PEOPLE III Flashcards
Total Rewards
Includes everything the employee perceives to be of value resulting from the employment relationship.
Rewards: benefits
Retirement, health care, sick pay/disability schemes, life insurance, and paid time off,. External and internal training and development that employees receive is also considered a benefit
Rewards: Compensation
Salary and allowances. Commissions and bonuses
Rewards: Perquisites
Compensation provided on an individual basis in the form of goods or services. Ex: cars and mobile devices
Rewards: Incentives or premiums
Payments in return for the achievement of specific, time-limited, targeted objectives.
. Rewards: Location
City or suburbs;nearness to transportation, shopping, restaurants.
Rewards: Flexibility
Work attire, schedules, work-at-home opportunities
Rewards: Social interaction
Friendly workplace, family picnics or outings
Total rewards strategy
A plan or method implemented by an organization that provides monetary, benefits-in-kind, and developmental rewards to employees who achieve specific business goals.
Compensation philosophy
A short statement documenting the organization’s guiding principles and core values about employee compensation. The why behind employee pay.
Compensation philosophy passes the following quality test
Is the overall program equitable?
Is the overall program defensible and perceived by employees as fair?
Is the overall program fiscally sensitive?
Is the compensation philosophy legally compliant?
Compensation philosophy passes the following quality test continued
Can the organization effectively communicate the philosophy to employees and prospective candidates?
Are the programs the organization offers fair, competitive, and in line with the compensation philosophy and policies?
Building a total rewards strategy
Assessment: Evaluate the current compensation and benefits systems and the effectiveness of those systems in helping the organization reach its goals. Employees are usually surveyed
Building a total rewards strategy
Design: Identifies and analyzes various reward strategies to determine what would apply best in their workplace. Decisions are made about what will be rewarded and what rewards will be offered to employees for those achievements.
Building a total rewards strategy
Implementation: Implements the new rewards system and circulates materials that communicate the new strategy to employees. Training also commences so that department managers are able to effectively measure the achievement and employees understand what they need to accomplish to receive the rewards.
Building a total rewards strategy
Evaluation:
Organizations typically take one of two basic approaches toward employees: Entitlement-oriented
Some organizations promote a caring, protective feeling and want employees to feel as if they are part of the family. In general, as benefits increase, there is less emphasis on individual employee contributions and responsibility and more emphasis on the success of the organization as a whole.
Organizations typically take one of two basic approaches toward employees: Contribution-oriented
Compensation programs of other organizations are more performance-driven, putting emphasis on the performance and contributions of individual employees. Compensation systems emphasize performance-based pay, incentives, and shared responsibility for benefits.
Pay Equity
Related to the fairness of compensation and benefits paid to employees.
Internal Equity
Occurs when employees feel that performance or job differences result in corresponding differences in rewards that are fair.
External Equity
Involves comparing an organization’s compensation levels and benefits to those of other organizations that are in the same labor market and that compete for the same employees.
Lag market competition
Sets pay rates below those of other organizations.
May enable an organization to offset other higher costs such as purchasing, distribution, or sales expenses.
Will offer other benefits such as learning and development, attractive roles via career paths.
Match market competition
Offers wage rates and benefits packages similar to that of the competition.
Often referred to as being externally competitive.
Most common approach.
Lead market competition
Offers higher wages and/or better benefits in an attempt to attract and keep the best talent.
Rationalizes that higher-quality employees are most productive, which makes up for the higher salaries.
Implications for Global Compensation and Benefits Strategy: Ethnocentric
This leads to transfer of headquarters total compensation policies, with inadequate consideration of local legal and cultural differences.
Implications for Global Compensation and Benefits Strategy: Polycentric
Local cultural and legal compensation norms are more likely to be understood and emplemented
Implications for Global Compensation and Benefits Strategy: Regiocentric
There is greater potential for consistency of remuneration approaches within a region.
Implications for Global Compensation and Benefits Strategy: Geocentric
Local compensation strategies are more likely to be consistent with global policies. A desire for too much global consistency can lead to the imposition of inappropriate policies at the local country level.
