive coverage automatically and need not pass physical examination
long-term care insurance
Third party in an employment dispute who meets with one party and then the other in order to suggest compromise solutions-is a third-party neutral who helps the two parties reach a compromise decision Fact finder and an open channel of communication between the parties Have no authority to force either side toward an agreement
mediator
Requires group health plans to treat mental health benefits the same way they do medical and surgical benefits
mental health parity and addiction equity act
Bases for compensation: Covered by the overtime provisions of the Fair Labor Standards Act (FLSA) Paid at a rate of one and a half times their regular pay rate for time worked in excess of forty hours in their workweek
nonexempt employees
These agreements prohibit ex-employees from soliciting clients or customers of former employers for a specific period and from disclosing or making use of confidential employer information. Because these agreements restrict workers and competition to a lesser degree, courts have been more willing to uphold them more than noncompete agreements. Today, most legal experts suggest employers use antipiracy agreements rather than noncompete agreements.
nonpiracy agreement
common disciplinary problems include: bullying, intoxication at work, insubordination, horseplay, smoking in unauthorized places, carelessness, sleeping on the job, using abusive or threatening language or supervisors, processing illegal narcotics or alcohol, sexual harassment
on the job behavior problems
these benefits are provided by what two acts: Firms that employ fifty or more people working for thirty hours or more per week, but do not offer them health insurance are required to pay a penalty to the government Employers must offer coverage for employee's children until they turn twenty-six Copays or deductibles cannot be charged to employees and dependents for preventive care related services Lifetime dollar limits on key health care benefits are not allowed Employees cannot lose insurance coverage solely because of an honest mistake made on insurance applications
patient protection and affordable care act
Employee's perception that compensation received is equal to the value of the work performed
pay equity
Can be traced to the choice of performance measures Overly quantitative, complex measures should be avoided Selection of performance measure need to evaluate the extent to which employees involved can influence the measurement Avoid intensifying performance goals continuously trying to exceed previous results Leads to employee frustration and perception that the standards are unattainable
problems with incentive plans
Enterprise incentive plan: Procedure by which an employer pays, or makes available to all regular employees, special current or deferred sums based on the organization's profits Advantages: Gives employees the opportunity to increase their earnings by contributing to the growth of the organization's profits and Stimulates employees to think and feel like partners in the enterprise (Garners total commitment from employees rather than specific areas) Disadvantages: Profits shared with employees may be the result of factors over which employees have no control, Decreased motivational value as profit sharing payments are made once a year or deferred until retirement may reduce their motivational value, If failed to pay off for several years in a row, has an adverse effect on productivity and employee morale
profit sharing
Encourages employees to assume ownership of their jobs, thereby improving effort and job performance Motivates employees to expend more effort than under hourly and/or seniority-based compensation systems Supports a compensation strategy to attract and retain top-performing employees
purposes of incentive plans
Important Terms in Pay Mix Wage increases larger than rises in the CPI, that is, the real earning power of wages
real wages
these employees' compensation is computed on the basis of weekly, biweekly, or monthly pay periods
salaried employees
when using a merit increase form of pay for performance it is important to consider these three factors in determining the percentage and dollar increase in wage or salary
salary pool, the performance rating, and compensation ratio of individual employee
Disciplinary model: suggestions for what? Have to be reasonable and relate to safe and efficient operation of the organization Consequences for breaking them should be written down and widely disseminated to all employees Have to be clearly explained Employees should sign a document stating that they have read and understand the organizational rules Have to be reviewed, especially those rules critical to work success
set organizational rules
System of reviewing employee complaints and disputes by successively higher levels of management Managers are required to provide a full response to the complaint within a specified time period Employee is allowed to bypass meeting if he or she fears reprisal Decision is not appealable is based on a pre-established set of steps for review of an employee complaint by successively higher levels of management
step-review system
Cash or stock award determined by an increase in stock price during any time chosen by the executive in the option period; it doesn't require executive financing.
stock appreciation rights
inclusions in the documentation: true or false? Date, time, and location of the incident(s) Behavior exhibited by the employee (the problem) Consequences of that action or behavior on the employee's overall work performance and/or the operation of the employee's work unit Prior discussion(s) with the employee about the problem Disciplinary action to be taken and the improvements expected should be documented Consequences of failing to make the improvements by a certain follow-up date Employee's reaction to the supervisor's attempt to change his or her behavior Names of witnesses to the incident (if applicable)
true
result of inaction: true or false? Failure to discipline employees aggravates a problem HR department is responsible for: Developing and having top management approve an organization's disciplinary policies and Ensuring that disciplinary action taken against employees are consistent
true
curve in a scattergram representing the relationship between relative worth of job and pay rates EX: The relationship between the relative worth of jobs and their pay rates can be represented by means of
wage curve
Sponsored by employers Designed to encourage employees to maintain and improve health and well-being by: Getting regular checkups, Eating properly, Exercising Managing stress levels
wellness program
job protection rights: Complaints to governmental agencies by employees about their employers' illegal or immoral acts or practices
whistle blowing
