mqm 354 exam 3
Benefits of FMLA
12 weeks of unpaid leave return to previous job health insurance coverage during the leave period
If Philadelphia has a CPI of 165 and Houston has a CPI of 145, and if both cities started with bases of 100, it means that
A. prices have risen faster in Philadelphia since the base year than in Houston
The Mechanics
Adopt a single 'gender neutral' point job evaluation plan for all jobs within a unit. All jobs with equal job evaluation results should be paid the same. Identify the percentages of male and female employees in each job group. The wage-to-job evaluation point ratio should be based on the wages paid for male-dominated jobs.
Overtime
All nonexempt workers must be paid 1.5 times their regular rate of pay for hours worked in excess of 40 in any workweek. Exceptions: Does not include discretionary bonuses, employers' contributions to benefit plans, small noncash gifts, or pay for unworked hours. Unworked hours: sick pay, holiday pay, vacation pay, jury duty pay, or similar compensation for unworked days.
Workweek
Any fixed, recurring period of 168 consecutive hours (7 days x 24 hours) Can begin on any day of the week. Does not have to coincide with the duty cycle or pay period, or with a particular day f the week or hour of the day It remains fixed regardless of how many hours are worked within the period.
Pay changes can play two roles in restructuring.
Can be a leading catalyst for change, or A follower of change.
State and local laws affect regulations
Cover employers exempt from federal laws, or include requirements that go beyond federal law
Fair Labor Standards Act of 1938
Covers all employees of companies engaged in interstate commerce or in the production of goods for interstate commerce Major provisions include: minimum wage, hours of work, and child labor. Records must be kept of employees, their hours worked, and their pay
Which of the following is NOT one of the steps in establishing a comparable-worth pay plan?
D. D. Base the wage-to-job evaluation point ratio on the wages paid for female-dominated jobs
Financial Accountng Standards Board Statement 123 R 2004
EMPLOYEE STOCK options must be expensed on financial statements
SEC
EXECUTIVE COMPENSATION RULES
Social Security
Earn 40 quarters of credit be employed for 10 years be age 62 for partial benefits be age 65 for full benefit in 2022 be age 67
skill
Experience, training, education, and ability as measured by job performance requirements
Overtime and Hours of Work
FLSA requires pay at one-and-a-half times standard pay for more than 40 hours/week. Objective - make hiring additional workers less costly than scheduling overtime.
Which of the following is NOT a likely consequence of a highly decentralized pay system?
Financial malfeasance is completely eliminated.
1991 Civil Right Act of 1991
Increases burden of proof on employers covers international
government defined prevailing wage
Is the minimum wage that must be paid for work done on covered government projects or purchases
Or, find a standard to compare the value of jobs.
It must permit dissimilar jobs to be declared equal. It must permit pay differences for dissimilar jobs that are not comparable. Job evaluation has become that standard.
Affordable Care Act Covered Employers
Large Employers- those employing 50 or more full time employees defines a full time employee as one working an average of at least 30 hours per week or at least 130 hours in a month
Points to consider with Pay
Overtime 8/80 clause Retroactive Pay Increases FLSA does not permit averaging of hours over two or more workweeks Seasonal employees exempt from overtime pay 5-20 minute breaks are considered hours worked On-call time cannot pursue the majority of non-work activities Nonexempt employees must be paid for business travel time
Which of the following is Not a benefit that is required by statutory law
Pension and retirement benefits
Executive Order 11246
Prohibits discrimination on the basis of race, color, religion, sex, or national origin. Requires government contractors to file affirmative action plans, with three parts. Utilization analysis compares contractor's workforce to external workforce. Goals and timetables to achieve affirmative action. Action steps for achieving goals and timetables.
1965 Executive Order 11246
Prohibits federl contractors from discriminating on the same basis as above
Minimum Wage
Provides an income floor for workers in society's least productive jobs. Higher rate prevails if state and federal laws cover the same jobs.
FMLA covered employers
Public agencies including state local and federal employers local education agencies
Absent a professional code, it is a challenge to ensure ethical compliance
Public discussion informs ethical boundaries
Which of the following is NOT a potential problem with headcount reductions?
RIFs are very costly in tangible terms in the long run due to decreases in unemployment insurance tax rate.
Rates of Pay
Regular rate is the hourly rate actually paid to the employee for the normal, nonovertime workweek. Should be an hourly measurement of all straight-time compensation received by the employee.
