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6.RewardingWork.pptxRewarding Work Pay and Benefits
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“All growth depends on activity . There is no development Physically or Intellectually without effort, and effort means work.”
“No person was ever honored for what he received. Honor has been the reward for what he gave”….
Calvin Coolidge, 30th President of the United States of American
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Employment: A Work in Process…
Employment is a relationship between two parties, usually based on a contract where work is paid for, where one is the employer and the other is the employee.
Employer and managerial control within an organization rests at many levels and has important implications for staff and productivity alike, with control forming the fundamental link between desired outcomes and actual processes.
Employers must balance interests such as decreasing wage constraints with a maximization of labor productivity in order to achieve a profitable and productive employment relationship.
Traditionally, potential employees were attracted to the public sector jobs because civil service jobs were thought to be stable and secure when compared to jobs in the private sector.
However times are a changing…
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New Beginnings….Starts Here…
As public agencies move toward alternative mechanism and flexible employment relationships typical of more market-based models, both public agencies and their employees find that they need to rethink their reward systems.
Questions:
Does the total compensation package [pay and benefits] meet the needs of both the employee and employer under current employment conditions?
Does the economic rewards measure the worth of the employees?
How does the pay and benefits compare to other employees within the agency and to others located in the existing job market?
Can the economic rewards be competitive enough to attract and retain employees with valued competencies?
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The Contemporary Pay and Benefits Environment….
The assumption that an individual’s civil service job was a basically shielded and relativity stable, even in an environment that promotes dynamism and change, no longer exist….Why?
Because of the negative image of the civil service system there is
an increasing focus on public sector accountability,
and increased emphasis on flexibility and contract management.
Within the civil service system the following three elements as characterizing the future of compensation….
Turn away from long-term (seniority) toward shorter-term perpective
Performance orientation in compensation
Retrenchment in level and types of benefits.
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The Elements of a Total Compensation Package …
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Indirect Compensation (non-salary)
Protection Programs
Mandated
(Social Security, Medicare, workers’ compensation, unemployment insurance)
Discretionary (health, life, pension, disability, long-term care)
Pay for Time Not Worked (sick leave, annual leave, disability, holidays, personal days)
General
(RAP, tuition, cafeteria, recreational and social programs, parking, credit union)
Extrinsic Rewards
Financial
Employee Services and Perquisite (“Perks”)
Limited
(car allowance, deterred compensation plans)
Direct Compensation (base and variable)
Nonfinancial
Intrinsic Rewards
What is the Compensation of Employees?
Compensation of employees (CE) is a statistical term used in national accounts, balance of payments statistics and sometimes in corporate accounts as well.
It refers basically to the total gross (pre-tax) wages paid by employers to employees for work done in an accounting period, such as a quarter or a year.
However, in reality, the aggregate includes more than just gross wages, at least in national accounts and balance of payments statistics.
The reason is that in these accounts, CE is defined as "the total remuneration, in cash or in kind, payable by an enterprise to an employee in return for work done by the latter during the accounting period".
It represents effectively a total labor cost to an employer, paid from the gross revenues or the capital of an enterprise.
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Laws Affecting Compensation Policy and Practice…
Pay setting in public agencies is governed by legal constraints, historical practice, and the relative power of stakeholders. Alone with various state statutes, four primary federal laws apply:
Fair Labor Standards Act (FLSA) of 1938;
Garcia v. San Antonio Metropolitan Transit Authority, (1985)
the Equal Pay of 1963;
the 1964 Civil Rights Act (Title VII);
and the Age Discrimination in Employment Act of 1963.
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The Fair Labor Standards Act of 1938…FLSA
The Fair Labor Standards Act of 1938[ is a federal statute of the United States. The FLSA introduced the forty-hour work week, established a national minimum wage, guaranteed "time-and-a-half" for overtime in certain jobs, and prohibited most employment of minors in "oppressive child labor", a term that is defined in the statute.
It applies to employees engaged in interstate commerce or employed by an enterprise engaged in commerce or in the production of goods for commerce, unless the employer can claim an exemption from coverage.
Garcia v. San Antonio Metropolitan Transit Authority, 469 U.S. 528 (1985), is a United States Supreme Court decision that holds that the Congress has the power under the Commerce Clause of the Constitution to extend the Fair Labor Standards Act, which requires that employers provide minimum wage and overtime pay to their employees, to state and local governments.
