Compensation and Benefits

125
Copyright © 2012 by HRCP, L.C. www.hrcp.com Compensation Compensation and Benefits and Benefits PHR 19% - SPHR 13%

description

Compensation and Benefits. PHR 19% - SPHR 13%. Total Rewards: Financial & Non Financial. Inducements: Rewards for Work. Financial Compensation. Non-financial Compensation. Incentives Merit Pay Piece-Rate Incentives Bonuses Group Incentives Gain Sharing Profit Sharing - PowerPoint PPT Presentation

Transcript of Compensation and Benefits

Page 1: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Compensation Compensation and Benefitsand Benefits

PHR 19% - SPHR 13%PHR 19% - SPHR 13%

Page 2: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Total Rewards:

Financial & Non Financial

Page 3: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Page 4: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Strategic Objectives of Compensation

Compensation has a strong influence on job satisfaction, productivity, labor turnover, and

other organizational processes.

Page 5: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Co

mp

ens

atio

n S

yste

m

Page 6: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Discussion Question:

What are the objectives of a compensation system?

What happens if all of these objectives are not considered simultaneously?

Page 7: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Compensation Motivating

Legal

AdequateEquitable

Secure

Cost/benefit effective

Strategic Objectives of Compensation

Page 8: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Determinants of Pay

Many factors besides the job market influence pay levels, and these factors need to be considered as a whole.

What are the major factors that influence pay?

Page 9: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Wage Decisions

1. Wage-level decision

2. Wage-structure decision

3. Individual wage decision

Page 10: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

The Wage-levelDecision

Page 11: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Discussion Question:

What would be the consequences of a wage-level decision that pays wages that are significantly higher than the market rate?

Page 12: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Establishing the Wage Level

1. To attract an adequate supply of labor.

2. To keep present employees reasonably satisfied with their compensation.

3. To avoid costly turnover.

Page 13: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Factors Influencing the Wage Level

Most significant factors influencing wage levels:

Organizational Size

Unionization

Productivity (Ability to Pay)

Page 14: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Wage Surveys

What four conditions must be met for do-it-yourself wage

surveys to be useful?

Page 15: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Discussion Question:

What are the major limitations of information gained from wage surveys?

Page 16: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Job EvaluationMethods

Page 17: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Wage-Structure Decision

How much each job should be paid relative to other jobs in the organization.

Page 18: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Job Evaluation

The systematic approach of determining the relative worth or value of each job in an organization.

Page 19: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Ranking Method

The simplest method of developing a wage structure is to have the job-evaluation committee rank the jobs from highest to lowest in value.

What are the advantages and disadvantages of the ranking method?

Page 20: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Classification/Grading Method

Job descriptions for each job are compared with a classification scheme that ranks the

jobs in a hierarchy of job worth.

Page 21: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Point Method

The compensable factors of key jobs are used to develop the wage curve. Points are assigned to each factor, and the

total points are associated with a specific pay level.

Page 22: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com 0 100 200 300 400 500 600 700 800 900

Wage curve passes through the midpoint of each pay grade

$

Illustration of a Wage Curve Using the Point Method of Job Evaluation

Points

Page 23: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Compensable Factor

Weighted percentage Degree/Points

1 2 3 4 5

Skill (40%) 20 32 48 72 100

Responsibility (30%) 15 24 36 54 75

Effort (20%) 10 16 24 36 50

Working Conditions (10%) 2 8 12 18 25

Example:

Regrind Operator Compensable Factor Degree Points

Skill 3 48

Responsibility 2 24

Effort 4 36

Working Conditions 4 18

Total Points 126

Point Assignments for Four Compensable Factors

Page 24: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Discussion Question:

In developing a wage curve, why is it so important for the key jobs to be equitably paid jobs?

Page 25: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

X

Y

Pay $

Points

Wage Curve Based on 15 Key Jobs

Page 26: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Factor Comparison Method

Identify key (benchmark) jobs

Identify job factors

Rank jobs

Assign monetary amounts to each job on each factor

Compare unique jobs with key jobs

Page 27: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Guide Chart-Profile Method

A job evaluation system that is basically a factor comparison system, although it is also very

similar to the point method since it uses points.