Pay differences legal if affirmative defense:
Seniority, merit or quality of performance, quality or quantity of production, or some factor other than sex
Prevailing wage laws
Set pay for work done to produce goods and services contracted by the federal government
Employers must pay
Social Security, unemployment and workers compensation taxes on wages and salaries. Unless the worker is an independent contractor
Costing out wage proposals is done prior to recommending pay increases
Software is available to analyze every aspect of compensation information.
Range maximums and minimums.
The maximum is an important cost control.
working conditions
The physical surroundings and hazards of a job; inside/outside, heat/cold, and poor ventilation
Range midpoints reflect the pay policy line in relation to external competition.
To assess how pay relates to the midpoint, an index called a compa-ratio is often used.
Employers must keep compensation current and competitive.
To retain high performing employees.
Child Labor
Under 18 cannot work hazardous jobs. Under 16 cannot work in jobs involving interstate commerce, except for a parent. Additional exceptions and limitations exist
Employees must understand the pay system.
Understanding is shaped indirectly by paycheck. Shaped directly through formal communication.
Many believe valuation discrimination does not define correctly
and can occur when men and women hold different jobs, with the same comparable worth. Hinges on equal pay for comparable worth. Also called pay equity or gender pay equity. Not supported by federal law but several state laws require a comparable worth standard.
Family and Medical Leave Act of 1993
applies to all employers having 50 or more employees and entitles all eligible employees to receive unpaid leave up to 12 weeks per year for specified family or medical reasons
Top 4 rewards contributing to employee satisfaction
compensation benefits job security work/life balance
Survivors benefit
deceased was fully insured dependent unmarried children widows age 60 and older dependent parent age 62 and older
unemployment eligibility
did not leave job voluntarily able and available work actively seeking work had not refused suitable work not off due to labor dispute not fired for gross work violation must be employed for the last four or five quarters prior to becoming unemployed
Changes in minimum wage
directly effects workers and indirectly raises everyone's base pay, the spillover effect. Employers must comply if the wage is raised, experts fear this will decrease labor demand
2014 Executive Order 13665
directs regulators to develop financial industry specific rules
Employment Retirement Income Security Act
does not require emploters offer a pension but if a company decideds to have one it is rigidly controlled by ERIS provisions 1. protect the interest of approximately 100million active participants 2 stimulate the growth of such plans eligible begining at age 21 requires 12 months of service
Compensation budgets require tradeoffs
employee contributions versus across-the-board, short- versus long-term incentives, performance versus seniority, and cash compensation compared to benefits.
In majority of the states unemployment insurance is financed exclusively by
employers that pay federal and state unemployment insurance
federal trade commission
enforces antitrust laws
1963 Equal Pay Act
equal pay for men and women doing substantially similar work
Unemployment insurance
financed by employers that pay federal and state unemployment insurance tax states administer within federal guidelines states send money to federal government agriculture and domestic workers are exempt maximum is 26 weeks
2009 Troubled Asset Relief Program
financial institutions receiving Tarp funds must meet all restrictions on compensation prohibits several pay programs
Equal Pay Act of 1963, part of FLSA
forbids wage discrimination on the basis of gender if performing equal work in the same firm
point of service plan
hybrid of PPO and HMO permits an individual to choose which plan to seek treatment from at the time that services are needed provides the economic benefits of the HMO with the freedom of the PPO
Cash balance plans
hybrid of defined contribution and defined benefit plans
2010 Dodd Frank Wall Street
increases SEC requirements stock and executive compensation
Afforadable Care Act employer Mandates
increasing the cost of medical devices increases healthcare costs which drive up premium costs for employers employers would have to match this all health insurance plans must guarantee the availability and renewal of coverage regardless of health status increased premium costs will be passed on to employers
Disparate treatment.
intentional
Access discrimination
is the denial of particular jobs, promotions or training opportunities to qualified women or minorities.
1931 Davis Bacon Act
laborers on public construction must be paid prevailing wage
Valuation discrimination
looks at the pay women and minorities receive for the jobs they perform. Hinges on equal pay for equal work.
Tradeoffs between higher wages and fewer jobs
makes unions in industries facing stiff international competition reluctant to support comparable worth.
