A12 - Managing the Compensation Process Flashcards

Question

2009 : Troubled Asset Relief Program (TARP) American Recovery and Reinvestment Act (ARRA)

Answer 1

* Fin. instits. receiving funds from TARP have restrictions on comp. * prohibits use of several comp. programs, inlcuding, but not limited to bonuses, retention awards, and incentive pay, except where part of a preexisting employment contract, during the period TARP funds are received * restricted stk is permitted if 1/3 or less of annual comp. * if firms receiving the largest TARP assistnace, restrictions cover senior execs. and the next 20 highest paid EES

Answer 2

* fed'l law * covers all EEs of companies engaged in interstate commerce or in the prod. of goods for interstate commerce * cornerstone of pay reg. in U.S. * Major Provisions: * min. wage * hrs of work * child labor * EE records requirements including hrs worked and pay

Answer 3

* provide an income floor for workers in society's least productive jobs * last set in 2009 - $7.25 * (44) states have own min wages to cover jobs omitted from fed'l legislation * if state and fed'l laws cover the same job, the higher rate prevails * several states have mins higher than fed'l rate * effect of raising the min. wage goes beyond the # of ppl who actually are being padi the min. * as legis. forces pay rates at the lowest end of the scale to move up, pay rates above the min. often incr. in order to maintain differentials * not all industries are affected if there is a chg in the level * if the min that the industry is already paying is already higher than the min wage, then there will be little affect on that industry * concern for increases?? * resulting higher labor costs for affected firms may lead them to decr. their demand for workers and/or their hrs worked * a higher min. wage, which is intended to help low wage workers, runs the risk of reducing employment opps for those workers

Answer 4

* not part of FLSA min. wage provs, but very similar * a push that provides min. wage tailored to living costs in a specific area * pay legis. in some cities that req's wages above fed'l min. wage level * often applies only to city gov't EEs * usually covers only base wages, but they have req'd health ins., vacs., sick, job security, and provide incentives to unionize * Maryland was first to adopt this practice in 2009

Answer 5

* OT provision of FLSA req's pmt at 1 and a 1/2 times the standard for working more than 40 hrs per week * law's obj. is to share available work by making the hiring of addtional workers a less costly option than the scheduling of OT for current EEs * some state laws go beyond the FLSA requirements

Answer 6

* Wage and Hour Division of DoL enforces FLSA * provides strict criteria that must be met in order for jobs to be exempt from min-wage and OT provs. * ERs have tried to get around this OT requirement by classifying EEs as exec, even though the work of these 'execs' is only slightly diff. from their co-workers * DoL cares more on the ***nature*** of the job (not the job title) * another challenge: evolving, always-on workplace where EEs routinely put in extra hrs and shoot off e-mails late at night from mobile devices, when the workday begins and ends has become an issue for ERs * impact of this depends importantly on the degree to which they are enforced * unpaid OT in JAP is major prob

Answer 7

* EE must be comp. on a slry basis ( as defined in the regs) at a rate not less than $455 per week * EE's primary duty must be managing the enterprise, or managing a customarily recognized dept or subdivision of the enterprise * EE must customarily and regularly direct the work of at least 2 or more other FT EEs or their equivalent * EE must have the authority to hire or fire other EEs, or the EE's suggestions and recommendations as to the hiring, firing, advancement, promo, or any other chg of status of other EEs must be given particular weight

Answer 8

* the EE must be comp. on a slry or fee basis (as defined in the regs) at a rate not less than $455 per week * EE's primary duty must be the perf. of office or non-manual work directly related to the mgmt or gen. bus. ops of the ER or the ER's custs * EE's primary duty includes the exercise of discretion and independent judgment w/ respect to matters of significance

Answer 9

* EE must be compensated on a slry or fee basis (as defined in the regs) at a rate not less than $455 per week * EE's primary duty must be the perf. of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment * advanced knowledge must be in a field of science or learning * advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction

Answer 10

* EE must be compensated on a slry or fee basis (as defined in the regs) at a rate not less than $455 per week * EE's primary duty must be the perf. of work requiring invention, imagination, origninality or talent in a recognized field of artistic or creative endeavor

Answer 11

* the EE must be comp. on a slry or fee basis (as defined in the regs) at a rate not less than $455 per week or if compensated on an hrly basis, at a rate not less than $27.63 an hour * EE must be employed as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field performing duties below * EE's primary duty must consist of: * app. of systems analysis techniques and procedures, including consulting w/ users, to determine hardware, software or system functional specifications * the design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications * design, doc. testing, creation or modification of computer programs related to machine operating systems * a combo of the before duties, the perf. of which requires the same level of skills

Answer 12

* EE's primary duty must be making sales (as defined in the FLSA), or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or cust * EE must be customarily and regularly engaged away from the ER's place or places of bus.