Page 28: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Job Pricing and PayRate Administration

Page 29: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Job Pricing

The process of placing a dollar value on the worth of a job is referred to as

job pricing.

Page 30: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Labor grades

1 2 3 4

Points

5 6 7 8

Hourly wage

Maximum for labor grade 2

Starting wage for labor grade 2

Maximum

Trend line

Minimum limit line

Pay range

Red circle rate

Pay Grades Constructed Along the Wage Curve

Page 31: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Points

$

10%

20%

Two Pay Ranges

Page 32: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Discussion Question:

What are compa-ratios and how can they be used?

Page 33: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Discussion Question:

What are red circle rates? What alternative methods does a company have for handling red circle rates?

Page 34: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Adjustments for Inflation

Administrative problems may arise when the wage structure has to be adjusted due to inflation or internal changes within the organization, such as job redesign.

What are the consequences of adjusting the wage curve?

Page 35: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Individual Pay Rate Determination

The relative pay of individuals who perform similar jobs in the same company.

Page 36: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Pay Decisions

Pay decisions are controlled by two basic processes.

1. The design of the wage structure

2. The formal budgeting process

Page 37: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Economic FactorsAffecting

Compensation

Page 38: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Economic Factors Affect Compensation

Inflation Interest rates Industry competition Foreign competition Economic growth Demographic trends

Page 39: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Demographic Trends

The labor market is primarily influenced by five demographic forces:

birthrates participation rates immigration Education unemployment

How can demographic trends in the labor market impact wages?

Page 40: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Discussion Question:

How does an increase or decrease in unemployment rates influence a company's compensation system?

Page 41: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Incentive CompensationSystems

Page 42: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Money & Motivation Theories

How is money viewed in the following theories?

Need Theory

Self-determination Theory

Expectancy Theory

Equity Theory

Goal Setting Theory

Page 43: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Discussion Question:

According to Expectancy Theory, what should a supervisor do to motivate an employee?

Page 44: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Efforts to Reduce Inequity

Inequity can exist when people are either overpaid or underpaid. Both conditions or inequity motivate individuals to establish a more equitable exchange.

What methods do individuals use to reduce inequity?

Page 45: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Incentive Compensation

Plays a strategic role in increasing organizational effectiveness.

Page 46: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Performance Rating*Expected Number

of Employees

Fixed Increase Amount

orDiscretionary

Increase Range

Outstanding: Truly exceptional performance

1 in 10 12% 10-15%

Excellent: Constantly exceeds standards 2 in 10 8% 7-9%

Good: Occasionally exceeds standards

4 in 10 5% 4-6%

Average: Occasionally meets standards

2 in 10 3% 2-3%

Fair: Marginal performance 1 in 10 1% 0-1%

* Note to supervisors: This column shows the number of employees in a typical department who would normally be rated in each category.

Merit-Increase Guidelines: Fixed Increase or Discretionary Increase

Page 47: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Salary Increase Matrix using the Compa-ratio Approach

PerformanceCompa-ratio

0.80 - 0.89 0.90 - 0.99 1.00 - 1.09 1.10 - 1.20

Outstanding 7.0 - 8.0 % 6.0 - 7.0 % 5.0 - 6.0 % 4.0 - 5.0 %

Above Average 5.0 - 6.0 % 4.0 - 5.0 % 3.5 - 4.5 % 3.0 - 4.0 %

Average 3.0 - 4.0 % 2.5 - 3.5 % 2.0 - 3.0 % 1.5 - 2.5 %

Below Average 1.0 - 2.0 % 0.8 - 1.8 % 0.6 - 1.6 % 0.4 - 1.4 %

Unsatisfactory 0 % 0 % 0 % 0 %

Page 48: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

$

Number of units produced

Straight piecework: 25 cents/unit

Taylor’s differential piece-rate plan: 22 cents/unit if less than standard; 27 cents/unit if more than standard

Standard

A Comparison of Straight Piecework & F.W. Taylor’s Differential Piece-Rate Plan

Page 49: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

The Standard Hour Plan

Workers are paid an hourly wage, but the hour is

measured in units produced rather than in minutes.