Michael was laid off by his company owing to budget cuts. Before being laid off, he earned $1,000 per week. If he has been receiving unemployment insurance benefits for 26 weeks, which of the following statements is true in this scenario?
no longer eligible for unemployment benefits
social security problem
number of retired workers is rising no corresponding increase in number of contributors to offset costs
1978 Pregnancy discrimination Act
pregnancy must be covered as a medical conditiion
Pension Protection Act of 2006 PPA
purpose to protect employees retirement income as well as transfer some responsibility for retirement savings from the employer to the employee
A major advantage of a _____ is that it reduces benefits costs, something that the other cost-cutting options ordinarily do not achieve.
reduction in force
The Davis-Bacon Act _____.
requires that mechanics and laborers on public construction projects be paid the prevailing wage in an area
financial accounting stanards board
rules governing executive and employee compensation
Economic Growth and Tax Relief Reconciliation Act of 2001
states that employers contribution must vest at least as quickly as one of the following 2 formulas fulle vesting after 3 years 20% after 2 years
IRS
tax and rules for executive pay
arbitration
to resolve individual disputes
Adjustments to average cash compensation level can be made:
top down - management allocates money down. bottom up - collection of individual's pay.
The _____ recognizes the fact that when people leave an organization, they typically are replaced by employees who earn a lower wage.
turnover effect
Disparate impact.
unintentional
1993 family and medical leave act
up to 12 weeks of unpaid leave for family medical emergencies
At the minimum, the most important information to be communicated is
work-related and business-related rationales on which pay systems are based.
disability benefits
worker was fully insured meets social security work requirements varies according to age and disability must last one year or be terminal 6 moth waiting period
Legally required benefits by statutory law
workers compensation unemployment compensation social security ( health insurance, family medical leave)
Two reasons for communicating pay information:
Attract, retain, and motivate performance. Employees misperceive the pay system. Especially helpful for benefit information.
Compensation drives future revenues.
Companies analyze the value added of pay decisions and influence on revenues.
Government and Legal Issues in Compensation
Compliance and fairness are continuing compensation objectives. The legislative process begins when a problem is identified and corrective legislation is proposed, then passed into law
Supreme Court determined pay differences for dissimilar jobs may reflect discrimination.
Courts uphold the use of market data to justify pay differences in different jobs.
Exempt Employees
Excluded from overtime pay Five categories qualify as exempt (White-Collar Employees) Executive Administrative Professional Learned Creative Computer Outside Sales (Seasonal Employees)
Rates above this are called red circle rates
Green circle rates are paid below the minimum
Workers compensation covers
Medical care for work related injuries temporary disability benefits permanent partial and permanent total disability benefits surviviors benefits rehabilitation covered by state not federal laws
effort
Mental or physical, the degree of effort actually performed on the job
Managing compensation ethically is increasingly complicated due to:
Pay really matters; important to all of us. Fierce pressure to achieve results.
Regression Analysis
Perform the Job Evaluation 2. Perform an External Salary Survey 3. Rank order Jobs 4. Regress Job Evaluation Points on External Market Data 5. Set the Midpoints on the Market Pay Line 6. Determine the Desired Range Spread 7. Calculate the Maximum-Minimum 8. Use the Regression formula to assign jobs into pay grades 9. Evaluate
Organizations reduce headcount through layoffs or exit incentives.
Reduces benefit costs. Opportunity to reshape the workforce. However, regulations make cuts difficult. May harm employee relations, increase turnover. Increases unemployment insurance tax rates and administrative costs and disrupts workflow. May harm future business if cut too deep.
responsibility
The degree of accountability required in the job performance
For an employer to support a claim of unequal work, the following must be met
The effort/skill/responsibility must be substantially greater in one of the jobs. Tasks with the extra effort/skill/responsibility must consume a significant amount of time for all employees' wages in question. Extra effort/skill/responsibility must have a value commensurate with the pay differential
Variable pay must be re-earned each period.
The financial insecurity may affect employees
Three branches of U.S. federal government
The legislative branch - Congress. The executive branch - President. The judicial branch - the courts
Blue-Collar Workers
Those who perform work involving repetitive operations with their hands, physical skill, and energy. These individuals are never exempt no matter how highly they are compensated. Examples: Mechanics, plumbers, first responders. Caveat: exemption status is based on job duties not job titles; therefore, DOL decides on case-by-case basis.
defined contribution plans
a benefit option in which employers negotiates a dollar maximum payout any change in benefit cost over time reduces the amount of coverage unless new dollar limits are negotiated pension is based on employees and employer contribution and any gains in stock investment more portable
Individual retirement Accounts IRA
a tax favored retirement savings plan that individuals can establish themselves
Regarding pay differences for different jobs, _____.
courts continue to uphold the use of market data to justify differences
Workers compensation
covers injuries and diseases that arise out of and while in the course of employment
1934 Securities Exchange Act
created the securities and exchange commission
2009 Lilly Ledbetter Fair Pay Act
employers liable for pay loss resulting from discrimination
Jobs are considered equal if requiring
equal skill, effort, and responsibility, performed under the same conditions.
