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SHRM CP 2020 > 2 - People: Total Rewards (From Study Group) > Flashcards

2 - People: Total Rewards (From Study Group) Flashcards

1
Q

Abilities

Job Analysis

A

Capabilities necessary to perform job

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2
Q

Additional Information Sources

Total Rewards Data Analysis

A
  • Governments (e.g., ministries of labor or government statistical bureaus).
  • International organizations (e.g., International Labor Organization). Membership-based business organizations (e.g., employer federations and local chambers of commerce)
  • Professional, trade, and industrial associations
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3
Q

Annual increase/decrease in health-care benefit costs

A
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4
Q

Benchmarking

A
  • Initiatives range from informal networking and knowledge sharing to formal engagements with private firms.
  • Helps to identify gaps in policies and procedures compared to competitors and best practices.
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5
Q

Benefits

A

Tangible payments or services provided to broad groups of employees to cover common issues (e.g., retirement and paid time off), in addition to those required by law.

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6
Q

Benefits costs as a percentage of total payroll costs

A
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7
Q

Benefits Needs Assessment

A
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8
Q

Broadbanding

A

Combines salary grades to create larger ranges

  • Allows people to move within their job without outgrowing the pay scale.
  • Avoids having too many grades with small midpoint differences between them.

Advantages

  • Provides wider ranges than the spread of a traditional pay range; generally permits the movement of individuals between jobs without being overly limited by pay ranges
  • Reduces the number of job grades (e.g., from possibly 30 or more to as few as five)
  • Reduces the number of reporting levels within an organization
  • Provides more autonomy to line managers in salary and promotion decisions
  • Enhances employee mobility as employees can transfer without requiring a change in assigned pay range

Disadvantages

  • Reduces the value of ranges as parameters for governing pay rates
  • Affords less control for the organization in salary and promotion decisions
  • Creates overly broad salary ranges; affords less control of salary costs as there is no mechanism to tie the salary growth of individual employees to the skills necessary for advancement to the next higher-level position
  • Makes it hard to justify salary differentials if two employees are in the same broadband doing similar work; can lead to the perception of pay inequity and increase the potential for pay discrimination charges
  • Reduces the opportunity for promotion and accompanying job title and base salary changes; fewer salary ranges lessens promotions to another range, which can lead to retention issues
  • Risks divergence from market pay practices; paying too little relative to competitors could mean higher employee turnover and paying too much could mean higher product or service costs
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9
Q

Choosing Benefits/Perquisites

A
  • Which benefits are required by law?
  • Which benefits enable an employer to compete for employees?
  • Which benefits are cost-effective to purchase and to administer?
  • Which benefits do employees prefer?
  • Which benefits provide creative choices?
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10
Q

Compa-Ratios

A
  • Divide the pay rate of an employee by the midpoint of the range.
    • Given a range of $16 to $20 an hour, a midpoint of $18, and a salary of $16 an hour, the compa-ratio is:

$16 ÷ $18 = .89 or 89%.

  • Compa-ratios below 1.00 mean wages are below the midpoint; compa-ratios greater than 1.00 mean wages exceed the midpoint.
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11
Q

Compensation

A

Refers to all other financial returns (beyond any tangible benefits payments or services), including salary and allowances.

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12
Q

Compensation for Outside Directors

A
  • Base pay or retainer
  • Fees paid for various events or services
  • Benefits - liability, life insurance
  • Perquisites
  • Non-qualified stock options/grant plans
  • Non-qualified deferred compensation programs
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13
Q

Compensation Philosophy

A

A short (but broad) statement documenting the organization’s guiding principles and core values about employee compensation

Philosophy should be:

  • Equitable
  • Defensible
  • Perceived as fair
  • Fiscally sensitive
  • Legally compliant
  • Easy to communicate

Programs offered should be:

  • Fair
  • Competitive
  • Aligned to philosophy and policies
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14
Q

Compensation Ratio

A
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15
Q

Compensation System Design

A
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16
Q

Contribution-Oriented

A
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17
Q

Creating a Pay Structure

A
  1. Establish pay grades
    • Group jobs that have the same relative internal or external worth.
    • Pay the same rate or within the same pay range.
  2. Set pay ranges
    • Set upper/lower bounds of possible compensation for individuals whose jobs fall in a pay grade.
    • Market data from surveys used to determine a midpoint
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18
Q

Data Analysis

A

Salary data may need to be aged, leveled, and/or factored for geography.