Answer 13

* HCEs performing office or non-manual work and paid total ann. comp. of $100,000 or more (which must include at least $455 per week paid on a slry or fee basis) are exempt from the FLSA if they customarily and regularly perform at least one of the duties of an exempt exec., admin, or prof. EE ID in the standard tests for exemption

Answer 14

* blue-collar workers * police, fire fighters, paramedics, and other first responders * they are not exempt, but rather covered by the FLSA

Answer 15

* counting the hrs of work has beomce a contest * law is also relevant to "on-call EEs" you must be avilable to respond outside the usual workday * carry pager * don't need to be paid unless paged * if they are req'd to stay 'on premises', then they are obligated to be paid for that time even if not working

Answer 16

* in 1999, Wage and Hr Div. stated that ERs had to include bonus, gain-sharing and stk pmts in calculating OT time * in 2000, Worker Econ. Opp. Act, amended FLSA to allow stk options and bonuses to be exempt from inclusion in OT pay calcs. * gifst or special-occasion bonuses have never needed ot be included - at ER's discretion

Answer 17

* chg'g nature of the workplace and of pay systems has led to calls to reform FLSA to allow for more flexible scheduling and easier admin of variable pay plans * Fed. legis. has been proposed that would give EEs and ERs the option of trading OT pay for time off * EE would get more time to deal with personal matters and it would save ER money

Answer 18

* generally - * persons under 18 cannot work in hazardous jobs such as meat packing and logging * persons under 16 cannot be employed in jobs involving interstate commerce except for nonhazardous work for a parent or guardian * gov't guidelines exist to help monitor child labor in employment practices of subcontractors producing goods for the U.S. mkt

Answer 19

* U.S. ER's are not obligated to pay legally req'd or additional benefits to indep. contractors * determining whether or not you are an EE or an indep. contractor can have signif. cost implications for the ER * decision requires careful attention to compliance issues * both tax law (IRS) and ERISA (DOL) * most widely used - IRS * (2) general criteria - behavioral and financial control * the more control a firm is able to exercise, the more likely it is that the IRS will see the worker as an EE rather than an indep. contracto * also what type of relationship it is (is it permanent)

Answer 20

* legis. that provides for a gov't-defined prevailing wage as the min. wage that must be paid for work done on cov'd gov't projs. or purchs. * set pay for work done to prod. goods/services contracted by the fed'l gov't * to comply - contractors must determine the *'going rate'* for construction labor in an area * in practice, these prevailing rates have been union rates paid in various geographic areas * prevents contractors from using their size to drive down wages * one effect is to distort mkt wages and drive up the cost of gov't-financed projs. * main prevailing-wage laws: * Davis-Bacon Act * Walsh-Healey Public Contracts Act * Service Contract Act * Nat'l Foundation for the Arts and Humanities Act * *

Answer 21

* (2) types of discrim. recognized by law: * access discrim - denial of particular jobs, promos, or training opps. to qualified women or minorities * most often make the news * valuation discrim - looks at the pay women and minorities receive for the jobs they perform * hinges on the standard of *equal pay for equal work*

Answer 22

* policy that women performing jobs judged to be equal on some measure of inherent worth s/b paid the same as men, excepting allowable differences, such as seniority, merit, prod.-based pay plans, and other non-sex-related factors * obj. is to eliminate use of the mkt in setting wages for jobs held by women * *equal pay for work of comparable worth* (also called pay equity or gender pay equity)

Answer 23

* forbids wage discrim. on the basis of gender if EEs perform equal work in the same establishment * jobs considered equal if they require equal skill, effort, and responsiblity and are performed under similar working conditions * differences b/w men and women performing same work are legal if these differences are basd on any 1 of 4 criteria (*affirmative defense*) * seniority * merit or quality of perf. * quality or quantity of prod. * some factor other than sex

Answer 24

* maintained (2) job classes for selector-packers in its prod. dept.: male and female * female job class carried a pay rate 10% below tha of the male job class which was b/c male job class had additional tasks such as shoveling, opening doors, doing heavy lifting to justify pay diff. * court decided that they were not equal and that it was o.k. that the female class was paid less * ruled that the equal work standard req'd only that jobs be substantially equal, not identical

Answer 25

1. *Skill: * Experience, training, educ., and ability as measured by the perf. requirements of a particular job 2. *Effort: * mental or physical - the degree of effort (not type of effort) actually expended in the perf. of a job. 3. *Responsibility:* the degree of accountability req'd in the perf. of a job 4. *Working Conditions: * the phys. surroundings and hazards of a job, including dimensions such as inside vs. outside work, heat, cold, and poor ventilation * time of day doesn't constitute dissimilar working conditions

