1 Administrative Office Management, 8/e by Zane Quible ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ Administering Salaries of Office Employees Administering Salaries of Office Employees Chapter 14

2 Administrative Office Management, 8/e by Zane Quible ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ It is a basic determinant of their worth to the organization. 2. It provides a measure of status and recognition. 3. It directly affects their standard of living. 4. It is a reward for the time and effort they contribute to the organization. Reasons Why Fair, Equitable Compensation is Important to Employees

3 Administrative Office Management, 8/e by Zane Quible ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ To provide a systematic determination of equitable compensation for employees. 2. To help the organization conform with existing legislation pertaining to employee compensation. 3. To help the organization control its salary costs. 4. To help reduce employee turnover. 5. To motivate employees to perform at an optimum level. 6. To promote good employer-employee relations. Goals of Salary Administration Programs

4 Administrative Office Management, 8/e by Zane Quible ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ Salary Administration Areas for Which Policies Should Exist (1 of 2) Salary Administration Areas for Which Policies Should Exist (1 of 2) 1. Advancement of employees from one salary range to another. 2. Plans for periodic review of organization’s salary administration program. 3. Steps to be used when filing a compensation- related grievance. 4. Plans for making merit increases. 5. Plans for awarding salary increases.

5 Administrative Office Management, 8/e by Zane Quible ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ Salary Administration Areas for Which Policies Should Exist (2 of 2) Salary Administration Areas for Which Policies Should Exist (2 of 2) 6. Types of fringe benefits available to employees. 7. Plans for shift or overtime pay. 8. Plans for dealing with the union. 9. Plans for incentive pay or performance-based pay.

6 Administrative Office Management, 8/e by Zane Quible ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ Responsibility for Salary Administration Program Responsibility for Salary Administration Program In large organizations, Generally falls under the guidance of the director of the salary administration program. In small organizations, Generally falls under the guid- ance of the human resources manager. In many organizations, The input of an advisory committee is also available.

7 Administrative Office Management, 8/e by Zane Quible ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ Factors that Affect the Salary Structure (1 of 2) Factors that Affect the Salary Structure (1 of 2) 1. Relative worth of jobs-determined by job evaluation. 2. Going rates-can determine comparable rates for comparable jobs using salary surveys. 3. Cost-of-living index-giving raises that at least match the cost-of-living index enables employees to maintain their purchasing power. 4. Legislation-a variety of federal and state laws affect employee’s salaries.

8 Administrative Office Management, 8/e by Zane Quible ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ Factors that Affect the Salary Structure (2 of 2) Factors that Affect the Salary Structure (2 of 2) 5. Collective bargaining-in unionized organizations, collective bargaining often plays a role in setting salaries and salary increases. 7. Level of productivity-the more productive an organization is, the more able it is to have a competitive salary program. 6. Organization’s ability to pay-the more able the organization is to pay, the more likely its salary program is comparable to other organizations in the community.

9 Administrative Office Management, 8/e by Zane Quible ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ Examples of Prepared Salary Surveys Compensation Comparisons-Industrial and Financial Management Directory of Office Salaries AMS Guide to Management Compensation

10 Administrative Office Management, 8/e by Zane Quible ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ When an organization conducts its own salary survey, these guidelines are important: 1. When surveying only a portion of the com- munity’s organizations, make sure those selected are done so using a random selection process. 2. The number selected to survey has to be suf- ficiently large to be representative. 3. The organization should survey organizations of like classification in the community. 4. The questionnaire used to collect data must be complete and effective. 5. Job descriptions from other companies should be collected to help provide assurance that jobs are comparable.

11 Administrative Office Management, 8/e by Zane Quible ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ Salary Scattergram Is used in determining the monetary worth of each job. Shows the relationship between the relative worth and the monetary worth of each job. Horizontal axis shows the points value or relative worth of the job. Vertical axis shows the monetary worth of the job.

12 Administrative Office Management, 8/e by Zane Quible ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ Correlation Line Is drawn once the plot point for each job (point where relative worth and monetary worth of the job intersect each other on the scatter- gram) is determined. Line is drawn where approximately half of the plot points are above the correlation line; the other half are below the line. Line is drawn where approximately half of the plot points are above the correlation line; the other half are below the line.

13 Administrative Office Management, 8/e by Zane Quible ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ The Organization’s Correlation Line Is compared with the community’s correlation line. To be competitive, the correlation line will have to be adjusted upward if the organization’s salaries fall below the community’s line. To be competitive, the correlation line will have to be adjusted upward if the organization’s salaries fall below the community’s line.

14 Administrative Office Management, 8/e by Zane Quible ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ Once the correlation line is determined, salary ranges are fixed. Most organizations have overlapping salary ranges between job levels. Most organizations have overlapping salary ranges between job levels.

15 Administrative Office Management, 8/e by Zane Quible ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ Plans for salary increases also have to be put into place. Salaries are increased in three different ways: At specific time intervals By merit By using a combination of time and merit

16 Administrative Office Management, 8/e by Zane Quible ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ Interval Method Employees receive salary increases at specific, predetermined times, such as once or twice a year.

