MGT 468 Exam 3
Consolidated Omnibus Budget Reconciliation Act (COBRA):
1985 Applies if 20 or more employees Extends health coverage during certain events An employer can charge individuals up to 102% of the premium Brief qualifying period of 18 months
Family and Medical Leave Act (FMLA):
1993 Applies if 50 or more employees Up to 12 weeks of unpaid leave
Health Insurance Portability and Accountability Act (HIPAA):
1996 Designed to lessen denial for preexisting conditions Prevents discrimination on the basis of health
Contingent workers represent between ___ and ____ of the workforce.
5% and 35%
Individual incentive:
A compensation plan that is directly tied to an employee's individual performance.
Criterion deficient:
A criterion that fails to include all of the dimensions relevant to job performance
Tying pay to performance requires three things:
A definition of performance. A continuum showing levels from low to high. Awarded merit increase at each level.
Profit sharing:
A form of compensation whereby a percentage of company profits is distributed to the employees whose work helped to generate them
Success-sharing plans:
A generic category of pay add-on which is tied to some measure of group performance, not individual performance
Characteristics of point-of-service plan (POS):
A hybrid plan combining HMO and PPO benefits
Two major components are vital for success of a Rucker or Scanlon plan:
A productivity norm Effective worker committees
Goal Setting Theory:
Challenging performance goals influence greater intensity and duration in employee performance
How can someone verify the data used for a survey?
Check for accuracy Check for anomalies
How to translate external competitive policy into practice:
Choice of measure Updating Policy line as a percent of market line
_______ is when an employee asserts an event has occurred and demands the employer pay.
Claims processing
Bottom up adjustments to average cash compensation include:
Collection of individual's pay
Components of a total reward system:
Compensation Benefits Social interaction Security Status/recognition Work variety Workload Work importance Authority Advancement Feedback Work conditions Development opportunity
Merit increases may be tied to:
Competency Performance-and-position-based guidelines
_____ is the collection and analysis of information about external conditions and competitors that will enable an organization to be more competitive.
Competitive intelligence
Materialistic fit:
Concerned about pay level
Employers desire a long-term relationship with ___ employees and have a short-term relationship with ____ workers.
Core; contingent
Compensation Communication Cycle:
Define objectives of the employee communication program Collect information and identify the facts Choose communication tools and media Conduct the communication sessions with employees Evaluate the success of the communication program
Two generic pension plans are:
Defined benefit Defined contribution
Why bother with grades and ranges?
Differences in quality Differences in the productivity or value of these quality variations Differences in the mix of pay forms competitors use
What are the two types of equity/fairness?
Distributive justice Procedural justice
The pay model suggests effectiveness depends on three things. What are they?
Efficiency, equity, and compliance
How does one get the most out of a salary survey?
Look for communication from survey vendor Focus on your specific business needs Look for easy access to data Avoid time-consuming data input Stretch your salary budget Look for added value
Characteristics of preferred provider organization (PPO):
Lower rates for employer selected providers
Top down adjustments to average cash compensation include:
Management allocating money down
A ____ links a company's benchmark jobs on the horizontal axis (internal structure) with market rates paid by competitors (market survey) on the vertical axis. Summarizes the distribution of going rates paid by competitors in the market.
Market line
What are the motivation theories?
Maslow's Need Hierachy Herzberg's Two-Factor Theory Expectancy Equity Reinforcement Goal setting Agency
Central tendency includes:
Mean, median, mode, and weighted mean
What system links increases in base pay to how highly employees are rated on a performance evaluation?
Merit
The starting point of all plans is:
Merit pay
Expectancy Theory:
Motivation is the product of three perspectives: expectancy, instrumentality, and valence
Characteristics of social security:
Nearly every American worker is covered. Money for benefits comes from employees, employers, and self-employed Money currently collected pay current beneficiaries
Characteristics of worker's compensation:
No-fault insurance Covers injuries/diseases arising from employment Benefits include: medical care, temporary or permanent disability payments, survivor benefits, rehab, and training Costs vary over time States vary in the size of payout for claims
What process do raters follow?
