Compensation

Question 1

Direct compensation

Answer 1

Encompasses wages and salaries, incentives, bonuses, and commissions

Question 2

Indirect compensation

Answer 2

Comprises the many benefits supplied by employers

Question 3

Nonfinancial compensation

Answer 3

Includes employee recognition programs, rewarding jobs, organizational support, work environment, and flexible working hours to accommodate personal needs (Intrinsic rewards)

Question 4

Equity Theory

Answer 4

States that individuals form a ratio of their inputs (abilities, skills, experiences) in a situation to their outcomes (salary, benefits) in the situation); they then compare the value of the ratio to value of the input/output ratio for other individuals in a similar class of jobs either internal or external. For employees, equity is achieved when their perceived input/output ratio equals the input/output ratio of the referent others.

Question 5

Expectancy Theory

Answer 5

Predicts that one’s level of motivation depends on the attractiveness of the rewards sought and the probability of achieving those rewards.

Question 6

Three Conditions for Rewards to Motivate (Expectancy)

Answer 6

1) It must have high valance (aka. it must be valued). 2) Must have instrumentality (must be a connection between goals and rewards). 3) There must be an expectancy that the tasks can be achieved (must be attainable)

Question 7

Hourly work

Answer 7

Work paid on an hourly basis

Question 8

Piece work

Answer 8

Work paid according to the number of units produced

Question 9

Consumer Price Index (CPI)

Answer 9

A measure of the average change in prices over time in a fixed “market basket” of goods and services

Question 10

Escalator clauses

Answer 10

Clauses in collective agreements that provide quarterly cost-of-living adjustments in wages, basing the adjustments on changes in the consumer price index

Question 11

Real wages

Answer 11

Wage increases larger than rises in the CPI, that is, the real earning power of wages

Question 12

Job evaluation

Answer 12

A systematic process of determining the relative worth of jobs to establish which jobs should be paid more than others within an organization

Question 13

Job ranking system

Answer 13

The simplest and oldest system of job evaluation by which jobs are arrayed on the basis of their relative worth; not very precise and doesn’t show value differences between jobs; it can also only really work for organizations with less than 15 jobs

Question 14

Job classification system

Answer 14

A system of job evaluation in which jobs are classified and grouped according to a series of predetermined wage grades. Successive grades require increasing amounts of responsibility, skill, knowledge, ability or other factors selected to compare jobs. (E.g GS-1 in the US Federal Government); it is less precise than the point system because jobs are evaluated as a whole

Question 15

Point system

Answer 15

A quantitative job evaluation procedure that determines a job’s relative value by calculating the total points assigned to it; points are assigned based on compensable factors e.g. skills, efforts, responsibilities, and working conditions

Question 16

Point manual

Answer 16

A handbook that contains a description of the compensable factors and the degrees to which these factors may exist within the jobs

Question 17

Work valuation

Answer 17

A job evaluation system that seeks to measure a job’s worth through its value to the business goals of the organization. This is a relatively new approach championed to meet the demands of a dynamic business environment.

Question 18

Hay profile method

Answer 18

A job evaluation technique using three factors - knowledge, mental activity, and accountability - to evaluate executive and managerial positions

Question 19

Wage and salary survey

Answer 19

A survey of the wages paid to employees of other employers in the surveying organizations’ relevant labour market (e.g. local, regional, or national)

Question 20

Wage curve

Answer 20

A curve in a scattergram representing the relationship between the relative worth of jobs and wage rates

Question 21

Pay grades

Answer 21

Groups of jobs within a particular class that are paid the same rate (This can occur as part of the job evaluation process)

Question 22

Red Circle Rates

Answer 22

Payment rates above the maximum of the pay range

Question 23

Competency-based pay (Skill- or Knowledge-based)

Answer 23

Pay based on an employee’s skill level, variety of skills possessed, or increased job knowledge; encourages employees to earn higher base wages by learning and performing a wider variety of skills (or jobs) or displaying a larger array of competencies

Question 24

Broadbanding

Answer 24

Collapsing the many traditional salary grades into a few wide salary bands; encourages lateral skill building while addressing the need to pay employees performing multiples jobs with different skill level requirements