17 Administrative Office Management, 8/e by Zane Quible ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ Merit Method Ties the quality of an employee’s performance to the amount of his or her salary increase. Employees whose work is distinctly superior receive a larger increase than those whose performance is less than superior.

18 Administrative Office Management, 8/e by Zane Quible ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ Combination Method Typically gives employees salary in- creases until they reach the midpoint or average salary for their range. After that point, then any increase is merit based. After that point, then any increase is merit based.

19 Administrative Office Management, 8/e by Zane Quible ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ Incentive Pay Plans Are designed to take into consideration employees’ performance in relation to work standards established through work measurement procedures. Properly Designed Incentive Pay Plans Benefit Both Employees and the Organization Properly Designed Incentive Pay Plans Benefit Both Employees and the Organization Employees Are able to increase their level of compensation. Organization Is able to increase its productivity, which improves its profitability.

20 Administrative Office Management, 8/e by Zane Quible ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ Characteristics of Effective Incentive Pay Plans (1 of 2) Characteristics of Effective Incentive Pay Plans (1 of 2) 1. Employees are convinced that a direct correlation exists between their level of performance and the amount of incentive pay they receive. 2. Employees are aware of the precise level at which they must perform to be eligible to receive incentive pay. 3. Management thoroughly communicates its expectations to employees.

21 Administrative Office Management, 8/e by Zane Quible ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ Characteristics of Effective Incentive Pay Plans (2 of 2) Characteristics of Effective Incentive Pay Plans (2 of 2) 4. Incentive pay is given only to those employees who increase their effectiveness. 5. Employees are fully convinced they will benefit substantially as a result of improved performance.

22 Administrative Office Management, 8/e by Zane Quible ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ Types of Incentive Pay Plans Individual incentive plans Group incentive plans

23 Administrative Office Management, 8/e by Zane Quible ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ Individual Plans Partial Plans A portion of the employee’s compensation is based on his or her output that exceeds a minimum threshold amount. Whole Plans The entire paycheck is based on the amount of the employee’s output.

24 Administrative Office Management, 8/e by Zane Quible ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ Group Incentive Plans Are often based on 1. Amount of profit earned by the organization. 2. Amount of cost reduction it realizes.

25 Administrative Office Management, 8/e by Zane Quible ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ Performance-Based Pay Plans Tend to put greater emphasis on key employees than do the incentive plans. Performance- Based Plans Reward total performance rather than just one component of an employee’s job.

26 Administrative Office Management, 8/e by Zane Quible ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ Performance-Based Pay Plans Key Contributor Plans Employees labeled as key contributors earn as much as per- cent of their annual salary. Gain Sharing Plans Are goal-based, organizationwide plans that involve employees extensively in the plans’ operations.

27 Administrative Office Management, 8/e by Zane Quible ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ Trends in Salary Administration Competency-based pay: paying employees on the basis of the breadth and depth of skills they possess as well as on the basis of the job knowledge they use in carrying out their assigned duties. Broadbanding: reduces the number of salary grades and pay ranges in an organization.

28 Administrative Office Management, 8/e by Zane Quible ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ Legally Required Plans Social Security Worker’s Compensation Unemployment Compensation Disability Insurance

29 Administrative Office Management, 8/e by Zane Quible ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ Fringe Benefits Are supplemental compensation in excess of the direct compensation employees receive for performing a specific job. Approximately 40 percent of an organization’s total employee compensation program is attributed to fringe benefits.

30 Administrative Office Management, 8/e by Zane Quible ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ Types of Fringe Benefits (1 of 2) Types of Fringe Benefits (1 of 2) Paid holidays Paid vacations Sick leave Paid personal days Educational assistance Life insurance programs Health care insurance Disability insurance Health maintenance organizations (HM0s) Preferred provider organizations Medical and fitness facilities Maternity leave

31 Administrative Office Management, 8/e by Zane Quible ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ Types of Fringe Benefits (2 of 2) Types of Fringe Benefits (2 of 2) Employee assistance programs Pension plans Profit sharing Child-care services Car pools Cafeteria services Company discounts Wellness programs Eldercare Reimbursement account programs Time-off bank

32 Administrative Office Management, 8/e by Zane Quible ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ Federal Legislation Impacting Salary Administration (1 of 2) Federal Legislation Impacting Salary Administration (1 of 2) Fair Labor Standards Act Equal Pay Act Walsh-Healy Act Davis-Bacon Act Pregnancy Discrimination Act Pension Reform Act Age Discrimination in Employment Act Civil Rights Act

33 Administrative Office Management, 8/e by Zane Quible ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ Federal Legislation Impacting Salary Administration (2 of 2) Federal Legislation Impacting Salary Administration (2 of 2) Economic Recovery Tax Act Deficit Reduction Act Consolidated Omnibus Budget Reconciliation Act Family and Medical Leave Act Health Insurance Portability and Accountability Act