Total Rewards (Compensation & Benefits)
What are the advantages to using job classification?
- A good method to use in grouping a large number of jobs together and are understandable to the employees. - Inexpensive - Easy to administer and implement
What are the disadvantages of using the Point-factor method?
- Complex and time-consuming - Difficult to explain to EEs - Requires good job documentation, including job descriptions and thorough job analysis - Relies on judgment of those doing evaluation. - Purchasing one is expensive
What are the disadvantages of using job ranking?
- Fails to establish specific factors about each job that would need to be looked at when comparing jobs to each other - Prone to rater subjectivity - will not demonstrate relative worth of one job to another
Describe the qualifications for Computer Employees
- Must meet salary minimum (either $455/week or $27.63/hr). - Employed as a systems analyst, programmer, software engineer, etc. - Primary duties must fall into 1 of 4 categories: 1. Application of systems analysis techniques and procedures 2. Design, development, documentation, analysis, creation, testing or modification of systems or programs 3. Design documentation, testing, creation or modification of programs related to machine operating systems 4. Combo of 1-3 **Some states do not recognize this exemption
What are the advantages to the Factor comparison method?
- affords greater reliability between different raters and minimizes error or subjectivity - provides good documentation and audit trail
What are the advantages to using the Point-factor method?
- affords greater reliability between different raters and minimizes error or subjectivity - provides good documentation and audit trail
What are the disadvantages to the Factor comparison method?
- complex and time-consuming - difficult to explain to EEs - requires good job documentation, including job descriptions and a thorough job analysis - relies on judgment of those doing evaluation - not easy to maintain when market rates change (requires monitoring and updating)
What are the 7 critical tests that can be used to determine an independent Contractor relationship?
1. Ability to set own hrs and determine own schedule of work 2. Working offsite 3. Working by the project rather than a continuous relationship 4. Being paid by the job 5. Opportunity for profit or loss 6. Furnishes own tools or training 7. Self-Employed
What 3 categories does the IRS group their 11 Independent Contractor tests into?
1. Behavioral Control - facts showing business has right to direct and control how worker does the task 2. Financial Control - facts showing business has right to control business aspects of the worker's job 3. Type of Relationship - facts showing parties' type of relationship
What are some exceptions to the minimum wage requirement under the FLSA?
1. EEs younger than 20, during their first 90 consecutive days of employment 2. Tipped EEs - employers must pay cash wage of at least $2.13/hr if they claim a tip credit against their minimum wage obligations. If tips combined with cash wage do not equal minimum hourly wage, employer must make up the difference. 3. FT students employed in retail or service establishments, agriculture or universities - employer must obtain cert from DOL under the FT Student Program. 4. Student learners who are at least 16 and are employed PT pursuant to a bona fide vocational training program - employer must obtain cert from DOL under student learner program 5. Workers whose earning or productive capacity is impaired by physical or mental disability - employer must obtain cert from DOL
What tests does the IRS associate with the Financial Control category when detecting Independent Contractor status?
1. Extent to which worker has unreimbursed expenses 2. Extent of worker's investment - often has significant investment in facilities he/she uses in performing services for someone else (though sometimes doesn't) 3. Extent to which worker makes services available to relevant market - generally free to seek out business opportunities 4. How the business pays the worker - usually by flat fee, but some are paid hourly, specifically in law. 5. Extent to which worker can realize a profit or loss
Name two ways salary survey data can be sorted and analyzed
1. Frequency distribution 2. Measures of Central Tendency (i.e., mean, median, mode)
Name the three factors that define the relevant labor markets. Companies compete for EEs with other companies who share their...
1. Industry - both companies have similar products and services 2. Occupation - Both companies employ workers with the same experience or skills 3. Location - Both companies employ workers in teh same geographical area
What tests does the IRS associate with the Behavioral Control category when detecting Independent Contractor status?
