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87 Cards in this Set

  • Front
  • Back
exchange of payment for service providede by employees
total compensation
Entire package; includes cash, equity, benefits, perquisites and nonmonetary rewards
monetary compensation
any cost the org. incurs for the benefit of employers including 401(k)matching, medical, time off, stocks options and incentive plans
nonmonetary compensation
intrinsic and extrinsic rewards
intrinsic- encourages individual self-esteem
extrinsic-esteem achieved from working with other e.g. talented team or great relationship
-also includes non-traditional benefits like flextime, training etc.
compensation philosophy
high level mission statement that guides development and implementation of compensation programs
determines wether it is based on merit, performance, or seniority and how total comp package is divided
internal conditions
organization's willingness and ability to pay
corporate culture
types of product and services
external conditions
decide if ay structure will lead match or lag the market
performance based philosophy
reward performance or bahavior that moves org, closer to achieve goals
-compensation programs have line of sight
line of sight
when employees know that their performance impacts rewards
entitlement philosophy
rewards employee longevity
performance is secondary
creates loyalty to co.
factors that influence compensastion
-labor market
-market competition
-tax & accounting (irs and taxes)
-legislation governing compensation
cost of labor
economic factor, cost to attract and retain individuals with skills needed
labor market
any source from which org. recruits
private letter ruling
request for IRS to review changes proposed to comp structure, used to find out tax implications of unusual financial transactions
Securities exchange act of 1934
gave authority to SEC to establish reporting standards for public co's
american institure of cpa's
established gaap, generally accepted accounting principles
financial accounting standards board
established by AICPA to set standards recognized by SEC
Legislation Governing compensation
-Davis bacon act
-walsh healy public contracts act
-service contract act
-FLSA (fair labor standards act)
-FLSA ammendments
*portal to portal act
*EPA (equal pay act)
Davis Bacon Act
first regulation of min. wages
-required construction contractors and subcontractors to pay at least the prevailing wage for the lcoal area
Walsh Healy Public contracts act
requires gov. contractors w/ contracts >$10k for other than construction work to pay their employes the prevailing wage for their local area as established by the secretary of labor
Service Contract Act
Fed. service contractor w. contract >$2.5k to pay prevailing wages and ringe benefits fr the area
-provide sanitary working conditions
-notify employees of min. allowable wage
first regulation for private enterprises
-introcuced min wage
-id overtime and set rate
-criteria for jobs exempt from FLSA
-placed limitations on working conditions for children
-id info employers must keep
Portal to portal act
FLSA ammendment
employers not required to pay employees for commute time
requires payment of nonregular hours for non-exempt employees
equal pay act
FLSA ammendment
first anti-discrimination to protect women
equal pay for equal work, enforced by EEOC
allows differences with bona-fide systems that measures standards other than sex
base pay
ammount of comp that agree will be paid for performance of duties
performance-based compensation
based on how well employes perform against co's standard of performance
performance ratings determine eligible range of increase
important that accuraterecords are kept to account for disparity
merit pay
adjustment to base pay based on performance
merit matrices
used by employers to dedtermine merit systems pay
low, midpoint or high level of performance
senority based compensation
representative of entitlement compensation philosophy
usually a union representing its workers uses this type of comp
pay differential
provides additional pay for work that is considered beyond the min requirements of the job
*shift pay
*on-call pay
*call-back pay
*reporting pay
*hazard pay
*geographic pay
-FLSA requires payment for time worked over 40 hrs/week
-employers may require to not pay overtime as long as paid at the required wage rate
-not common to pay overtime to exempt
-requiring employees to keep track of time is not prohibited as long as it does not resullt i a reduction of their pay
shift pay
specific start and end time used for non exempt employees
day shift (8-4) swing shift (4-midnight) graveyard shit (midnight-8)
shift premium
additional copensation provided for employees for wor shifts other than the day shift
on-call pay
paying premium to be on-call, not required
call-back pay
paying premiums employees who are called to work before or after their schedule, not required
reporting pay
when an employee is called into workand there is no work available, may be required to pay min hours by state
hazard pay
additional pay for dangeerous or uncomfortable work conditions
geographic pay
salary structure spacific to location
structure put into place to make sure that pay is aligned with local labor market
incentive pay
reward employees for individua and organizational results
aka pay for perfomance
imp to keep line of sight as center
individual incentives
-should be simple and easy to understand
-can be yearly or more frequent
-may require the need fo new contracts
org/group incentives
-scanlon plan
-profit sharing
employees and mgmt work together to review org performance and both share success and financial gains
establishes baseline productivity and new output is used to calculate performance
scanlon plan
administered by committe representative of employees. productivity and gains are disclosed and employees receive a portion of cost savings
profit sharing
distributes pretax $ based on gains. must have details on how distributed ni case of termination or similar situation
employee stock ownership plans
contribution plans that are tax dedictible where employees own stock
distributed at termination and are taxable at that time
Special pay programs
benefit specific groups of employees like excutives, sales or directors
exacutive pay
varies greatly. executive bonus is usually related to profitability. key elements are benefits and perquisites
"perks" additional benefits that provide comfort and luxury
omnibus budget reconciliation act
modified exec comp by limiting tax deductions to $1 million annually
bonus plans
additional compensation for performance above and beyond what is expected
spot bonus
immediate reward for an outstanding performance
stock options
right to purchase an emloyer's stock at the strike price at a future date
provide an opportunity to purchase shares but do not require it
4 types:
actual shares, not options:
strike price
grant price
incentive stock options
or qualified stock options
can be offered only to employees
not as favorable to co because only receives tax deduction if certain conditions are met

