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79 Cards in this Set
- Front
- Back
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What is Compensation?
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Compensation represents the rewards employees receive for performing their job.
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Intrinsic compensation
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critical psychological states that result from performing their jobs.
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extrinsic compensation
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monetary and nonmonetary (benefits) rewards
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Base pay
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Hourly pay & Annual Salary
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Base pay adjustments
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COLAs: cost of living adjustments
Merit pay : roll into pay Incentive pay: incentivize, fluctuating (bonus, new goal) Seniority pay: length of service Person-focused pay: competencies, skills, ability (flexibility) |
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Non-Monetary pay
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Benefits
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Legally required benefits
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Healthcare, Social Security, Workers comp., etc.
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Discretionary benefits
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Daycare, discounts, car, membership, paid time off etc.
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What are the objectives of compensation systems?
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Attraction
Retention Motivating performance/behavior reinforce firm strategy can change with what jobs/company/context |
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Compensation should be
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Internally consistent: correct amount for job, correct $ for value/worth of job
Can evaluate by job analysis Competitive with the market: What are they worth generally? Different industry, some types, can we attract/retain Recognize one's contribution: does it motivate & recognize performance |
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Planned use of company resources
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technology
capital human resource |
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List two generic competitive strategy choices
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low cost strategy
differentiation strategy |
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List 4 job situations where low cost strategy is effective
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jobs include predictable behaviors
jobs have a short term focus jobs require autonomous activity (work independently) jobs focus on quantity of output. (ex. Walmart, Mcdonalds, retail mall-jobs, zales, southwest, ikea, carmax) |
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List 4 job situations where differentiation strategy is effective
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jobs require highly creative behaviors
jobs have long term focus jobs demand cooperation and independence jobs involve risk-taking. (ex. apple, dell, ibm, luxury car design) |
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Strategic compensations -- external consistency/vertical alignment
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big picture
alignment with business practices strategic for business, make sense for company as whole |
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Strategic compensations -- internal consistency/horizonal alignment
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HR practices are mutually reinforcing
synergy within selection, recruitment, pay, etc. |
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Compensation department 3 important 'main' goals
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internal consistency
market competitiveness recognition of individual contributions |
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Internal consistency
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achieved when the value of each job is clearly defined
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What does internal consistency represent?
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job structure
heirarchy |
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How do you achieve internal consistency?
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job analysis -- job evaluation
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Market competitiveness
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compensation policies that fit with business objectives
vital in attracting and retaining employees |
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Competitive market compensation is based on what two things?
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strategic analysis
compensation surveys |
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Individual contributions -- pay structures
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recognize differences across jobs and employee credentials, job knowledge, and job performance
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Individual contributions -- pay grades
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based on compensable factors and value (pay band is broader, but the same)
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Individual contributions -- pay ranges
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builds on grades, uses midpoints, minimums, and maximums.
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Relevant employment laws -- in order of date
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Fair labor standards act (1938)
Equal pay act Title VII civil rights act (1964/1991) older workers benefit protection act Pregnancy discrimination act (1978) Family and medical leave act (1993) COBRA Executive orders, regs for contractors |
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Compensation law themes
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Income continuity, safety, and work hours
address pay discrimination meeting disabilities and family needs prevailing wage laws |
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3 broad issues in FLSA of 1938
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minimum wage
overtime pay child labor previsions |
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6 defining FLSA training factors
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site training
training benefits the trainee trainee is closely supervised on job no immediate benefit to employer trainee not guaranteed employment paid training not mandatory |
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Compensable work activities (portal to portal act)
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waiting time
on call time rest and meal periods sleeping time and other certain activities lectures, meetings, and training programs travel time (home to work home to work on special assignments travel that is all in a days work travel away from home community) |
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Child labor
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age 14 and younger cant work
14 & 15 can work (3 hours on school nights 18 hours a week during school 40 hours a week when schools out) 16 & 17 (no hourly restrictions cant work in a hazardous condition) |
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Equal pay act of 1963
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Broadened FLSA
enforced by EEOC prohibited sex discrimination for performing equal work defined compensable factors established legal pay differentials |
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4 Compensable factors
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Skill
Effort Responsibility Working conditions |
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Legal pay differentials
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Payments made pursuant to a -*- Seniority system
Merit system earning measured by quantity or quality of production differentials not based on gender |
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Two types of discrimination under Civil rights act of 1964 Title VII
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Disparate treatment
disparate impact |
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Disparate treatment
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Intentional
workers treated unfairly because of race, color, religion, gender, or national origin |
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Disparate impact
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unintentional
unequal treatment of protected employee groups |
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OWBPA
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Amendment to ADEA; places additional restrictions on employer benefit practices
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Pregnancy Discrimination act of 1978 (PDA)
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Amendment to Title VII
prohibits disparate impact of pregnancy pregnancy treated like disability also issues with benefits, cant be charged more or premiums |
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Family and medical leave act of 1993 (FMLA)
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Job protection during family and medical emergencies