When the Court confirmed Congress' power to regulate the wage and hour standards applicable to employees of state and local governments, a different, more conservative Congress than the ones that had extended the FLSA to governmental employees in the first place now confronted the complaints from local governments that the Act was too inflexible and expensive to comply with.
Congress responded by amending the Act in 1985, allowing governments to offer compensatory time off rather than overtime in some circumstances, creating an exemption for volunteers and excluding certain legislative employees from coverage under the Act.
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The Equal Pay Act of 1963
The Equal Pay Act of 1963 is a United States federal law amending the Fair Labor Standards Act, aimed at abolishing wage disparity based on sex (see Gender pay gap). It was signed into law on June 10, 1963, by John F. Kennedy as part of his New Frontier Program. In passing the bill, Congress stated that sex discrimination:
depresses wages and living standards for employees necessary for their health and efficiency;
prevents the maximum utilization of the available labor resources;
tends to cause labor disputes, thereby burdening, affecting, and obstructing commerce;
burdens commerce and the free flow of goods in commerce; and
constitutes an unfair method of competition.
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The 1964 Civil Rights Act (Title VII)
The Civil Rights Act of 1964 is a landmark piece of civil rights legislation in the United States that outlawed discrimination based on race, color, religion, sex, or national origin. It ended unequal application of voter registration requirements and racial segregation in schools, at the workplace and by facilities that served the general public (known as "public accommodations").
Powers given to enforce the act were initially weak, but were supplemented during later years.
Title VII of the Act, prohibits discrimination by covered employers on the basis of race, color, religion, sex or national origin. Title VII applies to and covers an employer "who has fifteen (15) or more employees for each working day in each of twenty or more calendar weeks in the current or preceding calendar year."
Title VII also prohibits discrimination against an individual because of his or her association with another individual of a particular race, color, religion, sex, or national origin, such as by an interracial marriage.
The EEO Title VII has also been supplemented with legislation prohibiting pregnancy, age, and disability discrimination.
(i.e. Pregnancy Discrimination Act of 1978, Age Discrimination in Employment Act, Americans with Disabilities Act of 1990).
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Age Discrimination in Employment Act
The Age Discrimination in Employment Act of 1967 The ADEA, forbids employment discrimination against anyone at least 40 years of age in the United States. The ADEA includes a broad ban against age discrimination and also specifically prohibits:
Discrimination in hiring, promotions, wages, or termination of employment and layoffs.
Statements or specifications in job notices or advertisements of age preference and limitations.
Denial of benefits to older employees. An employer may reduce benefits based on age only if the cost of providing the reduced benefits to older workers is the same as the cost of providing full benefits to younger workers.
Since 1986 it has prohibited mandatory retirement in most sectors, with phased elimination of mandatory retirement for tenured workers, such as college professors, in 1993.
Defenses
Employers may enforce waivers of age discrimination claims made without EEOC or court approval if the waiver is "knowing or voluntary."
Valid arbitration agreements between employers and employees covering the dispute are subject to compulsory arbitration and no court action can be brought.
Employers can discharge or discipline an employee for "good cause," regardless of the employee's age.
Employers can take an action based on "reasonable factors other than age."
Bona fide occupational qualifications, seniority systems, employee benefit or early retirement plans.
Voluntary early retirement incentives.
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Alternative Ways of Setting Pay in Public Agencies…
Setting pay in the public sector has traditionally focused on:
maintaining internal fairness within organizations;
and ensuring external equity with alternate employment sectors.
A long standing norm used in setting public sector pay is the point-factor job evaluation system.
Its primarily focused on ensuring internal equity between jobs within an organization but has been characterized as highly standardized, inflexible, slow to respond to changing market conditions, and inadequately linked to employee performance.
Several public sector organizations have implement more flexible systems such as:
rank-in-person,
broad-banding,
and pay-for-performance.
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The Point-factor Job Evaluation System… or PFA
Point factor analysis (PFA) is a systemic bureaucratic method for determining a relative score for a job. Jobs can then be banded into grades, and the grades used to determine pay.
PFA is a type of Job Evaluation. The main advantage of PFA is that it is systemic and analytical.
Jobs are broken down into factors such as “knowledge required”. A set of closed questions in each factor break down to detail such as “level of education”.
The responses to these questions are given a score, and totaled for each factor. Each factor is given a weight, and this effects the contribution made to the overall total score by that factor.
