M1 - The Role of Base Pay in Total Rewards

Question 1

What does a total rewards strategy do?

Answer 1

a total rewards strategy establishes the framework and priorities for the design and administration of compensation and benefits programs.

provides direction for tactical compensation decision be defining a link between day to day compensation decisions and the business.

must be able to change according to company’s business strategy.

evaluated continuously.

Question 2

Fixed pay:

Answer 2

non-discretionary compensation that does not regularly vary according to performance or results achieved

Question 3

Variable pay:

Answer 3

compensation that is contingent on discretion, performance, or results achieved. it may be referred to as “pay at risk”. much of the innovation in compensation occurs in the variable pay element.

Question 4

Total Rewards Design Process

Answer 4

Corporate vision and mission –> business strategy –> HR strategy –> total rewards strategy –> program design and administration –> program evaluation: revise or enhance

Question 5

Business Life Cycle

Answer 5

Start Up = (blank for base pay), depends on resources for short-term incentives, and (blank for long term incentives).

Growth = Increasing for base pay, (blank for short term incentives), very high/wider group for long-term incentives.

Maturity = high base pay, high short term incentives, decreasing long term incentives.

Decline = frozen/cut base pay, (blank short term incentives), long term incentives may be used to motivate

Question 6

Compensation Program Objectives

Answer 6

Internally equitable
Externally competitive
Affordable
Understandable
Legal / defensible
Efficient to administer
Capable of being reshaped for the future
Appropriate for the organization
Attract, motivate, engage and retain employees
Create alignment of employee efforts and business objectives

Question 7

Base Pay

Answer 7

fixed compensation paid to an employee for performing specific job responsibilities. typically paid as a salary, hourly, or piece rate.

Question 8

Salary / Hourly Rate / Piece Rate

Answer 8

Salary: compensation paid on a weekly, biweekly, or monthly basis rather than by the hour. Generally these positions are not eligible for overtime pay.

Hourly rate: compensation paid by the hour for a job being performed. an individuals annual pay is dependent on the number of hours worked during the course of the year and the hourly rate of pay. generally, positions paid on an hourly basis are paid for overtime.

Piece rate: payment is based on an individual employees rate of production. a payment is received for each piece or unit of work produced. piece rate payment can be either in place or in addition to hourly payment. the organization must ensure the employee is earning at least minimum wage.

Question 9

Overview of Base Pay Structure Design

Answer 9

Job Analysis –> Job Documentation –> Job Evaluation –> Job worth hierarchy –> Base pay structure

Job analysis: provides key information about the nature and level of work performed.

Job documentation: includes written information about job content or the functions of the job and associated knowledge, skills, and abilities.

Job evaluation: collects data needed to create a job worth hierarchy using a market data or job content approach.

Job worth hierarchy: illustrates where each job fits, relative to other jobs.

Base pay structure: after the job worth hierarchy is built, a base pay structure can be created and utilized as a framework for pay decisions.

Question 10

Job Evaluation

Answer 10

systematic method and process for determining and comparing the relative value of one job to others. enables the creation of a job worth hierarchy withing the organization.

Question 11

Market Data Approach

Answer 11

• job descriptions are used to match survey data.
• benchmark jobs are arranged into a hierarchy based on an analysis of market data.
• a benchmark job is used for making pay comparisons to develop or validate a job worth hierarchy.
• benchmark jobs are internal jobs that can serve as a market anchor points because they closely resemble jobs performed in other organizations or industries (at least 70% match of duties)
• at least 50% of the jobs in the organization should be benchmarked when using the market based job evaluation method.
• job with no market data are slotted using job content to determine relative worth

Question 12

Job content approach

Answer 12

• relative internal value is determined between jobs based on the nature and level of work
• some jobs are priced as anchor points

Question 13

What is a job worth hierarchy?

Answer 13

a perceived value of jobs in relationship to each other within an organization

Question 14

Why is a job worth hierarchy important?

Answer 14

helps to establish a relationship between various jobs, allowing groupings of similar jobs. by establishing a job worth hierarchy, compensation professionals can determine how various jobs can be classified within the organization.
it can then be used to form the foundation of the base pay system

Question 15

Why is a job worth hierarchy used?

Answer 15

used to determine and ensure internal and/or external equity among both positions and groups of positions. job grades/pay structures are then based upon that internal and/or external equity

Question 16

Q: Identify the most common compensation program objectives

Answer 16

……….

Question 17

Q: Define base pay and explain its delivery methods

Answer 17

……….

Question 18

Q: Explain the two basic approaches to job evaluation

Answer 18

……..

Question 19

Q: Explain the purpose and importance of a job worth hierarchy

Answer 19

………

Question 20

Quiz: Which of the following is one of the most common compensation program objectives? A) Ensuring external competitiveness. B) Paying at the median or 50th percentile. C) Deferring compensation expenses. D) Competitive base and highly leveraged incentives.

Answer 20

Ensuring external competitiveness.

Question 21

Which of the following best defines base pay? A) Variable compensation paid on a weekly basis to an employee. B) Fixed compensation paid to an employee for performing specific job responsibilities. C) Total cash compensation paid for goal attainment. D) Payment based on an individual’s rate of production.

Answer 21

Fixed compensation paid to an employee for performing specific job responsibilities.

Question 22

Which statement is most accurate regarding the market data approach to job evaluation? A) Job descriptions are used to match survey data. B) At least 20% of jobs should be benchmarked. C) Internal job worth is more important than external job values. D) Jobs with no market data cannot be priced.

Answer 22

Job descriptions are used to match survey data.

Question 23

What is a reason for establishing a job worth hierarchy? A) To determine appropriate placement of anchor points during the job evaluation. B) To prove that job grades are not needed in an organization. C) To establish midpoint differentials for managers and subordinates. D) To determine equity among both positions and groups of positions.

Answer 23

To determine equity among both positions and groups of positions.