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35 Cards in this Set

  • Front
  • Back
Total compensation equation
BASE COMP+Pay Incentive+Benefit
base compensation
fixed pay an employee receives on a regular basis
Pay incentives
reward employees for good performances
approaches 41% of workers' compensation
Internal equity
perceived fairness of the pay structure within a firm
External equity
perceived fairness in pay relative to what other employers are paying for the same type of labor
Distributive Justice model
Employees exchange their contributions or input to the firm for a set of outcomes

Compare what they bring to the firm and what they receive in return

Compare input/output ratio
Labor Market Model
supploy of labor equals the demand for labor in the marketyplace
Balancing equity
internal equity focus for older and more established firms

retention bonuses in bad times
Fixed pay
reduces risk to both employer and employee
helps reduce unemployment

10% of U.S. pay is variable
Performance vs. Membership
pay tied to individual or group contributions
piece-rate plans/commissions

contingent compensations- provide the same or similar wage to every employee in a given job
Skill Based Pay
pay system in which employees are paid on the basis of the jobs they can do or talents they have that can be successfully applied to a variety of tasks and situations
Elitism vs. Egalitarianism
Elitism- different compensation plans by organization level

Egalitarianism- most employees under same compensation

More flexibility without promotion into management
Below Market vs. Above-Market
Above- markety pay policies are more prevalent among large companies in less competitve industries

Below- work in depressed areas
Monetary vs. Nonmonetary Rewards
Pay ranks higher than people comment on

Stable workforce- emphasize more nonmonetary rewards
Open vs. Secret Pay
O- eliminates paranoi, force managers to be more fair, but managers are forced to defend decisions and more time involved in this argument
Centralization vs. Decentralization of Pay Decisions
HR department should do it because of frequent legal issues

Decentralized in large and diverse organization
Pay grades
groups of jobs that are paid within the same pay range

most important jobs pay the most


Achieving internal equity
Achieving external equity
Achieving individual equity
Achieving Intteranl Equity through Job Evaluation
1. Conduct a job analysis
2. Write a job description
3. Determine Job Specifications
4. Rate worth of all jobs using a predetermined system
5. Create a Job Hierarchy
6. Clarify Jobs by Grade Levels
Compensable factors
work related crteria that an organization considers most imiportant in assessing the relative value of different jobs
Job Hierarchy
listing of jobs in terms of their relative assesssed value
Achieving External Equity: Markety Surveys
1. Identify Benchmark or Key Jobs

2. Establish a pay policy
Jobs that are similar or comparable in content across firms
Pay policy
firms decison to pay above at or below market
Individual equity
fairness in pay decisions for employees holding the same job
Evaluating Job-Based Compensation Plans
Definitions of jobs change and vary
Subjective process
Less approrpiate at higher levels

Jobs continue to be more broadly defined

Bureaucratic, mechanistic, inflexible

Discriminates against women

No definitive data

Employees perception is the one tha counts
Suggestions for practice for Jobs based pay
think strategically in making policy decisions concerning pay

Secure employee input

job banding

examine statistics and dual career ladders
Job banding
replacing narrowly defined jobs with ones more broadly defined
Skill based compensation plans: 3 skills
Depth skill- expert in a field

Horizontal skill- knowledge of job within a firm

Verical skills- SM abilities
Advantages and Disadvantages of skill based compensation plans.

Flexible workforce
Promotes cross-training
Fewer supervisors
Increases employee control over compensation

Leads to higher compensation and training costs
Employee skills may become rusty
When at top/no motivation occurs
Can become a guessing game
May require time-consuming processes
FLSA Fair Labor Standards Act
Must keep accurate records of how much employees work

exempt vs. non exempt
Equal Pay Act
Four exceptions that allow employees to pay one sex more than another

1. seniority
2. better job performance
3. Greater quantity or quality of production
4. Night shift, etc.
comparable owth
comparable pay for jobs that require comparable skills
IRC Internal Revenue Code
affects how much of their earning employees can keep

withhold part of employees income