Factors can be weighted according to their significance to the organization, and this allows the pay scheme to be linked to the organization's strategy.
A critical factor in job evaluation is that it is the role that is assessed, not the person doing it.
A criticism often made against PFA in isolation is that it fails to take account of external factors.
Skills in high demand in the market can create a premium as organizations have to compete for the people who have them.
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Rank-in-Person
Rank-in-Person system differ from traditional job classification and evaluation (rank-in-job system) because their focus is not on the duties of a particular position, but on the competencies of the employee.
Under a rank-in-job system, all employees are classified by type of occupation and level of responsibility, and these factors are tied to a job analysis, classification, and evaluation system.
In others words, the employee accepts a job and the rank is in the job, not the person who occupies it.
Under the rank-in-person system employees qualify for promotion from one rank to another based on competences and education.
And the rank is carried with the employee who moves from one job to another.
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Broad-Banding …
Broad banding is a job grading structure that falls between using spot salaries vs. many job grades to determine what to pay particular positions and incumbents within those positions.
While broad banding gives the organization using it some broad job classifications, it does not have as many distinct job grades as traditional salary structures do.
Thus, broad banding reduces the emphasis on ‘status’ or hierarchy and places more of an emphasis on lateral job movement within the company.
In a broad banding structure an employee can be more easily rewarded for lateral movement or skills development, whereas in
traditional multiple grade salary structures pay progression happens primarily via job promotion.
In this way, broad banding is a more flexible pay system.
This flexibility, however, can lead to internal pay relativity problems as there isn’t as much control over salary progression as there would be within a traditional multi-level grading structure
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And Pay-for-Performance
The high performing organizations always introduce the concept of the pay for performance. It is closely connected with the high performance corporate culture and it is not just a compensation and benefits area.
The pay for performance is a complex of different HR Processes aimed to build the environment, which encourages employees and managers to stretch the goals and to pay the best employees more than the others.
The “pay for performance” has to be included in the corporate culture and cannot be used as separated HR initiatives and HR processes as the separated usage would miss the main goal - paying the employees for the performance reached.
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What is “pay for performance”?
Pay for performance is not just a pure compensation and benefits concept. The pay for performance is a right mix of the HR Processes, which supports the optimal performance of the organization and it pays the most performing employees significantly differently, includes special compensation schemes for the selected groups of employees and gives career opportunities to the best talents in the organization
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Pay for Performance
Seniority Pay
Flexible, performance-based Incentives
Merit pay (gain sharing)
Cost-of-Living Allowance (COLA)
Demands that Agency becomes more Business Like
Variable Pay (a motivator)
Problems and Prospect in Implementing Pay for Performance…
Why have performance-based compensation systems’ expectations not have been realized?
Not all work lends itself to pay for performance….
Some organizational cultures and structures do not lend themselves to performance-based compensation.
As in the case with the system proposed for the Department of Homeland Security, external factors like the presence of a union or legal constraints or political forces may block successful implementations.
In some cases not enough money has been set aside to establish an extrinsic motivating effect.
In the end some folk’s believe that this type of program contributes to the inflation of performance appraisals while pushing some employees to suspect the equitable distribution of the monetary rewards.
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Setting Pay in Alternative Personnel Systems
The manner in which pay is set under alternative public personnel systems reflects the conflict among the values of efficiency and equity,
and the historical practice within which these values and systems have evolved.
Privatization, contracting out, exempt appointments, and the use of temporary workers to reduce full-time equivalent staffing levels, which are now increasing,
have proven powerful alternatives to union’ political influence over the contract negotiation and ratification process.
Note: Most contract workers (without sought after technical skills) have lower salaries because they are set by market models rather than legislative deliberations and collective bargaining programs.
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Required Employee Benefits….Social Security
In the United States, Social Security is primarily the Old-Age, Survivors, and Disability Insurance (OASDI) federal program.
The original Social Security Act (1935) and the current version of the Act, as amended, encompass several social welfare and social insurance programs. Social Security is funded through payroll taxes called Federal Insurance Contributions Act tax (FICA) or Self Employed Contributions Act Tax (SECA).
Tax deposits are collected by the Internal Revenue Service (IRS) and are formally entrusted to the Federal Old-Age and Survivors Insurance Trust Fund, the Federal Disability Insurance Trust Fund, the Federal Hospital Insurance Trust Fund, or the Federal Supplementary Medical Insurance Trust Fund which make up the Social Security Trust Funds.
