Wage & Salary Exam 2

Tools for Building Job Structures:
Job analysis (lead by HR specialists)

• a descriptive procedure

• systematic process for gathering, documenting, and analyzing information in order to describe jobs

Tools for Building Job Structures
Job Evaluation

• Compensation systems set pay levels

• Establish pay differentials

Job analysis assesses: Job analysis method is only valid if it accurately assesses each job's duties.

• Job content

• Worker requirements

• Working Conditions

Job content:

describes job duties, tasks, and pertinent factors needed to perform a job adequately

• Greeting clients, Saying “Hello”, Asking the client’s name, Offering beverages, etc.

Worker requirements:

minimum qualifications and K S A’s

Working Conditions:

social context or physical environment where the work will be performed.

Writing Job Descriptions:
Summarize a job’s purpose tasks, duties, and responsibilities:

contain the following four sections:

• Job title

• Job summary

• Job duties

• Worker specifications

Job Evaluation:

• Systematically recognizes differences in the relative worth among a set of jobs

• Helps to establish pay differentials accordingly

• Job evaluation partly reflects the values and priorities that management places on various positions

• Job analysis, in contrast, is almost purely descriptive

Universal Compensable Factors:

• Skill

• Effort

• Responsibility

• Working Conditions

Two Examples of Job Evaluation Techniques:

• Market-based evaluation: uses market data to determine differences in job worth

• Job-content evaluation: emphasizes company’s internal value system by establishing a hierarchy of internal job worth; the point method is a job-content evaluation system

Market-based evaluation:

uses market data to determine differences in job worth

Job-content evaluation:

emphasizes company’s internal value system by establishing a hierarchy of internal job worth; the point method is a job-content evaluation system

What is the purpose of Strategic Analysis in the Market-Competitive Pay System?

entails an examination of a company’s external market context and internal factors:

External market context:

• industry profile

• information on competition

• long-term prospects

Internal factors:

• financial condition

• functional capabilities

Define Strategic Analysis:

is an in-depth examination of the external and internal environmental factors that are likely to have the greatest impact on the future of the company.

Define Job Leveling:

• differences between a company’s jobs and benchmark jobs

• Corrections for these differences are based on subjective judgment

• The process for making these corrections is referred to as job leveling

• Point level factor refers to one job leveling process

Regression Analysis:

• Analyses enable compensation professionals to establish pay rates for a set of jobs that are consistent with typical pay rates for jobs in the external market.

• Statistical procedure designed to find the best-fitting line between two variables

Regression Analysis Formula:

Y = a +bX

Y = predicted salary

X = job evaluation points

a = Y intercept

X = 0

b = the slope

Pay-Level Policies:

•Market lead (75^th percentile)

•Market match (50^th percentile)

•Market lag (25^th percentile)

Market lead (75^th percentile):

• Levels above market pay lines

• Best for differentiation strategies

Market match (50^th percentile):

• Pay according to market pay line

• Appropriate with differentiation strategy

Market lag (25^th percentile):

• Levels below market pay lines

• Best for lowest-cost strategies

What are Compensation Surveys used for?

as survey tools used by employers to determine the pay levels needed to recruit highly qualified employees.

Focus on two factors:

• Competitors’ wages

• Salary practices

What are Benchmark Jobs?

Jobs used as reference points for job evaluation and compensation comparisons

What are the 4 Characteristics of Benchmark Jobs?

1. Contents are established, well-known, stable
2. Common across employers
3. Entire range of jobs
4. Accepted for setting pay ranges

market points to run the regression analysis 

What are the Three Methods of Dispersion?

1. Standard Deviation
2. Quartile
3. Percentile

Standard deviation:

Refer to the mean distance of each figure from the mean

Quartile:

Percentile of figures below a point based on four groupings

• 25

• 50

• 75

• 100

Percentile:

Percentage of figures below a point based on 100 groupings

Define Pay Grades:

Based on compensable factors, values, management philosophy

Widths:

       •Narrow or wide

       •Affects hierarchy and social distance

      •Absolute or percentage-based job evaluation points

Define: Pay Ranges

1. Build upon pay grades
2. Include: min, max, midpoint
3. Pay grades represent horizontal dimension
4. Pay ranges represent vertical dimension

What is Pay Compression?

When the pay spread between newly hired or less qualified individuals, and more qualified job incumbents is small

Threatens competitive advantage

Caused by:

• Failure to raise pay range minimum and maximum rates

• Scarcity of qualified applicants

Pay structures represent:

• Pay rate differences for jobs of unequal worth

• The framework for recognizing differences in employee contributions

Companies recognize Pay Structure differences by paying individuals according to their:

• Credentials

• Knowledge

• Job performance

Calculating Pay Ranges and Spreads:

• Minimum: midpoint" / ("100%" +(range spread/2)

• Maximum: minimum + (range spread x minimum)

• Difference between maximum and minimum values

Green Circle Rates:

Paying below minimum pay rates

Results from:

• Paying employees who do not meet the minimum requirements less than the minimum rate

• Failure to raise pay range minimum and maximum rates

Define: Compa-Ratios

Compa-ratios index competitiveness of internal pay rates based on midpoints

Pay rate divided by the pay range midpoint

• 1 = market match rate

• x < 1 = market lag rate

• x > 1 = market lead rate

What are the two approaches companies typically take for Timing pay raises?