Observing behavior Encoding the behavior Storing the information in memory Evaluating Deciding on the final ratings
Benefits under social security:
Old age or disability benefits Benefits for dependents Benefits for surviving family members Lump-sum death payments
Quartiles and percentiles:
Order all data from lowest to highest, then convert to percentages
Median:
Order of all data points from highest to lowest; the one in the middle is the median
What is the guiding force that determines what kinds of employee behaviors are needed?
Organization strategy
______ ranking simplifies ranking by comparing pairs of people. Each individual is compared separately with all others in the group.
Paired-comparison
A ______ structure is anchored by the organization's external competitive position and reflected in its pay-policy line.
Pay
Agency Theory:
Pay directs and motivates employee performance Depicts employees as agents who enter an exchange with principals - the owners or their designated managers
Range midpoints reflect what?
Pay policy line in relation to external competition
A ____ exists whenever two or more rates are paid to employees in the same job.
Pay range
Scanlon Plan ratio:
Payroll costs/net sales
Maslow's Hierarchy of Needs:
People are motivated by inner needs Needs form a hierarchy from most basic to higher order
Common cost containment opportunities:
Probationary periods Benefit limitations Copay Administrative cost containment Deny service Outsourcing
The Pension Protection Act of 2006 (PPA):
Protects retirement income and transfers responsibility from employer to employee Identifies 'at risk' plans that are less than 70% funded
______ requires comparing employees against each other to determine the relative ordering of the group on some performance measure.
Ranking
Two categories of evaluation formats are:
Ranking Rating
_______ require raters to evaluate employees against a standard rather than against each other.
Ratings formats
Ranges provide managers the opportunities to:
Recognize individual performance differences with pay Meet employees' expectations that their pay will increase over time (even in the same job) Encourage employees to remain with the same organization
Rates above the maximum are called:
Red circle rates
Employer factors influencing choice of benefit package:
Relationship to total compensation costs Costs relative to benefits Competitive offerings Legal requirements
How could you reconcile differences in structures?
Reviewing the job analysis, job evaluation, or market data
Reinforcement Theory:
Rewards reinforce (motivate and sustain) performance Rewards must follow directly after behaviors
Difference between Rucker plans and Scanlon plans:
Rucker - tie incentives to a variety of savings Scanlon - focus on labor savings
Cost-of-living increase:
Same as across-the-board increase, except magnitude based on change in cost of living
Characteristics of a relevant labor market:
Same occupations or skills Employees within same geographic area The same products and services
401(k) plan:
Savings plan where employees can defer pretax income Employers match at 50 cents on the dollar
Banding takes two steps. What are they?
Setting the number of bands Pricing the bands based on market rates
Ch10: What is a pay for performance plan?
Signals a movement away from entitlement toward pay that varies with performance
Self-funding plans:
Specify that payouts only occur after the company reaches a certain profit target
What is the criteria for pay-level determination?
Specifying pay-level policy Defining the purpose of the survey Specifying the relevant market Designing and conducting survey Interpreting and applying the result Designing grades and ranges or bands
Variation includes:
Standard deviation Quartiles and percentiles
_____ ranking is where employees are ranked relative to each other.
Straight
Efficiency involves three areas of concern. What are they?
Strategy, structure, and standards
Labor costs =
# of workers and hours worked x (avg cash compensation + average benefit cost
True or false: variable pay must be re-earned each period.
True
Improshare ratio:
Actual hours worked/total standard value hours
Gain sharing:
Allows employees to share in cost savings or productivity gains realized by their efforts
_______ ranking recognizes that raters are better at ranking people at extreme ends of distribution.
Alternation
Merit bonused (lump sum bonus):
As with merit pay, granted for individual performance
360 degree feedback:
Assesses performance from five points of view: Supervisor, peer, self, customer, and subordinate
Compa-ratio =
Average rate actual paid / range midpoint
Total compensation data includes:
Base pay Total cash Total compensation
Flexible compensation:
Based on the idea that only the individual employee knows what package of rewards would best suit personal needs
Ch 11: Performance ratings are influenced by:
Behaviors observed by raters Organization values Competition among departments Status differences between departments Economic conditions
What are the approaches to selecting jobs to include on your survey?