With a few exceptions, all salaried income, up to an amount specifically determined by law (see tax rate table below) has an FICA or SECA tax collected on it.
All income over said amount is not taxed, for 2014 the maximum amount of taxable earnings is $117,000.
With few exceptions, all legal residents working in the United States now have an individual Social Security number.
Indeed, nearly all working (and many non-working) residents since Social Security's 1935 inception have had a Social Security number, because it is required to do a wide range of things including paying the IRS and getting a job.
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Required Employee Benefits….Worker’ Compensation ….
Workers' compensation is a form of insurance providing wage replacement and medical benefits to employees injured in the course of employment in exchange for mandatory relinquishment of the employee's right to sue his or her employer for the tort of negligence.
The tradeoff between assured, limited coverage and lack of recourse outside the worker compensation system is known as "the compensation bargain".
While plans differ among jurisdictions, provision can be made for weekly payments in place of
wages (functioning in this case as a form of disability insurance),
compensation for economic loss (past and future),
reimbursement or payment of medical and like expenses (functioning in this case as a form of health insurance),
and benefits payable to the dependents of workers killed during employment (functioning in this case as a form of life insurance).
General damage for pain and suffering, and punitive damages for employer negligence, are generally not available in workers' compensation plans, and negligence is generally not an issue in the case.
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Required Employee Benefits….Unemployment Compensation …
Unemployment benefits also called unemployment compensation) are social welfare payments made by the state or other authorized bodies to unemployed people.
Benefits may be based on a compulsory para-governmental insurance system.
Depending on the jurisdiction and the status of the person, those sums may be small, covering only basic needs, or may compensate the lost time proportionally to the previous earned salary.
Unemployment benefits are generally given only to those registering as unemployed, and often on conditions ensuring that they seek work and do not currently have a job.
In the United States unemployment benefits generally pay eligible workers between 40-50% of their previous pay.
Benefits are generally paid by state governments, funded in large part by state and federal payroll taxes levied against employers, to workers who have become unemployed through no fault of their own.
This compensation is classified as a type of social welfare benefit.
According to the Internal Revenue Code, these types of benefits are to be included in a taxpayer's gross income.
The standard time-length of unemployment compensation is six months, although extensions are possible during economic downturns.
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Unemployment Benefits….
In the United States unemployment benefits generally pay eligible workers between 40-50% of their previous pay.
Benefits are generally paid by state governments, funded in large part by state and federal payroll taxes levied against employers, to workers who have become unemployed through no fault of their own.
This compensation is classified as a type of social welfare benefit.
According to the Internal Revenue Code, these types of benefits are to be included in a taxpayer's gross income.
The standard time-length of unemployment compensation is six months, although extensions are possible during economic downturns.
Once this six-month time period elapses and payment ceases, an individual who remains unemployed is left with little means of a social safety net other than through help from charities, family or friends.
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Optional Employee Benefits
Pensions
Health Insurance
Sick Leave, Vacations, Holiday Pay, and Discretionary Days…
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Public employee pension plans in the United States
A pension is a fixed sum to be paid regularly to a person, typically following retirement from service.
There are many different types of pensions, including defined benefit plans, defined contribution plans, as well as several others.
Pensions should not be confused with severance pay; the former is paid in regular installments, while the latter is paid in one lump sum.
In the United States, public sector pensions are offered by federal, state and local levels of government.
They are available to most, but not all, public sector employees.
These employer contributions to these plans typically vest after some period of time.
These plans may be defined-benefit or defined-contribution pension plans, but the former have been most widely used by public agencies in the U.S. throughout the late twentieth century.
Some local governments do not offer defined-benefit pensions but may offer a defined contribution plan.
In many states, public employee pension plans are known as Public Employee Retirement Systems (PERS).
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Health Insurance
Health Insurance Portability and Accountability Act of 1996 (HIPAA;
Was enacted August 21, 1996) was enacted by the United States Congress and signed by President Bill Clinton in 1996.
It has been known as the Kennedy–Kassebaum Act or Kassebaum-Kennedy Act after two of its leading sponsors.
Title I of HIPAA protects health insurance coverage for workers and their families when they change or lose their jobs.
