Final paper

Human Resource Management MSL660/MPA606 Hall #6 It’s Time to Get Paid!

Format for Hall session

• Introduction of the Hall • Hall Topics • Christian worldview applications • Major points for the week’s learning

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Topics we’ll cover

• Total Rewards & Compensation • Compensation Design System Issues • Legal Constraints on Pay Systems • Development of a Base Pay System • Pay Structures • Determining Pay Increases • Variable Pay: Incentives for Performance • Individual Incentives • Group/Team Incentives • Organizational Incentives • Sales Compensation • Executive Compensation

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Biblical Foundation: Deut. 24:14-15

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Hall Objectives

• How organizations use total rewards to help accomplish organizational strategy

• How the FLSA affects how organizations run their organizations

• How organizations determine how they will pay their employees

• How incentives enhance performance • What are the different kinds of incentives • What is sales compensation and executive

compensation

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Questions or Topics for Reflection & Study

• What is the difference between wages & salaries? • What are the three (3) major provisions of the

Fair Labor Standards Act (FLSA)? • What are the types of incentives organizations

pay? • What is the difference between commission & a

draw?

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Total Rewards

• Total Rewards – Monetary & nonmonetary rewards provided by companies to attract, motivate, & retain employees. ▫ Legal compliance with all appropriate laws & regulations ▫ Cost-effectiveness for the organization ▫ Internal, external, & individual equity for employees ▫ Performance enhancement for the organization ▫ Performance recognition & talent management for

employees ▫ Enhanced recruitment, involvement, & retention of

employees

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Total Rewards Components

• Fig. 11-1

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Source: Mathis & Jackson (2011), Human Resource Management (13th ed.), Mason, OH, Cengage Southwestern.

Compensation

• Types: ▫ Base pay

 Wages  Salaries

▫ Variable pay ▫ Benefits

• Philosophies: ▫ Entitlement ▫ Performance

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HR Metrics for Compensation

• Fig. 11-3

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Source: Mathis & Jackson (2011), Human Resource Management (13th ed.), Mason, OH, Cengage Southwestern.

Compensation System Design Issues

• Fairness & equity

• Strategy: ▫ “Meet the market” ▫ “Lag the market” ▫ “Lead the market”

• Competency-based pay

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Legal Constraints on Pay Systems

• Fair Labor Standards Act (FLSA) – major federal law affecting compensation & is enforced by the Wage & Hour Division of the U.S. Dept of Labor ▫ Major Provisions:

 Establish a minimum wage  Discourage oppressive use of child labor  Encourage limits on the number of hours

employees work per week through OT provisions

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Legal Constraints on Pay Systems

• Minimum wage – can only be changed by Congress, raised to $7.25/hr on 7/24/2009

• Child Labor Provisions: ▫ Minimum age to work unlimited hours – 16 ▫ Hazardous occupations – 18 ▫ Certain limitations – 14 & 15

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Legal Constraints on Pay Systems

• Exempt & Nonexempt Statuses: ▫ Exempt employees – don’t have to pay OT ▫ Nonexempt employees – must pay OT

• Exempt Categories: ▫ Executive ▫ Administrative ▫ Professional ▫ Computer employees ▫ Outside sales

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Legal Constraints on Pay Systems

• Overtime: ▫ 1 ½ x pay for hours worked over 8/day or

40/week ▫ If desired, nursing homes & hospitals are allowed

to use a 14-day period instead of 7-day week as long as employees are paid OT for hours worked over 8/day or 80/14-day period

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Legal Constraints on Pay Systems

• Equal Pay & Pay Equity: ▫ Pay differences can be justified on basis for merit,

seniority, experience, etc. ▫ Pay equity – pay for all jobs requiring comparable

KSAs should be the same even if actual job duties & market rates differ significantly

• State & Local Laws • Garnishment Laws • Lilly Ledbetter Fair Pay Act – negated any statute

of limitations filing a complaint of pay discrimination

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Development of a Pay System • Fig. 11-8

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Source: Mathis & Jackson (2011), Human Resource Management (13th ed.), Mason, OH, Cengage Southwestern.

Development of a Pay System

• Job evaluation - Formal, systematic means to identify the relative worth of jobs within an organization.

• Market pricing - Use of market pay data to identify the relative value of jobs based on what other employers pay for similar jobs.

• Pay survey - Collection of data on compensation rates for workers performing similar jobs in other organizations.

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Pay Structures

• Fig. 11-10

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Source: Mathis & Jackson (2011), Human Resource Management (13th ed.), Mason, OH, Cengage Southwestern.

Pay Structures

• Pay grades – Groupings of individual jobs having approximately the same job worth.

• Market banding – Grouping jobs into pay grades based on similar market survey amounts.

• Broadbanding – Practice of using fewer pay grades with much broader ranges than in traditional compensation systems.

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Standardized Pay Adjustments

• Seniority – Time spent in an organization or on a particular job.

• Cost-of-Living Adjustment (COLA)

• Across-the-Board Increase

• Lump-sum Increase – One-time payment of all or part of a yearly pay increase.

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Variable Pay: Incentives for Performance

• Variable pay – Compensation linked to individual, group/team, and/or organizational performance.

• Fig. 12-3

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Source: Mathis & Jackson (2011), Human Resource Management (13th ed.), Mason, OH, Cengage Southwestern.

Individual Incentives

• Straight piece-rate system – Pay system in which wages are determined by multiplying the number of units produced by the piece rate for one unit.

• Differential piece-rate system • Bonus – One-time payment that does not become part

of the employee’s base pay. • Special Incentive Programs: ▫ Performance awards ▫ Recognition awards ▫ Service awards

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Group/Team Incentives

• Group/team results

• Gainsharing – System of sharing with employees greater-than-expected gains in profits and/or productivity.

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Organizational Incentives

• Profit sharing – System to distribute a portion of the profits of an organization to employees.

• Stock option plan – Plan that gives employees the right to purchase a fixed number of shares of company stock at a specified price for a limited period of time.

• Employee stock ownership plan (ESOP) – Plan designed to give employees significant stock ownership in their employees.

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Sales Compensation

• Salary only

• Straight commission ▫ Commission ▫ Draw

• Salary-plus-commission or bonus

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Executive Compensation

• Executive salaries

• Executive benefits

• Perks

• Annual executive incentives & bonuses

• Long-term executive performance incentives

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Questions or Topics for Review

• What is the difference between wages & salaries? • What are the three (3) major provisions of the

Fair Labor Standards Act (FLSA)? • What are the types of incentives organizations

pay? • What is the difference between commission & a

draw?

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What next?

• Take the Hall Quiz • Complete your detailed reading • Answer the discussion questions • Complete the writing assignments

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References

• Mathis, Robert & Jackson, John. (2011) Human Resource Management (13th ed.) Mason, OH: Cengage Southwestern.

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This concludes Hall 6