4 reasons for communication for the total rewards strategy
- Educating employees about the organization’s total rewards practices.
- Achieving employees’ buy-in and making them aware of the overall value.
- Supporting the organization’s strategic objectives
- Supporting the organization’s goals for performance management.
Required communication
Some communications are mandated by laws and statutory regulations.
Common items included in a total compensation statement are:
Salary/hourly rate. medical benefits coverage flexible spending account information Paid leave Disability insurance life insurance employee assistant program retirement benefits educational assistance programs relocation expenses
Self-service technologies and employee self-service (ESS) applications provide employees with quick and easy access to compensation and benefits information online.
Less administrative tasks for HR.
Increased accuracy of employee data.
Improved timeliness in information and employee transactions.
Reduced dollars spent on other traditional HR delivery channels (Paper-based transactions)
Two effective practices for compliance are to always:
- Research local laws versus organizational practices.
- Involve experts, internal or external, to validate particularly complex local compensation and benefits practices and requirements in order to implement compliant and culturally accurate programs.
Is the system strategy in compliance?
How easy is it for the organization to meet legal requirements?
Is the system strategy in compliance?
Does the system protect employee privacy and the organization’s proprietary data?
Is the system strategy in compliance?
Does the system support the organization’s diversity/inclusion goals?
A project team working on the design of a total rewards strategy decides to survey employees’ attitudes. This survey is done during which project phase?
Assessment
Which philosophy would an entitlement-oriented organization embrace?
Across-the board annual raises
What is a major advantage of an organization having internal equity?
It allows organizations to fairly recognize unique jobs.
An employee is motivated by knowing there is room for base pay to grow. This BEST exemplifies
Pay transparency
When an organization operates in a jurisdiction where there are multiple sets of laws and regulations in force, the organization must
Comply with all employment laws, codes, and practices.
Activities in Compensation System Design: Job Analysis
identifies job tasks and qualifications of incumbents
Activities in Compensation System Design: Job Documentation
Creates job descriptions/specifications
Activities in Compensation System Design: Job Evaluation
Establishes value of jobs within organization
Activities in Compensation System Design: Pay Structure
Establishes pay grades/ranges
Job analysis
A systematic study of jobs to determine what activities (tasks) and responsibilities they include, the personal qualifications necessary for performance of the jobs, and the conditions under which the work is performed.
Job analysis gathers information: Job context
The purpose of the job, its work environment, its place in the organizational structure
Job analysis gathers information: Job content
The duties and responsibilities of people who hold the job.
Job analysis gathers information: Job specifications/qualifications
knowledge, skills, and abilities required for a person to have a reasonable chance of successfully performing the job.
Job analysis gathers information: Performance criteria
Desired behaviors/results that will constitute performance in the job.
Job Analysis Methods: Observation
Direct observation of employees performing the tasks of a job, recording observations, and translating them into the necessary knowledge, skills, and abilities.
Job Analysis Methods: Interview
Face-to-face interview in which the interviewer obtains the necessary information from the employee, peers, supervisors, and team/unit members about knowledge, skills, and abilities needed to perform the job.
Job Analysis Methods: Open-ended questionnaire
For job incumbents and sometimes managers, asking about the KSAs necessary to perform the job.
Job Analysis Methods: Highly structured questionnaire
Questionnaires structured in a manner that allows only specific responses, aimed at determining the frequency with which specific tasks are performed, their relative importance, and the skills required.
Job Analysis Methods: Work diary or log
Record maintained by the employee. Job information, including the frequency and timing of tasks, is recorded in the diary.
Job documentation results in three deliverables
Job descriptions, Job specifications, Job Competencies
Job documentation helps compensation systems
Helps to set up evaluation criteria for job performance.
Provides data for comparing pay with that of other organizations.
Helps in assigning objective classifications or job titles to employees.
Job evaluation
Determines the value and price of a job in order to place and compare it within an organization as well as attract and retain employees in a competitive environment.
Job-content-based job evaluation
The relative worth and pay structure of different jobs are based on an assessment of their content (responsibilities and requirements) and their relationship to other jobs within the organization.
