Total Rewards Flashcards
Job evaluation method in which descriptions are written for each class of jobs; individual jobs are then put into the grade that best matches their class description.

Job classification
Set the upper and lower bounds of possible compensation for individuals whose jobs fall within a pay grade.

Pay ranges
Pay systems in which employee characteristics, rather than the job, determine pay.
Name the 3 systems

Person-based pay/system
Skill-based, knowledge-based, competency-based
Provides each incumbent of a job with the same rate of pay, regardless of performance or seniority.

Single-rate pay // flat rate pay
Used to group jobs that have approximately the same relative internal or external worth and are paid at the same rate or within the same pay range.

Pay grades
Situation where an individual’s performance on the job is the basis for the amount and timing of pay increases.

Performance-based, Performance 4 Pay, Merit-based pay
System in which pay is based on longevity in the job and pay increases occur on a pre-determined schedule.

Time-based // step-rate pay

Situation in which an organization’s compensation levels and benefits are similar to those of other organizations that are in the same labor market and compete for the same employees.
External equity
Factor that motivates performance of a desired behavior or discourages performance of an undesired behavior.
Incentive
Pay adjustment given to eligible employees regardless of performance or organizational profitability; usually linked to inflation.

Cost of living adjustment (COLA)
Plan or method implemented by an organization that provides monetary, benefits-in-kind, and developmental rewards to employees who achieve specific business goals.
Total rewards strategy
Form of direct compensation where employers pay for performance beyond normal expectations to motivate higher performance.
Incentive pay
- or premiums. Payments in return for the achievement of specific, time-limited, targeted objectives.*
- Often they are calculated as a percentage of base salary. Payment may be made in a lump sum or as ongoing payments over a specified period of time.*
- Examples: profit-sharing, commission, non-cash rewards (trips, gifts), gainsharing plans, flat monetary cash*
- Can be at any level: individual, group, or org-wide*
- Based on theory that rewards drive behavior*
Job evaluation method that looks at compensable factors (such as skills and working conditions) that reflect how much a job adds value to the organization; points are assigned to each factor and then added to come up with an overall point value for the job.
Point-factor system
(it is the most systematic and analytical method and it includes documentation of the process)
Pay rate divided by the midpoint of the pay range.

Compa-ratio
Process of systematically studying a job in order to identify the activities/tasks and responsibilities it includes, the personal qualifications necessary to perform it, and the conditions under which it is performed.
Job analysis
Job evaluation method in which the relative worth and pay structure of different jobs are based on an assessment of their content and their relationship to other jobs within the organization.
Job-content-based job evaluation
Situations in which an employee’s pay is below the minimum of the range.
Green-circle rates (tool used to monitor comp system)

Pay based on the quantity of work and outputs that can be accurately measured.

Productivity-based pay
Pay increase given to employees based on local competitive market requirements; awarded regardless of employee performance.
General pay increase
Short but broad statement documenting an organization’s guiding principles and core values about employee compensation.

Compensation philosophy
(creates a framework for consistency and transparency, Compensation philosophies are typically created in collaboration with leadership. Compensation philosophies take local conditions into consideration as part of the review for competitiveness.)
Combining several salary grades or job classifications with narrow pay ranges into one band with a wider salary spread.

Broadbanding
Job evaluation method in which the relative worth and pay structure of different jobs are based on their market value or the going rate in the marketplace.
Market-based job evaluation
Instruments that collect information on prevailing market compensation and benefits practices (including starting wage rates, base pay, pay ranges, statutory and market cash payments, variable compensation, and paid time off).

Remuneration surveys
Mandatory or voluntary payments or services provided to employees, typically covering retirement, health care, sick pay/disability, life insurance, and paid time off.

Benefits
Process of determining a job’s value and price for the purpose of attracting and retaining employees by comparing the job against other jobs within the organization or against similar jobs in competing organizations.
Job evaluation
Situations in which employees’ pay is above the range maximum.
Red-circle rates (tool used to monitor comp system)

Job evaluation method that involves establishing a hierarchy of jobs from lowest to highest based on each job’s overall value to the organization.

