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87 Cards in this Set
- Front
- Back
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compensation
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exchange of payment for service providede by employees
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total compensation
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Entire package; includes cash, equity, benefits, perquisites and nonmonetary rewards
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monetary compensation
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any cost the org. incurs for the benefit of employers including 401(k)matching, medical, time off, stocks options and incentive plans
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nonmonetary compensation
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intrinsic and extrinsic rewards
intrinsic- encourages individual self-esteem extrinsic-esteem achieved from working with other e.g. talented team or great relationship -also includes non-traditional benefits like flextime, training etc. |
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compensation philosophy
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high level mission statement that guides development and implementation of compensation programs
determines wether it is based on merit, performance, or seniority and how total comp package is divided |
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internal conditions
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organization's willingness and ability to pay
corporate culture types of product and services |
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external conditions
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decide if ay structure will lead match or lag the market
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performance based philosophy
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reward performance or bahavior that moves org, closer to achieve goals
-compensation programs have line of sight |
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line of sight
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when employees know that their performance impacts rewards
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entitlement philosophy
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rewards employee longevity
performance is secondary creates loyalty to co. |
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factors that influence compensastion
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-economy
-labor market -market competition -tax & accounting (irs and taxes) -legislation governing compensation |
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cost of labor
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economic factor, cost to attract and retain individuals with skills needed
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labor market
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any source from which org. recruits
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private letter ruling
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request for IRS to review changes proposed to comp structure, used to find out tax implications of unusual financial transactions
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Securities exchange act of 1934
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gave authority to SEC to establish reporting standards for public co's
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AICPA
american institure of cpa's |
established gaap, generally accepted accounting principles
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FASB
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financial accounting standards board
established by AICPA to set standards recognized by SEC |
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Legislation Governing compensation
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-Davis bacon act
-walsh healy public contracts act -service contract act -FLSA (fair labor standards act) -FLSA ammendments *portal to portal act *EPA (equal pay act) |
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Davis Bacon Act
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first regulation of min. wages
-required construction contractors and subcontractors to pay at least the prevailing wage for the lcoal area |
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Walsh Healy Public contracts act
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requires gov. contractors w/ contracts >$10k for other than construction work to pay their employes the prevailing wage for their local area as established by the secretary of labor
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Service Contract Act
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Fed. service contractor w. contract >$2.5k to pay prevailing wages and ringe benefits fr the area
-provide sanitary working conditions -notify employees of min. allowable wage |
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FLSA
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first regulation for private enterprises
-introcuced min wage -id overtime and set rate -criteria for jobs exempt from FLSA -placed limitations on working conditions for children -id info employers must keep |
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Portal to portal act
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FLSA ammendment
employers not required to pay employees for commute time requires payment of nonregular hours for non-exempt employees |
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EPA
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equal pay act
FLSA ammendment first anti-discrimination to protect women equal pay for equal work, enforced by EEOC allows differences with bona-fide systems that measures standards other than sex |
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base pay
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ammount of comp that agree will be paid for performance of duties
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performance-based compensation
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based on how well employes perform against co's standard of performance
performance ratings determine eligible range of increase important that accuraterecords are kept to account for disparity |
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merit pay
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adjustment to base pay based on performance
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merit matrices
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used by employers to dedtermine merit systems pay
low, midpoint or high level of performance |
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senority based compensation
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representative of entitlement compensation philosophy
usually a union representing its workers uses this type of comp |
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pay differential
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provides additional pay for work that is considered beyond the min requirements of the job
*overtime *shift pay *on-call pay *call-back pay *reporting pay *hazard pay *geographic pay |
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overtime
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-FLSA requires payment for time worked over 40 hrs/week
-employers may require to not pay overtime as long as paid at the required wage rate -not common to pay overtime to exempt -requiring employees to keep track of time is not prohibited as long as it does not resullt i a reduction of their pay |
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shift pay
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specific start and end time used for non exempt employees
day shift (8-4) swing shift (4-midnight) graveyard shit (midnight-8) |
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shift premium
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additional copensation provided for employees for wor shifts other than the day shift
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on-call pay
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paying premium to be on-call, not required
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call-back pay
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paying premiums employees who are called to work before or after their schedule, not required
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reporting pay
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when an employee is called into workand there is no work available, may be required to pay min hours by state
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hazard pay
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additional pay for dangeerous or uncomfortable work conditions
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geographic pay
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salary structure spacific to location
structure put into place to make sure that pay is aligned with local labor market |
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incentive pay
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reward employees for individua and organizational results
aka pay for perfomance imp to keep line of sight as center |
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individual incentives
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-should be simple and easy to understand
-can be yearly or more frequent -may require the need fo new contracts |
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org/group incentives
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-gainsharing
-improshare -scanlon plan -profit sharing -ESOPs |
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gainsharing