Two common non quantitative methods include
job ranking and job classification
Job Ranking
Involves establishing a hierarchy of jobs from lowest to highest based on each job’s overall value to the organization. Ranking evaluates the whole job, rather than parts of it, and compares on job to another.
Paired-comparison method
Used in which each job is compared with every other job being evaluated.
Job classification method
writes descriptions for each class of jobs. Individual jobs are then put into the grade that best matches their class description, based on the judgment of the evaluator.
Quantitative methods evaluate the job using a variety of factors - often called compensable factors.
Compensables factors reflect how much the job adds value to the organization.
Compensable factors should
Reflect the actual work being done.
Be supported by documentation such as job descriptions.
Reinforce the organization’s strategic plan and culture.
Be valued by all affected parties (stakeholders).
Be reviewed annually.
Point-factor system
The compensable factors chosen for the evaluation must reflect the nature of the job being evaluated. Example: Hazards and working environment would be pertinent factors in a manufacturing setting but not as relevant in most office jobs.
The factors most commonly used in point-factor evaluations include:
Skills, responsibilities, Effort and Physical Demands, Working conditions, supervision of others
Market-based job evaluation
The relative worth and pay structure of different jobs are based on their market value or the going rate in the marketplace.
Remuneration Surveyes
Collect information on prevailing market compensation and benefits practices, including starting wage rates, base pay, pay ranges, other statutory and market cash payments (EX: OT and shift differentials), variable compensation (short and long term incentive plans) and time off
Internal Surveys
Organizations that have available resources and expertise may choose to develop their own internal survey to allow for more control over the survey technique and data analysis.
Disadvantages of an internal survey
- competitors may not be willing to cooperate and to share their pay structures
- Matching the positions may be difficult.
Advantages of using an independent consultant for internal surveys
- The organization still maintains control over the internal survey
- Outsourcing the task may place less demand on organizational resources.
External Surveys
External surveys may draw on extensive databases of incumbents and industry benchmarks and can provide real-time insights into total compensation levels, practices, and emerging trends.
Benefits of compensation and benefits benchmarking and consulting:
- Access to pay data
- Knowledge of local and regional laws and cultural practices
- Assessment of current market position.
- Improved understanding of current market practices as well as key market trends and innovative ideas.
Two types to developing pay structure
- Grouping jobs into pay grades and setting pay ranges
Pay grades
Used to group jobs that have approximately the same relative worth in an organization. All jobs within a particular grade are paid the same rate or within the same pay range.
Number of pay grades an organization has will depend on the following factors
- The size of the organization ( how many employees and positions in the organization)
- The distance between the highest- and lowest-level jobs
- How clearly the organization defines and differentiates jobs
- The organizational policies regarding pay increases and promotions
For each pay grade:
An organization creates a pay range that sets the upper and lower limits of compensation for employees whose jobs fit within that particular grade.
Developing a pay structure:
- Develop a market line for all jobs, comparing the job evaluation points or values with the market value for comparable jobs.
Developing a pay structure:
- use the market line to decide pay grades by grouping together the jobs with similar value to the organization
Developing a pay structure:
Spread pay grades evenly over the points or values on the market line, attempting to place jobs in the middle of the pay grade.
Developing a pay structure:
Calculate the pay ranges for each grade. Assuming that the jobs are placed in the middle of the range (midpoint). set up a range spread that fits with the type of positions and the number of grades. Each pay range will have a minimum, midpoint, and maximum, with equal distance between each.
Developing a pay structure:
Calculate individual pay rates using a pay policy line that is set by the organization. Example: in a highly competitive marketplace, an employer may decide to hire employees at 105% of the pay structure, or 5% above the midpoint each range.
Compa-ratios
When pay ranges are based on the target market rate. The indicator as to how actual wages match, lead, or lag the target market.
Compa-ratios are computed by dividing the pay rate of an employee by the midpoint of the pay range.
Compa-ratio=pay rate/midpoint
Broadbanding
Combines two or more salary grades to create larger ranges and give people wide latitude to move within their job without outgrowing the pay scale.
Advantages of broadbanding
Provides wider ranges than the spread of a traditional pay range.
