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78 Cards in this Set
- Front
- Back
Compensation
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all forms of financial returns and tangible services and benefits that employees receive as part of an employment relationship
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Relational Returns
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-psychological returns employees believe they receive in the workplace
-IE: learning opportunities, recognition and status, challenging work, etc. |
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Total Rewards
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all rewards received by employees, including cash compensation, benefits, and relational return
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Wage
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pay expressed at an hourly rate
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Salary
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pay expressed at an annual or monthly rate
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Base Pay |
-wage or salary; cash compensation received for work performed -reflects the value of the work or skills and generally ignores differences attributable to the individual employee |
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Merit increase
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increment to base pay in recognition of past work behaviour
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Cost of living adjustment
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percentage increment to base pay provided to all employees regardless of performance in order to maintain pay levels relative to increases in cost of living
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Incentives (variable pay)
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one time payments for meeting pre-established performance objectives in a future time period
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Work/Life programs
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programs that help employees better integrate their work and life responsibilities
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Allowances
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compensation to provide for items that are in short supply such as lodging
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Contributing Factors to Wage Determination |
1. human capital (work experience, education, tenure) 2. demographics characteristics (marital status, children at home) 3. job characteristics (industry, size of establishment, type of work) |
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Pay Model |
Contains 3 basic building blocks: 1. strategic compensation objectives 2. strategic policies that form the foundation of compensation 3. techniques of compensation |
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Basic Objectives of Pay Systems |
1. Efficiency 2. Fairness 3. Compliance with laws & regulations |
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Efficiency |
1. Improve performance or quality 2. Control labour costs |
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Procedural Fairness |
Concerned with processes used to make decisions about pay. |
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Internal Alignment
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pay comparisons between jobs or skill levels inside a single organization
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External Competitiveness
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comparison of compensation with that of competitors
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strategic perspective
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a focus on compensation decisions that help the organization gain and sustain competitive advantage
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strategy
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the fundamental business decisions an organization has made to achieve its strategic objectives such as what business to be in and how to obtain competitive advantage
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competitive advantage
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a business practice or process that results in better performance than one's competitors
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best fit perspective
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suggests that compensation be aligned or fit with the specific business strategy adopted by the organization
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best practices perspective
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suggests there is one set of best pay practices that can be applied universally across situations and strategies, attracting superior employees who then create a winning strategy
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Internal equity
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the relationships between the jobs within a single orga
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Pay structure
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the array of pay rates for different work or skills within a single orga; the number of levels, the differentials in pay between levels, and the criteria used to determine these differences create the structure
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workflow
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process by which goods and services are delivered to the customer
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differentials
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pay differences between job levels
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marginal productivity theory
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the theory that unless an employee can produce something of value from his/her job equal to the value received in wages, it will not be worthwhile for an employer to hire that employee
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human capital
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the education, experience, knowledge, abilities, and skills that people possess
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internal labour markets
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rules and procedures that determine the pay for different jobs within a single organization and that allocate employees to those different jobs
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procedural justice
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fairness of a process by which a decision is reached
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distributive justice
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fairness of a decision outcome
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tailored structure
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pay structure for well defined jobs with relatively small differences in pay
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loosely couples structure
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pay structure for jobs that are flexible, adaptable, and changing
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Equity theory
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Focuses on how employees compare their work qualifications and pay to those of others (judge fairness of their pay)
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Tournament Theory
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Suggests that the greater the difference between salaries in the pay structure the harder employees will work
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Institutional Theory
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Organization should copy the "best practices" of others
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Job analysis
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the systematic process of collecting information about the nature of specific jobs
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Position analysis Questionnaire (PAQ)
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a structured job analysis questionnaire used for analyzing jobs on the basis of 194 job elements that describe generic work behaviours
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job description
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written summary of a job including responsibilities, qualifications, and relationships
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Job specifications
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qualifications required to be hired for a job; may be included in the job description
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offshoring
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movement of jobs to locations beyond home country borders
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validity
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accuracy of a measure
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benefits of traditional job analysis?