1. Instructions given to the worker -- when/where to work; what tools to use; what workers to hire; where to purchase supplies; what work must be performed; what order to follow *Even if no instruction given, control can exist if employer has right to control how results are achieved **Key consideration is whether business has retained right to control details of a worker's performance.
What are the nine categories that an employer must hire from to be eligible for the WOTC?
1. Long-term TANF (Temporary Assistance to Needy Families) recipients 2. Other TANF recipients - members of a family that is receiving or recently received TANF benefits 3. Qualified veterans - who are disabled or a member of a family that is receiving or recently received food stamps. 4. Qualified food stamp recipients - 18 to 39 year old members of a family who receive food stamps 5. Designated community residents - 18 to 39 year old residents who live in a federally designated area: Empowerment Zones (EZs), Enterprise Communities (ECs), Renewal Communities (RCs) or Rural Renewal Counties (RRCs) 6. Summer Youth Employees - 16 to 17 year olds who live in an EZ, EC, or RC area 7. Vocational rehabilitation referrals 8. Qualified ex-felons 9. Supplemental Security Income (SSI) recipients
When considering external equity, what are the three most common strategies?
1. Match the market - most common approach and is sometimes referred to as being externally competitive 2. Lead the market - believe that higher-quality EEs are more productive, thereby offsetting the higher salaries. 3. Lag the market - reduced labor rates may enable the org. to offset other higher costs such as purchasing, distribution or sales expenses. **Likely that an organization will use a combo of these - may lead the market in one area and match in another
How can having Internal Equity help an employer?
1. Meet employees' needs for a fair wage and adequate benefits 2. Recognize EEs' contributions to the org. 3. Reward equal work with equal pay 4. Not discriminate against protected classes
What factors does the DOL consider when determining a contractor relationship?
1. Nature and degree of control retained or exercised by the alleged employer 2. amount of alleged contractor's investment in facilities and equipment 3. Permanency of the relationship 4. Opportunities for profit or loss by alleged contractor 5. Extent to which services in question are an integral part of the employer's business 6. Degree of independent initiative, judgment, and skill required to perform the work
What are the guidelines included in the Portal-to-Portal act and its amendments?
1. On-call/standby times 2. Preparatory/concluding activities 3. Waiting time 4. Meals and breaks 5. Travel Time 6. Training Time
Compensable factors should...
1. Reflect actual work being done 2. Be supported by documentation such as job descriptions 3. Reinforce the organization's strategic plan and culture 4. Be valued by all affected parties (stakeholders) 5. Be reviewed annually
What are the compensable factors included in the EPA and Title VII of the Civil Rights Act?
1. Skill 2. Responsibility 3. Effort 4. Working Conditions 5. Supervision of others
What are the 4 factors of which equality of job content is assessed?
1. Skill - degree of experience, ability, ed., and training needed 2. Effort - amount of physical/mental exertion required 3. Responsibility - degree that an employer entrusts to and expects from particular person in specific position 4. Working Conditions - physical surroundings of the position and associated hazards
What tests does the IRS associate with the Type of Relationship category when detecting Independent Contractor status?
1. Written contracts describing relationship parties intended to create - least important, since underlying intent is really what matters, but can make a difference in close cases 2. Whether business provides worker w/EE-type benefits - power to grant = power to take away which is a power employers hold over employees 3. Permanency of relationship - if expectation exists that work will continue indefinitely after project ends 4. Extent to which services performed are a key aspect of regular business of the company - if so, likely company has right to direct & control activities.
What are the characteristics of a benchmark job?
1. contents are well-known, relatively stable and agreed to by the employer 2. represent the entire range of jobs to be evaluated 3. sizable portion of the workforce is employed in these jobs, and the jobs are common across a number of different employers 4. External pay rates for the jobs are an acceptable basis for setting wages
What factors should be considered when determining whether to use an external or internal pay survey?
