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MGT 468 - JSU - Chapter 1 - Pay and Compensation
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compensation objectives, policy decisions, and techniques
What are the three main components of the pay model?
compensation system
A well-designed ___________ can help an organization achieve and sustain competitive advantage
competitive advantage
A well-designed compensation system can help an organization achieve and sustain _____________.
True
True or False:
Poorly designed compensation systems can play a major role in undermining organizational success.
justice
Some people in society see pay as a measure of _______.
Laws and regulations
______ and __________ aim to eliminate the gap between male/female earnings differentials.
Benefits
_______ may also be seen as a reflection of equality or justice in society.
labor costs (and productivity).
Job losses (or gains) in a country is partly a function of__________.
behave
How people view compensation affects how they _________.
Society, Stockholder, Manager, or Employee
What perspectives are compensation looked at/viewed as?
productivity
Increases in _______ are necessary to generate increases in income and wealth for most of the population.
income , wealth
Increases in productivity are necessary to generate increases in _____ and _____ for most of the population.
Economic output per employed person; A measure of national Productivity
What is GDP and what does it measure?
ownership ; wealth
Some stockholders say using stock to pay employees creates a sense of ________ while others argue it dilutes stockholders _______.
executives
Stockholders have a particular interest in __________ pay.
executive
Linking _______ pay to company performance increases stockholders' returns.
company performance
Linking executive pay to ________ increases stockholders' returns.
stockholders' returns.
Linking executive pay to company performance increases __________.
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?
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?
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?
sorting
The ______ effect is the effect that pay can have on the composition of the workforce.
incentive
The ______ effect is the degree to which pay influences individual and aggregate motivation.
sorting
How an organization pays can result in ______ effects.
True
True or False:
How an organization pays can result in the sorting effect.
Compensation
All forms of financial returns and tangible services and benefits employees receive as part of an employment relationship.
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.
Compensation
________ can be seen by employees as an entitlement, a return, incentive and/or a reward.
True
True or False:
Compensation can be seen by employees as an entitlement, a return, incentive and/or a reward.
performance
Motivation, together with employee ability and work/organizational design (which can help or hinder employee performance), determines employee behaviors such as _________.
incentive effect
The degree to which pay influences individual and aggregate motivation among the employees we have at any point in time.
motivation ; behavior
Pay can influence employee _____ and ______ in two different ways.
sorting effect
When higher pay levels attract high quality applicants or ensure retention, this is known as the ________.
unsolicited outside offers
A substantial share of employee turnover results from receiving ____________________.
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 _______.
compensation
In English, __________ means something that counterbalances, offsets, or makes up for something else.
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.
total compensation ; relational returns
Total returns are categorized as __________ and ___________.
relational
Learning opportunities, challenges, status, and so on are known as ______ returns.
Total compensation
Pay received directly as cash and indirectly as benefits
Relational
_____ returns such as challenges, learning opportunities, status, rank, etc, are a form of compensation under total returns.
Total compensation and Relational Returns
What are the two forms of pay?
Indirect benefits
Pensions, medical insurance, programs to help balance work and life demands, brightly colored uniforms
cash compensation and benefits
Total compensation are made up of:
cash compensation
Base pay, merit/cost of living allowance, short term incentives, and long term incentives are known as:
benefits
Income protection, work-life balance, and allowances are known as:
total compensation
Benefits and cash compensation fall under the ___________ of the total return.
Relational Returns
Recognition and status, Employment security, challenging work, and learning opportunities fall under the _____ category of the total return.
Relational Returns and total compensation (cash compensation and benefits)
What categories are under the total return of an employee?
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
Cash Compensation: Base wage
A function of the skill or education an employee possesses
Merit increases
____________ are increments to base pay based on performance
Merit bonuses
__________ are paid in a lump sum rather than becoming a part of base pay
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.
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.
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.
salary
Managers and professionals are usually exempt from regulations of the FLSA and therefore are typically ______ employees.
Salaried
_____ employees pay is calculated at an annual or monthly rate rather than hourly, because hours worked do not need to be recorded.
Nonexempt
__________ employees are subject to the rules under FSLA and are paid an hourly wage.
Merit increases
__________ are given as increments to base pay and are based on performance.
Incentives
__________ are tied to objective performance measures (e.g., sales) usually in a formula-based way.
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?
Present value of a stream of earnings.
Comparison of today's initial offers to consideration of future bonuses, merit increases, and promotions
Relational returns from work.
Nonfinancial returns that substantially impact employee behavior
A network of returns.
Created by different forms of pay; useful if bonuses, development opportunities, and promotions all work together
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?
Income Protection
Medical insurance, retirement programs, life insurance, and savings plans are common
Work-life balance
Includes time away from work, access to services, and flexible work arrangements.
Allowances often grow out of short supply.
China’s housing and transportation allowances
Incentives
___________ are a one-time payment which differs from merit adjustments.
Efficiency
_______ is improving performance, increasing quality, and controlling costs
Fairness ; procedural fairness
______ or ___________ is the process used to make pay decisions
Ethics
______ means the organization cares about how its results are achieved
Compliance
_______ is conforming to federal and state compensation laws and regulations
Internal Alignment
refers to comparisons among jobs or skill levels inside a single organization.
Internal Alignment
pertains to the pay rates both for employees doing equal work and for those doing dissimilar work
Pay relationships
________ affect the compensation objectives of efficiency, fairness and compliance.
efficiency, fairness , compliance
Pay relationships affect the compensation objectives of ____, _____ and ______.
External competitiveness
____________ refers to pay comparisons with competitors.
Internal Alignment
External Competitiveness
Employee Contributions
Management
What are the four policy choices of a pay structure/model?
Merit
________ payments are based on an assessment (or rating) of recent past performance made (with or without a formal performance evaluation).
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?
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.
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.
Individual Incentive Pay
A pay plan where each employee’s pay depended on his/her own performance
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?