Compensation

Question 1

pay

Answer 1

a powerful tool that directly impacts
employee attitudes and behaviors, but it can
be a significant cost to the organization.

Question 2

Total Compensation/Total Rewards Mix

Answer 2

Cash compensation/benefits

Question 3

Wages

Answer 3

-based on hours
-eligible for overtime pay of 1.5 times their regular hourly rate for over 40 hours- non-exempt
-common in retail, hospitality, manual labor jobs

Question 4

salaries

Answer 4

-fixed compensation on regular basis, annual and divided into periodic payments such as monthly or biweekly
-not eligible for overtime pay regardless of hours, exempt

Question 5

when do higher pay outweigh higher costs?

Answer 5

when orgs have tech or structures that depend on highly skilled employees

Question 6

pay level

Answer 6

the average pay of jobs determined by external benchmarking to determine a competitive position while being mindful of budget considerations

Question 7

job structure

Answer 7

relative pay of jobs in an organization determined by job evaluation, creating a ladder and internal equity, range of pay expressed by salary pays

Question 8

Product market competition

Answer 8

-must sell goods and services at a quantity and price that brings a sufficient return on investment
-orgs with higher labor costs than its product market competitors will have to charge a higher average price of similar quality
-places an upper bound on labor costs and compensation

Question 9

Labor market competition

Answer 9

-how much an organization must pay to compete against other orgs that hire similar employees
-reflects number of workers available relative to number of jobs available
-shortages/surpluses influence pay levels
-places a lower bound on pay levels or sets minimum limit on wages/salaries

Question 10

efficiency wage theory

Answer 10

wages influence worker productivity, employees that are paid more than they would receive elsewhere will put forth the effort to retain good jobs

Question 11

equity theory

Answer 11

do you think you are being paid fairly and determine this by looking at what others are being paid

Question 12

internal equity pay comparisons

Answer 12

what are other employees wi the same organization are paid,

Question 13

job evaluation

Answer 13

used to evaluate internal equity

Question 14

external equity

Answer 14

comparing your pay to what employees are being paid in other organizations

Question 15

market pay surveys

Answer 15

-a way to compare your orgs pay practice to other organizations (external equity)

Question 16

Collecting Market Wage Data

Answer 16

-collected from relevant labor marker
-focus on key jobs
-can collect data in house, or outside firm or rely on other sources
-determine return on investment in employees using revenues/employees and revenues/labor costs ratios

Question 17

rate ranges

Answer 17

pay grades, permit company to recognize differences in employee performance, seniority and training in setting individual pay where different employees in the same job may have different job rates

Question 18

key jobs

Answer 18

benchmark jobs
stable content, common to many organizations so market pay data can be obtained
ex. accountant, software developer, project manager

Question 19

non key jobs

Answer 19

unique to organizations
cannot be directly valued or compared through market surveys
ex. chief data scientist, innovation manager

Question 20

job evaluation

Answer 20

composed of compensable factors and weighting scheme
includes input from many

Question 21

compensable factors

Answer 21

characteristics of a job that an organization values and pays for

Question 22

job ranking

Answer 22

ranks jobs on the basis of their relative worth; the simplest oldest system of job evaluation; used paired comparisons to establish rank
ranked highest to lowest based on factors such as responsibility, complexity or required skills
advantage: easy to implement
dis: highly subjective

Question 23

Job Classification

Answer 23

jobs are grouped according to a series of predetermined wage grades.
The descriptions of each job classes constitute the scale against which the specifications for the various jobs compared
Classified by clerical/managerial/technical where each class has their ow definition and job descriptions allow classification
ADV: structure/consistency
DIS: Rigid/ time consuming to develop data and criteria

Question 24

Factor Compensation/ Point Systems

Answer 24

Identify compensable factors and assign a value to each factor based on importance
benchmark jobs against other roles for each factor to create a score for the job
ADV: Objective comparison of jobs
DIS: can be costly and difficult to implement

Question 25

Hay Plan

Answer 25

Specific type of point system developed form hay group focused on 1.) Know how 2.) Problem solving 3.) Accountability

Question 25

the point factor system

Answer 25

-determine compensable factors
-assign points to degrees of compensable factors
-rate the job based on the compensable factors
-total points and group into grades/classifications

Question 25

Job Evaluation Criticisms

Answer 25

-low reliability
bureaucratic- hierarchical or arguing “thats not my job”
-focus on internal equity
-inconsistent with many innovations

Question 26

pay policy line

Answer 26

-mathematical expression that describes the relationship between a job’s pay and its job evaluation points
-combines external and internal comparisons to derive payrates for both key and non key jobs
-combination of market rates and job evaluation data
-does not use actual market rates- greater degree of internal consistency

Question 27

pay grades

Answer 27

when jobs of similar worth or content are grouped together for pay administration purposes
-grouping jobs into pay classes
each job wi a grade has same rate range
-less administrative burden
-permits greater flexibility in moving employees from job to job
-range spread is larger at higher levels

Question 28

pay setting line

Answer 28

monthly salary based on job evaluation points

Question 29

Job based pay structures cause problems

Answer 29

-reinforces top down decision making as well as status differentials
-bureaucracy, time/cost required to generate and update job descriptions can become a barrier to change
-job based structure may not reward desired behavior
-system encourages promotion-seeking behavior btu discourages lateral movement

Question 30

Delayering and banding reducing the number of job levels to achieve more flexibility in job assignments

Answer 30

reduces opportunities for promotion
broad bands can weaken budgetary control, lead to rising labor costs

Question 31

Broad Band

Answer 31

A compensation strategy used in organizational pay structures to simplify and streamline job classification and salary administration. It contrasts with traditional compensation systems that use narrow pay grades and specific salary ranges for each grade

Question 32

Skill based pay

Answer 32

paying individuals for skills they are capable of rather than for the job they are performing
Pay for knowledge
pay increases based on mastery of new skill
ADV: Flexibility, Increased satisfaction and job security
DIS: Higher pay and training costs, Administrative Burden

Question 33

competency based pay

Answer 33

compensate employees to learn more skills and become more advanced in their jobs.
Typically aimed at exempt employees (managers)

Question 34

Fair Labor Standards Act (FLSA) of 1938

Answer 34

established a minimum wage of $7.25 and overtime pay rate
many states have set higher minimum wages

Question 35

Exempt

Answer 35

employees not covered by the FLSA and not eligible for overtime pay

Question 36

Davis- Bacon Act and Walsh-Healy Public Contracts Act

Answer 36

require federal contractors to pay employee no less than area’s prevailing wages