more favorable to employees income not reported until sold at a later date
can be sed for employees, eternal employees ,consultants and board of directors
co. receives tax deduction when options are exercised and employees have further tax implications

more favorable to employers
restricted stock
common stock offered to employees actual shares, not options
usually have a vesting schedule for retention purposes
phantom stock
used in provate companies to provide employee ownership without owning stock
doesn't grant equity
usually received by executis and BODs
compensation fr sales employees paid on comission only must meet at least the min wage
sales bonus plan
receives percentage of salary bonus for exceeding quota
elected by shareholdres to oversse management on behalf of stockholders
if memebers of org, are known as inside directors or external, outside directors
compensable factors
characteristics that distinguish jobs from one another
e.g. bs in eng., 2 yrs. exp.
job evaluation
2 methods
ranking method for job evaluation
compare value of jobs to one another, esp. compensable factors needed
classification methods
IDs benchmark positions and associate with a grade on a hierarchichal structure
benchmark positions
jobs found across orgs. regardless of industry
internal equity
value of jobs to each other relative to their valuue in the org.
assessed through either
-HAY systemt
-point factor
splits positions into broad levels, facilitate lateral movement, single, manager, director, vp
in contrast narrowbanding may have many classifications
point factor
system of points assigned ot wach positions and receives pay grade using various factors like experience, skill, effort, etc.
HAY system
complex point factor system and matched to profile
compensation administration
describes how org, develops and administers pay
job pricing
4 steps
1. review jd, level & skils
2. salary survey
3. review comp. componenets
4. recommend salary range
pay grade
name given to a pay range
green circle
employees below pay range
red circle
employees above pay range
wage compresion
new employees hired for a higher salary that existing workers
compares base pay to midpoint of range
base/midpoint of range x 100
comparable worth/pay equity
about inherent value of job to society and not labor market, social engineering
payroll systems
-must accurately calculate payments due
-calculate statutory and voluntary deductions
-track payroll tax payments due to fed and state
-provide cost reports to mgmt
-provide security for payroll info
calculating exempt employee gorss pay
base, bonus, paid leave
calculating non-exempt gross pay
hours, pay rate, shift differentials, tips, bonuses, paid leave
statutory deductions
-social security
-fed income tax
-state income tax
-unemployment insurance, in some states
-disability insurance, insome states
voluntary deductions
401(k, union dues, and contributions to charity
involuntary deductions
wage garnishments, employees have no say, wages are automatically garnished
consumer credit protection act of 1968
limits amounts to be garnished and prevents from being terminated for a single garnishment order
record keeping
FLSA requires
-birthdate if <19

nonexempt requirements:
-work week
-hours worked
-pay period dates
-straight time and overtime pay
-date of payment
personal responsibility and work opportunity reconciliation act of 1996
requires employer to report all new hires within 20 days of hire date to the state dept. of new hires, requires W-4