Question 25

Pay Equity

Answer 25

Equal pay for work of equal value

Question 26

Wage-rate compression

Answer 26

Compression of differentials between different job classes, particularly the differential between hourly workers and their managers

Question 27

Variable pay

Answer 27

Tying pay to some measure of individual, group, or organizational performance

Question 28

Straight piecework

Answer 28

An incentive plan under which employees receive a certain rate for each unit produced

Question 29

Differential piece rate

Answer 29

A compensation rate under which employees whose production exceeds the standard amount of output receive a higher rate for all their work than the rate paid for those who d not exceed the standard amount

Question 30

Standard hour plan

Answer 30

An incentive plan that sets rates based on the completion of a job in a predetermined standard time (Common in auto mechanic shops)

Question 31

Bonus

Answer 31

An incentive payment that is supplemental to the base wage

Question 32

Spot bonus

Answer 32

An unplanned bonus given for employee effort unrelated to an established performance measure

Question 33

Merit guidelines

Answer 33

Guidelines for awarding merit raises that are tied to performance objectives

Question 34

Lump-sum merit program

Answer 34

Program under which employees receive a year-end payment which is not added to their base pay

Question 35

Straight salary plan

Answer 35

A compensation plan that permits salespeople to be paid for performing various duties that are not reflected immediately in their sales volume

Question 36

Straight commission plan

Answer 36

A compensation plan based on a percentage of sales

Question 37

Combined salary and commission plan

Answer 37

A compensation plan that includes straight salary and a commission (This is most common)

Question 38

Salary plus bonus plan

Answer 38

A compensation plan that pays a salary plus a bonus achieved by reaching targeted sales goals

Question 39

Components of Executive Pay Package

Answer 39

1) Base salary; 2) Short-term incentives/bonuses; 3) Long-term incentives or stock plans; 4) benefits; 5) perquisites

Question 40

Perquisites

Answer 40

Special nonmonetary benefits given to executives; often referred to as PERKS

Question 41

Team incentive plan

Answer 41

A compensation plan in which all team members receive an incentive bonus payment when production or service standards are met or exceeded; seek to foster cooperation

Question 42

Gainsharing plans

Answer 42

Programs under which both employees and the organization share financial gains according to a predetermined formula that reflects improved productivity and profitability

Question 43

Profit sharing

Answer 43

Any procedure by. which an employer pays, or makes available to all regular employees, in addition to base pay, special current or deferred. sums based on the profits of the enterprise

Question 44

Scanlon Plan (sales value)

Answer 44

Gainsharing plan that creates mechanisms for employee participation in developing productivity improvements and that shares the financial benefits of those improvements with the employee group that generated them (E.g by reducing costs and increasing productivity)

Question 45

Rucker Plan (value added)

Answer 45

Modified version of Scanlon Plan by expressing labour costs as a percentage of value-added (SV - purchased inputs), rather than the sales value of production.

Question 46

Improshare

Answer 46

A gainsharing plan that focuses on labour hours per unit of output and does not usually include worker participation

Question 47

Family of measures

Answer 47

Any gain-sharing formula that uses variety of measures to determine the extent to which a bonus is justified; benefits include flexibility and focus

Question 48

Employee stock ownership plans (ESOPs)

Answer 48

Stock plans in which an organization contributes shares of its stocks to an established trust for the purpose of stock purchases by employees

Question 49

Flexible benefit plans

Answer 49

Benefit plans that enable individual employees to choose the benefits that are best suited to their particular needs

Question 50

Contributory Plan

Answer 50

A pension plan in which contributions are made jointly by employees and employers

Question 51

Noncontributory Plan

Answer 51

A pension plan in which contributions are made solely by the employer

Question 52

Defined-benefit plan

Answer 52

A pension plan in which the amount an employee is to receive on retirement is specifically set forth; usually determined based on an employee's years of service, average earnings during a specified period, and age at time of retirement)

Question 53

Defined-contribution plan

Answer 53

A pension plan that establishes the basis on which an employer will contribute to the pension fund

Question 54

Vesting

Answer 54

A guarantee of accrued benefits to participants at retirement age, regardless of their employment status at the time

Question 55

Employee Assistance Program (EAP)

Answer 55

Services provided by employers to help workers cope with a wide variety of problems that interfere with the way they perform their jobs