Unit 4: Total Rewards Flashcards
Adverse Selection
When bad-risk employees under a flexible benefits plan choose a benefit and good-risk employees do not.
Aging Data
When data on a compensation survey is adjusted to account for movement in market salary rates since the time the survey was completed.
Aging Factor
The percentage by which salary rates on a compensation survey are adjusted to account for changes in the market salary rate since the survey was completed. It is determined by multiplying the age of the survey by the movement percentage rate.
Allocation Formula
The formula used in profit sharing plans that determines how the profit is allocated to individuals; it is normally based on seniority and performance.
Annual-Cost Method
A method of computing the costs of benefits by calculating the total annual cost of each benefit.
Benchmark Jobs
Jobs that are considered equitably paid and are used in the point method to develop a wage structure. The pay levels for other jobs are determined from the wage curve that was developed using the benchmark jobs. They are often called key jobs.
Bonus
The incentive pay that individuals may receive for outstanding performance; it is not part of their base pay.
Broadbanding
Creating wide labor grades so that there are fewer labor grades with more jobs in each one.
Cafeteria Benefit Plans
Employees choose the benefits they desire, subject to certain limitations and total cost constraints.
Carryover Provision
A vacation policy that allows employees to move a certain number of unused vacation days into the next leave year. Any unused vacation days above the carryover limit are lost.
Cash Balance Plans
Plans that allow employers to decide how funds will be invested and that are more portable when employees want to move from company to company.
Cash Profit-Sharing Plan
A profit-sharing plan in which payments are made to employees at the end of each period.
Cash-In Provisions
A vacation policy that allows covered employees to receive their normal daily earnings or some other amount for each unused vacation day up to a certain number of vacation days per year. Any unused vacation days above the cash-in limit lost.
Cents Per Hour
A method of calculating the cost of employee benefits by dividing the total annual cost by the number of employee hours.
Classification Method
A procedure used to develop a wage structure in which the job descriptions for each job are compared with a classification scheme that ranks the jobs in a hierarchy of job worth.
Cliff Vesting
A retirement plan where an employee becomes fully vested in a retirement plan after a specified period of time with the organization.
Cobra
Consolidated Omnibus Budget Reconciliation Act. A law that requires employers of 20 or more employees to extend health insurance group benefits to terminated employees, employees with reduced hours, and their family members.
COLA
Cost-of-living adjustment. A procedure that provides for automatic increases in the level of pay based on the rate of inflation-usually indexed to the consumer price index.
Commission Sales
A form of incentive pay offered to sales representatives whereby they receive a fixed percentage of the merchandise they sell.
Compa-Ratio
A number that compares a person’s pay rate with the midpoint of the pay range. A compa-ratio is pay divided by the midpoint of the labor grade times 100.
Comparable-Worth Controversy
A controversy that centers on the issue of whether organizations should be required to establish a common set of criteria for evaluating the worth of jobs and to provide equal pay for jobs of comparable worth.
Compensable Factors
The factors associated with the different jobs that justify paying one job more than another. Responsibility, education, and skill are usually considered the most important compensable factors.
Compensatory Plans
Stock purchase plans that are designed to compensate employees.
Contingent Workers
Workers who do not have an ongoing expectation of full-time employment, such as part-time workers, independent contractors, temporaries, consultants, “life-of-the-project” workers, leased employees, and subcontractors.
Contributory Pension Plans
A pension plan in which both the employee and the employer make contributions to the fund.
Cost Per Employee Per Year
A benefit costing method that is computed by dividing the total annual cost of each benefit by the number of employees receiving the benefit.
CPI
Consumer Price Index: a well-accepted measure of the rate of inflation.
Decreasing-Rate Increase
A procedure for adjusting the wage curve in which the wages of higher-level jobs are increased by successively smaller amounts.
Deductible
The initial amount of a covered expense that must be paid by the insured person before the benefit becomes payable by the insurer.
Deferred Profit-Sharing Plan
A profit-sharing plan in which an employee’s share is held until a later period, usually retirement.
Defined Benefit Plan
A pension plan that provides a retirement income to retirees based on a formula that usually combines the retiree’s years of service and average annual income for the last five years.
Defined Contribution Plan
An individual pension fund created for each employee into which the company and usually the employee invest a specified amount of money each year until the individual retires. The amount of money available to the retiree is determined by how much was contributed and how successfully the money was invested.
Differential Piece-Rate Plan
A piece-rate incentive plan that provides a low piece rate for individuals who produce less than the standard and a high piece rate for individuals who meet or exceed the standard.
Election Notice
A notification by employers to employees within 14 days after a qualifying event that describes the COBRA coverage and the premiums.
Employee Assistance Program
A benefit program that provides counseling to employees with such problems as marital conflict, indebtedness, alcoholism, and drug abuse.
