MGMT 335 Test 3 CHP.10
Terms
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- Total compensation equation
- BASE COMP+Pay Incentive+Benefit
- base compensation
- fixed pay an employee receives on a regular basis
- Pay incentives
- reward employees for good performances
- Benefits
- approaches 41% of workers' compensation
- Internal equity
- perceived fairness of the pay structure within a firm
- External equity
- perceived fairness in pay relative to what other employers are paying for the same type of labor
- Distributive Justice model
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Employees exchange their contributions or input to the firm for a set of outcomes
Compare what they bring to the firm and what they receive in return
Compare input/output ratio - Labor Market Model
- supploy of labor equals the demand for labor in the marketyplace
- Balancing equity
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internal equity focus for older and more established firms
retention bonuses in bad times - Fixed pay
- reduces risk to both employer and employee
- Variable
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helps reduce unemployment
10% of U.S. pay is variable - Performance vs. Membership
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P-
pay tied to individual or group contributions
piece-rate plans/commissions
M-
contingent compensations- provide the same or similar wage to every employee in a given job - Skill Based Pay
- pay system in which employees are paid on the basis of the jobs they can do or talents they have that can be successfully applied to a variety of tasks and situations
- Elitism vs. Egalitarianism
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Elitism- different compensation plans by organization level
Egalitarianism- most employees under same compensation
More flexibility without promotion into management - Below Market vs. Above-Market
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Above- markety pay policies are more prevalent among large companies in less competitve industries
Below- work in depressed areas - Monetary vs. Nonmonetary Rewards
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Pay ranks higher than people comment on
Stable workforce- emphasize more nonmonetary rewards - Open vs. Secret Pay
- O- eliminates paranoi, force managers to be more fair, but managers are forced to defend decisions and more time involved in this argument
- Centralization vs. Decentralization of Pay Decisions
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HR department should do it because of frequent legal issues
Decentralized in large and diverse organization - Pay grades
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groups of jobs that are paid within the same pay range
most important jobs pay the most
GOALS:
Achieving internal equity
Achieving external equity
Achieving individual equity - Achieving Intteranl Equity through Job Evaluation
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1. Conduct a job analysis
2. Write a job description
3. Determine Job Specifications
4. Rate worth of all jobs using a predetermined system
5. Create a Job Hierarchy
6. Clarify Jobs by Grade Levels - Compensable factors
- work related crteria that an organization considers most imiportant in assessing the relative value of different jobs
- Job Hierarchy
- listing of jobs in terms of their relative assesssed value
- Achieving External Equity: Markety Surveys
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1. Identify Benchmark or Key Jobs
2. Establish a pay policy - Benchmark
- Jobs that are similar or comparable in content across firms
- Pay policy
- firms decison to pay above at or below market
- Individual equity
- fairness in pay decisions for employees holding the same job
- Evaluating Job-Based Compensation Plans
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Definitions of jobs change and vary
Subjective process
Less approrpiate at higher levels
Jobs continue to be more broadly defined
Bureaucratic, mechanistic, inflexible
Discriminates against women
No definitive data
Employees perception is the one tha counts - Suggestions for practice for Jobs based pay
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think strategically in making policy decisions concerning pay
Secure employee input
job banding
examine statistics and dual career ladders - Job banding
- replacing narrowly defined jobs with ones more broadly defined
- Skill based compensation plans: 3 skills
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Depth skill- expert in a field
Horizontal skill- knowledge of job within a firm
Verical skills- SM abilities - Advantages and Disadvantages of skill based compensation plans.
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ADV:
Flexible workforce
Promotes cross-training
Fewer supervisors
Increases employee control over compensation
Disadvantages:
Leads to higher compensation and training costs
Employee skills may become rusty
When at top/no motivation occurs
Can become a guessing game
May require time-consuming processes - FLSA Fair Labor Standards Act
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Must keep accurate records of how much employees work
exempt vs. non exempt - Equal Pay Act
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Four exceptions that allow employees to pay one sex more than another
1. seniority
2. better job performance
3. Greater quantity or quality of production
4. Night shift, etc. - comparable owth
- comparable pay for jobs that require comparable skills
- IRC Internal Revenue Code
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affects how much of their earning employees can keep
withhold part of employees income