HR Final
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208 Terms
What is pay-for-performance standard?
a standard by which managers tie compensation to employee effort and performance
What is pay equity?
an employee’s perception that compensation received is equal to the value of the work performed
What is external equity?
people in similar jobs compare themselves to what others are making in differet organizations
What is internal equity?
people compare themselves to peers in different jobs in the same organizations
What is individual equity?
people compare themselves to others in their organization with the same job
Common Goals of a Compensation Theory
Reward employees’ ____ ________
past performance
Common Goals of a Compensation Theory
Remain _________ in the labor market
competitive
Common Goals of a Compensation Theory
Maintain salary ______ among employees
equity
Common Goals of a Compensation Theory
Motivate employee’s ______ performances
future
Common Goals of a Compensation Theory
Attract _____ employees
new
Common Goals of a Compensation Theory
Reduce _______ turnover
unnecessary
Common Goals of a Compensation Theory
Maintain the company _____
budget
What is direct compensation?
employee wages and salaries, incentives, bonuses, and commissions
What is indirect compensation?
benefits supplied by employers
What is nonfinancial compensation?
employee recognition programs, reward work, organizational support, work environment, flexibility
What is the compensation strategy?
linking compensation, pay for performance and bases for compensation
Objectives and Key Results (OKR) is a system to….
tie compensation to objectives
Objectives and Key Results (OKR)
Set up an objective for your team and the individuals within the team
Objective should be
definitive and measureable
Objectives and Key Results (OKR)
Set up a number of ____ ______ that are quantifiable that your team and each member of the team must complete by a specific time period
key results
To be successful in the OKR system you need to have ______ check-in
quarterly
OKRs to compensation remember
Clarify expectations
if you intend to reward contributors who go above and beyond to complete their objectives, you must first identify the criteria for outstanding performance versus just completing your OKRS on time
OKRs to compensation remember
Balance aspirational with operational
some OKRs can be big stretch goals, while others can be more operational in nature. Determine how many goals are stretch goals as opposed to routine responsibilities, you can determine a ratio and increase people’s performance based on work that they did that was a stretch
OKRs to compensation remember
Consider additional performance factors
hitting your objectives demonstrates hard work, but it does not cover everything that should be rewarded
OKRs to compensation remember
Drive collaboration, not competition
provide bonuses and pay raises on a combination of individual-level and group-level OKRs
What assumption has to hold for a pay secrecy to work?
people can’t share what they make
Should employees be paid based on performance or seniority?
performance
What is hourly work?
work paid on an hourly basis
What is piecework?
work paid according to the number of units produced
What are nonexempt employees?
employees covered by the overtime provisions of the Fair Labor Standards Act
What are exempt employees?
employees not covered by the overtime provisions of the Fair Labor Standards Act
Factors Affecting the Pay Mix
Internal Factors
Compensation Strategy
What is the first step?
internal wage relationship between jobs and skill levels
Factors Affecting the Pay Mix
Internal Factors
Compensation Strategy
What is the 2nd step?
external competition, or an employer’s pay position relative to what competitors are paying
Factors Affecting the Pay Mix
Internal Factors
Compensation Strategy
What is the 3rd step?
policy of rewarding employee performance
Factors Affecting the Pay Mix
Internal Factors
Compensation Strategy
What is the 4th step?
administrative decisions concerning elements of the pay system such as overtime premiums, payment periods, and short or long-term incentives
Factors Affecting the Pay Mix
Internal Factors
Worth of a job
Organizations with formal compensation programs rely on a job _______ system
evaluation
Factors Affecting the Pay Mix
Internal Factors
Worth of a job
A job’s value should be based on
the total value delievered to the organization
Factors Affecting the Pay Mix
Internal Factors
Employee’s Relative Worth
Superior performance can be rewarded by granting merit raises on the basis on the person’s job ________
classification
Factors Affecting the Pay Mix
Internal Factors
Employer’s Ability to Pay
What are some things that affect an employer’s ability to pay?
competition and recession
Factors Affecting the Pay Mix
External Factors
Labor Market Conditions
This is affected by:
supply and demand
Factors Affecting the Pay Mix
External Factors
Area Pay Rates
Formal pay structure should provide rates:
that are in line with those being paid by other employers
Factors Affecting the Pay Mix
External Factors
Area Pay Rates
What are wage surveys?
ensuring external pay equity between the surveying organization and other organizations competing for labor in the surrounding labor market
Factors Affecting the Pay Mix
External Factors
Cost of Living
Why will granting wages based largely on “cost of living” not inspire high performance?
pay is unrelated to individual performance and may cause valued employees to leave the organization
What is consumer price index (CPI)?
a measure of the average change in prices over time in a fixed” market basket” of goods and services
What are escalator clauses?
clauses in labor agreements that provide for quarterly cost-of-living adjustments in wages, basing the adjustments on changes in the consumer price index
Factors Affecting the Pay Mix
External Factors
Collective Bargaining
What are real wages?
wages increase larger that rises in the consumer price index; that is, the real earning power of wages
What is job evaluation?
a systematic process of determining the relative worth of jobs to establish which jobs should be paid more than others within an organization
Job Evaluation Systems
3 traditional methods of comparison
What is the 1st one?
rank the value of jobs from highest to lowest
Job Evaluation Systems
3 traditional methods of comparison
What is the 2nd one?
classify jobs so they can be benchmarked internally and externally
Job Evaluation Systems
3 traditional methods of comparison
What is the 3rd one?
award points to each job based on its link to organizational objectives
Job Evaluation Systems
Job ranking system
the simplest and oldest system of job evaluation, in which jobs are arrayed on the basis of their relative worth
Job Evaluation Systems
Job ranking system
What is one of the disadvantages?
