Managing Compensation Chapter 10 MGT 3513 “The thermometer of success is merely the jealousy of the malcontents.” Salvador Dali

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Questions on Compensation What are the three components of total compensation? Explain each. How much of a cost does compensation represent to most firms?

Dr. Marler’s Unsolicited Advice on the “JOB SEARCH” Dr. Marler’s Unsolicited Advice on the “JOB SEARCH” Salary.com Information on salary (national & local) Information about salary negotiation tactics ( negotiation-tactics/slide/5/ ) negotiation-tactics/slide/5/

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What is the median salary?

Go to the benefits tab

What is the base pay? What are the pay incentives? What are benefits worth?

Cost of Living Calculator ayoutscripts/coll_start.aspx It will compare salary & cost of living in two locations It will tell you how much you would have to earn in a new location to maintain the same standard of living.

Cost of Living Calculator – enter median salary & 2 locations

What is the net change in income? What is the typical salary in location 1? What is the typical salary in location 2?

Figure 10.2 in textbook is a useful outline for the chapter 1) Internal / External 2) Fixed / Variable 3) Performance / Membership 4) Job / Individual Pay 5) Egalitarianism / Elitism 6) Below-Market / Above-Market Compensation 7) Monetary / Nonmonetary 8) Open / Secret 9) Centralization / Decentralization of Pay Decisions

1) Internal / External How do we know if we are paid a fair amount? Equity ◦internal equity ◦external equity What happens if we decide that our pay is NOT fair?

1) Internal / External Distributive justice model of pay equity ◦Input/outcome ratio Labor market model of pay equity ◦Wage rate = intersection of supply & demand ◦“going rate”

Practice Question Kayla makes $20 an hour as a fitness instructor; however, she becomes frustrated to learn that an employee with less seniority is making $25 an hour. What type of equity comparison is she making ? A. Internal B. External

A. Internal B. External My company is conducting a market survey to make sure their current pay rates are competitive. What type of equity applies to this situation? Practice Question

2) Fixed / Variable What is fixed pay? What is variable pay? Which form (fixed or variable) do most U.S. companies use? Why?

3) Performance / Membership Performance-contingent compensation ◦What is a piece-rate plan? What is membership-contingent compensation? ◦In your opinion, what is potentially a major disadvantage of this type of compensation system?

4) Job / Individual Pay  Skill-based approach – What is the ________ worth?  Job-based approaches – What is the ______ worth?

5) Egalitarianism / Elitism What is an egalitarian pay system? What is an elitist pay system?

6) Above the market / below the market Above the market ◦Quality of applicant = ___________ ◦Turnover = __________ Below the market ◦Quality of applicant = ___________ ◦Turnover = __________

7) Monetary / Nonmonetary What are monetary rewards? What are nonmonetary rewards? ◦Give examples

8) Open / Secret What is secret pay? What is open pay?

9) Centralization / Decentralization of Pay Decisions Contrast centralized and decentralized pay decisions

Compensation Tools Job-based approaches  How does a company know what a job is worth? ◦Achieving internal equity  Job evaluation = the process of evaluating the relative ____________ or contribution of different jobs to an organization ◦Achieving external equity  Market surveys =

Internal Equity - - Job Evaluation 1.Conduct _____________ 2.Write __________, including job specifications 3.Rate worth of all jobs using a predetermined system 4.Create a _____________ 5.Classify jobs by grade levels

Internal Equity – Rating the Worth of Jobs (Job evaluation) Point factor method Assigns points to jobs based on ____________________. Skill Effort Responsibility Working conditions

Internal Equity – Rating the Worth of Jobs (Job evaluation) Point factor method example NurseTree Climber Part-time Office Assistant Skill Effort Responsibility Working Conditions Total Points

Pay Structure $27,000 Pay Grade 1 __________ $20,000 $32,000 Pay Grade 2 $25,000 $37,000 Pay Grade 3 __________ $30,000 Pay RangePay Range Job evaluation points $Pay $Pay

Terms to Know Pay Structure Pay Grade Pay Range Compensable factors Job hierarchy

External Equity -- Market survey 1.Identify benchmark or key jobs Benchmark job = 2.Establish a pay policy Decision to pay _______________ _______________

FLSA Fair Labor Standards Act ______________ “exempt” vs. “nonexempt” employees

McDonald’s: Hiring 50,000 in one day 04/04/n_mcdonalds_hiring.cnnmoney/ 04/04/n_mcdonalds_hiring.cnnmoney/ What is meant by the term “living wage”? ________________________________ What is the estimated amount of money people need to earn each year to stay out of poverty? ________________________________

Questions on the FLSA Minimum wage ◦Why do some believe that it should be raised? ◦Why do some argue that it should not be raised? ◦Is it possible for employers to be required to pay a minimum wage that is higher than the federal minimum wage? If so, why?

Additional Information about the Minimum Wage Current minimum wage = $7.25 ◦Oregon’s minimum wage = $9.25 Workers who receive tips ◦Minimum wage = $2.13  Rate established in 1991

Questions on the FLSA (continued) How many hours must a person work to receive overtime pay? What is the minimum pay rate for overtime pay? Why is overtime pay an attractive option to employers?

Common Exemptions from FSLA Common Exemptions from FSLA n75.asp n75.asp