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SHRM-CP Exam > (Chapter 4) Compensation & Benefits > Flashcards

(Chapter 4) Compensation & Benefits Flashcards

1
Q

What does total rewards describe?

A

all the tools an employer uses to attract, motivate and retain employees; anything the employee perceives to be valuable. example: compensation, benefits, work/life programs, recognition programs, professional development

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2
Q

What is the employee life cycle?

A

the whole life cycle of an employee, beginning with attraction and recruitment, onboarding and development, then separation or termination

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3
Q

what is another word for compensation

A

remuneration

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4
Q

What does the Fair Labor Standards Act (FLSA) dictate about exempt or nonexempt employees?

A

Exempt employees are exempted from the FLSA so it doesn’t apply to them. Nonexempt positions have specific requirements like paying overtime wages when an employee works more than 40 hours. All hourly employees are NONEXEMPT

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5
Q

What is fixed pay (also called base pay)

A

nondiscretionary compensation, means it does not fluctuate based on performance or results

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6
Q

What is variable pay?

A

compensation that changes directly with performance or results achieved; can be linked to either or both the employee’s and employer’s performance

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7
Q

what is pay-for-performance

A

when employees are rewarded for achieving goals

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8
Q

what is a piece-rate system

A

rewards an individual based on the number of units they produce

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9
Q

what is premium pay

A

compensation that is tied to nontraditional work schedules, shifts, and skills - premium pay is provided in ADDITION to a fixed pay

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10
Q

what is deferred compensation

A

some of an employee’s compensation is paid out long after the employee earns the money. example may be a pension plan or stock options

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11
Q

what is direct compensation

A

typically refers to monetary payouts that have been discussed previously in regard to monies paid for work or time performed

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12
Q

what is indirect compensation

A

refers to nonmonetary items paid for by the company for the employee - “fringe benefits” - tuition reimbursements, gym memberships, company cars, etc.

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13
Q

What is comparable worth?

A

describes the idea that employees who perform roles or work with relatively the same value should be paid a similar wage

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14
Q

what is pay equity

A

equal pay for equal work (men v women, many other examples of pay disparity)

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15
Q

analysis of current employee wages can determine internal alignment. What is internal alignment?

A

Internal alignment compares the compensation level of one job with another within the same organization

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16
Q

What is external competitiveness?

A

assesses the pay level of an internal job in relation to the market value of that job more broadly

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17
Q

What does internal consistency do?

A

uses job analysis, wage data, and job descriptions to analyze the relative value and pay of a role as it relates to other roles in the organization

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18
Q

What does a companys pay structure refer to?

A

Refers to its method of administering pay

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19
Q

What are the two common types of pay structures and define them?

A

Internal equity method - based on the job’s placement in the organizational hierarchy. Market pricing - each jobs pay is tied to the prevailing market rate

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20
Q

What is a red circled employee, and what happens to them

A

If they are paid above the market rate, they are red circled. They typically has their pay held or receive smaller increases until the market/target pay level meets their salary

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21
Q

what is a green circled employee, and what happens to them

A

if an employee is paid below the established pay range of a job, they are green circled. Typically receive larger increases to help the individual catch up.

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22
Q

What does it mean when a company wants to “meet the market”

A

that they pay the average market rates

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23
Q

what does it mean when a company wants to “exceed the market”

A

when they want to pay above the average market rate to attract and retain employees; important strategy for a high tech company that needs to attract employees in high demand

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24
Q

What are factors to consider when creating a compensation philosophy

A

the size of the organization, turnover levels, financial performance, candidate availability, and the total compensation of an employee

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25
Q

what is a KSA

A

knowledge, skills, attributes

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26
Q

what are the three main steps of a compensation analysis

A

(1) determine payroll budget, (2) benchmark each job’s value (3) create salary ranges and pay grades

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27
Q

what are pay grades?

A

a system of establishing a range of compensation through a fixed framework. There may be anywhere from five to fifteen pay grades depending on the size and complexity of an organization.

