MGT 468 - Chapter 1 - Pay and Compensation

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MGT 468 - JSU - Chapter 1 - Pay and Compensation

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86 Terms

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compensation objectives, policy decisions, and techniques

What are the three main components of the pay model?

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compensation system

A well-designed ___________ can help an organization achieve and sustain competitive advantage

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competitive advantage

A well-designed compensation system can help an organization achieve and sustain _____________.

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True

True or False:
Poorly designed compensation systems can play a major role in undermining organizational success.

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justice

Some people in society see pay as a measure of _______.

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Laws and regulations

______ and __________ aim to eliminate the gap between male/female earnings differentials.

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Benefits

_______ may also be seen as a reflection of equality or justice in society.

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labor costs (and productivity).

Job losses (or gains) in a country is partly a function of__________.

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behave

How people view compensation affects how they _________.

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Society, Stockholder, Manager, or Employee

What perspectives are compensation looked at/viewed as?

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productivity

Increases in _______ are necessary to generate increases in income and wealth for most of the population.

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income , wealth

Increases in productivity are necessary to generate increases in _____ and _____ for most of the population.

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Economic output per employed person; A measure of national Productivity

What is GDP and what does it measure?

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ownership ; wealth

Some stockholders say using stock to pay employees creates a sense of ________ while others argue it dilutes stockholders _______.

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executives

Stockholders have a particular interest in __________ pay.

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executive

Linking _______ pay to company performance increases stockholders' returns.

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company performance

Linking executive pay to ________ increases stockholders' returns.

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stockholders' returns.

Linking executive pay to company performance increases __________.

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1- It is a major expense that must be managed

2- It is a major determinant of employees attitudes and behaviors.

Compensation influences managers success in two ways. What are those two ways?

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a return in an exchange, an entitlement for being an employee of the company, an incentive to take/stay in a job and invest in performing well, or as a reward for having done so

What are the ways that an employee may view compensation?

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The incentive effect is the degree to which pay influences individual and aggregate motivation.

The sorting effect is the effect that pay can have on the composition of the workforce.

Pay can influence employee motivation in two ways. What are those two ways?

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sorting

The ______ effect is the effect that pay can have on the composition of the workforce.

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incentive

The ______ effect is the degree to which pay influences individual and aggregate motivation.

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sorting

How an organization pays can result in ______ effects.

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True

True or False:
How an organization pays can result in the sorting effect.

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Compensation

All forms of financial returns and tangible services and benefits employees receive as part of an employment relationship.

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True

True or False:
Employees may see compensation as a return in an exchange between their employer and themselves, as an entitlement for being an employee of the company, as an incentive to decide to take/stay in a job and invest in performing well in that job, or as a reward for having done so. Compensation can be all of these things.

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Compensation

________ can be seen by employees as an entitlement, a return, incentive and/or a reward.

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True

True or False:
Compensation can be seen by employees as an entitlement, a return, incentive and/or a reward.

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performance

Motivation, together with employee ability and work/organizational design (which can help or hinder employee performance), determines employee behaviors such as _________.

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incentive effect

The degree to which pay influences individual and aggregate motivation among the employees we have at any point in time.

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motivation ; behavior

Pay can influence employee _____ and ______ in two different ways.

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sorting effect

When higher pay levels attract high quality applicants or ensure retention, this is known as the ________.

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unsolicited outside offers

A substantial share of employee turnover results from receiving ____________________.

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behaviors

Focusing only on the incentive effects of pay (on current workers) can miss the other major mechanism (sorting) by which pay decisions influence employee _______.

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compensation

In English, __________ means something that counterbalances, offsets, or makes up for something else.

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True

True or False:
In China, the traditional characters for the word “compensation” are based on the symbols for logs and water, suggesting that compensation provides the necessities in life.

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total compensation ; relational returns

Total returns are categorized as __________ and ___________.

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relational

Learning opportunities, challenges, status, and so on are known as ______ returns.

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Total compensation

Pay received directly as cash and indirectly as benefits

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Relational

_____ returns such as challenges, learning opportunities, status, rank, etc, are a form of compensation under total returns.

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Total compensation and Relational Returns

What are the two forms of pay?

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Indirect benefits

Pensions, medical insurance, programs to help balance work and life demands, brightly colored uniforms

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cash compensation and benefits

Total compensation are made up of:

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cash compensation

Base pay, merit/cost of living allowance, short term incentives, and long term incentives are known as:

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benefits

Income protection, work-life balance, and allowances are known as:

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total compensation

Benefits and cash compensation fall under the ___________ of the total return.