Benchmark-job approach Low-high approach Benchmark conversion/survey leveling
Average cash compensation includes:
Bonuses Gain sharing Stock plans Profit sharing
_______ consolidates as many as four or five traditional grades into a single band with one minimum and one maximum.
Broad banding
BBOPs:
Broad-based option plans Stock grants and versatile
In the United States, who is the major source of publicly available compensation data?
Bureau of Labor Statistics (BLS)
ERISA:
Employee Retirement Income Security Act Does not require a pension plan Designed to achieve two goals: to protect 100 million active participants, and to stimulate the growth of such plans.
Risk sharing plans:
Employee not only shares in the successes but also is penalized during poor performance years
ESOP:
Employee stock ownership plan Provides employer stock to employees based on income and profits of company
ESOPs:
Employee stock ownership plans Distribute company stock to employees as a form of profit sharing
Herberg's Two Factor Theory:
Employees are motivated by two types of motivators -- hygeine and satisfiers
Equity Theory:
Employees are motivated when perceived outputs are equal to perceived inputs
Expectation:
Employees' assessment of their ability to perform required job tasks
Instrumentality:
Employees' beliefs that requisite job performance will be rewarded by the organization
Pension Benefit Guaranty Corporation (PBGC):
Employers must buy insurance from the PBGC who guarantee payment of vested benefits
Employee factors influencing choice of benefit package:
Equity Personal needs Age Sex Marital status Number of dependents
Distributive justice:
Fairness in the amount that is distributed to employees
Procedural justice:
Fairness of the procedures used to determine the amount of rewards
Characteristics of unemployment insurance:
Financed by employers federal and state unemployment insurance tax Covered workers must meet eligibility
Organization data includes:
Financial and reporting relationships data Turnover Revenue
The major requirements of ERISA are:
General requirements Vesting and portability Pension benefit guaranty corporation The Pension Protection Act of 2006
Rates below the maximum are called:
Green circle rates
Types of team incentive plans:
Group Gain-sharing
The first step in building flexibility into the pay structure is to do what?
Group different jobs that are considered equal for pay purposes
Common errors in the appraisal process:
Halo Horn First impression Recency Leniency Severity Central tendency Clone Spillover
Three plans have variable incentives linked to a standard expressed as a time period per unit of production. What are they?
Halsey 50-50 method Rowan plan. Gantt plan.
Standard deviation:
How tightly all the rates are clustered around the mean
Ch 9: What behaviors do employers care about?
How to attract good employment prospects How to retain those good employees How to get those employees to develop skills How to get employees to perform well
Performance research includes:
Identifying/improving the best appraisal formats Selecting the right raters Understanding how raters process information Training rates to rate more accurately
Characteristics of life insurance:
Typically one to two times annual salary. Most premiums are paid by the employer. 30% include retiree coverage. Nearly all are forfeitable upon quitting. Some offer a core coverage with optional additional coverage available.
Variable pay can be traced to two trends:
Increasing competition from foreign producers and a fast-paced business environment
IRAs:
Individual Retirement Accounts Tax favored retirement savings plan that individuals can establish themselves
What information should be collected during a survey?
Information about the organization Information about the total compensation system Specific pay data on each incumbent in the jobs
The courts stress six issues in setting up performance appraisal systems. What are they?
Instructions Clear criteria Sound job descriptions Required feedback Higher-level review Consistent treatment
A _____ structure orders jobs on the basis of internal factors.