Title II of HIPAA, known as the Administrative Simplification (AS) provisions, requires the establishment of national standards for electronic health care transactions and national identifiers for providers, health insurance plans, and employers
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Patient Protection and Affordable Care Act
The Patient Protection and Affordable Care Act (PPACA), commonly called the Affordable Care Act (ACA) or colloquially Obamacare, is a United States federal statute signed into law by President Barack Obama on March 23, 2010.
Together with the Health Care and Education Reconciliation Act amendment, it represents the most significant regulatory overhaul of the U.S. healthcare system since the passage of Medicare and Medicaid in 1965.
The ACA was enacted to increase the quality and affordability of health insurance, lower the uninsured rate by expanding public and private insurance coverage, and reduce the costs of healthcare for individuals and the government. It introduced mechanisms like mandates, subsidies, and insurance exchanges.
The law requires insurance companies to cover all applicants within new minimum standards and offer the same rates regardless of pre-existing conditions or sex.[ In 2011 the Congressional Budget Office projected that the ACA would lower both future deficits[ and Medicare spending.
https://en.wikipedia.org/wiki/Patient_Protection_and_Affordable_Care_Act#See_also
In March 2015, the Centers for Disease Control and Prevention reported that the average number of uninsured during the period from January to September 2014 was 11.4 million fewer than the average in 2010.[ In April 2015, Gallup reported that the percentage of adults who were uninsured dropped from 18% in the third quarter of 2013 to 11.4% in the second quarter of 2015
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Sick Leave, Vacations, Holiday Pay, and Discretionary Days…
Sick leave (or paid sick days or sick pay) is time off from work that workers can use to stay home to address their health and safety needs without losing pay. Paid sick leave is a statutory requirement in many nations around the world. Most European, many Latin American, a few African and a few Asian countries have legal requirements for paid sick leave.
Paid sick leave advocates assert that providing paid sick time can reduce turnover, increase productivity, and reduce the spread of contamination in the workplace.[
Some studies show that the cost of losing an employee (which can include advertising for, interviewing, and training a replacement) is often greater than the cost of providing sick days to retain existing employees.
Opponents of a workplace mandate assert that employers should offer paid sick days at their own discretion.
They say employers best understand the benefit preferences of their employees and must maintain flexibility to meet the unique needs of their workforce
The United States does not currently require that employees have access to paid sick days to address their own short-term illnesses or the short-term illness of a family member.
The U.S. does guarantee unpaid leave for serious illnesses through the Family and Medical Leave Act (FMLA).
This law requires employers with 50 workers working within a 75 mile radius to comply and, within those businesses, covers employees who have worked for their employer for at least 12 months prior to taking the leave.
In January 2015, President Barack Obama asked Congress to pass the Healthy Families act under which employees could earn one hour of paid sick time for every 30 hours they work up to seven days or 56 hours of paid sick leave annually.
The bill as proposed, would apply to employers with 15 or more employees, for employees as defined in the Fair Labor Standards Act.[
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Emergent Employee Benefit Issues
Family and Medical Leave Act of 1993 (FMLA)
Child Care, Elder Care, and Long-Term Care
Educational Benefits
Flexible Benefit Programs
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Family and Medical Leave Act of 1993 (FMLA)
The Family and Medical Leave Act of 1993 (FMLA) is a United States federal law requiring covered employers to provide employees job-protected and unpaid leave for qualified medical and family reasons.
Qualified medical and family reasons include: personal or family illness, family military leave, pregnancy, adoption, or the foster care placement of a child.
The FMLA was intended "to balance the demands of the workplace with the needs of families.“
The Act allows eligible employees to take up to 12 work weeks of unpaid leave during any 12-month period to attend to the serious health condition of the employee, parent, spouse or child, or for pregnancy or care of a newborn child, or for adoption or foster care of a child.
In order to be eligible for FMLA leave, an employee must have been at the business at least 12 months, and worked at least 1,250 hours over the past 12 months, and work at a location where the company employs 50 or more employees within 75 miles.
The FMLA covers both public- and private-sector employees, but certain categories of employees are excluded, including elected officials and their personal staff members.
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Pay, Benefits, and Conflict Among Personnel Systems…
Conflicts emerges between individual rights (pay and benefits for employees) and agency efficiency (reduced pay and benefit cost).
And the outcome of this issue directly affects the conflict among competing personnel systems.
Note: Despite their relatively short expected tenure in office, political appointees have frequently have been able to include themselves in the benefit provision offered to public employees..
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