1. internal time and expertise required 2. relevance/match of external surveyed jobs to teh organization's jobs 3. how current the external survey data is 4. expense associated with the type of survey 5. need for independent, creditable findings
What are the 3 requirements that must be met for an employee to have exempt status?
1. minimum salary ($455/week) 2. paid on salary basis (w/o improper deducting) 3. exempt duties
What are the penalties to an employer not complying with FLSA OT requirements?
A violation is considered willful if the employer knew or showed reckless disregard as to whether its conduct violated the law. - Civil damages for failure to pay OT are the amount of the unpaid OT -- if willful, employer may be required to pay an additional amount equal to the amount owed as liquidated damages - prevailing plaintiff is entitled to attorneys' fees - Criminal penalties of no more than $10,000 and 6 mos. in jail may also be imposed - Statute of limitations = 2 years under FLSA. If willful, 3 year statute applies
Act that determined that older workers may not be discriminated against by performance-based pay systems
Age Discrimination in Employment Act (ADEA) of 1967
Who may initiate a complaint under FLSA?
Any employee covered by the FLSA - investigator visits the work site and reviews the employer's pay practices and status determinations. Conference is held to discuss the settlement, in some cases, employer can go to court.
What is the "specialized intellectual instruction" requirement?
Applies to the Professional-Learned exemption -- restricts exemption to professions where specialized academic training is a standard pre-requisite (i.e. academic degree, but can also extend to combo of training and work experience). Examples are: doctors, lawyers, engineers, pharmacists, dental hygienists, accountants, etc.
Jobs used as reference points when setting up a job classification system and when designing or modifying a pay structure
Benchmark Jobs
When might Point-factor method be used?
Best suited to organizations desiring a systematic procedure for evaluating each job and to those with time and resources to develop a custom evaluation system. Also has a better chance of succeeding when jobs aren't greatly affected by inflation/market conditions
When might the Factor comparison method be used?
Best suited to organizations with time and resources to develop a custom evaluation system; has better chance of succeeding when jobs are not greatly affected by inflation/fluctuating market conditions
How might the "clearly communicated policy" in the Safe-Harbor provision be met?
By providing a copy of the policy to all newly-hired employees, by publishing the policy in the handbook or on the Inet or through an oral statement to all employees
How can an employer defend its pay disparity when charged with discrimination under the EPA?
Can prove it was based on the following: 1. A seniority system 2. A merit system 3. A difference in the quality or quantity of work 4. Geographic work differentials 5. Any factor other than gender **Note that a pay system that pays for performance must not discriminate against older workers to avoid violated the ADEA (Age Discrimination in Employment Act)
Concept that states that jobs requiring comparable skills, effort, responsibility and working conditions filled primarily by women should have the same job classification and salary as similar jobs filled by men (i.e., clerical workers who are primarily female should be in the same salary range as parking attendants, primarily male)
Comparable Worth
The skills, abilities, characteristics, or areas of responsibility that an organization values and for which it is willing to pay.
Compensable Factors
Act that prohibits federal contractors from receiving kickbacks from employees or subcontractors for wages earned on federal projects
Copeland "Anti-Kickback" Act - 1934
Act that first established minimum (prevailing) wage and benefit requirements for contractors and subcontractors on federally funded construction projects in excess of $2,000.
Davis-Bacon Act - 1931
Which acts deal with the DOL's ability to enforce compliances?
Davis-Bacon Act and Service Contract Act
Excludes federal contractors from OT pay requirements after 8 hrs of work each day. Time and a half only paid for hours in excess of 40 hrs/week
Defense Authorization Bill of 1986
What are the disadvantages of using job classification?
Difficult to use with groups having overlapping jobs b/c they look only at the whole job, however using benchmark jobs may help with clarification. - Raters are more likely to evaluate jobs on the basis of the current incumbent rather than on the jobs themselves -- violates a key principle of sound job evaluation.
Amendment to Portal-to-Portal Act that clarifies commuting time is not paid work time, even when the employee is using a company vehicle.
