Chapter 7 Flashcards
The pay relationships among organizations; focuses attention on the competitive positions reflected in these relationships.
external competitiveness
An average of the array of rates paid by an employer.
pay level
Relative emphasis among compensation components such as base pay, merit,
incentives, and benefits
pay mix
labor costs =
pay level x number of employees
The basic cash compensation that an employer pays for the work performed. Tends to reflect the value of the work itself and ignores differences in individual contributions.
base wage
The complete pay package for employees, including all forms of money, bonuses, benefits, services, and stock.
total compensation
Stores that label each item’s price or ads that list a job’s opening starting wage
quoted price
allows haggling over terms and conditions until an
agreement is reached.
bourse
The additional output associated with the employment of one additional
human resource unit, with other factors held constant.
marginal product of labor
The additional revenue generated when the firm employs one additional
unit of human resources, with other factors held constant
marginal revenue of labor
The employment level organizations require.
labor demand
Economic theory that attributes the variety of pay rates in the external labor
market to differences in attractive as well as negative characteristics in jobs. Pay differences must overcome negative characteristics to attract employees
compensating differentials
A theory that explains why firms are rational in offering higher-than-necessary
wages
efficiency-wage theory
avoid or neglect
shirking
The analysis of utility, the dollar value created by increasing revenues and/or
decreasing costs by changing one or more human resource practices. It has most
typically been used to analyze the payoff to making more valid employee
hiring/selection decisions.
utility theory
The ability of a firm to meet employee wage demands while remaining
profitable; a frequent issue in contract negotiations with unions.
ability to pay
a return (profits) received from activities that are in excess of the minimum (pay level) needed to attract people to those activities
rent
A theoretical minimum standard below which a job seeker will not accept an offer, no
matter how attractive the other job attributes.
reservation wage
An economic theory proposing that the investment one is willing to make
to enter an occupation is related to the returns one expects to earn over time
in the form of compensation.
human capital
A function of the discrepancy between employees’ perceptions of how much
pay they should receive and how much pay they do receive.
pay satisfaction
Those employers with which an organization competes for skills and
products/services.
relevant markets
A wage structure that is set to match market rates at the beginning of the plan year only. The rest of the plan year, internal rates will lag behind market rates. Its objective is to offset labor costs, but it may hinder a
firm’s ability to attract and retain quality employees.
lag pay-level policy
The view that a firm’s external wage competitiveness is just one facet of its overall human resource policy and that competitiveness is more properly judged on overall
policies. Challenging work, great colleagues, or an organization’s prestige must be factored into an overall consideration of attractiveness.
employer of choice
An external competitiveness policy that offers employees substantial choice
among their pay forms.
shared choice
argues that when factors of production are held constant, each additional worker is less productive than the last one hired.
Marginal productivity theory
