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PPA > Slide 8 > Flashcards

Slide 8 Flashcards

1
Q

What are the two approaches that employers use in setting pay rates?

A
  1. market-based approaches- smaller firm
  2. evaluation methods- involves assigning values to each of the company’s jobs
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2
Q

What are some employer objectives for reward strategies?

A
  1. Attracting staff
  2. Retaining staff
  3. Motivating staff
  4. Driving change
  5. Corporate reputation
  6. Affordability
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3
Q

What are some employee objectives for reward strategies?

A
  1. purchasing power
  2. fairness
  3. rights
  4. recognition
  5. composition
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4
Q

What are the two main components in employee compensation?

A
  1. direct financial payments: wages, salaries, incentives
  2. indirect financial payments: employer-paid insurance and vacations
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5
Q

What factors determine the design of any pay plan?

A
  1. legal
    2.union
  2. company strategy/policy
  3. equity
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6
Q

What are the components of equity?

A
  1. external equity
  2. internal equity
  3. individual equity
  4. procedural equity
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7
Q

What is external equity?

A

it refers to how a job’s pay rate in one company compares to the job’s pay rate in other companies

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8
Q

What is internal equity?

A

it refers to how fair the job’s pay rate is when compared to other jobs within the same company

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9
Q

What is individual equity?

A

it refers to the fairness of an individual’s pay as compared with what his or her coworkers are earning for the same or very similar jobs within the company, based on each person’s performance.

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10
Q

what is procedural equity?

A

“Perceived fairness of the processes and procedures used to make decisions regarding the allocation of pay.”.

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11
Q

What is the traditional approach for salary structures?

A
  1. job families
  2. ladders and steps
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12
Q

What are some contemporary trends for salary structures?

A
  1. single pay spines
  2. performance-based progression
  3. broad banding
  4. total reward
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13
Q

What are the objectives of the single spine pay structure?

A
  1. Firstly place all public sector employees on one pay structure
  2. Second, ensure that jobs within the same job value range are paid within the same pay range
  3. Thirdly, allow Government the ability to manage the wage bill more efficiently
  4. Again, ensure compliance and ease of monitoring pay structures of independent institutions
  5. Also, minimise industrial relations tensions related to pay distortions across the public sector
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14
Q

What are the advantages of the Single spine pay structure?

A
  1. One single ladder and set of grades covers the whole organisation
  2. Helps flexibility and harmonization
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15
Q

What are the disadvantages of the single spine structure?

A
  1. A common set of assumptions may be inappropriate for certain groups
  2. Can hinder pay flexibility for certain groups
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16
Q

Talk a bit about performance-based progression salary structure

A

Progression depends on performance rather than seniority
Leads to more effective wage cost control
However, can be perceived by employees as being over reliant on managers’ opinions

17
Q

What is broadbanding?

A

Broadbanding means collapsing salary grades into just a few wide levels or bands, each of which contains a relatively wide range of jobs and pay levels.
Involves retaining some form of grading system while reducing the numbers of grades or salary bands
Broadbanding injects greater flexibility into employee assignments, and it allows an employee to move up or down along the pay scale without changing pay ranges.

18
Q

What are benefits?

A

indirect financial and nonfinancial payments employees receive for continuing their employment with the company. They include things like health and life insurance, pensions, time off with pay, and child-care assistance

19
Q

What are some types of benefits?

A

Pensions
Company cars
Sick pay
Meals
Live-in accommodation
Parking facilities
Private health insurance
Crèche facilities

20
Q

What is statutory sick pay?

A

A state benefit
Provides basic income to employees who are incapable of work due to illness
Administered by employers and paid through payroll
Since 1994 employers have full financial responsibility for SSP for first 4 weeks of absence
After 4 weeks, the employers can claim back a portion of costs from the state

21
Q

What is occupational sick pay?

A

No obligation on employers to pay employees for absence due to sickness beyond requirements of SSP
If employers choose to – via occupational sick pay (OSP) schemes
A sum in excess of the statutory minimum is paid
Tend to be most generous in unionised environments
Schemes can vary on length of service of staff

22
Q

What are pensions?

A

Pension funds can be described as contribution made by employees towards their retirement

23
Q

What are pensions?

A

Pension funds can be described as contribution made by employees towards their retirement

24
Q

What are some types of occupational pension schemes?

A
  1. Defined benefit scheme
  2. Defined contribution scheme
  3. Hybrid schemes
25
Q

What is a defined benefit scheme

A

Contributions made into a single organisation fund which is invested for its members
Retired employees draw pension from fund calculated according to defined formula
You’ll get a pension based on a percentage of your earnings. Broadly speaking, the greater your salary and length of service the bigger your pension should be. These pensions offer a more predictable pension.

26
Q

What is a defined contribution scheme?

A

Also known as money purchase schemes
Employees and employers contribute a fixed percentage of salary
Pension benefits received dependent on money contributed and way it has been invested
Investments perform well – a good level of pension can be gained
Single lump sum given to employees on retirement to buy an annuity from life insurance company
Your pension depends on the amount of money put into the scheme, how well the funds have been invested, the level of charges applied to your fund

27
Q

What is the main difference between a defined benefit plan and a defined contribution plan?

A

With a defined benefit plan, the employee can compute what his or her retirement benefits will be upon retirement.
With a defined contribution plan, the actual pension will depend on the amounts contributed to the fund and on the success of the fund’s investment earnings

28
Q

What is the hybrid pension scheme?

A

It seeks to combine the best elements of the two main schemes

29
Q

How does a personal pension scheme work?

A

Personal pensions are arranged through an insurance company
Individuals pay amounts into their own personal pension, which is then invested in a similar way as a company pension

30
Q

How does a group personal pension scheme work?

A

Set up by an employer instead of an occupational pension scheme
From a legal and taxation viewpoint, no different from any individual personal pension
Charges are lower as employer can arrange a bulk discount
Scheme administered by an insurance company
Company and employees make contributions

31
Q

How does a stakeholder pension work?

A

Established in 2001
Aimed primarily at middle income earners who do not have access to occupational schemes
Aim is to reduce the number of people reliant solely on state pensions
Can be operated by employers, financial services companies or a trade union
Charges are kept low as providers follow government standards
Employers not obliged to make contributions, but must provide access to a pension through the payroll

PPA (8 decks)

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