does not measure each job’s worth and only measures the relative importance of each job
Job Evaluation Systems
Job Classification
a system of job evaluation in which jobs are classified and grouped according to a series of predetermined wage grades
Job Evaluation Systems
What is an advantage for GS-1 system?
simplicity
Job Evaluation Systems
Job Classification
What system is better?
point system is more precise
Job Evaluation Systems
Job Classification Systems
What is the GS-1?
classes of positions the duties of which are to perform, under immediate supervision, with little to or not latitude for the exercise of independent judgment
Job Evaluation Systems
Point System
a quantitative job evaluation procedure that determines the relative value of a job based on the total points assigned to it
Job Evaluation Systems
Point System
What is an advantage?
more refined basis for making judgments than either the ranking or classification system
Job Evaluation Systems
Point System
What are compensable factors?
fiscal accountability, leadership, teamwork, and project accountability
Job Evaluation Systems
Point System
What is the point manual?
handbook that contains a description of compensable factors and the degrees to which of the factors that may exist within the jobs
Job Evaluation Systems
Point System
How do you use the point manual?
each factor is assigned a number of points specified in the manual. then when each factor has been determined the total point value for the job as a whole can be calculated
Job Evaluation Systems
Work valuation
a job evaluation system that seeks to measure a job’s worth through its value to the organization
Job Evaluation Systems
What is the hay profile method?
a job evaluation technique using 3 factors- knowledge, mental activity, and accountability- to evaluate executive and managerial positions
What is wage and salary surveys?
a survey of the wages paid to employees of other employers in the surveying organization’s relevant labor market
What do wage and salary survey increase the likelihood of?
internal and external equity
Wage and Salary Surveys
What is the biggest survey data in the US for wage and salary information?
United States of Bureau of Labor Statistics
What is the wage curve?
a curve in a scattergram representing the relationship between relative worth of jobs and pay rates
What is a pay grade?
groups of jobs within a particular class that are paid the same rate
When the point system is used what must happen with pay grades?
must be established at selected intervals that represent either the point or the evaluated monetary values of these days
What is a rate range?
provide a range of rates for each pay grade
What are red circle rates?
payments rates above the maximum of the pay range
What is competence base pay?
pay based on an employee’s skill level, variety of skills possessed, or increased job knowledge
What is a green circle rate?
an employee's salary that falls below the minimum of their position's pay range
What are some advantages of competency base pay?
increase in pay after each skill or knowledge has been mastered, encourages employees to seek out training when new or updated skills are needed by an organization
What are some disadvantages of competency base pay?
limit the amount of compensation emplloyees can earn, regardless of skills they acquire
What is broadbanding?
a pay system that collapses many traditional salary grades into a few wide salary bands
Fair Labor Standards Act of 1938
What is the minimum wage rate? (pay)
$7.25
Fair Labor Standards Act of 1938
How often is minimum wage rate assessed?
every few years and adjusted for cost of living factors
Fair Labor Standards Act of 1938
Minimum wage rate applies to actual earning rate ______ any added overtime premiums
before
Fair Labor Standards Act of 1938
Overtime wage rate
The overtime base rate is ______
1.5 times
Fair Labor Standards Act of 1938
Overtime wage rate
When does a company have to pay overtime?
when over 40 hours are worked
Fair Labor Standards Act of 1938
Overtime wage rate
Base wage rate must include
incentive payments or bonuses received during that period
Fair Labor Standards Act of 1938
Overtime wage rate
Employees paid on a piecework basis must receive a premium
for overtime work
Fair Labor Standards Act of 1938
What is compensatory (comp) time?
employees are given time off in return for overtime work
Fair Labor Standards Act of 1938
When is comp time granted?
1.5 times the number of hours worked as overtime
Fair Labor Standards Act of 1938
Minimum Wage Rate
What is pay rate compression?
compression of pay between new and experienced employees caused by the higher starting salaries of new employees'; also the differential in pay between hourly workers and their managers
Fair Labor Standards Act of 1938
Incorporate the following ideas into pay policies
1.
reward high-performance and merit-worthy employees with large pay increases
Fair Labor Standards Act of 1938
Incorporate the following ideas into pay policies
2.
design the pay structure to allow a wide spread between hourly and supervisory employees
Fair Labor Standards Act of 1938
Incorporate the following ideas into pay policies
3.
prepare high-performing employees for promotions to jobs with higher salary levels
Fair Labor Standards Act of 1938
Incorporate the following ideas into pay policies
4.
provide equity adjustments for selected employees who are hardest hit by pay compression
Fair Labor Standards Act of 1938
Child Labor Provisions
What is the minimum age required for employment?
16
Fair Labor Standards Act of 1938
Child Labor Provisions
At 16 can work unlimited hours as long as they are not working in a _______ occupation
hazardous
Fair Labor Standards Act of 1938
Child Labor Provisions
What can 14 and 15 year olds do for work?
jobs outside of school hours for limited periods of time each day and each week
Fair Labor Standards Act of 1938
Pay Equity Provisions
Why do pay laws exist?
to protect employees against pay discriminations
What is a compensation scorecard?
displays the results for all the measures that a company uses to monitor and compare compensation among internal departments or units
What is internal equity?
how fairly I am paid compared to other people in my org
What is external equity?
how fairly I am paid compared to everyone in the industry
Match Strategy
external market is good
What is leading the market?
more talent, better candidates
Why might some companies lead the market (pay above)?
paying more to make up for a bad part of the job
What is one way to make up for lagging in the market?
offer good benefits and other componets make up for it