Reduces the number of job grades.
Reduces the number of reporting levels within an organization.
Disadvantages of broadbanding
Affords less control for the organization in salary and promotion decisions.
Reduces the opportunity for promotion and accompanying job title and base salary changes;fewer salary ranges lessens promotions to another range, which can lead to retention issues
A job analysis has identified several knowledge, skill, and ability requirements for salespeople responsible for selling a product line to corporate accounts and government agencies. What example of a knowledge requirement?
Identifying product features and benefits
What is an example of a skill requirement?
Demonstrating product features
What is an example of an ability requirement?
Maintaining friendly relations with suppliers
Which job evaluation method would provide a small organization with a quick and inexpensive way to compare one job to another?
Job ranking
Which job evaluation method would be MOST appropriate for an organization that has a large number of people with similar, defined jobs?
Job classification
Hr gathered salary data but was unable to analyze it until the following year. Is the data still considered usable?
yes, if the data is adjusted for wage inflation
What is the compa-ratio for an employee who earns $15 per hour where the salary range has a midpoint of $12 per hour?
1.25
Most employees receive some type of base pay, in one of two forms:
- Hourly wage(for each hour worked)
2. A salary (the same amount no matter how many hours are worked)
Single-rate pay or flat-rate pay systems
Each incumbent of a job has the same rate of pay, regardless of performance or seniority.
Time-based step-rate pay system
The employee’s pay rate is based on longevity in the job. Pay increases occur on a pre-determined schedule.
Performance-based pay system
The individual employee’s performance on the job is the basis for the amount and timing of pay inreases
A performance-based pay system is commonly called
merit pay or pay for performance
Difficulties in using merit pay
- The incentive value of the reward offered may be too small to motivate performance.
- The link between performance and rewards may be weak.
- Managers may be reluctant to distinguish between performance levels.
Guidelines for effective use of merit pay
Gain executive buy-in.
Align the merit pay system with organizational goals and culture.
Develop accurate performance appraisal systems that recognize proficiency. Proficiency at a job should dictate value and awards (not just longevity or tenure or other subjective measures)
Guidelines for effective use of merit pay continued
Train supervisors in the mechanics of the performance appraisal system and in the art of giving feedback.
Tie meaningful rewards closely to performance.
Use a wide range of increases to differentiate between performance levels.
Productivity-based pay system
Pay is determined by the employee’s output
Straight Piece-Rate System
The employee receives a base wage rate and is awarded additional compensation for the amount of output produced.
Differential Piece-Rate System
The employee receives one piece rate up to the standard and then a higher rate once the standard has been exceeded.
Person-based pay
employee characteristics, rather than how the job is performed, determine pay.
Knowledge-based system
pay is based on the level of knowledge the employee has in a field. This approach is dominant for compensating learned professions such as scientists or teachers, although staff professionals may also be paid this way.
Skill-based systems
Base pay on the number of different skills an employee is qualified to perform. Employees increase their pay by acquiring new skills, even if they do not use the skills in their current assignment.
Competency-based systems
Set pay at the level at which an employee can operate in defined competencies (Directing or training others). This type of system is commonly found when rewarding professional groups of employees.
Single- or flat-rate system (advantages)
Works well for routine, simple jobs.
Implemented and administered simply
Single- or flat-rate system (disadvantages)
Does not reflect individual performance, seniority, or skill differences
Time-based step-rate system
advantages
Best suited to routine jobs where the qualifications of job incumbents increase with time.
Time-based step-rate system
disdvantages
Generally does not reflect the varying rates at which incumbents become proficient.
Does not reflect performance differences, except for unsatisfactory performance
Can raise average pay levels over time even if performance is below average
Performance-based/merit pay system; pay for performance
advantages
Works best where individual performance is valued and accurately measured.
Rewards and encourages superior performance.
Performance-based/merit pay system; pay for performance
disadvantages
Requires well-documented performance appraisal systems on which managers have been thoroughly trained.
Can be manipulated by supervisors to benefit certain employees over others.
