HRM Exam
Healthcare Compensation Practices
Week 5: Part 2
1
Enforced by: U.S. Department of Labor
Provisions of the Law:
Establishes a minimum wage
Child labor – minimum age requirements
Defines exempt and non-exempt status
Sets overtime provisions
Sets rules for compensatory time off
2
Legal Issues: Fair Labor Standards Act (FLSA)
Independent contractor v. employee
Why does it matter?
IRS test
Key factors
Behavioral control
Financial control
Type of the relationship
3
4
Partial IRS Test for Employees & Independent Contractors
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Second level
Third level
Fourth level
Fifth level
Job Evaluation
A systematic basis for determining the relative worth of jobs within an organization
Priced according to:
Relative importance of the job
Knowledge, skills, & abilities (KSAs) needed to perform the job
Difficulty of the job
Many methods:
Point system is very common
Compensable factors
Factor comparison, ranking, job classification
Wage surveys are used
Benchmark Jobs are identified
Ranges are created
5
Job Evaluation
6
Pay Ranges
Start with market line,
used as the midpoint
Determine minimum and
maximum pay levels
Types of Jobs Range Above Minimum % Around Midpoint
Executives 50%-70% + or –20-25%
Mid-Management/Professional 40%-50% + or –16-20%
Technicians/Skilled Craft & Clerical 30%-40% + or –13-16%
General Clerical/Others 25%-35% + or –11-15%
Pay Compression
Occurs when the pay differences among individuals with different levels of experience and performance becomes small
7
Pay Rate Issues
Red-Circled Employees
Green-Circled Employees
An incumbent who is paid
above the range of the job
An incumbent who is paid
below the range of the job
Rates out of Range
Seniority
Step systems -- pay increases based solely on how long they have been with the organization
Performance Appraisals
- How much of the pay increase is variable?
Cost-of-Living Adjustments (COLA)
How much does inflation play a role? (CPI)
Lump-Sum Increases (LSI)
A one-time payment for all or part of the yearly pay increase
Does not increase base pay
8
Issues Involving Pay Increases
9
Performance-Based Pay Adjustment Matrix
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Second level
Third level
Fourth level
Fifth level
Compa-ratio
A person’s pay level divided by the midpoint of the pay range
Examples:
10
Pay Adjustment Factor: Compa-Ratio
104
100
(midpoint)
$24.00
pay)
(current
$25.00
A
Employee
=
´
=
92
100
(midpoint)
$24.00
pay)
(current
$22.00
B
Employee
=
´
=