Answer 26

* prompted most court cases * include: * shift differentials * temp assignments * bona fide training programs * differences based on ability, training, or experience * other reasons of "bus. necessity" * ER is req'd to justify the bus. relatedness of the practice * focus on "pattern of practices" instead of a specific practice * since most cases have been decided outside of court - no legal clarification of this has ever been provided * does seem that pay diffs. for equal work can be justified for demonstrably bus.-related reasons * but what the means has not been decided

Answer 27

* still discrim even if it is against 'white males'?? * the design of any pay systems to fight off discrim. must incorporate a policy of equal pay for substantially equal work in order to fight off the chances of reverse discrim.

Answer 28

* prohibits discrim. on the basis of sex, race, color, religion, or nat'l origin in any employment condition, inlcuidng hiring, firing, promo, transfer, comp, admission to training programs * amended in 1972, 1978, 1990 * typically focus on diff. in pay, promo, pay rasies, and perf. reviews * litigation cases are very costly for the company in terms of legal expenses, unfavorable publicity, EE relations, and the allocation of time away from the core bus.

Answer 29

* prohibited discrim. based on age * compliance w/ the ADEA is typically a key concern in workforce reductino programs * not only to age-related diff. in pay and employment outcomes, but in addition, it was amended in 1990 to include the Older Workers Benefit Protection Act (OWBPA) that detailed rules regarding how separation agreements involving older workers were used (exp = early retirement incentives)

Answer 30

1. disparate _treatment:_ * unequal treatment that applies diff. standards to diff. EEs * mere fact of unequal treatment may be taken as evidence of the ER's intention to discrim. under U.S. law 2. disparate _impact_: * whether ER intended to discrim or not is irrelevant * personnel decision can, on its face, seem neutral, but if its results are unequal, the ER must demonstrate that the decision is work-related

Answer 31

* enforced by Off. of Fed'l Contracts Compliance Programs (OFCCP) and DoL * prohibits discrim. on the basis of race, color, religion, sec, or nat'l origin * req's cov'd gov't contractors to file AAPs: (3) parts * utilization analysis compares the contractor's workforce to the available external workforce * goals and timetables are developed for achieving affirmative action * action steps are developed for achieving these goals and timetables

Answer 32

* determined that pay diff. for dissimilar jobs may reflect discrim. and therefore can be brought to courts for Title VII discrim. for jobs that are dissimilar * 4 jail matrons claimed that their work was comparable to that performed by male guards * matrons also were assigned clerical duties, b/c guarding the smaller # of female prisoners did not occupy all of their time * lower courts said that the matrons didn't have grounds b/c the jobs didn't meet the equal work reqmnt of EPA * Supreme Court said that Title VII pay case was not bound by the difinitions in EPA * didn't say that Wash. Co had discrim'd, but did say that a claim of wage discrim. could also be brought under Title VII for situations where the jobs were not the same

Answer 33

* courts continue to updold use of mkt data to justify pay differenceds for different jobs

Answer 34

* find a standard by which to compare the value of jobs (job evals) * 1st - must permit jobs w/ dissimilar content to be declared equal or "in some sense comparable" * 2nd - must permit pay diffs. for dissimilar jobs that are not comparable * *AFSCME v. State of Washington* * state commissioned a study of the concept of comparable worth and its projected effect on the state's pay system * found that basing wages on the ext. mkt, state was paying women approx. 20% less than it was paying men in jobs deemed of comparable value to the state * state took no action to fix stating that they couldn't afford to adjust wages, so AFSCME sued the state since it knew of the adverse effect of this present policy and that failure to chg the policy constituted discrim. * appeals court ruled that the state was not obligated to correct the disparity * this case has led many public ERs to undertake in 'pay equity studies' to assess the 'gender neutrality' of pay systems

Answer 35

* work/occup. diffs: * responsibilities * effort req'd * skill/knowledge req'd * working conditions * qualifications diffs: * educ. * experience * work-related behavior * career/life tradeoffs * turnover * perf. * hrs of work * labor mkt diffs: * demand/supply for specific skills * firm/industry diffs: * size tech * pay strat * Union diffs * power interests * discrim

Answer 36

* evidence that women of all ethnic groups are more likely than men to seek PT and flex. work arrangements that they are more likely than men to interrupt their careers due to family responsiblities * evidence that there are still gender diffs. in occupational choices * evidence of incr'd levels of occupational attainment doesn't automatically mean tha the wage gap will close * relatively small wage gap among younger corhorts (recent grads) tends to incr. as the cohort ages * perhaps b/c women tend to drop out of the labor force at some point for family reasons * OR due to barriers to continued advancement become more substandtial at higher levels in the job hierarchy * level of schooling and work-related experience appear to be primary sources of the pay gaps among both block and hispanic men and women