• Common review date or common review period

• Employee’s anniversary date

Nonrecurring merit increases or lump sum bonuses, lend themselves well to cost containment since these bonuses are not permanent percentage increases.

What is Commission-Only compensation?

Commission is a form of compensation based upon a percentage of the selling price of a product or service.

Multi-tiered Commission:

• employee earns a higher rate for all sales made in a given period if the sales level exceeds a predetermined level

• Increased percentage rates for meeting and exceeding sales goal

• Ex: 8% if total sales volume < 1,000 units, 12% if total sales volume > 1000 units.

Origins of Employee Benefits:

• Retirement plans – one of the first signs in the use of discretionary benefits

• Discretionary benefits as an alternative to pay hikes

• Wage freezes by the government contributed to the use of welfare benefits

• Unions contributed indirectly to the rise in discretionary benefits offerings

• Greater workforce diversity contributed to the use of flexible benefits plans

• Legally required benefits are social insurance

Define: Pension Protection Act (PPA) of 2006

Designed to strengthen protection for employees' retirement plans using:

• Benefit Plans: Pension Benefit Guarantee Corporation makes it more difficult for employers to skip making required payments to insure these plans

• Contribution Plans: enable companies to enroll their employees automatically in plans like profit-sharing plans, stock bonus plans, and employee stock ownership plans

What are Wellness Programs designed to do?

Help keep health costs low:

• Weight control and nutrition

• Stress management

• Smoking cessation

Long-Term Disability:

• 6 months to life

• Unable to perform any job qualified for

• Benefit: 50% to 70% of pretax pay

• 6 to12 month elimination (waiting) period

• Other benefits used first

Life Insurance Types:

• Term life insurance: provides protection to employees’ beneficiaries only during a limited period based on a specified number of years

• Whole life insurance: does not terminate until payment is made to beneficiaries

• Universal life insurance: combines features of term life and whole life

Outplacement Assistance Programs Factors:

• Layoffs due to economic hardship

• Mergers and acquisitions

• Company reorganizations

• Changes in management

• Plant closings or relocation

• Elimination of specific positions, often the result of changes in technology

What is required for Unemployment Insurance Eligibility?

• Able and available for work

• Actively seeking work

• Has not refused suitable work

• Must be employed for the last four or five quarters prior to becoming unemployed, known as the base period

Grandfathered Plans:

Health plans in existence prior to the enactment of P P A C A on March 23, 2010

• Grandfathered plans can lose status if there are substantial modifications, for example, elimination of all or substantially all benefits to diagnose or treat particular medical conditions

Non-Grandfathered Plans:

Health plans established after the enactment of P P A C A

Health Care Plans: Common Features

• Deductibles: The amount an insured must pay for services before health insurance benefits become active.

• Coinsurance: The insured pays a percentage of covered expenses.

• Copayment: A set dollar amount that the patient must pay for a specific service, treatment, or medication.

• Out-of-pocket maximums: The maximum amount the insured must pay per calendar year or plan year.

Consumer-Driven Health Care Plans:

• Refers to the objective of helping companies maintain control over costs while also enabling employees to make greater choices about health care

• Enables employers to lower the cost of insurance premiums by selecting plans with higher employee deductibles

OASDI (Old - Age, Survivors, & Disability) Retirement Statistics:

• Earn 40 quarters of credit to become fully insured

• Once fully insured, you remain fully insured during your lifetime

• Retirement age for full benefits slowly increased from age 65 to 67, final in 2022.

• To be fully insured would have to work at least 10 years

Family and Medical Leave Act:

Eligible workers must have been employed for at least 12 months by the employer and provided at least 1,250 hours of service during the 12 months prior to making a request for leave.

12 weeks of unpaid leave for:

• Birth, adoption, foster care

• Serious family medical problems

• Worker’s serious medical problem

Retention of:

• Seniority

• Health insurance coverage

• Credit for previous service

• Accrued retirement benefits

Patient Protection and Affordable Care Act of 2010 (P P A C A):

• P P A C A provides the basis for health care reform in the U.S.

• P P A C A mandates health care coverage and sets minimum standards for insurance

• Companies with at least 50 employees

Flexible Spending Accounts (F S A):

• Permit employees to pay for specified health care costs that are not covered by an employer’s insurance plan

• Prior to each plan year, employees elect the amount of pay they wish to allocate

Advantage:

• Ability to make contributions on a pretax basis

Disadvantage:

• “use it or lose it” provision of FSAs