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provides defensible job related decisions and establishes a foundation for career paths
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job structure
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hierarchy of all jobs based on value to the organization; provides the basis for the pay structure
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job evaluation
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the process of systematically determining the relative worth of the job to create a job structure for the organization
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benchmark job
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a job whose contents are well known, relatively stable, and common across different employers
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Ranking
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a job evaluation method that ranks jobs from highest to lowest based on a global definition of value
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alternation ranking method
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ranking the highest and lowest valued jobs first then the next highest and lowest values jobs repeating the process until all jobs have been ranked
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paired comparison method
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listing all the jobs across columns and down rows of a matrix, comparing the two jobs in each cell and indicating which is of greater value, then ranking the jobs on the basis of the total number of times each is ranked as being of greater value
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classification
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job evaluation method based on job class descriptions into which jobs are categorized
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point method
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job evaluation method that assigns a number of points to each job based on compensable factors that are numerically scaled and weighted
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Six steps in the point method
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1) conduct job analysis
2) determine compensable factors 3) scale the factors 4) weight the factors and assign points 5) communicate the plan 6) apply the plan to non benchmark jobs |
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compensable factors
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those characteristics of the work that the organization values, that help it pursue its strategy, and that achieve its objectives
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factor degree/level
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description of several different degrees or levels of a factor in jobs; a different number of points will be associated with each degree/level
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factor weights
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weighting assigned to each factor to reflect the differences in importance attached to each factor by the employer
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Skill based pay structures
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link pay to the depth or breadth of the skills, abilities, and knowledge a person acquires that are relevant to the work
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Skill analysis
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a systematic process to identify and collect information about skills required to perform work in an organization
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four basic steps in skill analysis
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1) decide what info should be collected
2) decide what methods should be used to collect info 3) decide who should be involved 4) ensure the results are useful for pay purposes by establishing certification methods |
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competencies
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underlying, broadly applicable, knowledge, skills, and behaviours that form the foundation for successful work performance
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Competency based pay structure
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links pay to work related competencies
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core competencies
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competencies required for successful work performance in any job in the organization
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competency sets
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specific components of competency
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competency indicators
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observable behaviours that indicate the level of competency within each competency set
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competency analysis
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a systematic process to identify and collect information about the competencies required for successful work performance
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two possible sources of bias in internal pay structures
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1) bias in the job evaluation of traditionally female dominated jobs
2) bias in current wages that may be perpetuated when job evaluation plans are structured to mirror existing pay rates |
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Pay level
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the average of the array of rates paid by an employer: Base+Bonuses+Benefits+Stock Options / # of employees
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Pay forms
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the mix of the various types of payments that make up total compensation
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Marginal product of labour
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the additional output associated with the employment of one additional human resources unit, with other production factors held constant
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marginal revenue of labour
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the additional revenue generated by each additional unit of human resources, with other production factors held constant
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compensating differentials theory
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the idea that higher wages must be offered to compensate for negative features of jobs
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efficiency wage theory
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high wages may increase efficiency and lower labour costs by attracting higher quality applicants who will work harder
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Signalling theory
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the idea that pay levels and pay mix are designed to signal desired employee behaviours
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Reservation wage theory
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the idea that job seekers have a reservation wage level below which they will not accept a job, no matter how attractive the other job attributes
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human capital theory
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the idea that higher earnings are made by people who improve their potential productivity by acquiring education, training, and experience
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external competitiveness
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the relationship of one organizations pay to that of its competitors
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Three major factors that shape external competitiveness
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1) competition in the labour market for ppl with various skills
2) competition in the product and service markets which affects the financial condition of the organization 3) characteristics unique to each organization and its employees such as its business strategy, technology and the productivity and experience of its sales force |
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Three competitive pay level alternatives
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1) match the market
2) lag the market 3) lead the market |