  • Aging uses movement in market rates to adjust outdated salary data.
  • Leveling adjusts salaries when surveyed jobs are similar but not identical to jobs in the organization.
  • Since wage rates will vary by location, the organization should factor any national salary survey data for geography.
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19
Q

Defined Benefit Plan

Retirement

A
  • Promises payment of a specific benefit amount at retirement.
  • Vesting schedule is set up.
  • Benefits are based on service and perhaps salary; decided by a formula.
  • Provides a pre-specified level of benefits.
  • Employer bears investment risk.
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20
Q

Defined Contribution Plan

Retirement

A
  • Money contributed regularly is specified.
  • No promise is made regarding the future value of the benefit.
  • Employees receive 100% of their investment and the vested employer portion
  • Requires individual employee accounts.
  • Amount at retirement depends on the return.
  • Employee bears investment risk.
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21
Q

Disability Benefits

A

Pays employees unable to work because of illness or injuries; causes may be in or outside the workplace; may be funded by government, employer, and employee.

  • Short-term
  • Long-term
  • Permanent
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22
Q

Effective Communication of Total Rewards

A

Requires attention to a variety of factors, such as:

  • Type of information (required and voluntary communication)
  • Communication plans
  • Direct communication
  • Individualized total compensation statements
  • Self-service technologies
  • Consistent key messages

Starts with an overarching strategy and standard implementation guidelines but adaptable to organizational specifications and local conditions and norms.

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23
Q

Entitlement-Oriented

A

Promote caring, protective, feeling and want employees feel as if they are a part of the family.

  • Health care
  • Employee assistance
  • Disability
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24
Q

Evaluating a Total Rewards Strategy

A

Is the total rewards strategy:

  • In compliance?
  • Compatible with the organization’s mission and strategy?
  • A fit with the organization’s culture and appropriate workforce?
  • Internally equitable?
  • Externally competitive?
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25
Q

Executive Compensation

HR’s Role

A
  • Consulting on strategy.
  • Participating in selecting outside experts.
  • Monitoring and evaluating compensation systems.
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26
Q

External Equity

A
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27
Q

External Remuneration Surveys

A

Offer different options for externally published data

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28
Q

Family-Oriented Benefits

A

Help employees balance work roles with family roles.

  • Flexible work hours
  • Child and elder care
  • Domestic partner benefits.
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29
Q

Fiduciary

A

Refers to the obligated party

  • An individual or party entrusted with the care of money or property
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30
Q

Fiduciary Duty

A

Implies a legal obligation of one party (e.g., the employer) to act in the best interest of another (e.g., the employees).

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31
Q

Finance and Accounting Knowledge

A
  • Total rewards are a significant component of an organization’s operating expenses.
  • Understanding key finance and accounting terms and concepts, financial statement basics, and payroll provides critical insights.

Partnering with finance colleagues is always helpful as well as consulting “finance for non-finance professionals” resources.

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32
Q

Geographic Differential Pay

A

Differentials:

  • For labor costs
  • To attract workers to certain locations
  • For foreign countries
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33
Q

Global Influences

A
  • Standardization vs. localization
  • Culture
  • Competitive Labor Market
  • Collective bargaining, employee representation, government mandates
  • Economic factors
  • Taxation
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34
Q

Global Market Survey Considerations

A
  • What are the best sources of salary data?
  • How much information is available?
  • How frequently does the market change?
  • Does the data for the jobs available match or compare to the ones being compared?
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35
Q

Green-Circle Rates

A

Rates below the range minimum

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36
Q

Group Incentive Pay

A

Used when measuring individual performance is difficult or when performance requires cooperation

  • gainsharing plans
  • team bonuses
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37
Q

Health Benefits

A

Funded through social or private insurance; affected by culture and location.

  • Medical
  • Dental
  • Wellness
  • Employee assistance programs.
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38
Q

Health-care expense per employee

A
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39
Q

Importance of Total Rewards Strategy Communication

A
  • Educating employees about the organization’s total rewards practices
  • Achieving employees’ buy-in and making them aware of the overall value
  • Supporting the organization’s strategic objectives
  • Supporting the organization’s goals for performance management

A total rewards program is a powerful motivator when it is understood and accepted by employees.

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40
Q

Incentive Pay

A
  • Motivates employees to perform at higher levels
  • Pays for performance beyond base-pay expectations
  • Must be related to aspects of the job that an employee can influence with achievable goals
  • Can be structured to reward short-term accomplishments or long-term results or a balance of both short- and long-term goals
41
Q

Incentives or Premiums

A

Payments in return for the achievement of specific, time-limited, targeted objectives; often calculated as a percentage of base salary and paid as lump sums or ongoing payments.

42
Q

Indirect Compensation

A
  • Life insurance
  • STD
  • Health insurance
  • Dental
  • Vacations
  • Noncash rewards
43
Q

Individual Incentive Pay

A

Purpose is to improve individual performance

  • piece rate
  • commissions
  • noncash reward programs

Challenges for global organizations include designing and awarding culturally appropriate incentives and regulatory compliance.

44
Q

Internal Equity

A

When EEs feel that performance or job differences result in corresponding differences in rewards that are fair.