Bias or subjectivity in performance appraisals may lead to employee discrimination claims
Productivity-based system (advantages)
Works best where emphasis is on quantity of work and outputs are accurately measured.
Encourages high level of employee productivity.
Ties pay to the volume of the work performed.
Productivity-based system (disadvantages)
May sacrifice quality of work without careful supervision
May lead to inflexibility in the workforce bc employees may want to stay with the job for which they are paid the most.
Person-based system (advantages)
Works best where skill/knowledge levels are well defined and development of employees is valued.
Encourages a flexible and better-trained workforce.
May reduce need of specialists
Allows for work teams that are highly interdependent.
Person-based system (disadvantages)
Can be costly in terms of both administration and training.
May result in high pay rates.
Skills/knowledge must be effectively utilized to provide the organization with an offset to the higher pay rates.
May be more difficult to institute cost controls
Red-circle rates
Employee pay rates above the range maximum
Green-circle rates
Are the opposite of red-circle rates-and employee’s pay is below the minimum of the range.
Examples of when red-circle rates may occur
When long-term employees reach the maximum rate in their range or when promotion opportunities are rare
When employees are bumped down to a lower-level job, rather than getting laid off, but their salary is not reduced ( Sometimes a red-circle is rate frozen until the pay structure is increased enough so that the rate falls within the range.)
Examples of when red-circle rates may occur
When a manager is paid at the top of the job range but there are no openings at the next job range ( In this case, bonuses are sometimes used to increase the manager’s take-home pay.)
Green-circle rates can happen when an organization
Promotes an employee or “tries out” an employee who does not possess all the requisite KSAs for a job.
Green-circle rates can happen when an organization
Reviews and updates its pay ranges, increasing minimums as a result
Pay compression
Salary compression, describes situations where there is only a small difference in pay between employees regardless of their experience, skills, level, or seniority
Pay compression typically occurs when:
Beginning salaries are raised due to increases in the minimum wage or inflation. Therefore, new hires can make the same as employees in the same job with more experience who began at a lower wage.
Pay compression typically occurs when:
Labor market pay levels increase more rapidly than an employer’s pay adjustments. An example would be hiring an inexperienced systems engineer at or close to what more-experienced systems engineers earn bc of escalation in competitive hiring rates. If the experienced systems engineer is paid more than the experienced ones, pay compression occurs.
Pay compression typically occurs when:
There is not enough difference between pay levels. This situation allows an employee making overtime to have a larger net pay than his/her supervisor even though the base pay of the employee is less than the supervisor’s pay.
To counteract the effects of pay compression, organizations can:
- Match the market in pay rates for all employees, not just new hires.
- Provide other benefits to employees affected by pay compression.
- Continuously evaluate survey data and update pay ranges accordingly.
To counteract the effects of pay compression, organizations can:
- Provide incentive plans for managers.
- Increase the amount of time off awarded.
- Provide longevity bonuses.
- Monitor salaries for inflation.
- Install a more aggressive merit pay program.
Cost-of- living adjustment (COLA)
Is a pay adjustment given to all eligible employees without regard to organizational profitability, employee productivity, or other performance factors. Paid as a lump sum, or quarterly
General pay increase
Is given to all employees (or sometimes a class of employees such as office or production workers) based on local competitive market requirements. This type of increase is awarded regardless of employee performance. The pay increase is not linked to the cost of living and will depend on the employer’s ability to pay for compensation increases.
Seniority Increase
Is the time spent in an organization, is sometimes the basis for pay adjustments.
Organizations may agree to one of these two conditions when seniority is used:
- Employees may need to be employed for a certain period of time before they are eligible for pay increases
- Employees may receive pay increases automatically after a set time in the job.
Lump-Sum Increases (LSIs) or performance bonus
An LSi is a one-time payment of all or part of a yearly pay increase. An employee’s base wage rate is typically not adjusted by this increase.
Market-Based Increases
Organizations may use market-based salary increases to be competitive in attracting new talent or to keep key employees. Market-based salary increases are usually added to base pay and may also be called equity increases
Differential Pay (or variable pay)
Depends on performance and is not added to the employee’s base pay. This practice allows organizations to better control their labor costs and to tie performance and pay together.