Page 50: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

The Halsey Premium Plan

Workers receive a guaranteed hourly wage plus a percentage (33 percent was recommended) of the wage for any time saved.

The actual production standards are determined by past performance rather than by time-and-motion studies.

Page 51: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Discussion Question:

What is "restriction of output," and why does it occur?

What can be done to avoid it?

Page 52: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Units per hour

60 Standard

56 Group norm

Starting date Two and one-half weeks later

Illustration of Group Norms Restricting Productivity: Individual Productivity of a New Employee

Page 53: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Discussion Question:

What conditions are necessary for these individual incentive plans to operate effectively: piecework, merit pay increase, commission sales, and the standard hour plan?

Page 54: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Skill & Knowledge Based Pay

Reward employees for their ability to perform an array of related tasks or skills rather than

for the actual work performed.

Page 55: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Performance Level

Skill Level Marginal AcceptableAbove

StandardExceptional

1 $8.00 8.36 8.75 9.15

2 8.48 8.87 9.30 9.72

3 9.00 9.42 9.87 10.33

4 9.55 10.00 10.50 11.00

Skill x Performance Pay Matrix Hourly Rates of Pay

Page 56: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Differential Pay

overtime

shift pay

hazard pay

on-call pay

call-back pay

geographic differentials

Page 57: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Discussion Question:

What conditions make a group incentive system superior to an individual incentive system?

Page 58: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Profit Sharing & Gainsharing

Pay based on the performance of the entire organization.

Page 59: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Discussion Question:

What are the advantages and disadvantages of "cash" profit-sharing plans and "deferred" profit-sharing plans?

Page 60: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Gainsharing

Scanlon Plans

Rucker Plans

Improshare

Page 61: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Employee Stock Ownership Plans

Page 62: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Strategic Alignment of

Base Pay & Incentive Pay

What factors should be considered in balancing base pay and incentive pay?

Page 63: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Job AClerical position in a credit union

Job BMetal worker in a metal shop

Job CSales supervisor at a used car lot

Profit sharing

Individual incentive

Base pay

10%

5%

85%

Group bonus

Base pay (determined partly by individual performance)

20%

80%

Profit sharing

Group incentive

Individual incentive

Base pay

15%

15%

40%

30%

Page 64: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Discussion Question:

In fine tuning an incentive system, what problems would occur if excessive weight were placed on individual incentives? on group incentives? on profit sharing? on base salary?

Page 65: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Average Annual Pay of Factory Workers, High School Teachers,Engineers, and Chief Executive Officers: 1990-2000

1960 1970 1980 1990 2000 2010

Worker $4,665 6,933 15,008 20,862 28,600 32,840

Teacher 4,995 8,626 15,970 29,143 40,350 54,390

Engineer 9,828 14,695 28,486 49,772 62,760 89,086

CEO* 190,383 548,787 624,996 1.95 mil 12.4 mil 10.9 mil

*Total compensation, including salary, bonus, and stock options.

Page 66: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Stock Options

A stock option is the right to buy a company’s stock at a certain price over a certain period of time, usually ten years.

What rules govern stock options?

Page 67: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Discussion Question:

What are the implications of reporting executive stock options as an expense?

Page 68: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Employee BenefitPrograms

Page 69: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Required Benefits

Employers are required to provide three benefits that are intended to protect employees’ incomes.

What are the three benefits required by law?

Page 70: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Social Security Benefits

1. Old age or disability benefits

2. Benefits for dependents of retired, disabled, or deceased workers

3. Lump-sum death benefits

4. Medicare

Page 71: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Pension Plans

Defined Benefit Pension Plan

Defined Contribution Pension Plan

What are the differences between these two plans?

Page 72: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Individual Savings Plans

Deferred accounts that are approved by the IRS, called qualified plans, enjoy special

tax considerations.

Page 73: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Pension Protection Act

Allows employers to automatically enroll employees in a 401(k) plan.

Page 74: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Health & Accident Insurance

Page 75: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Income Replacement

Life insurance and income-continuation plans help to

alleviate difficulties.