Guarantees unpaid leave employee returns with same or similar (position, pay, conditions, benefits) |
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Davis-Bacon Act
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Standards for contractors with federal contracts (>$2000)
Applies to on-site laborers and mechanics must pay prevailing wages must offer comparable benefits |
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Walsh-Healey public contracts act
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Covers contractors and manufacturers who sell supplies, materials, and equipment to the federal government (>$10,000)
Coverage is more extensive than Davis-Bacon act Applies to both construction and non-construction activities |
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Federal Insurance Contributions Act (FICA)
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tax both employee and employer
6.2% and a ceiling for first $113,700 for social security 1.45% for medicare |
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Federal Unemployment Tax Act (FUTA)
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This is federal tax 6% employer ($7,000)
also state taxes from "experience rating" via layoff history tax deduction |
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Consolidated omnibus budget reconciliation act of 1985 (COBRA)
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Provide employees opportunity to continue receiving employer-sponsored medical care insurance temporarily if their coverage otherwise ceases due to: termination, layoff, other change in employment status
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Traditional bases of pay
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Seniority pay
longevity pay merit pay |
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Rationale for Seniority pay
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Grounded in human capital theory
employees become more valuable over time good employees may leave if not compensated fairly |
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Rationale for Merit Pay Plans
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Link pay to performance
reward excellent effort or results motivate future performance help retain values employees |
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Expectancy Theory - Motivation
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E x I x V
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Expectancy Theory - Expectancy
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Perceived probability of successful performance
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Expectancy Theory - Instrumentality
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Perceived probability that successful performance will lead to rewards
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Expectancy Theory - Valence
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Subjective value of offered rewards
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Three types of Comparison Systems
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Ranking
forces distribution paired comparisons |
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Goal-Oriented System - Management-by-objectives
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Supervisors and employees set objectives
highly effective technique rated on how well objectives are met mainly for professionals and managers |
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Four major types of Rater Errors
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Bias errors
Contrast Errors Errors of central tendency Errors of leniency or strictness |
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Bias Errors
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First-impression effect
Positive halo effect Negative halo effect similar-to-me effect illegal discriminatory biases |
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Contrast Errors
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Supervisor compares employees' performances to other employees, not to explicit performance standards
Evaluating someone's performance, but not against objective measure, basing it on someone else |
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Pay for Performance
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Link appraisals to business goals
Analyze jobs Communicate: understand how the pay is administered, how it is linked to performance Establish effective appraisals Empower employees Differentiate among performers |
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Limitations of Merit Pay Programs (list)
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Failure to differentiate among performers
poor measures supervisor biases poor communication undesirable social structures using non merit factors undesirable competition little motivational value |
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Incentive pay - Compensation fluctuates according to
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pre-established formula
individual or group goals company earnings |
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3 incentive pay categories
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Individual
group company-wide |
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Gain sharing plan
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Incentives based on company performance in (increased productivity
increased customer satisfaction lower costs better safety records) based on open leadership involved employee participation includes bonuses |
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3 Types of company wide incentive plans
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Profit sharing plans
restricted stock ee stock options |
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Three types of Ee ownership
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Company stock
stock options ESOPs |
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Advantages of individual incentive pay
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You as an individual get rewarded
clear link between performance and reward dont have to worry about other people pulling you down |
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Disadvantages of individual incentive pay
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Encourage highly competitive atmosphere
hinder teamwork if competing for bonus hard to figure out what one person does |
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Advantages for group incentive pay
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Work together
good context diversity in ideas and personality different skills and behaviors |
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Disadvantages for group incentive pay
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Others bring you down, take on too much
Harder to measure than individuals |
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Advantages of company-wide incentive pay
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Promote achievement of something bigger
best interest in company/profitability/direction |
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Disadvantages of company-wide incentive pay
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Front end, not strong link between performance and how company does
short term/temp ees not as motivated or held accountable |
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Person focused plans reward ee's for acquiring job-related what? (list at least 3)
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competencies
knowledge skills (values, teamwork, leadership, attitudes, KSAO) changing actual pay for new skills |
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Horizontal skills
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Skills at the same level of responsibility or difficulty
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Vertical skills
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Skills that are traditionally considered supervisory
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Depth of skills
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Level of expertise or specialization an employee possesses
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Competencies
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Unique combined characteristics of the person that enables ees to fulfill job requirements well
core competencies are derived from company's strategic statements |
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Stair-step model
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Jobs from same job family
jobs differ in complexity higher the step, greater the skills companies use separate models models designed to match jobs |
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Skill block model
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applies to jobs in the same job family
ees expected to progress to increasingly complex jobs skills may not build on eachother emphasizes horizontal and vertical skills |
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Job point accrual model
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applied to jobs from different job families
creates organizational flexibility points are assigned to various skills the higher the number of points, the higher the core compensation levels |
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Cross departmental model
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ee develop skills usable in other departments
helps manage sporadic, short term staffing shortages helps meet seasonal fluctuations |