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28
Q

What is a merit adjustment?

A

a reward based on high performance

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29
Q

What is incentive pay?

A

When an organization offers compensation to employees who exceed their duties

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30
Q

What is skill-based pay?

A

Rewards for employees for mastering new skills, typically given to those who perform physical or production work.

31
Q

What is a COLA (cost of living adjustment)

A

awarding annual increases based on inflation

32
Q

What is a seniority adjustment

A

a pay adjustment based on an employee’s length of service or seniority at the organization

33
Q

How does executive compensation packages differ from regular employee compensation?

A

Lol, they are just BETTER and get MORE

34
Q

Companies with employees in European Union countries must follow the EU Data Protection Directive. What is that?

A

It restricts how personal information can be collected, stored, and shared. Restricts the sharing of data with countries that do not have rigorous security standards

35
Q

Maintaining pay equity is an important issue in global compensation. Why?

A

Base pay and traditional compensation structures vary from country to country. Regional differences must be factored in to the overall compensation program and they must be accounted for.

36
Q

Cost of living is a major matter in global compensation. Why?

A

The value of a US dollar in a given country affects the pay levels of employees in that country. For a position paying 60K in the US, may pay a local employee doing the same work 11K in another country due to the difference in cost of living.

37
Q

What do payroll departments manage?

A

employee compensation, including tax witholdings and deductions.

38
Q

what is a TPA (third party administrator) and what do they do?

A

Smaller organizations may outsource their payroll and/or human resources to a TPA. They help the organization administer payroll, benefits, and HR records for less cost than hiring full time staff.

39
Q

What is a communication device that helps show an employee the value of their total compensation package?

A

a compensation statement which includes information about direct and indirect compensation and benefits, including both the employer and employee contributions

40
Q

What is a sheet that is a financial summary of the company’s assets and libalities?

A

the balance sheet

41
Q

what is the profit and loss (P&L) statement

A

summarizes the organizations revenue, costs and expenses. Shows overall profitability and performance

42
Q

What is the name for the money owed BY the company? And money owed TO the company?

A

Money owed BY the company is accounts payable; money owed TO the company is accounts receivable

43
Q

what is the accrual principle?

A

when the financial statements reflect the costs when they occur rather when they are paid; in this type of system even if a pay run falls into the next month, the cost of that payroll will be recorded in the month the hours were worked

44
Q

What is the payment awarded to employees upon their termination?

A

Severance pay; typically equal to 1 or 2 weeks of pay for every year of service

45
Q

Severance pay is also usually tied to what?

A

a severance agreement which is a contract between the terminated employee and the organization that releases claims toward the employer for a specific amount of money or benefits

46
Q

Why can severance pay affect a worker’s unemployment?

A

Because it is considered “income” by many state plans

47
Q

What’s the difference between executive severance and regular people severance eyeroll

A

executive severance is MORE GENEROUS and can include pay from SIX MONTHS TO A YEAR; may include bonuses and benefits

48
Q

What are the type of employee benefits that must be provided by law?

A

Mandated benefits - ex: social security taxes, unemployment insurance, workers’ compensation insurance, disability insurance, family and medical leave, Military family leave, patient protection and affordable care act

49
Q

what is the most common discretionary benefits offered by employers?

A

health and welfare benefits - typically offered in the form of a group health plan established or maintained by the employer (or union)

50
Q

what is a cafeteria plan?

A

allows an employee to reduce their compensation in order to pay a share of employer-provided benefits coverage on a pretax basis. Employees can choose from two or more cash or qualified benefit plans. A cafeteria plan must not discriminate in favor of either highly compensated employees or key employees

51
Q

what is a flexible spending account (FSA)?

A

when an employee sets aside a portion of earnings to pay for certain expenses; made on a pre tax basis; “use it or lose it” program, unused dollars don’t roll over

52
Q

What is a health reimbursement account (HRA)?