Page 76: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Paid holidays

Paid vacations

Paid personal leave

Union activities

Reporting time

Sabbatical leaves

Paid funeral leave

Jury duty

Military Leave

Pay for Time Not Worked

Page 77: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Recognition & Achievement Awards

Organizations use a variety of recognition programs to

influence the attitudes and behaviors of employees.

Page 78: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Health Care Benefits

Page 79: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Maximum freedom of choice

Minimum cost control

Minimum freedom of choice

Maximum cost control

Fee for Service

Preferred Provider

organizationPoint of service

Health maintenance organization

Group health

cooperatives

Managed Health Care Options Freedom of Choice versus Cost Control

Page 80: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Discussion Question:

What are the advantages of an HMO?

Page 81: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Consumer-directed Health Care

Flexible Benefit Plans

Flexible Spending Arrangements (FSA)

Health Reimbursement Arrangements (HRA)

Health Savings Accounts (HAS)

State Sponsored Health Exchange

Page 82: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Discussion Question:

What are the advantages and disadvantages of flexible benefits?

Page 83: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Managing EmployeeBenefit Programs

Page 84: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Employee Benefits Philosophy

1. Sharing the risks of accidents and illness.

2. Forced savings for retirement or bad times.

3. Sharing the costs of special services.

Page 85: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Domestic Partner Benefits

Allow employees to include domestic partners in their health insurance plans.

Page 86: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Cost Benefit Analysis & Cost Management

What methods are used for measuring and analyzing the costs of employee benefit plans?

Page 87: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Employee Retirement Income & Security Act

Medical, surgical, or hospital care.

Reimbursement in event of accidents, disability, or death.

Vacation and sick leave benefits.

Unemployment benefits, such as severance pay.

Apprenticeship or training programs.

Day care.

Scholarship funds.

Prepaid legal services.

Page 88: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Communicating Benefit Programs

Plans must be in writing & the plan document must:

1. Establish the funding mechanism for the plan.

2. Set forth procedures for making payments and providing benefits.

3. Indicate who is responsible for administering the plan.

4. Provide for amendments to the plan.

Page 89: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Summary Plan Document

Employers are required to have a Summary Plan Document (SPD) that describes each

welfare benefit offered by the employer.

Page 90: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Compensation Lawsand Regulations

Page 91: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Davis-Bacon Act (Prevailing Wage Law)

Requires organizations holding federal contracts to pay laborers and mechanics the prevailing wages of the locality in which the work is performed.

Overtime must be paid at one-and-one half times the local rate.

Page 92: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Copeland Act & Anti-Kickback Law

What are the provisions of the Copeland Act and the Anti-Kickback Law?

Page 93: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Walsh-Healey Act (Public Contracts Act)

Extended the Davis-Bacon Act to non-construction federal contractors

Page 94: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Fair Labor Standards Act (Wage & Hour Law)

FLSA sets minimum wage standards, overtime pay standards, and child labor restrictions.

Under the FLSA, what determines whether an employee is exempt or non-exempt?

Page 95: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Overtime Provisions

Employees receive one-and-one-half times the regular rate of pay for all hours worked in excess of 40 during a given week.

Page 96: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Overtime Calculations with Bonus

EE earns $10/hr for 48-hour week, receives $24 weekly production bonus & gets 8 hours of overtime pay based on rate that includes bonus.

EE really earns $10.50/hr ($10/hr base pay plus $24 bonus divided by 48 hours required to earn it or 50¢/hr) & an overtime rate of $15.75. The EE’s earnings for that week would be:

Regular time 40 x 10.50 = $420.00Overtime 8 x 15.75 = 126.00Weekly earnings $546.00

Page 97: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Overtime Calculations – Paid on Piece Rate

Hourly rate of pay for those paid on a piece rate basis is calculated by dividing money they earned by number of hours they spent earning it.

