EXAM 3 COMPENSATION Flashcards
indirect compensation
non-monetary (benefits, services, perks)
direct compensation
monetary
Base
salary, hourly wage
merit
permanent reward for past performance
don’t know ahead of time
incentives
motivate future performance
one time thing
told ahead of time
skill/knowledge
more valuable
ex. degree, CPA, skills
seniority
loyalty/stay with company a long time
more experience = better employee
add-ons
ot
shift differentials
holidays
weekends
COLA
cost of living adjustment
higher inflation = higher $
compensation philosophies?
entitlement
performance
compensation philosophy (entitlement)
seniority based
across the board raises (every year)
“santa claus” bonuses (once a year, good or bad)
compensation philosophy (performance)
performance based (earn it)
no raises for poor performers
not necessarily every year
MORE COMMON
equity theory
compare pay to others to determine fairness (outside company or coworkers)
equity (fair)
my outcomes/inputs = other’s outcomes/inputs
inequity (under-reward)
my outcomes/inputs < other’s outcomes/inputs
quit? less effort, bad attitude
inequity (over-reward)
my outcomes/inputs > other’s outcomes/inputs
rationalize, move on
pay secrecy
guess higher pay than actual
internal equity
pay differences for ALL jobs are fair
external equity
what I am paying vs. what others are paying
individual equity
same job, same company
determining internal equity: job evaluation
job ranking
job classification
point-factor method
job ranking
cons- diff. standard, criteria?, diff. between jobs, relies heavily on job description
pros– fairly easy and quick if few jobs
point-factor method
compensable factors (characteristics w/ value)
–> levels w/ points –> job description (not person)
VALUE OF JOB, NOT PERSON
cons- need training, time consuming
pros- most common, east to defend, criteria
job classification
take job descriptions and rank from highest to lowest
determine external equity: market review
conduct salary surveys
determine pay level policy
w/ other companies
conduct salary surveys
size
location
industry
determine pay level policy
match (=)
lead (+)
lag (-)
match
most companies
no leverage
lead
more applicants
more labor costs
lag
harder to attract
higher turnover
lower labor costs
only get bad performers
offer benefits to offset it
establishing pay: combining internal & external equity
- plot each job
- market line
- pay grades
lead = move line up
lag = move line down
red circle employee
employee whose pay is ABOVE their position’s maximum rate
green circle employee
employee whose pay is BELOW their position’s maximum rate
recognizing individual equity
experience
seniority
performance (merit pay, incentives, knowledge/skill pay)
title VII of the civil rights act of 1964
protects from employment discrimination based on race, color, religion, sex and national origin
lilly ledbetter fair play act of 2009
every time you get a paycheck based on discrimination, the 180 days resets
fair labor standards act of 1938
min. wage
overtime
child labor
(14-15 yrs: limited jobs and hours
16-17 yrs: limited jobs
18+ yrs: unlimited)
min. wage provision
provide an income floor flow worker’s lowest paid jobs
can pay less if tipped
state laws diff. (can’t pay worse than federal min. wage)
overtime provision
time and a half for > 40 hours
nonexempt = OT
exempt = no OT
exempt from OT?
salary test (earn more than this amount)
job duties test (executive, admin, professional, outside sales, computer related, highly compensated)
equal pay act of 1963
pay men + women in same job w/ same company the same amount
exceptions:
- seniority
- merit pay
- quantity or quality of production
- factors other than sex