Hazard pay
Is used in some industries to compensate employees for increased levels of risk. Example: Employees earn hazard when working in workplaces with high infection or injury rates or in geographical areas characterized by violence or instability.
Time-Based Differential Pay
Some employees receive time-based differential pay, or a different rate of pay based on when they work. Keep in mind that any overtime premium must be applied to the differential pay.
Time-Based Differential Pay: Shift Pay
Some employees receive extra pay when they work less-desirable hours such as a second or third shift. Shift pay may be a flat amount per hour or a percentage of the base pay.
Time-Based Differential Pay: Emergency-shift pay
Certain types of industries pay emergency-shift pay when employees work in response to an emergency
Time-Based Differential Pay: Premium pay
Some employers pay premium pay (extra pay), or overtime at a higher rate, for working any of the following:
- Holidays or vacation days or weekends.
- For the sixth or seventh day of straight time.
- After eight hours in a day
Time-Based Differential Pay: Premium pay
- On-call or call-back pay- In some organizations employees earn pay when they are on call, even if they are not called in to work (on-call pay). Employees may also earn extra pay when they are called back for an extra shift in the same workday (call-back pay)
Time-Based Differential Pay: Reporting pay
Employees are paid for reporting to work as scheduled even if upon arrival no work is available.
Time-Based Differential Pay: Travel pay
Hourly employees receive travel pay for time spent traveling to work assignments, even if the travel time is outside of working hours.
Time-Based Differential Pay: Overtime pay
In various countries the minimum amount to be paid for overtime is dictated by legislation
Geographic differential pay
Based on where an employee works. Organizations with facilities in different locations often need to tailor their compensation programs to the differences in local labor markets
Reason for differential pay by geographic region: For labor costs
For labor costs: Employers change their base-pay structure to reflect different wage rates or factors that impact the cost of living in different geographic areas.
Reason for differential pay by geographic region: To attract workers to certain locations
Employers pay more to employees who accept work in remote locations or in places where the climate or quality of living is a deterrent. An offshore oil platform is a good example.
Reason for differential pay by geographic region: For foreign countries
Employers offer a base-pay structure plus allowances to reflect factors that affect the economics of employees who work in foreign countries. These factors may include differences in culture, education, technology, climate, and taxes.
Incentive pay
Used to motivate employees to perform at a higher level by paying for performance that exceeds base-pay expectations.
Incentive Type: Individual
The piece-rate system is the most basic individual incentive system. Workers who produce more earn more.
A commission.
Gifts, awards, trips, prizes,
Incentive Type: Group
Past production records may be used to set up base productivity standards. Any gains above that standard are shared 50/50 by the organization and its employees.
Incentive Type: Organization-wide
Profit sharing and stock ownership are the most common organization-wide incentive plans.
For an incentive pay plan to be successful, organizations need to have the following in place:
Competitive base salaries
Fairly stable management presence and strategic direction
Good communication between management and employees
Reliable method for measuring the results linked to incentives
Commitment from the top down to communicate the plan and to provide ongoing training and coaching
Executive pay plans
Incentives usually account for a greater share of an executive’s total direct compensation package (total annual cash compensation plus the annualized value of long-term incentives)
Second. Incentives are generally linked to the performance of the entire organization or the major units/businesses - typically to organizational profitability.
Types of Executive Compensation
Companies often use equity or pay executives large cash discretionary bonuses and pay increases linked to cost-of-living adjustments. Pay-for-performance alignment is vital.
Typical long-term incentives for executives
Stock option plans: the right to purchase shares of the company’s stock at a pre-determined price, which is referred to as the exercise price.
given a certain time period to purchase stock - five to ten years. Participants usually gain vesting rights to exercise a pre-determined percentage of the total stock option allocation each year.
Typical long-term incentives for executives
Stock purchase plans are broad-based plans available to most or all of a public company’s employees. An opportunity to invest in the organization’s stock either at a discount or without payment of brokerage commissions.