2002 sarbanes oxley act
executives cannot retain bonuses or stock if they mislead public
The Worker Economic Opportunity Act
exempts stock options and bonuses from overtime pay calculations
1936 Walsh Healey Public Contracts Act
extends prevailing wages to suppliers of government contracts
Governments' usual interests are
fair pay, safety nets for the unemployed, and protecting employees from exploitation
Pension Benefit Guranty Corporation
to protect indivduals confronted by bankruptcy employers are required to pay insurance premiums to the PBGC which is established by ERISA
GronLan Inc., a company with a majority of workers with high seniority, decides to hire 1,000 college graduates to meet the sudden productivity requirements generated by a growth in the market. Which of the following statements is most likely to be happen in this situation?
. The average pay actually paid by the company will fall below its range midpoint.
The Worker Economic Opportunity Act _____.
. states that income from most stock plans need not be included in calculating overtime pay
Steve has a small company with 12 employees. One of his employees, Larry, has been laid off because his work has been outsourced. Larry had health coverage through Steve's company and wants to continue that coverage. According to COBRA, how long can Larry continue his coverage through Steve's company after being laid off?
0 months
What does the Securities Exchange Act of 1934 do?
The Securities Exchange Act Of 1934 Created the Securities and Exchange Commission (SEC). Currently, the SEC requires companies that have more than $10 million in assets and whose securities are publicly traded and held by more than 500 owners to periodically report information, which is available to the public. This includes disclosure of compensation received by the CEO, CFO, and three other highest paid executives.
definition of equal
The Supreme Court ruled that jobs be substantially equal, not identical. When job descriptions differed from actual employee duties, the courts held that the actual work performed must be used to decide whether jobs are substantially equal
Meltrop Corp. employs two store clerks, Sam and Stella. Stella sues Meltrop claiming unequal pay as she earns $500 a week less than Sam does despite doing the same work as Sam. Which of the following is most likely to be the result of the litigation?
Meltrop will lose the litigation as it has committed valuation discrimination.
Living Wages
Minimum wage tailored to living costs at local levels. Sometimes the laws only cover a city. Sometimes a state, such as Maryland. Popular, backed by unions and churches. Speculated objective is to reduce cost savings from outsourcing. More government jobs, and union members.
1990 American with Disabilities Act
Must accommodate a person able to fulfill essential elements of a job
The four factors in the labor cost model are not independent.
Number of employees. Hours worked. Cash compensation. Benefit costs.
Overtime and Hours Worked
OSHA specifies breaks in an 8-hour workday.
2000 Worker economic opportunity act Q
OVERTIME PAY DOES NOT HACE TO INCLUDE STOCK PLN INCOME
The _____ specifies the number of breaks that must be provided in an eight-hour workday.
Occupational Safety and Health Administration legislation
Successful alignment drives future revenues.
Strategic business changes mean the compensation strategy must be realigned
Reducing benefits costs includes
Suspending matching contributions. Seeking bankruptcy protection. Controlling health care benefits.
How to classify?
Tax law and ERISA are relevant. Two general criteria How much control the firm exercises. The type and permanence of the relationship.
Explain the coverage of the FMLA.
The 1993 Family and Medical Leave Act applies to all employers having 50 or more employees and entitles all eligible employees to receive unpaid leave up to 12 weeks per year for specified family or medical reasons. To be eligible, an employee must have worked at least 1,250 hours for the employer in the previous year.
Susan works in a sterile laboratory that requires her to scrub and put on protective clothing. Which of the following acts determines whether she should be paid for this time?
The Portal-to-Portal Act
defined benefit plans
a benefit option or package in which employers agrees to give specified benefit without regard to cost maximum may be dying breed expressed as either a fixed dollar or a percentage of earnings amount that may vary with years of seniority in the company
Employee Eligibility under FMLA
Work for a covered employer for a total of 12 months for at least 1250 hours at a location in the U.S
Health Insurance Portability and Accountability Act (HIPAA)
1996 lessen denial for preexisting condtion prevent discrimination on the basis of health privacy provisions cause added compliance problems
formula used to calculate benefits
2/3 * average weekly wage * % of disability = weekly benefit
For an employee to gain lifetime coverage under Social security they must have worked__ quarters during which they were covered by the Act
40
three popular forms of defined contribution plans
401k - savings plan in which employees are allowed to defer pretax income employers typically match employee savings employee stock ownership plan- a plan in which a company borrows money from a financial institution by using stock as a collateral profit sharing plan- focuses on profitability as the standard for group incentive typically involves cash, deferred plans, combination plans
Compa-ratio = average rate actual paid range midpoint
A ratio less than 1 means below midpoint pay. A ratio greater than 1 pays above the midpoint
Nonexempt Employees
Are not excluded and are entitled to overtime
Broad bands offer managers flexibility.
