Podcast
Questions and Answers
Which type of pay is specifically linked to individual or group performance and aims to incentivize specific goals?
Which type of pay is specifically linked to individual or group performance and aims to incentivize specific goals?
What is a primary purpose of team-based compensation?
What is a primary purpose of team-based compensation?
Which of the following is a type of organization-wide incentive plan?
Which of the following is a type of organization-wide incentive plan?
What compensation strategy aims to keep expatriate employees at a standard of living comparable to their home country?
What compensation strategy aims to keep expatriate employees at a standard of living comparable to their home country?
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What benefit is a golden parachute intended to provide to executives?
What benefit is a golden parachute intended to provide to executives?
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What element is NOT considered in a total rewards compensation strategy?
What element is NOT considered in a total rewards compensation strategy?
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Which law distinguishes between exempt and nonexempt employees based on pay and work conditions?
Which law distinguishes between exempt and nonexempt employees based on pay and work conditions?
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How can organizations respond to wage pressures in a tight labor market?
How can organizations respond to wage pressures in a tight labor market?
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Which of the following methods is NOT a job evaluation technique?
Which of the following methods is NOT a job evaluation technique?
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What is a wage curve primarily used for in compensation management?
What is a wage curve primarily used for in compensation management?
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What type of compensation is considered the foundation of an employee’s earning?
What type of compensation is considered the foundation of an employee’s earning?
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What is a primary goal of compensation administration in organizations?
What is a primary goal of compensation administration in organizations?
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Which factors directly impact compensation levels in a given market?
Which factors directly impact compensation levels in a given market?
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Base pay is determined solely by an employee's performance on the job.
Base pay is determined solely by an employee's performance on the job.
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The Fair Labor Standards Act (FLSA) was enacted to establish guidelines for minimum wage and overtime pay.
The Fair Labor Standards Act (FLSA) was enacted to establish guidelines for minimum wage and overtime pay.
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Compensation practices of competitors have no influence on an organization's pay structure.
Compensation practices of competitors have no influence on an organization's pay structure.
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Variable pay is not linked to individual, group, or organizational performance.
Variable pay is not linked to individual, group, or organizational performance.
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Compensation surveys are used to ensure an organization’s pay structure is competitive in the market.
Compensation surveys are used to ensure an organization’s pay structure is competitive in the market.
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Intrinsic rewards include financial incentives such as bonuses and salary increases.
Intrinsic rewards include financial incentives such as bonuses and salary increases.
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Executive compensation typically includes a mix of base salary and long-term incentives like stock options.
Executive compensation typically includes a mix of base salary and long-term incentives like stock options.
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Collective bargaining typically leads to lower compensation levels in unionized organizations.
Collective bargaining typically leads to lower compensation levels in unionized organizations.
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Hardship differentials are meant to offset higher living costs in overseas assignments.
Hardship differentials are meant to offset higher living costs in overseas assignments.
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The Scanlon plan is a type of individual incentive that rewards personal performance only.
The Scanlon plan is a type of individual incentive that rewards personal performance only.
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The point method is one of the techniques used in job evaluation.
The point method is one of the techniques used in job evaluation.
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Wage curves illustrate the relationship between employee qualifications and job satisfaction.
Wage curves illustrate the relationship between employee qualifications and job satisfaction.
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The balance sheet approach is used to determine compensation for local employees only.
The balance sheet approach is used to determine compensation for local employees only.
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Study Notes
Total Rewards Compensation
- A comprehensive approach to employee compensation, considering pay, training, benefits, time off, work-life balance, challenging work assignments, work culture, autonomy, and advancement opportunities.
- A well-designed strategy attracts, retains, and motivates qualified employees.
- Employee compensation can be categorized as intrinsic vs extrinsic, financial vs non-financial, and performance-based vs membership-based rewards.
Key Legislation and Regulations
- Fair Labor Standards Act (FLSA) of 1938 sets minimum wage, overtime pay, record-keeping, and child labor requirements; distinguishes exempt and nonexempt employees.
- Walsh-Healy Act mandates prevailing wage rates for government contractors.
- Civil Rights Act, Equal Pay Act, and Lilly Ledbetter Fair Pay Act prevent pay discrimination.
External Factors Affecting Compensation
- Geographical differences influence wages due to labor supply and demand; higher wages in areas with worker shortages.
- Labor supply significantly impacts compensation; a tight labor market with low unemployment requires higher wages.
- Compensation practices of competitors influence pay; employers can match, lead, or lag the market.
- Collective bargaining influences wages and benefits; unionized organizations often have higher compensation.
Compensation Administration
- Managing an organization's compensation program, including position evaluation, pay structure design, and policy communication.
- Job evaluation is a systematic process to determine the relative value of jobs, creating a fair and equitable pay structure.
- Methods include ranking, classification, and point methods.
Compensation Surveys and Wage Structures
- Compensation surveys collect data on pay practices in specific industries and regions; ensure an organization's pay structure is competitive.
- Wage curve graphically represents the relationship between job evaluation points and pay rates; Identifies overpaid or underpaid jobs.
- Wage structure organizes jobs into pay grades with a range of pay rates; ensures similar-value jobs are paid similarly.
Types of Compensation
- Base pay: Foundation of an employee's compensation, determined by job evaluation; paid as hourly wage, salary, or piecework rate.
- Premium pay: Additional compensation for undesirable, hazardous, or inconvenient work (overtime, shift differentials, on-call, hazard pay).
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Variable pay: Linked to individual, group, or organizational performance; incentivizes achieving goals.
- Individual incentives: Commissions, bonuses, merit-pay.
- Competency-based compensation: Rewards employees for mastering relevant skills and behaviors; uses broad banding.
- Team-based compensation: Rewards teams for their performance; encourages cooperation.
- Organization-wide incentives: Gainsharing and profit-sharing plans (Scanlon plan, Improshare) encourage working towards common organizational goals.
Executive Compensation
- Set by the board of directors to attract and retain top talent.
- Mix of base salary, short-term incentives (bonuses), long-term incentives (stocks), and perquisites (perks).
- Stock options: Right to purchase company stock at a specific price.
- Golden parachutes: Financial protection for executives during mergers/acquisitions/major organizational changes.
International Compensation
- Compensation programs need to consider country-specific factors (cost of living, tax, currency exchange, labor laws).
- Balance sheet approach: Common method for expatriate employee compensation; aims to maintain a comparable standard of living to their home country.
- Compensation packages often include base pay, differentials (offsetting higher living costs), hardship differentials, incentives, and assistance programs (relocation).
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Description
This quiz covers key concepts related to total rewards compensation, including intrinsic and extrinsic rewards as well as important legislation that governs employee pay. Understand how external factors like geography can influence compensation. Test your knowledge on the Fair Labor Standards Act and other critical laws shaping employee compensation.