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Relational Returns

Recognition and status, Employment security, challenging work, and learning opportunities fall under the _____ category of the total return.

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Relational Returns and total compensation (cash compensation and benefits)

What categories are under the total return of an employee?

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Cash Compensation: Base wage

Cash that an employer pays in return for the work performed ; A function of the skill or education an employee possesses

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Cash Compensation: Base wage

A function of the skill or education an employee possesses

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Merit increases

____________ are increments to base pay based on performance

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Merit bonuses

__________ are paid in a lump sum rather than becoming a part of base pay

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cost of living adjustment (COLA)

A _______________ is made to base pay on the basis of changes in what others are paying, living costs, or experience/skill.

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Base wage

__________ is the cash compensation that an employer pays for the work performed and tends to reflect the value of the work or skills and generally ignores differences attributable to individual employees.

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salary

A distinction is often made in the United States between wage and salary, with ___________ referring to pay for employees who are exempt from regulations of the Fair Labor Standards Act (FLSA) and hence do not receive overtime pay.

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salary

Managers and professionals are usually exempt from regulations of the FLSA and therefore are typically ______ employees.

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Salaried

_____ employees pay is calculated at an annual or monthly rate rather than hourly, because hours worked do not need to be recorded.

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Nonexempt

__________ employees are subject to the rules under FSLA and are paid an hourly wage.

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Merit increases

__________ are given as increments to base pay and are based on performance.

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Incentives

__________ are tied to objective performance measures (e.g., sales) usually in a formula-based way.

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The compensation objectives.

The policies that form the foundation of the compensation system.

The techniques that make up the compensation system

What are the three basic building blocks of the pay system?

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Present value of a stream of earnings.

Comparison of today's initial offers to consideration of future bonuses, merit increases, and promotions

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Relational returns from work.

Nonfinancial returns that substantially impact employee behavior

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A network of returns.

Created by different forms of pay; useful if bonuses, development opportunities, and promotions all work together

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Present value of a stream of earnings.

Relational returns from work.

A network of returns

Total earnings opportunities are classified into three (3) groups. What are those?

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Income Protection

Medical insurance, retirement programs, life insurance, and savings plans are common

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Work-life balance

Includes time away from work, access to services, and flexible work arrangements.

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Allowances often grow out of short supply.

China’s housing and transportation allowances

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Incentives

___________ are a one-time payment which differs from merit adjustments.

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Efficiency

_______ is improving performance, increasing quality, and controlling costs

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Fairness ; procedural fairness

______ or ___________ is the process used to make pay decisions

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Ethics

______ means the organization cares about how its results are achieved

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Compliance

_______ is conforming to federal and state compensation laws and regulations

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Internal Alignment

refers to comparisons among jobs or skill levels inside a single organization.

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Internal Alignment

pertains to the pay rates both for employees doing equal work and for those doing dissimilar work

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Pay relationships

________ affect the compensation objectives of efficiency, fairness and compliance.

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efficiency, fairness , compliance

Pay relationships affect the compensation objectives of ____, _____ and ______.

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External competitiveness

____________ refers to pay comparisons with competitors.

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Internal Alignment

External Competitiveness

Employee Contributions

Management

What are the four policy choices of a pay structure/model?

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Merit

________ payments are based on an assessment (or rating) of recent past performance made (with or without a formal performance evaluation).

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93%

If women had the same education, experience, and union coverage as men and worked in the same industry, and occupations, what would their percentage of what men earn be?

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Organizational Incentive Pay

A compensation strategy where financial rewards are tied to the performance of the entire organization, rather than individual or team performance. It aims to align all employees’ interests with the company’s overall success.

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Group Incentive Pay

A compensation system where a team or group of employees receives financial rewards based on the collective performance of the group, rather than individual performance.

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Individual Incentive Pay

A pay plan where each employee’s pay depended on his/her own performance

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Internal Alignment: Work analysis, descriptions, evaluations/certifications, internal structure

Competitiveness: Market definitions, surveys, policy lines, pay structures

Contributions: Seniority based, incentives, merit guidelines, merit guidelines, pay for performance

Management: Cost, Communication, Change, Evaluation

What are the various techniques for meeting the policies of a Pay Model?