Employee Commuting Flexibility Act (1996)
Commonly referred to as "wage and hour law" -- act that regulates employee status, OT pay, child labor (youth employment) standards, minimum wage, record keeping, and other administrative concerns
Fair Labor Standards Act (FLSA) of 1938
Discuss consequences of improper deductions
Employers that make improper deductions from an exempt EEs salary will lose the exemption if facts demonstrate that the employer did not intend to pay employees on a salary basis. Example: an exempt employee's pay cannot be deducted for illness or disability in less than full-day increments - only exception is if covered under FMLA. **If employer has a practice of making improper deductions, then the employer loses the OT exemption for all employees in the same job classification working under the individuals responsible for the improper deductions during the time period in which they were made. If inadvertent, employer can reimburse EEs and not lose exemption.
Act that prohibits wage discrimination on basis of sex in payment of wages or benefits to men and women who perform equal (though not identical) work. **Technically an amendment to the FLSA - does not address comparable worth
Equal Pay Act (EPA) of 1963
When an organization's pay rates are at least equal to market rates
External Equity -- involves comparing compensation levels and practices to those of other organizations in the same market and compete for the same EEs
Job evaluation method that ranks each job by each selected compensable factor and then identifies dollar values to develop a pay rate
Factor comparison method (job-to-standard) - more complex than either ranking or classification and is rarely used.
When analyzing salary survey data, listing of grouped data, from lowest to highest.
Frequency distribution
Shows the number of incumbents who receive a particular salary
Frequency table - can be easily converted into a histogram for a graphic representation of data
Are technologists and technicians exempt or non-exempt?
Generally do not qualify for the Learned Professional exemption b/c the occupations are not of recognized professional status. (i.e., veterinary technicians, ultrasound techs, and engineering techs)
Discuss the Training Time guideline under the Portal-to-Portal Act
Generally included, however, time spent at conference, meeting or seminar does not have to be compensated if 4 conditions are met: 1. Attendance is voluntary 2. Attendance is outside of normal work hours 3. Event is not directly job-related 4. EE performs no productive work during this period
Evaluation method that establishes a hierarchy of jobs from lowest to highest based on overall importance to the organization.
Job Ranking (job-to-job)
Describe the process of a paired-comparison when job ranking
Job with the largest number of "greater than" rankings is the highest-ranked job. Matrix is used to compare all possible pairs. 1. Select the jobs to be rated 2. Compare each job to the other jobs and indicate favorable comparison 3. Total favorable comparisons 4. Rank jobs 5. Compare rankings
What does it mean when data in a pay survey is leveled?
If a job on a survey is similar but not identical to one in the organization and is weighted for a better match.
Discuss the On-call/standby times guideline under the Portal-to-Portal Act
If personal business is not allowed, hrs are included in OT. FLSA does not require employers to pay OT when EE is off the premises and on call as long as not otherwise restricted.
Are nurses exempt or non-exempt?
Licensed by an appropriate state board, will likely fall under the Learned Professional exemption if paid on salary basis. Licensed practical nurses and similar health-care providers would not be exempt b/c possession of a specialized degree is not a standard prerequisite for the occupation.
Occurs when people feel that performance or job differences result in corresponding differences in pay rates
Internal Equity
Discuss the Preparatory/concluding activities guideline under the Portal-to-Portal Act
Is the activity performed solely for the employer's benefit? Is it an indispensable part of the EE's job activities (i.e., cleaning equipment, putting on safety gear, making deliveries for employer on way home)? **Case = IBP, Inc. v. Alvarez (2005) - time spent donning/doffing safety gear is compensable (if required to change at work) as well as time spent walking between changing and production areas.
What are the white -collar exemptions and when did DOL issue them?
