Chapter 1 Flashcards
What is compensation for employers?
> For most employers, compensation is a major part of the total cost of running a business, and often it is the single largest part of operating cost.
How people view compensation affects what?
> how they behave at work
Some people view pay as a measure of what? (Society’s perspective)
> a measure of justice
Economists have identified a number of contributing factors to wage determination. What are three?
1) human capital (work experience, education, and tenure),
2) demographic characteristics (marital status, having children living at home)
3) and job characteristics (industry, size of establishment, and type of work).
There are a few observations of what may have contributed to the gender wage gap- what are three?
1) at women are more likely to study health and education, whereas men are more likely to study engineering and other technology fields
2) women are more willing than men to adjust their work location and hours to take care of young children and elderly parents, and to do most if not all of the “unpaid” housework
3) nearly one in three women work in sales and service occupations, whereas men are likely to work in construction trades, in transport, and as equipment operators
In terms of the gender gap in median earnings of full-time employees, how does Canada rank in comparison to other OECD countries?
> Canada is definitely doing better than countries like Korea and Japan, but worse than the United Kingdom, France, and Italy.
Job losses (or gains) within a country over time are partly a function of what?
> relative labour costs (and productivity) across countries.
Canadians worry about losing manufacturing jobs to what countries? What other jobs are starting to be sent overseas?
> Mexico, China, and even the United States.
> Increasingly, white-collar work in areas like finance, computer programming, and legal services are also being sent overseas
What is the perspective of compensation from stockholders/shareholders?
> those who provide equity for the operation of businesses, compensation matters.
What is the stockholder debate surrounding using shares to pay employees?
1) some stockholders believe that using stock (shares of the company) to pay employees creates a sense of ownership that will improve performance (think WestJet), which will in turn increase stockholder wealth.
2) Others argue that granting employees too much ownership dilutes stockholder wealth and sometimes may not incentivize the behaviour as one originally intends.
Stockholders also have an interest in what kind of compensation?
> executive compensation
> (by paying executives on the basis of company performance measures such as shareholder return)
Compensation should supposedly be tied to what?
> Compensation should supposedly be tied to performance.
From the perspective of the managers, compensation directly influences what?
> their success
What are the two ways that compensation directly affects management success?
1) First, it is a major expense that must be managed.
2) a manager uses it to influence employees’ attitudes and behaviours and to improve organizational performance.
Studies show that in many enterprises, labour costs account for more than what percent of total costs? Can it be higher?
> 50%
In some industries, such as financial or professional services, or in education and government, this figure can be even higher
The amount and the way people are paid affects what aspects?
> affects the quality of their work, their attitude toward customers, their willingness to be flexible or learn new skills, or suggest innovations, and even their interest in unions or pursuing legal action against their employer.
Employees may view compensation what?
> as the return in an exchange between their employer and themselves,
> as an entitlement for being an employee of the company,
> as an incentive to take/stay in a job and invest in performing well in that job,
> or as a reward for performing well in the job.
What is compensation to employees ultimately?
Compensation is their return on those investments and contributions.
In some circumstances, employees in large countries withstate-owned enterprises (e.g., China) and in highly regulated countries (e.g., Sweden) sometimes believe their pay is what?
> is an entitlement—their due, regardless of their performance or that of their employers.
In English, compensationrefers to:
> something that counterbalances, offsets, or makes up for something else.
In China, the traditional characters for the word compensationare based on what?
> the symbols for logs and water—compensation provides the necessities in life.
In today’s China, however, the reforms of the last decades have led to the use of a new word, dai yu, which refers to what?
> Refers to how one is being treated—wages, benefits, training opportunities, and so on.
> When people talk about compensation, they ask each other about the dai yu in their companies.
> Rather than assuming that everyone is entitled to the same treatment, the meaning of compensation now reflects a broader sense of returns as well as entitlement.
Compensation in Japanese is kyuyo, which is made up of two separate characters (kyu and yo), both meaning what?
> Compensation in Japanese is kyuyo, which is made up of two separate characters (kyu and yo), both meaning “giving something”
> TCompensation in Japanese is kyuyo, which is made up of two separate characters (kyu and yo), both meaning
What does compensation mean in modern Japan?
> Today, business consultants in Japan try to substitute the word hou-syu, which means reward and has no association with notions of superiority.
> The many allowances that are part of Japanese compensation systems translate as teate, which means “taking care of something.”
> Teate is regarded as compensation that takes care of employees’ financial needs. This concept is consistent with the family, housing, and commuting allowances still used in many Japanese companies.
What is the defined definition of compensation?
> Compensation refers to all forms of financial returns and tangible services and benefits that employees receive as part of an employment relationship.
How are the returns that people receive from work catgeorized?
> They are categorized as total compensation and relational returns.
What are relational returns?
> The relational returns (learning opportunities, recognition and status, challenging work, and so on) are the psychological returns people believe they receive in the workplace.
What are 4 types of relational returns?
1) Recognition and Status
2) Employment security
3) Challenging work
4) Learning opportunities
What are total compensation returns?
> total compensation is more transactional and includes pay received directly as cash (e.g., base pay, merit increases, incentives, cost-of-living adjustments), stock, and indirectly as benefits (e.g., pensions, healthcare and life insurance, programs to help balance work and life demands).
What does total rewards include?
> total rewards include cash compensation, benefits, and relational returns.
What are two components underneath the total compensation umbrella?
1) Cash compensation
2) Benefits
Provide 4 examples of cash compensation:
1) Base pay
2) Merit/cost of Living
3) Short-term incentives
4) long-term incentives
Provide 3 examples of benefits:
1) Life/health/disability insurance and pension
2) work/life programs
3) allowances
What is base pay (wage/salary)
> Base pay—wage or salary—is the cash compensation an employee receives for the work performed
What does base pay reflect?
> Base pay tends to reflect the value of the work or skills
What does base pay ignore?
> generally ignores differences attributable to individual employees.
Some pay systems set base wage as what?
> set base wage as a function of the skill or education an employee possesses; this is common for engineers and schoolteachers
A distinction is often made between a wage and a salary, what is it? Provide an example of how people are paid with this distinction.
> the latter referring to pay expressed at an annual or monthly rate rather than hourly.
> Managers and professionals are usually paid a salary.
> In contrast, workers who are covered by overtime are likely to have their pay calculated on an hourly basis.