Equity Theory
A theory of job satisfaction suggesting that people compare their inputs and outputs with the inputs and outputs of others. Inputs include such things as knowledge, skill, education, training, and effort. Outputs include such things as compensation, benefits, and intrinsic satisfaction.
ERISA
Employee Retirement Income Security Act. This legislation was designed to ensure that employees covered under private pension plans and employee welfare benefit plans would receive the benefits promised. If an employer chooses to have a pension plan, it must comply with strict requirements.
ESOP
Employee Stock Ownership Plan. An arrangement whereby employees can own shares in the company, the same as if they were ordinary shareholders in a joint-stock company.
ESOT
Employee Stock Ownership Trust. A financial vehicle that allows employees to own company stock.
Exempt Employees
Employees who are exempt from the overtime requirements of the Fair Labor Standards Act, such as outside salespeople and executives who have administrative or managerial responsibilities.
Expatriate Allowances
The additional income and benefits provided for employees who are transferred to a foreign country.
Expectancy Theory
A process theory of motivation in which people decide what to do by subjectively estimating the probability of being able to perform an activity and whether that activity will be rewarding. The three components of expectancy theory include expectancy, instrumentality, and valence.
Experience Rating
A rating computed for each employer that is based on the number of accidents or the number of employees laid off. This rating is used to adjust the unemployment compensation and workers’ compensation tax rates for each employer.
Factor Copmarison
A method for developing a wage structure in which benchmark jobs are compared with other jobs, factor by factor, to determine how much money should be paid for each factor.
Fee-For-Service Plans
Health-care insurance plans that allow employees to decide what services they want and health care providers to charge a fee for the services they render. These charges are paid by the employee and/or the employee’s benefit plan.
Fiduciary Responsibilities
Responsibilities of the person who manages a pension fund.
Fine-tuning Compensation
Adjusting the incentive and base pay components in a compensation package to achieve a balance between security and motivation, such as increasing or decreasing individual incentives, group incentives, or company-wide incentives.
Fixed-Rate Increase
A procedure for adjusting the wage curve in which a fixed sum of money is added to every job in the hierarchy.
Flexible Benefits (Cafeteria Benefits)
Employees choose the benefits they desire, subject to certain limitations and total cost constraints.
Flexible Spending Account (FSA)
A savings plan that enables participants to pay health care and dependent care expenses with pretax dollars deducted from an employee’s income by the employer rather than after-tax dollars.
FMLA
Family and Medical Leave Act. A law that gives employees greater flexibility in responding to family needs and medical emergencies without fear of losing their jobs. It entitles eligible employees to take up to 12 weeks of unpaid leave each year for specified family and medical reasons.
FMLA Leave
Unpaid leave legislated by the Family and Medical Leave Act that is available when a new child is born to the employee; a new child is placed with the employee for adoption or foster care; the employee is needed to care for a seriously ill spouse, child, or parent (but not a parent-in-law); or the employee has a serious health condition.
Gainsharing
A pay-for-performance plan such as a Scanlon plan, a Rucker plan, or an improshare plan. Most gainsharing plans involve greater employee participation in their design.
Garnishment
Money taken from an employee’s paycheck as a result of a court judgement brought against that employee by a creditor.
Golden Parachute
An agreement between a company and an executive employee specifying that the executive will receive certain significant benefits if employment is terminated due to events such as a merger or takeover.
Graded Vesting
A retirement plan where an employee becomes partially vested after an initial period with the organization, then vested an additional percentage each year until fully vested.
Group Health Cooperatives
A special kind of HMO consisting of a collection of a physicians, hospitals, and clinics that combine to provide health care services for members. The members pay a capitated monthly fee and the staff members are paid a fixed salary rather than an amount based on the number of patients they see in a day.
Guide Chart-Profile Method
A widely-used job evaluation method that uses three compensable factor - knowhow, problem solving, and accountability - to determine how many points should be assigned to different jobs. The Hay method.
Halsey Premium Plan
An incentive plan where the workers receive a guaranteed hourly wage plus a percentage of the wage for any time saved.
Hay Method
A widely-used job evaluation method that uses three compensable factors - knowhow, problem solving, and accountability - to determine how many points should be assigned to different jobs. The Guide Chart Profile method.
Health Plan Purchasing Cooperatives
Health-care plans that contract with health-care providers to purchase services at a discounted rate.
Health Reimbursement Arrangement
Employer-provided reimbursements for medical expenses that are excluded from taxable income, but subject to maximum dollar limits for a coverage period. Unused funds at the end of the period can be carried forward to subsequent periods.
Herzberg’s Hygiene/Motivator Theory
A motivation theory that identifies two types of needs. Motivators are associated with the content of the job and contribute to individual motivation. Hygiene factors cause dissatisfaction when they are deficient but do not create motivation when they are present. Money is a hygiene.