Typical long-term incentives for executives
A restricted stock grant does not require an employee or executive to purchase the stock. A transfer or gift of stock with forfeiture provisions that result in a possible loss of the shares if certain requirements are not met. A holder of restricted stock can vote the shares at stockholder meetings and has all other rights as a stockholder. Can’t sell the stock until the specified time period has passed or vesting has occured.
Typical long-term incentives for executives
Phantom stock award, the employer pays a cash award to the employee in units that mimic actual shares of stock.
Typical long-term incentives for executives
Restricted stock units: Grantee does not receive actual equity ownership. Grantee is given a promise of a certain amount of stock after restrictions have been fulfilled (a vesting period, a company going public or being acquired)
Typical long-term incentives for executives
Performance grants: public companies can also benefit from linking stock-based compensation to organizational performance.
Direct Sales Personnel
Organizations compensate their direct sales force in one of 3 ways: Straight salary, straight commission, or salary plus commission and/or bonus
Straight salary
Least used compensation package for direct salespeople.
Appropriate straight salary use for direct sales
- The sales staff spends a significant amount of time servicing customers rather than securing sales (Ex: training, trade shows, or handling customer inquiries)
Appropriate straight salary use for direct sales
- Measuring sales performance is difficult
- The nature of the sales process makes it impossible to separate one individual’s efforts from those of the support people who also help secure the sales.
- There is a long sales cycle
Straight commission
The salesperson’s entire compensation is based on commission.
Appropriate staight commission use for direct sales
- The organization’s objectives are to motivate sales volume.
- Holding down the cost of sales is important.
- Competitors also compensate through commission-only systems.
Appropriate Salary plus commission and/or bonus use for direct sales
- motivated by financial gain.
2. Fits and best supports the organizational strategy.
Compensation Ratio: Relationship of current salaries to the midpoints of the salary ranges.
Employee’s pay rate/ pay ranges midpoint
Tracking individual salaries in comparison to the pay range midpoint allows managers to consider if employees are being paid appropriately on the basis of their skills, experience, and performance.
Total company compensation expense: All costs associated with employment, including salaries, overtime, benefits, and bonuses.
Salaries + OT + Benefits + Bonuses/ total costs
Tracking total compensation as a percentage of total costs helps an organization manage the costs associated with human capital, including evaluating the use of fixed versus variable compensation.
A compensation method related to an employee’s individual performance is known as
A merit pay plan
Which compensation system guarantees an employee a base wage and then pays an additional amount for each unit produced
Straight piece-rate system
An employer has redesigned its pay structure, and a position has a pay range for the grade of $9.10 to $12.75 per hour. What term would apply to an employee in this position who is earning $8 per hour?
Green-circle rate
Two consecutive years of mandated 10% increases in the minimum wage would probably result in
Compression between the lowest-paid workers and more-skilled workers for a retail trade employer.
Gainsharing is a type of
Group incentive
Which type of long-term incentive allows an executive to purchase shares of a company’s stock at a pre-determined price?
Stock options
What should be the compensation basis for a sales representative whose time is spent acquainting potential customers with the organization’s product line and providing technical assistance?
Base salary that represents a large percentage of compensation
To spend its benefits budget wisely, an organization must answer the following questions
Which benefits are required by law? Laws require that employers provide certain benefits to their employees.
To spend its benefits budget wisely, an organization must answer the following questions
Which benefits enable an employer to compete for employees? Paid time off. Offer an attractive benefit that is not offered by other employers.
To spend its benefits budget wisely, an organization must answer the following questions
Which benefits are cost-effective to purchase and to administer? paid holidays are easy to administer; pension and health-care plans are more time-consuming and costly to administer.
To spend its benefits budget wisely, an organization must answer the following questions
Which benefits do employees prefer? Must consider what benefits will attract and keep new employees. Survey employees regularly to understand how they feel
To spend its benefits budget wisely, an organization must answer the following questions
Which benefits do employees prefer contin? Health insurance ranks high with employees of all ages, Tuition reimbursement, life insurance and retirement for older workers
To spend its benefits budget wisely, an organization must answer the following questions
Which benefits provide creative choices? Organizations that cannot afford to provide health insurance may consider annual cash bonuses that employees can apply toward their insurance costs.