A

an employer funded account that can be used to cover qualified medical expenses of the employee and their dependents; can be used to pay for participants out of pocket qualified medical expenses

53
Q

What is an HSA (health savings account)

A

pretax medical savings account available to participants in a high deductible health plan; funds are not subject to federal income tax; CAN roll over year after year

54
Q

what is the ERISA - Employee Retirement Income Security Act

A

covers most private sector health plans; provides protections for participants and beneficiaries covered under employee benefit plans

55
Q

What is the consolidated omnibus budget reconciliation act (COBRA)

A

grants employees the right to keep the group health insurance (and pay the premium) that they would otherwise lose after they quit or lose their jobs, or reduce work hours. Most people can retain coverage up to 18 months, in some cases longer.

56
Q

What is the HIPAA Health Insurance Portability and Accountability Act of 1996?

A

provides opportunities for people to retain or obtain health insurance during qualifying events (getting married, having a kid, turning 26). Also protects the confidentiality and security of health care information

57
Q

What is the PPACA - Patient Protection and AFfordable Care act?

A

requires certain employers to offer affordable health insurance that provides minimum value to their full time employees and their dependents; employers must communicate about health care marketplaces to employees and offer a standardized summary of coverage to employees

58
Q

What is the PDA (pregnancy discrimination act)

A

requires certain health plans to provide the same level of coverage for pregnancy as for other conditions

59
Q

What is the Mental Health Parity Act?

A

requires that when a health plan covers mental health services, the annual or lifetime dollar limits, copays, and treatment limitations must be the same as or higher than the limits for other medical benefits

60
Q

What is the ADA (americans with disabilities act)

A

among other protections, requires that disabled and non-disabled individuals be provided the same benefits, premiums, deductibles, and limits under a given health plan

61
Q

Many employers have moved away from traditional siloed time off programs such as vacation, personal time, and sick days to a more consolidated paid time off PTO benefit. What is the difference with a PTO program?

A

in a PTO program, the employees are awarded a higher number of hours to use when away from work with the expectation that this time be used for most absences - vacation, sick days, jury duty, etc

62
Q

What is workers compensation?

A

paid when a worker is injured or becomes ill out of the course of employment

63
Q

When can an employee NOT claim unemployment?

A

If they left their jobs voluntarily, if they are unable to work, or if they were fired for cause

64
Q

What is a retirement plan?

A

a savings plan that supports employees once they retire; falls under three categories: defined benefit plans, defined contribution plans, and profit sharing plans.

65
Q

Which type of retirement plan is a company provided pension plan in which an employee’s pension payments are calculated according to the employee’s length of service with their company, and their earnings prior to retirement

A

a defined benefit plan

66
Q

What retirement plan is where the employee or employer or both contribute on a regular basis (typically pre tax). There is no guaranteed benefit (wtf???) employees have limited access to their accounts until retirement (give examples)

A

defined contribution plans, like a 401K, 403B

67
Q

What is a profit sharing plan?

A

typically offered in conjunction with a defined contribution plan; they allow the company to allocate profit to the employees retirement accounts using a vesting schedule

68
Q

What is a graded vesting schedule?

A

means an employee earns a specific percentage ownership to the company contributions until 100% vesting is met; this can take up to 6 years

69
Q

What is a cliff vesting schedule

A

one in which the employee is 100% vested upon reaching a specific milestone; this may be immediately upon hire or after reaching a designated anniversary year

70
Q

what is a fiduciary

A

can be anyone who has authority or control over the administration of an ERISA employee benefit plan such as a 401K program

71
Q

what are EAPs (employee assistance programs)

A

provide independent, confidential and free counseling and support service in mental health; family life and financial, legal, other issues

72
Q

what is a tool organizations offer to help employees integrate work and family life through nontraditional work arrangements, counseling and support?

A

work life balance programs

73
Q

According to Maslow’s hierarchy of needs, what are two of the most important psychological needs of humans? How can an organization meet these needs?

A

The need for appreciation and the need to belong. an organization can meet these needs through employee recognition programs.

SHRM-CP Exam (6 decks)

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