Issued in 2004 as part of the FairPay Provisions: 1. Executive 2. Administrative 3. Professional (Learned & Creative) 4. Highly Compensated EEs (HCEs) 5. Computer EEs 6. Outside Sales **All are exempt from OT pay
Evaluation method that categorizes jobs into broad categories, or levels, based on the level of work that is performed by jobs within each level.
Job Classification (job-to-standard) - best known system is the General Schedule (GS) system used by the Federal Government.
Systematic determination of the relative worth of jobs within the organization, concerned with the value of a job to the organization
Job Evaluation - determines relative worth of each job by establishing a hierarchy of jobs. Done after the job analysis.
Are HR EEs exempt or non-exempt?
Likely administratively exempt if duties include formulation, interpretation or implementation of employment policies or if the EE works as a management consultant who studies business operations and proposes changes in the org. Must have discretion and independent judgment!
Method similar to job evaluation systems that evaluates jobs based upon their market value
Market-based evaluation -- not a true job evaluation system, but can be used to determine a job-worth hierarchy.
What does it mean when salary data is aged?
Movement in market rates is used to adjust outdated data
Describe the qualifications for Highly Compensated Employees (HCEs)
Must be performing office/nonmanual work and paid more than $100,000 (which must meet min qual. of $455/week) and regularly perform at least one of the duties of executive, professional or administrative exemptions **Some states do not recognize this exemption
Describe the qualifications for Professional-Creative exemption
Must meet minimum salary requirements and must have primary duty performing work requiring invention, imagination, originality or talent in a recognized artistic field (music, writing and graphic arts) **Journalists qualify if investigating through interviews, writing editorials or performing on air.
Discuss the Waiting time guideline under the Portal-to-Portal Act
No pay required if EE arrives early and is waiting for workday to begin, but cannot be doing casual work while waiting **If occurs in middle of shift (i.e., machine breaks down), then generally compensable
Are first responders exempt or nonexempt?
Non-exempt -- police, fire fighters, paramedics, correctional officers, park rangers, etc - primary duty is not management and a specialized degree is not usually required.
Discuss the Meals and Breaks guideline under the Portal-to-Portal Act
Not required to provide rest or meal breaks. Rest periods of 5-20 min. are considered hours worked. Meal breaks of 30 min. or more are not compensable.
When might job classification be used?
Often used with government and public-sector employees and best suited to large organizations with many jobs and limited resources to commit to the evaluation process
Job ranking method used when there are many jobs to evaluate, in which evaluator compares each job with every other job being evaluated
Paired-comparison method
These methods collect information on prevailing market rates and include topics such as incentive plans, OT pay, base pay and vacation and holiday practices
Pay Surveys
Used to group jobs that have approximately the same relative internal worth
Pay grades
Most commonly used method of job evaluation; identifies specific compensable factors and establishes levels of performance within each of those factors.
Point-factor method (job-to-job) -- different points assigned to each level within each compensable factor.
Act that defines what is included as hours worked and is therefore compensable and a factor in calculating OT
Portal-to-Portal Act (1947)
Refers to the principal, main, major or most important duty that the employee performs
Primary Duty - if more than 50% of time spent doing exempt work, likely exempt
Describe qualifications for Outside Sales exemption
Primary duty must involve making sales or obtaining orders or contracts for services (or for use of facilities) for which a consideration will be paid by the client or customer, must customarily and regularly be engaged away from the employer's place or places of business **Not subject to minimum salary and salary basis requirements
Describe the qualifications for Executive exemption
Primary duty must involve management of an enterprise, must regularly direct work of 2 or more FT employees, has authority to hire/fire and make staffing changes
Describe the qualifications for Administrative exemption
Primary duty must involve performance of office or nonmanual work directly related to management or general business operations of the employer or customers, must include exercising discretion and independent judgment in respect to matters of significance
Describe the qualifications for Professional - Learned exemption
Primary duty requires advanced knowledge in science or learning - work is predominantly intellectual in nature.
Who needs to comply with the FLSA?