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employees and mgmt work together to review org performance and both share success and financial gains
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improshare
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establishes baseline productivity and new output is used to calculate performance
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scanlon plan
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administered by committe representative of employees. productivity and gains are disclosed and employees receive a portion of cost savings
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profit sharing
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distributes pretax $ based on gains. must have details on how distributed ni case of termination or similar situation
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ESOPs
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employee stock ownership plans
contribution plans that are tax dedictible where employees own stock distributed at termination and are taxable at that time |
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Special pay programs
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benefit specific groups of employees like excutives, sales or directors
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exacutive pay
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varies greatly. executive bonus is usually related to profitability. key elements are benefits and perquisites
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perquisites
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"perks" additional benefits that provide comfort and luxury
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obra
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omnibus budget reconciliation act
modified exec comp by limiting tax deductions to $1 million annually |
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bonus plans
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additional compensation for performance above and beyond what is expected
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spot bonus
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immediate reward for an outstanding performance
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stock options
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right to purchase an emloyer's stock at the strike price at a future date
provide an opportunity to purchase shares but do not require it 4 types: ISO nonqualified actual shares, not options: restricted phantom |
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strike price
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grant price
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ISOs
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incentive stock options
or qualified stock options can be offered only to employees not as favorable to co because only receives tax deduction if certain conditions are met more favorable to employees income not reported until sold at a later date |
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Nonqualified
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can be sed for employees, eternal employees ,consultants and board of directors
co. receives tax deduction when options are exercised and employees have further tax implications more favorable to employers |
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restricted stock
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common stock offered to employees actual shares, not options
usually have a vesting schedule for retention purposes |
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phantom stock
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used in provate companies to provide employee ownership without owning stock
doesn't grant equity usually received by executis and BODs |
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commissions
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compensation fr sales employees paid on comission only must meet at least the min wage
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sales bonus plan
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receives percentage of salary bonus for exceeding quota
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BOD
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elected by shareholdres to oversse management on behalf of stockholders
if memebers of org, are known as inside directors or external, outside directors |
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compensable factors
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characteristics that distinguish jobs from one another
e.g. bs in eng., 2 yrs. exp. |
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job evaluation
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2 methods
ranking classification |
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ranking method for job evaluation
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compare value of jobs to one another, esp. compensable factors needed
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classification methods
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IDs benchmark positions and associate with a grade on a hierarchichal structure
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benchmark positions
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jobs found across orgs. regardless of industry
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internal equity
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value of jobs to each other relative to their valuue in the org.
assessed through either -broadbanding -HAY systemt -point factor |
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broadbanding
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splits positions into broad levels, facilitate lateral movement, single, manager, director, vp
in contrast narrowbanding may have many classifications |
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point factor
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system of points assigned ot wach positions and receives pay grade using various factors like experience, skill, effort, etc.
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HAY system
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complex point factor system and matched to profile
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compensation administration
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describes how org, develops and administers pay
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job pricing
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4 steps
1. review jd, level & skils 2. salary survey 3. review comp. componenets 4. recommend salary range |
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pay grade
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name given to a pay range
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green circle
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employees below pay range
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red circle
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employees above pay range
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wage compresion
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new employees hired for a higher salary that existing workers
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compa-ratios
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compares base pay to midpoint of range
base/midpoint of range x 100 |
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comparable worth/pay equity
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about inherent value of job to society and not labor market, social engineering
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payroll systems
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-must accurately calculate payments due
-calculate statutory and voluntary deductions -track payroll tax payments due to fed and state -provide cost reports to mgmt -provide security for payroll info |
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calculating exempt employee gorss pay
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base, bonus, paid leave
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calculating non-exempt gross pay
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hours, pay rate, shift differentials, tips, bonuses, paid leave
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statutory deductions
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-social security
-medicare -fed income tax -state income tax -unemployment insurance, in some states -disability insurance, insome states |
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voluntary deductions
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401(k, union dues, and contributions to charity
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involuntary deductions
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wage garnishments, employees have no say, wages are automatically garnished
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consumer credit protection act of 1968
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limits amounts to be garnished and prevents from being terminated for a single garnishment order
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record keeping
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FLSA requires
-name -address -ssn -birthdate if <19 -sex -occupation nonexempt requirements: -work week -hours worked -differentials -bonuses -pay period dates -straight time and overtime pay -deductions -date of payment |
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personal responsibility and work opportunity reconciliation act of 1996
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requires employer to report all new hires within 20 days of hire date to the state dept. of new hires, requires W-4
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