Example: worker works 50 hrs & produces 100 pieces at rate of $4/piece would have an hourly rate of pay of $8 (100 pieces times $4 per piece equals $400, divided by 50 hrs equals $8/hr). This worker’s earnings for that week would be:

Regular time 40 hours x $8.00 = $320.00Overtime 10 hours x $12.00 = 120.00Weekly earnings $440.00

Page 98: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

New Wage Curve

Former Wage Curve

Indirect Effect

Direct Effect

Increase in the

Minimum Wage

Direct & Indirect Effects of a Minimum Wage Increase

Labor Grades

$

Page 99: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Record Keeping

The FLSA requires employers to keep records of wages, hours, and other related items.

Page 100: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Equal Pay Act

The Equal Pay Act prohibits employers from paying members of one sex less than members of

the opposite sex for performing equal work.

Page 101: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Permissible Wage Differences

Page 102: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Discussion Question:

What is the comparable worth controversy?

What has been the position of the courts in dealing with this issue?

Page 103: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Pregnancy Discrimination in Employment Act

Defines discrimination because of sex to include “pregnancy, childbirth, or related medical conditions.”

Page 104: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Family and Medical Leave Act

FMLA entitles eligible employees to take up to 12 weeks of unpaid leave each year for

specified family and medical reasons.

Page 105: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

National Defense Authorization Act

Extended FMLA by providing 12 weeks leave for family members impacted by active military duty.

Plus 26 weeks of military caregiver leave for the families of service members injured in the line of duty.

Page 106: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Health Insurance Portability & Accountability Act

HIPAA provides greater portability in health care coverage and limits the exclusions for preexisting conditions and places other restrictions on an insurance carrier’s ability to exclude a worker form insurance coverage.

What are the major provisions of HIPAA?

Page 107: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Patient Protection & Affordable Care Act

Page 108: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Small Business Job Protection Act

The Small Business Job Protection Act raised the minimum wage and made significant changes to pension plans.

What are the major provisions of SBJPA?

Page 109: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Wage Garnishment

Page 110: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Employee Retirement Income Security Act

Designed to ensure that employees covered under private pension plans & employee welfare benefit plans

would receive the benefits promised.

Page 111: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Discussion Question:

What is meant by vesting, portability, fiduciary, contributory, and noncontributory as they are used to describe pensions?

Page 112: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Reports Required by ERISA

Page 113: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Qualified Domestic Relations Order (QDRO)

A court order that instructs a plan administrator how to pay a divorced spouse or a child or other dependent all or a portion of a pension plan benefit.

May be used to divide the pension plan as a marital asset, or to pay alimony or child support.

Page 114: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Consolidated Omnibus Budget Reconciliation Act

COBRA was designed to protect people who leave an employer from losing their benefit coverage.

Page 115: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

IRS Regulations

IRS regulations require employers to withhold regular amounts from an employee’s pay and submit these

funds on a scheduled basis to the IRS.

Page 116: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Highly Compensated

Employees

Page 117: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

IRS 20-Factor Test

The Internal Revenue Service uses the following common law factors, called the IRS 20-Factor Test,

to determine whether a worker is an independent contractor or a regular employee.

Page 118: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

EvaluatingStrategy & Program

Effectiveness

Page 119: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Budgeting

Budgeting helps to ensure that future financial expenditures are coordinated & controlled.

Page 120: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Cost Management

To determine a firm’s labor costs:

Labor Costs =

Employment

X

(Average Cash Compensation + Average Benefit Cost)

Page 121: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Discussion Question:

What are the implications of the trend toward hiring more contingent workers?

How will the growth in the contingent workforce influence compensation and benefits practices?

Page 122: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Assessment of Methods & Processes

Compare outcomes against the following six criteria:

1. Legal

2. Adequate

3. Motivating

4. Equitable

5. Secure

6. Cost-benefit effective

Page 123: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

International HRCompensation Issues

Page 124: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Expatriate Pay and Allowances

When managers of multinational companies are assigned to work abroad, they normally draw additional compensation in the form of special expatriate allowances.

What are these special allowances?

Page 125: Compensation  and Benefits

Copyright © 2012 by HRCP, L.C.

www.hrcp.com

Compensation & Benefits for Expatriates

What considerations must be given in compensating expatriate managers?