45
Q

Internal Remuneration Surveys

A

Allow for more control over survey technique and data analysis

46
Q

Job Context

Job Analysis Considerations

A

The purpose of the job, its work environment, its place in the organizational structure

47
Q

Job Analysis Methods

A
  • Observation
  • Interview
  • Open-ended questionnaire
  • Highly structured questionnaire
  • Work diary or log
48
Q

Job Content

Job Analysis Considerations

A

The duties and responsibilities of people who hold the job

49
Q

Job Evaluation

A

Determines the relative worth and pay structure of jobs based on an assessment of their content and relationship to other jobs in the organization

50
Q

Job Specifications/Qualifications

Job Analysis Considerations

A

Knowledge, skills, and abilities required for a person to have a reasonable chance of successfully performing the job

51
Q

Knowledge

Job Analysis

A

Body of information necessary for task performance

52
Q

Legal Compliance

A
  • Laws and regulations legislated by a cooperative region
  • Laws pertaining to the industry legislated by the country
53
Q

Legal Compliance Complexities

A

Due diligence should include an understanding of relevant:

  • International standards and regulations.
  • Extraterritorial application of national law.
  • Application of national laws to international-owned subsidiaries operating within a nation’s borders.
54
Q

LIfe Insurance Benefits

A

Funded through social insurance and/or private insurance; paid to beneficiary.

55
Q

Market-Based Job Evaluation

A

Determines the relative worth and pay structure of different jobs based on their market value or the going rate in the marketplace

  • Sometimes called “market pricing.”
  • Data collection includes survey formats, survey analysis, and slotting.
  • Job content or internal job relationships may be secondary considerations.
56
Q

Methods for Compensating Employees

A
  • Develop and maintain a pay system that helps attract, motivate, and retain employees.
  • Most employees receive base pay in the form of an hourly wage or salary.
57
Q

Non-Voluntary Terminations

A

When employers discharge employees for cause or workforce adjustments

58
Q

Nonquantitative or Whole-Job Evaluation Methods

A

Establish order of jobs in terms of their value to the organization

  • Job ranking
  • Paired-comparison
  • Job classification
59
Q

Objectives of a Total Rewards Strategy

A
  • Compatible with the organization’s mission and strategy
  • Compatible with the culture
    • Entitlement-oriented vs. contribution-oriented
  • Appropriate for workforce
  • Internally and externally equitable
60
Q

Organizaton-Wide Incentive Pay

A

Reward overall results

  • profit sharing
  • stock ownership
  • bonus programs
61
Q

Paid Time Off

PTO

A

Often legislated or part of collective bargaining agreements; embedded in culture and tradition.

  • public holidays
  • parental leave
  • leave for illness.
62
Q

Pay Adjustments

A
  • Pay adjustment matrix
  • General pay increases
  • Lump-sum increases
  • COLAs
  • Seniority increases
  • Market-based increases
63
Q

Pay Compression

A

Small differences in pay regardless of experience, skills, level, or seniority

64
Q

Pay Equity

A

Fairness in compensation & benefits paid to EEs

65
Q

Pay Strategies

A

Compares an organization to other organizations that share its industry, occupation, or location.

Organizations may decide to:

  • Lag
  • Match
  • Lead
66
Q

Pay Transparency - Advantages

A
  • Supports the achievement of strategic business objectives
  • Reduces conflicts among employees and between employees and management regarding pay
67
Q

Pay Transparency - Challenges

A
  • Can lead to jealousy and performance problems and employees questioning the system’s fairness
  • Poses a risk that information may be used for inappropriate or unintended purposes
  • Requires protection of employee privacy and proprietary information
  • Raises individual and cultural concerns about fairness in the global environment
68
Q

Pay Variations

A
  • Red-circle rates
  • Green-circle rates
  • Pay compression
69
Q

Performance Criteria

Job Analysis Considerations

A

Desired behaviors/results that will constitute performance in the job

70
Q

Performance-based or merit pay (P4P or PfP)

Base-Pay Systems

A
  • Linked to measures of work quality or goals.
  • Employers must be able to defend practices.
  • Global differences must be addressed:
    • Types of incentives and remuneration.
    • Individual vs. collective performance.
    • Impact on risk.
71
Q

Perquisites

A

Compensation provided on an individual basis in the form of goods or services (e.g., automobiles and mobile devices).

72
Q

Perquisites

A

Vary by country & culture

  • Free/discounted products or services
  • Mobile devices
  • Professional organizations/certifications
  • Training programs
  • Education fees
  • Housing
  • Company car and/or cash car allowances
  • Club memberships
  • Meal allowances
73
Q

Person-Based

Base-Pay Systems

A

Affected by employee’s knowledge, skill, or competencies.