Job
Rewards that lead people to stay in a job:
Job satisfaction Pay and benefits Social Organizational commitment Organizational prestige
Rucker Plan ratio:
Labor costs/value added
How does an organization reduce headcount?
Layoffs Exit incentives
Characteristics of health maintenance organization (HMO):
Limited group of providers at agreed upon rates
____ focus on performance beyond one-year.
Long-term incentives
Key elements of a gain-sharing plan:
Strength of reinforcement. Productivity standards - usually historical standards. Sharing the gains. Scope of the formula. Perceived fairness of the formula. Ease of administration. Production variability.
What behaviors does compensation need to reinforce?
Sufficient enough to make recruiting and hiring possible Retaining good employees Building knowledge and skills
Mean:
Sum of all rates divided by the number of rates
A ______ is the systematic process of collecting and making judgements about the compensation paid by other employers.
Survey
Reducing benefits costs includes:
Suspending matching contributions. Seeking bankruptcy protection. Controlling health care benefits
Why do team incentive plans fail?
Team variety. The "level problem". Complexity. Control. Communications.
Base pay:
The guaranteed portion of an employee's wage package
Mode:
The most commonly occurring rate
Ch 12: What are employee benefits?
The part of the total compensation package, other than pay for time worked, provided to employees in whole or in part by employer payments.
What is a planned pay-level rise?
The percentage increase in average pay
Weighted mean:
The rate for each company is multiplied by the number of employees in that company
Edward Deming believed that:
The work situation (instead of the individual) determined work performance
Why would an employer conduct or participate in a survey?
To adjust the pay level in response to changing rates paid by competitors To set the mix of pay forms relative to that paid by competitors To establish or price a pay structure To analyze pay-related problems To estimate the labor costs of product/service market competitors
What is the objective of market pricing?
To base most of the internal pay structure on external market rates while breaking down the boundaries between the internal organization and the external market forces
What is the biggest complaint from employees and managers in the performance appraisal process?
Too subjective
Performance-standard training:
Training that gives performance appraisers a frame of reference for making rater appraisals
Performance-dimension training:
Training that gives performance appraisers an understanding of the dimensions on which to evaluate employee performance
Profit-sharing plans:
Use financial measures to gauge performance
Gain-sharing plans:
Use operating measures to gauge performance.
Valence:
Value employees attach to the organization rewards offered for satisfactory job performance
Why the growth in employee benefits?
Wage and price controls during WWII Employer impetus Cost effective Government impetus
Across-the-board increase:
Wage increase granted to all employees, regardless of performance
Merit pay:
Wage increase granted to employee as function of some assessment of employee performance. Adds on to base pay in subsequent years.
Risk-averse fit:
Want less performance-based pay
Low self-esteem fit:
Want little pay for performance
Individualist fit:
Want pay based on individual performance
Risk takes fit:
Want pay based on performance
Motivation involves three elements. What are they?
What's important to the person Offering it in exchange for some Desired behavior
Describe a fuzzy market.
Where new organizations and unique jobs may fuse diverse factors making relevant markets "fuzzy".
Designing a survey requires answering the following questions:
Who should be involved in the survey design? How many employers should be included? Which jobs should be included? What information should be collected?
Four major issues in setting up a benefit package:
Who should be protected or benefited? How much choice should employees have? How should benefits be financed? Are the benefits legally defensible?
What are the three mandate employee benefits?
Worker's compensation Unemployment Social security
Ch 13: Legally required benefits include:
Workers' compensation Social security Unemployment compensation FMLA COBRA HIPAA
Profit sharing plan:
a benefit whereby employees may share in the profits of the business
Defined contribution plans:
are private pension plans in which the size of the benefit depends on how much money is contributed to the plan
Defined benefit plans:
plans that provide for the payment of determinable retirement income benefits
Rater-error training:
the process of educating raters to make more accurate assessments of performance
Health care cost control strategies:
•Change either the design or the administration of health insurance policies. •Change the structure of the delivery systems and participate in business coalitions. •Provide incentives for healthy behavior.