Answer 37

* also affect earnings diffs. among men and women and among race/ethnic groups * diffs in the firm's comp. policies w/in a specific industry * diffs in policies for different jobs may even exist w/in firm * size of firm is systematcially related to differences in wages

Answer 38

* fin. planning is integral to managing comp. * updating pay structure, incr'g merit pay, or instituting gain sharing are critical * creating comp. budget req's tradeoffs - how much of an incr. s/b allocated according to EE contribs. vs. across-the-board incr's * req's understanding the *potential returns* gained from the allocation * not only influence on labor costs, but through its influence in helping incr. revs or returns * (3) main factors to control in order to manage labor costs * employment (# of workers and the hrs they work) * avg. cash comp (wages, bonuses) * avg. benefit costs

Answer 39

* begins w/ estimate from top mgmt of the pay incr. budget for the entire org. * then allocated to each mgr, who plans how to distrib. it among subordinates * several approaches to top-down budgeting * typical - **_planned pay-level rise_** = the %age incr. in avg. pay for the unit that is planned to occur

Answer 40

* current yr's rise * %age by which the avg. wage chg'd in the past yr * ability to pay * any decision to incr. avg. pay level is in part a function of the org's fin. circumstances * are they fin. healthy or not? Can they stay competitive in the mkt * competitive mkt * determining the firm's competitive position in the mkt * using benchmarks to determing going mkt rate for a job * turnover effects * when ppl leave (any way), they typically are replaced by EEs who earn a lower wage * cost of living * EEs compare their pay incr's to chgs in their living costs

Answer 41

* EE's Cost of Living - determined by personal exp budget * most difficult to measure b/c it is dependent on indiv. EE's expectations * chgs in prices in the product and service mkts - determined by CPI * many critics that point out that if you depend on the CPI, you basically are paying for inflation rather than perf. or mkt chgs * chgs in wages in labor mkts - determined by pay surveys * chgs are incorp'd in to the system through mkt adjmnts in the budget and updates of the policy line and range structure

Answer 42

* begins w/ mgrs' pay incr. recommendations for the upcoming plan yr

Answer 43

1. Instruct mgrs in comp. policies and techniques 2. distrib. forecasting instructions and workshts 3. provide consultation to mgrs 4. check data and compile rpts 5. analyze forecasts 6. review and revise forecasts and budgets w/ mgmt 7. conduct feedback w/ mgmt 8. monitor budgeted vs. actual incr's.

Answer 44

1. *_formal budgeting process_* - helps to ensure that future fin. expenditures are coord. and controlled * involves forecasting the total expenditures req'd by the pay system during the next period as well as the amt of the pay incr's * bottom up and top down 2. *_controls that are inherent in the design of the techniques_* - includes range maxs and mins, compa-ratios, variable pay and cost analyses (and other) * regulate mgrs' pay decisions by guiding what mgrs can and cannot do * controls are built into these techniques to direct them toward the pay system objs.

Answer 45

* set max/min $s to be paid for specific work * important for cost control - max * reps highes value the org. places on the output of work * _Red Circle Rates_ = if EEs are paid above the range max * most ERs "freeze" red circle rates until the ranges are shifted upward by mkt update adjmnts so that the rate is back w/in the range again * mins are put on the min. value paced the on the work * often, rates are set below min for trainees * _broad bands_ = offer mgrs greater flexibility compared to grade-range design * accompanied by ext. mkt 'reference rates' and 'shadow range' that guide mgrs' decisions * bands may be more about career mgmt thn pay decisions * control of slry budget is givent to mgrs

Answer 46

* an index that helps assess how mgrs actually pay EEs in relation to the midpoint of the pay range established for jobs * estimates how well actual practices correspond to intended policy * calc'd as avg. rates actually paid divided by range midpoint * _compa-ratio of less than 1_: on avg, EEs in a range are paid below the midpoint * mgrs are paying less than intended policy * reasons - may be new or recent hires; poor performers; promo. may be so rapid that few EEs stay in the job long enough to get into the high end of the range * _compa-ratio greater than 1_: rates are exceeding intended policy * reasons - high seniority, high perf., low turnover, few new hires, or low promo rates * may be calc'd for indiv. EEs, for each range, for org. units, or for functions

Answer 47

* can be used as a cost-control device since it is not added to base pay and must be re-earned every period * gives org. more flexibility in managings its labor costs, but is less appealing to EEs

Answer 48

* costing out wage proposals is commonly done prior to recommending pay incr's, especially for coll. bargaining