Private-sector employers engaged in interstate commerce and retail service firms with two or more employees and gross sales of at least $500,000 per year, most federal, state and local gov't personnel (except military) **very small family-owned and -operated businesses and family farms are excluded.
What are the advantages to using job ranking?
Quick, inexpensive and easily explained
What is the "Safe-Harbor" provision -- what does it relate to?
Relates to Improper Deductions and prevents an employer from losing an OT exemption for improper deductions where the employer: 1. has a "clearly communicated policy" (doesn't always have to be written, but must be communicated prior to deduction occurrence) that prohibits improper pay deductions and includes a complaint mechanism 2. reimburses EEs for any improper deductions 3. Makes a good faith effort to comply in the future
What is the definition of overtime pay?
Required for nonexempt workers under FLSA at 1.5 times the regular rate of pay for hours over 40/work week. Paid on hours worked, not hours compensated (i.e., sick, vacation, holiday, jury duty pay, etc.)
Act that extended prevailing wage rate and benefit requirements to employers providing services under federal gov't contracts
Service Contract Act (1965)
When might job ranking be used?
Small organization where a hierarchical ordering of jobs will suffice and resources are lacking for a complex system
Are insurance adjusters exempt or nonexempt?
Subject to case-by-case analysis -- likely to be administratively exempt if duties include activities such as interviewing insured, witnesses and physicians, inspecting property damage, making recommendations regarding coverage of claims and litigation and negotiating settlements
Are financial service industry workers exempt or non-exempt?
Subject to case-by-case analysis -- likely to be administratively exempt if their duties include collecting and analyzing info. regarding a customer's income, assets, investments or debts; advising the customer regarding advantages and disadvantages of different financial products; marketing, servicing or promoting the employer's financial products...
What are the basic objectives of a total rewards system?
To provide the employer and EEs with a system that is: 1. Compatible with the organization's mission and strategy 2. Compatible with the corporate culture 3. Appropriate for the workforces 4. Externally equitable 5. Internally equitable 6. Effective in recruiting and retaining EEs
All forms of financial and nonfinancial returns that EEs receive from their employer
Total Rewards
Discuss the Travel Time guideline under the Portal-to-Portal Act
Those traveling in course of workday are entitled to compensation. All travel compensable by contract, custom or practice must be counted as work time.
How does the DOL define Blue-collar workers?
Those who perform work involving the repetitive operations with their hands, physical skill and energy. These individuals will not be exempt no matter the pay (i.e., mechanics, plumbers, electricians, maintenance workers, construction workers, etc.)
What are the three non-quantitative job evaluation methods?
Try to establish a relative order of jobs - often referred to as whole-job methods as they evaluate the entire job and place different jobs in order w/o numeric value assigned. 1. Job Ranking 2. Job Classification 3. Job Slotting
What are the two quantitative job evaluation methods?
Try to establish how much more one job is worth compared to another job by using a scale system and evaluating specific factors while providing a score that indicates how valuable one job is compared to another. 1. Point-Factor Method 2. Factor Comparison Method
Raw average of data that gives equal weight to all factors with no regard to individual factors such as the number of incumbents or companies
Unweighted average
Act that extended concept of prevailing wage to employers with federal gov't contracts exceeding $10,000 and addressed OT pay and safe and sanitary working conditions.
Walsh-Healey Public Contracts Act (PCA) - 1936
Average of data that takes other factors such as the number of incumbents into account
Weighted average
Tax credit to encourage employers to hire people from targeted groups
Work Opportunity Tax Credit (WOTC) **Note: Tax Relief and Health Care Act of 2006 eliminated the Welfare-To-Work Tax Credit, merging the program into the WOTC. Small Business and Work Opportunity Act of 2007 extended the WOTC through 8/31/11.
Any fixed, recurring period of 168 consecutive hours (7 days x 24 hrs = 168) May begin on any day of the week, but must be consistent from week to week.
Workweek