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38 Cards in this Set
- Front
- Back
- 3rd side (hint)
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3 elements of total compensation
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base compensation
pay incentives indirect compensation/ benefits |
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Fair labor standards act
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covers non exempt employees
$7.25 per hour min wage Overtime- Time & a half anything over 40 hours per week |
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Exempt employees from the fair labor standards act
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Professional
Adminstrative executive outside sales |
not covered by FLSA
paid by salary |
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Living wage- pros
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right thing to do
decreases amount of govt assistance Reverse teh downward trend in wages for low-wage workers |
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Living wage -cons
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artifically fixing a price for labor above the market price.. cause decrease in demand
Leads to higher unemployment Not an appropriate role of government |
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Eaqual pay act of 1963
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Men & women must be paid teh same for "equal jobs"
skill effort responsibility working conditions it is acceptabel to pay differently based on seniority, merit, quantity/ quality differences or any other differential not related to sex` |
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Criteria for Compensation Plans
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Job vs. Individual
Performance vs. Membership Fixed vs. Variable Internal vs. External Equity Open vs. Secret Centralization vs. Decentralization of Pay Decisions |
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Job vs. Individual
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Will compensation be based on how
the company values a particular job or will it be based on how much skill and knowledge an employee brings to that job? |
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Performance vs. Membership
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Will compensation
emphasize performance and tie pay to individual or group contributions, or will it emphasize membership in the organization – logging in a prescribed number of hours each week and progressing up the organization ladder? |
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Fixed vs. Variable
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Will compensation be paid monthly
on a fixed basis or will it fluctuate depending on preestablished criteria such as performance or company profits? |
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Internal vs. External Equity
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Will the
compensation plan be perceived as fair within the company, or will it be perceived as fair relative to what other employers are paying for the same type of labor? |
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Open vs. Secret
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Will employees have access to
information about other workers’ compensation levels and how compensation decisions are made or will this knowledge be withheld from employees? |
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Centralization vs. Decentralization of Pay
Decisions |
Will compensation decisions be made
in a tightly controlled central location, or will they be delegated to managers of the firm’s units? |
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Job based pay if
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Employees do not need to cover for each other
• Significant training requirements • Employees move up • Standardized jobs within industry |
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Individual-based pay if
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• Relatively educated workforce
• Technology and organizational structure change • Employee participation and teamwork • No upward mobility but skill-development opportunities available • Significant effect of turnover/absenteeism on lost production |
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How do you determine the pay for a
particular job? |
• Job analysis
• Comparison with other jobs within the company - internal equity • Point system • Comparison with other jobs outside the company – external equity • Compensation survey |
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3 Assumptions of Pay for Performance/Incentive
Systems |
• Real differences in performance exit between
individuals/teams/plants. • Firm’s success is dependent on individual/team/plant performance. • Rewards are an important motivational tool. |
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Pay-for-Performance Programs Unit of Analysis Microlevel
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Individual
Merit pay Bonuses Awards Piece rate |
Team
Bonuses Awards |
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Pay-for-Performance Programs Unit of Analysis
Macrolevel |
Business Unit/Plant
Gainsharing Bonuses Awards |
Organization
Profit sharing Stock plans |
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Individual-Based Plans
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• Contributions accurately isolated
• Job demands autonomy • Cooperation isn’t critical or competition is encouraged |
Challenges in Implementation
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Team-Based Plans
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• Interdependent work tasks
• Organization consistent with team-based incentives • Foster entrepreneurship in self-managed work groups |
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Plant-Wide Plans Succeed
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• Small to midsize plants
• Technology limits improvements in efficiency • Consider comparative performance if multiple plants/location • No traditional hierarchy of authority • Product demand relatively stable |
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Differences Between Gain Sharing Plans
and Profit Sharing Plans |
Profit sharing
• Rewards workers based on profits of firm (generally outside worker control) • Mechanistic • Distribution to retirement Gain sharing • Rewards workers for their contributions to firm • Contingent on employee suggestions/ improvements • Self-funded • Frequent cash distributions |
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Corporate-Wide Plans Succeed
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• Difficult to isolate the financial performance of
any given segment of the corporation • Highly cyclical ups and downs in the demand for their product • Creates common goals and partnership among managers and workers Job Dissatisfaction and Stress Potential Reduction of Intrinsic Drives |
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Pay for Performance: The Challenges
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The “Do Only What You Get Paid For” Syndrome
Negative Effects on the Spirit of Cooperation Lack of Control Difficulties in Measuring Performance Psychological Contracts The Credibility Gap |
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The “Do Only What You Get Paid For” Syndrome
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The closer pay is tied to particular performance
indicators, the more employees tend to focus on those indicators and neglect other important job components |
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Negative Effects on the Spirit of Cooperation
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Employees may withhold information from a colleague
if they believe that it will help the other person get ahead |
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Lack of Control
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Employees often cannot control all of the factors
affecting their performance |
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Difficulties in Measuring Performance
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Assessing employee performance is one of the
thorniest tasks a manager faces, particularly when the assessments are used to dispense rewards |
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Psychological Contracts
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Once implemented, a pay-for-performance system
creates a psychological contract between the employee and firm, and it is very resistant to change |
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The Credibility Gap
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Employees often do not believe that pay-forperformance
programs are fair or that they truly reward performance |
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Job Dissatisfaction and Stress
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Pay-for-performance systems may lead to greater
productivity but lower job satisfaction |
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Potential Reduction of Intrinsic Drives
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Pay-for-performance systems may push employees
to the point of doing whatever it takes to get the promised monetary reward and in the process stifle their talents and creativity |
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Meeting the Challenges of pay and performance
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• Link Pay and Performance Appropriately
• Use Pay for Performance as Part of a Broader HRM System • Build Employee Trust • Promote the Belief that Performance Makes a Difference • Use Multiple Layers of Rewards • Increase Employee Involvement • Use Motivation and Nonfinancial Incentives |
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Incentive Pay for Executives
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Short-Term Incentives
Long-Term Incentives |
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Short-Term Incentives
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• Bonuses based on the
year’s profits, return on investment, or other measures related to the organization’s goals. • Actual payment of the bonus may be delayed to gain tax advantages. |
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Long-Term Incentives
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• Include stock options and
stock purchase plans. • Rationale for these longterm incentives is that executives will want to do what is best for the organization because that will cause the value of their stock to grow. |
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Incentive pay for executives lays the groundwork for
______________. |
significant ethical issues.
• When an organization links pay to its stock performance, executives need the courage to be honest about their company’s performance even when dishonesty or clever shading of the truth offers the tempting potential for large earnings. |
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