chapter 9 Flashcards
compensation
total of all rewards provided to employees in return for their services
attracked retain adn motivates employees
direct financial compensation
pa that a person receives in the form of wages, salary,commissions and bonuses
indirect financial compensation
all financial rewards that are not included in direct financial compensation
nonfinancial compensation
satisfaction a person receives from the job itself or from the psychological and/or physical environment in which the person works
equity theory
motivation theory that people assess their performance and attitutes by comparing both their contribution to work and the benefits they derive from it to the contributions and benefits of companirson others whom they select-and who in realtity may or may not be like them
financial equity
perception of fair treatment for employees.
external equity
equity that exists when a firms employees receive pay comparable to workers who perform similar jobs in other firms
internal equity
eqity that exists when employees receive pay accoding to the relative value of their jobs within the same organisation
employee equity
individuals performing similar jobs for the same firm receive pay according to factors unique to the employee such as performance level or seniority
team equity
achieved when teams are rewarded based on their groups productivity
determinants of direct financial compensation
organisation, labor market, job and employee
compensation policy
provides general guidelines for making compensation decisions
pay leaders
organisations that pay higher wages and salaries than competing firms
marketing rate
average pay most employers provide for a similar job in a particular area of the industry
pay followers
companies that choose to pay below the going rat because of a poor financial condition or a belief that they do not require highly capable employees
unprodctive workers high turnover
labor market
potential employees located within the geographic area from which employees are recruited
compensation survey
a means of obtaining data regading what other firms are paying for specific jobs or job classes within a given labor market
cost of living allowance
escalator clause in a labor agreement that automatically increases wages as the us bureau of labor statistics cost of living index rises
exempt employees
employees categorised as executive, administrative, professional or outside salesperson.
job evaluation
determines the relative value of one job in relation to another
rather in an administrative than economic sense
job evaluation ranking method
ranking classification, factor comparison, point
raters examine the description of each job being evaluated and arrange jobs in order according to their value to the company
ranking method
job evaluation raters examine description of each job and rank jobs according to their value in the company
classification method
classes or grades are defined to describe a group of jobs
factor comparison method
assume there are 5 universal factors consisting of mental requirements, skills, physical requirements, responsibilities and working conditions; the evaluato makes decisions on these factors independently
point method
raters assign numerical values to a specific job factors such as knowledge required and the sum of these values provides a quantitiative assessment o a jobs relative worth
historically most popular option
hay group guide chart profile method
refined version of point method used by approx. 8000 public and private sector organisations worldwide to evaluate clerical, trade, technical, professional, managerial and executive level jobs
job pricing
placing a dollar value on a jobs worth
pay grade
grouping of similar jobs to simplify pricing jobs
wage curve
fitting of plottet points to create a smooth progression between paygrades
pay range
minimum and maximum pay rate with enough variance between the two to allow for a significant pay difference
broadbanding
compensation technique that collapses many pay grades (salary grades) into a few wide bands to improve organisational effectiveness
single rate system
everyone in the same job receives the same base pay
employee as determinant of direct financial compensation
job performance based pay, merit pay, bonuses, piecework, skils based pay, competency, seniority, experience, organisation membership, potential, political influence, luck, salary compression
merit pay
pay increase added to employees base pay based on their level of performance
bonus
one time annual financial award based on productivity that is not added to base pay
piecework
incentive pay plan in which employees are paid for each unit they produce
skill based pay
system that compensates employees for their job related skills and knowledge not for their job titles
competency based pay
compensation plan that rewards employees for the capabilities they attain
skill based pay plan for professionals and managers
seniority
length of time and employee has been associated with the company, division, department or job
salary compression
situation that occurs when less experienced employees are paid as much as or more than employees who have been with the organisation a long time due to a gradual increase in starting salaries and limited salary adjustment for long term employees.
profit sharing
compensation plans that result in the distribution of a predetermined percentage of the firms profits to employees
current plans: payment to employees in cash or stock
deferred plans: placing companys contributins in an irrevocable trust credited to the employees account
combination plans: mix of those two
gain sharing
plans designed to bing employees to the firms productivity and provide an incentive payment based on improved company performance
scanlon plan
gain sharing plan that provides a financial reward to employees for saving labor costs resulting from their suggestions
professional employee
paid for the knowledge they bring to the company
straight salary
salesmen get fixed salary regardless of sales
straight commission
pay as percentage of sales
say on pay
provision that gives shareholders in all but the smallest companies an advisory vote on executive pay
golden parachute contract
perquisite that protects executives in the event that another company acquires thei firm or the exectuive is forced to leave the firm for other reasons
clawback policy
allows the company to recover compensation if subsequent review indicates that payments were not calculated accurately or performance goals were not met
stock option plans
incentive plan in which executives can buy a specified amount of stock in ther company in the future at or below the current market price
perquisites
special benefits provided by a firm to a small group of key executives and designed to give the executives something extra
dodd frank act
requires 5000 companies to hold nonbinding shareholder say on pay votes. at least every 3 years
5 basic elemts of executive compensation
base salary, bonuses and performance based pay, stock opion plans, peruquisites, severance packages