To spend its benefits budget wisely, an organization must answer the following questions
Which benefits provide creative choices? An organization that cannot offer a benefit due to cost may think about offering popular lower-cost benefits, such as a flexible work schedule, telecommuting, and casual dress.
Benefits Needs Assessment
Decide on a benefits package that will match the overall organizational strategies, support the organization’s mission and vision, and meet employee needs.
Benefits Needs Assessment: Review the organization’s strategy
Organizations that want to lead the market will offer their employees a more extensive benefits package.
Benefits Needs Assessment: Review the organization’s compensation philosophy
HR will need to find out how much can be spent on benefits
Benefits Needs Assessment: Analyze the demographics of the organization’s workforce
Organizations benefits plan must address the needs of various categories of employees. Cateogories include full-time vs part-time status, active vs retired status, age, martial status, and family status
Benefits Needs Assessment: Analyze the design and utilization data on all benefit plans
this analysis may result in design changes to a plan. Based on employee lifestyle and employee mix, types of benefits will vary and may include retirement, medical expenses, insurance, dependent care assistant, and capital accumulation.
FInal step in a benefits needs assessment is to compare the following
Organization needs (including budget)
employee needs
existing set of benefits
Gap Analysis Issues and Suggested Actions: Issues
Needs that are not being met by existing benefits
benefits that are not addressing organizational or employee needs
benefits that overlap each other
Benefits that are underutilizaed
Benefits that are too costly but are heavily used by employees.
Type of benefit: Paid time off
Vacation or holiday leave, Public, national, or bank holidays, maternity and paternity, or parental leave, leave related to illness, or other types of leave.
Employee assistance programs (EAP)
intended to help identify and resolve employee concerns related to personal matters or work-related issues that, some instances, can affect health or performance in the workplace. Usually priced her head or per capita rate
Wellness programs
Intended to promote and support the health, safety, and well-being of employees.
circumstances under which an organization can terminate employment and the amount of payment the terminated employee receives is prescribed by law and differs by country
Issuing warnings for misbehavior
the reasons for which termination can occur
the amount of severance payments provided to an employee
how long wages must continue to be paid to an employee after termination
Defined benefit
Promises specific benefit amount upon retirement.
Vesting schedule is set up.
Provides benefits based on service and perhaps on salary
Amount of benefit is decided by a formula
Provides a pre-specified level of benefts
Employer bears the investment risk
Defined contribution
Amount of money that is to be regularly contributed to the fund is specified.
No promises are made about the future value of the benefit.
Employees will be entitled to 100% of their investment and the vested portion of the employer’s contributions upon retirement.
Social security: Social insurance, where people receive benefits or services in recognition of contributions to an insurance program.
These services typically include provision for retirement pensions, disability insurance, survivor benefits, and unemployment insurance.
Social Security: Services provided by government or designated agencies responsible for social security provision
Includes medical care, financial support during unemployment, sickness, or retirement; health and safety at work; aspects of social work; and even industrial relations
Social Security: Basic security irrespective of participation in specific insurance programs where eligibility may otherwise be an issue
Assistance may be given to new-arriving refugees for basic necessities such as food, clothing, housing, education, money, and medical care.
Perquisites
Special incidental payments, benefits or privileges given to individual employees, over and above their regular rewards.
Common perquisites
- Free/discounted products or services
- Mobile devices
- Professional organizations/certifications
- Training programs
- Education fees
- Housing
- Company car and/or cash allowances
As part of conducting a benefits plan needs assessment, the HR professional has looked at the organization’s business strategy and compensation philosophy. What is the next step that should be taken?
Determine employee needs with regard to benefits
What is a possible outgrowth of a benefit plan needs assessment?
Adding medical coverage for acupuncture and chiropractic care
Which benefit has the best potential to reduce an employer’s health-care costs
Promoting a wellness program
Workers compensation benefits are provided
For an approved work-related accident or illness
An employee is terminated for repeated violations of employer policy. How does this type of separation impact severance payments?
It depends on country law and whether compensation is required.