Bands may be more about career management than pay decisions.
What is the top-down method of budgeting?
Top-down budgeting begins with an estimate from top management of the pay increase budget for the entire organization. Once the total budget is determined, it is then allocated to each manager, who plans how to distribute it among subordinates. There are many approaches to top-down budgeting. A typical one, planned pay-level rise, is simply the percentage increase in average pay for the unit that is planned to occur. Several factors influence the decision on how much to increase the average pay level for the next period: how much the average level was increased this period, ability to pay, competitive market pressures, turnover effects, and cost of living.
Traditional compensation plans may be
a bureaucratic nightmare, hindering the firm's ability to respond to competitive pressures. Some recommend reducing controls. Replace merit grids with bonuses. Replace job evaluation with skill-based plans.
Conditions have changed and contemporary employers face:
a skilled workforce, higher training costs, and higher benefit costs, fixed per employee. This lowers the break-even point of the cost of hiring more workers
2006 SEC ruled change on executive disclosure
adopts enhanced executive compensation disclosure requirements
Medicare
age 65 and older coverage for hospitalization convalescent care major doctor bills prescription drug costs
noncompete agreements
agree not to work for a competitor
Companies respond by
altering their practices, defending their practices before the courts, or lobbying for legislative change
1997 mental health act
mental illness covered the same as othr medical conditions
social security act of 1935
must contribute a minimum amount roughly 500 minimum 40 quarters 10 years of contribution
Benefits under social security fall under 4 categories
old age or disability benefit benefits for dependents of reitred or disabled worker benefit for surviving family members of deceased worker lump sum death payment
Retirement and Savings Plan Payment
only 68% of workers have access to pension coverage and only 53% actually participate
Health Care cost control strategies
organizations can motivate employees to change their demand for health care through changes in either the design or the administration of health insurance policies 2. changin the structure of health care delivery systems and participating in colalitions 3. Link incentives to healthy behaviors
1964 Title VII of Civil Rights Act of 1964
prohibits discrimination on basis of race sex color religion or national origin
1967 Age Discrimination in Employment Act
protects employee 40 and older from age discrimination
Consolidated Omnibus Budget Reconciliation Act
provide current and former employees and their spouses and dependents with a temporary extension of group health insurance when coverage is lost due to qualifying events after 18 months not qualified anymore applies if 20 or more employees can charge up to 102% of the premium
PPO
provide employees with more options in selecting doctors and hospitals
HMO
pulls together a group of providers willing to provide services at an agred upon rate in exchange for the employer limiting employees to these providers for health services on demand
Affordable Care Act Reporting Provisions
require employers to annually report to the IRS information pertaining to their group benefits including: Whether the employer offers minimum essential coverage to full-time employees; Waiting period for health coverage; The monthly premium for the lowest cost option in each enrollment category under the group's plan; The employer's share of the total allowed cost of benefits provided under the plan. The number of full-time employees during each month; The name, address, and taxpayer identification number (or Social Security number) of each full-time employee, and the months each employee was covered under the employer's plan, and "Such other information as the HHS may require." This requirement will likely be further refined in later regulations.
Laws are enforced by agencies through
rulings, regulations, inspections, and investigations
1938 Fair Labor Standards Act
set minimum wage hours worked overtime prohibits child labor
Factors for unequal pay, other than sex:
shift differentials or temporary assignments, bona fide training programs, differences based on ability, training, or experience, other reasons of 'business necessity'.
Vesting
the length of time an employee must work for an employer before they are entitled to employer payments made into the pension plans
employers must pay both state and federal unemployment taxes if
they pay wages to employees totaling 1500 or more in any quarter of a calendar year they had at least one employee during any day of a week during 20 weeks in a calendar year regardless of whether the weeks were consecutive
The Portal-to-Portal Act declares
time spent on activities before beginning the 'principle activity' is compensable.