74
Q

Process to Develop a Total Rewards Strategy

A
75
Q

Productivity-based

Base-Pay Systems

A
  • Based on output.
  • Straight piece-rate (base plus).
  • Differential piece-rate (rate increases in steps after standard is met).
76
Q

Quantitative Job Evaluation Methods

A

Use scale based on compensable factors to show how much more one job is worth than another

  • Point-factor system
77
Q

Red-Circle Rates

A

Rates above the range maximum

78
Q

Remuneration Surveys

A

Collect information on prevailing market compensation and benefits practices

  • Internal & External Surveys

Considerations between internal and external surveys:

  • Internal time and expertise required
  • Relevance/match of external surveyed jobs to organization’s jobs
  • How current external survey data is
  • Expense associated with type of survey
79
Q

Roles of Job Analysis in HR

A
  • HR Planning
  • Staffing
  • Training
  • Performance Management
  • Safety and Health
  • Rewards
  • Employee Relations
  • Legal Compliance
80
Q

Salary Plus Commission and/or Bonus

Direct Sales Compensation

A

Use when:

  • Organization needs to reward behaviors that support strategy.
  • System needs to be adaptable and allow for readjustments.
  • Competitors use the same strategy.
81
Q

Severance

A
  • If required, severance pay must be compliant and fairly compensate terminated employees to avoid discrimination lawsuits and regulatory fines and penalties.
  • Circumstances, requirements, and amount varies by country; some similarities within regions.
82
Q

Single- or Flat-Rate

Base-Pay System

A
  • Employees receive the same rate of pay, regardless of performance or seniority.
  • Generally corresponds to target market survey data for the job.
  • May be a training wage in a flat-rate job.
83
Q

Skills

Job Analysis

A

Level of proficiency needed for task performance

84
Q

Social Security

A
  • Varies by country.
  • Generally refers to:
    • Social insurance, where people receive benefits or services in recognition of contributions to an insurance program.
    • Services provided by government or designated agencies responsible for social security provision.
    • Basic security irrespective of participation in specific insurance programs where eligibility may otherwise be an issue.
85
Q

Straight Commisson

Direct Sales Compensation

A

Use when:

  • Organizational objective is to increase volume (even if it means less service).
  • Holding down cost of sales is important.
  • Competitors use the same strategy.
86
Q

Straight Salary

Direct Sales Compensation

A

Use when:

  • More time is spent on service than sales.
  • Measuring sales performance is difficult.
  • Individual sales and support efforts are hard to separate.
  • Sales cycle is long.
87
Q

Strategic Alignment

A
  • Support organizational missions & strategies
  • Attract the right people to the right jobs at the right time and place
  • Performance incentives to produce engaged employees
88
Q

Time-Based Differential Pay

A

Based on when an employee works

  • Shift pay
  • Emergency-shift pay
  • Premium pay
  • On-call or call-back pay
  • Reporting pay
  • Travel pay
  • Overtime pay
89
Q

Time-Based Step-Rate

Base-Pay System

A
  • Rate based on longevity.
  • Increases occur on pre-determined schedule:
    • Automatic by percentage and time.
    • Affected by performance.
    • Combination of step-rate and performance (when job rate is reached).
90
Q

Total Organization Compensation Expense

A
91
Q

Total Rewards

A

Direct and indirect remuneration (money paid) approaches that employers use to attract, recognize, and retain workers; “remuneration” and “compensation and benefits” have the same meaning.

92
Q

Types of Executive Compensation

A
  • Annual salary
  • Stock option plans
  • Stock purchase plans
  • Restricted stock grants
  • Phantom stock
  • Restricted stock units
  • Performance grants
93
Q

Types of Incentive Pay

A
  • Individual
  • Group
  • Organization-wide
94
Q

Unemployment Insurance

A
  • Applies toward paying a percentage of an employee’s salary in the case of the employee losing his or her job through no fault of the employee.
  • Helps workers who have been terminated to transition from one job to another equally suitable job.
  • May require a waiting period; benefit period is limited, as is the financial payout.
  • Other terms associated with this benefit are employment insurance, job seekers’ allowance/benefit, redundancy funds.
95
Q

Variations in Benefits

A

Standardization is difficult because of variations in benefits.

  • Government-provided benefits
  • Government-mandated benefits
  • Voluntary or discretionary benefits
  • Market practice benefits
  • Tax treatment of benefits
96
Q

Voluntary Terminations

A

When an employee resigns or retires

97
Q

Wage and Hour Law Compliance

A
  • Minimum wage and increases
  • Overtime and holiday pay
  • Equal pay
  • Exemption
  • Cap on hours worked
  • Special issues under local law
  • Taxation
98
Q

Workers’ Compensation Benefits

A

Pays employees portion of salary if they are unable to work due to a work-related accident or illness.

SHRM CP 2020 (19 decks)

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