Job ranking
Direct and indirect remuneration approaches that employers use to attract, recognize, and retain workers.

Total rewards
Job evaluation method in which each job is compared with every other job being evaluated; the job with the largest number of “greater than” rankings is the highest-ranked job, etc.
Paired-comparison method
Compensation provided on an individual basis in the form of goods or services.

Perquisites
Perquisites are special incidental payments, benefits, or privileges given to individuals over and above their regular rewards. Often awarded to senior-level positions, “perks” may extend to furnished housing, luxury transportation, and membership in exclusive clubs, phones
Payments in return for the achievement of specific, time-limited, targeted objectives.

Premiums/Performance bonus
Extent to which employees perceive that monetary and other rewards are distributed equitably, based on effort, skill and/or relevant outcomes.
Internal equity
Benefit needs assessment activity (4 steps)
1) Review org’s strategy & comp philosophy
2) Analyze workforce demographics
3) Analyze design & utilization benefit plans
4) Compare org needs, employee needs and existing set of benefits
5) The final step in a benefits needs assessment is to compare the following:
- Organizational needs (including budget)
- Employee needs
- Existing set of benefits
* The HR professional performs a gap analysis to identify the set of benefits that best matches the needs of the organization and its employees.*
Examples of direct benefits

Salaries, commissions, and bonuses
Examples of indirect benefits

Life insurance, company car, disability insurance, and noncash rewards
Surveys indicate that X reduces the number of job grades within an organization. This approach can be used to support de-layering efforts, which reduce the number of reporting levels within an organization.
Broadbanding
Give examples of what would be listed in an individualized total compensation statement
Salary, health benefits, welfare benefits and paid time off
(NOT: employee discount programs)
4 steps in developing a pay structure
1) Job analysis
2) Job documentation (description, specifications, competencies)
3) Job evaluation
4) Develop pay structure
All the other data to develop its pay structure; information gathered from surveys, local markets, and like institutions may assist with information gathering for benchmarking the position but only a part of the overall data collection for creating a pay structure.
Differential piece-rate pay system
With differential piece-rate systems, the employee receives one piece rate up to the standard and then a higher rate once the standard has been exceeded. This type of system provides employees with a pay basis but then links the attainment of certain productivity goals or achievements directly to their pay. For example, a salesperson may receive a certain base pay but will earn more if he or she meets a sales quota. Another example is a manufacturing employee who earns a premium over her base rate of pay by exceeding the daily productivity goal.
Situations where there is only a small difference in pay between employees regardless of their experience, skills, level, or seniority.

Pay compression
Examples of direct compensation (pay systems)
primarily involves cash-based rewards
gift cards, overtime payment and cash bonuses
Examples of indirect compensation
benefit and recognition programs typically includes noncash rewards.
Compensatory time off
Entitlement vs. Contribution Oriented Approaches
Entitlement = treated w/care, like family, entitled to benefits like healthcare, employee assistance
Contribution = Comp program driven by performance, shared responsibility for benefits (ex. co-payment for medical insurance)
There are two basic approaches to culture alignment
Name and describe characteristics of the 3 pay strategies
1) Lag market (controls cost, enables org to offset higher costs)
2) Match market (most common, competitive)
3) Lead market (higher pay to attract the best talent)
* Using more than 1 pay structure may cause morale issues
5 methods for job analysis
1) Observation
2) Interview
3) Open-ended questionnaire
4) Highly structured questionnaire
5) Work diary/log
Types of differential pay
Hazard
time-based (shift, emergency, premium holiday, on-call/call-back, rePorting, travel, overtime)
geographic differential pay (for labor costs, to attract workers to undesirable locations, for foreign countries)
Give examples of compensation approaches for special situations
Executive pay
direct sales (straight salary, straight commission, salary plus commission and/or bonus)
comp for outside directors (board)
internationally assigned employees
4 steps in Benefits Needs Assessment
1) Review org’s strategy
2) Review comp philosophy
3) Analyze org’s work demographic
4) Analyse design & utilization date on all benefit plans