Compensation: The Pay Model

Compensation Chapter 1 The Pay Model  Pay Varies…..Why? Luxury Retailer Discount Retailer Oil & Gas Food Service Higher margins & Lower margins High Prof...

Compensation Chapter 1 The Pay Model  Pay Varies…..Why? Luxury Retailer Discount Retailer Oil & Gas Food Service Higher margins & Lower margins High Profitability operating profit margins/capit struggles al intensive Labor costs a higher % Labor costs Labor costs of total operating as % of large % of expenses (up to 35%) operating cost structure expenses lower Challenging to increase productivity Location Talent development Growth opportunities Harvard Business Review  Compensation: Varying Views From the perspective of society: – Some see pay/benefits as a measure of equity or justice Example: pay inequalities between men and women – Job losses (or gains) in a country is partly a function of labor costs From a stockholder perspective: Loading… – Some stockholders say using stock to pay employees creates a sense of ownership which will improve performance & subsequently stockholder wealth – While others say it dilutes shareholder wealth – Stockholders have an interest in linking executive pay to performance From a manager’s perspective: – Compensation is a major expense that must be managed – It is also a major determinant of employee attitudes and behaviors Employees may view pay as financial security, a return in an exchange, an entitlement, an incentive, or a reward.  Incentive & Sorting Effects Pay influences motivation & behavior in two main ways: – Incentive effect – degree to which pay influences individual and aggregate motivation – Sorting effect – the effect pay can have on the composition of the Areworkforce you using the pay policy that will attract & I.e., attracting retain different the types types of of employees people you want?  Term ‘compensation’ In the U.S., compensation refers to all forms of financial returns and tangible services andLoading… benefits employees receive as part of an employment relationship  Forms of Pay Total Returns/Rewards Total Compensation - includes pay received directly as cash and indirectly as benefits – Cash payments include: base pay, merit pay, cost-of-living (COLA) adjustments and incentives – Benefits include: pensions, medical insurance, work/life balance programs Relational returns are psychological and include: – Recognition and status, employment security, learning opportunities, challenging work Exhibit 1.4: Total Returns for Work ** * *Unemployment, Disability, etc ** Job security – having & keeping a ©McG Cash Compensation: Base Base pay (wage) - the cash compensation an employer pays for work performed – Reflects the value of work or skills and ignores differences in individuals – In the U.S., salary refers to annual or monthly pay for employees exempt from overtime pay – Non-exempt employees are paid an hourly wage  Cash Compensation: COLA’s & Merit Pay Cost of Living Adjustments (COLA’s) – Changes in what other employers are paying for the same work – Changes in living costs – Changes in experience or skill Merit increases are performance based Merit bonuses are performance based given as a lump sum rather than a permanent change in salary  Cash Compensation: Incentives Incentives also tie pay increases to performance but differ from merit adjustments: – Use objective measures of performance – Do not increase base wage and must be re-earned – Is known beforehand – such as a commission – Try to influence future behavior, whereas merit rewards past behavior Incentives are a one-time payment, therefore, frequently referred to as variable pay Incentives may be short- or long-term – Long-term incentives are in the form of stock ownership or options Loading…  Benefits Benefits, including income protection, work/life services, and allowances, are also part of total compensation – Some programs are legally required in the U.S. – unemployment and Social Security Work/Life Balance includes: – Time away from work, access to services to meet specific needs, and flexible work arrangements Allowances often grow out of whatever is in short supply. – Example – housing for rotational workers  Relational Returns Non-financial returns from work affect employees’ behavior – includes recognition and status, employment security, challenging work, and opportunities to learn – personal satisfaction from facing new challenges, teaming with great co-workers, and receiving new uniforms – Such factors are part of the total return, broader than total compensation  The Pay Model Homework Techniques tie the objectives to the policies  The Pay Model: Compensation Objectives Although Objectives are on the far right side of the model, these objectives drive the system so we start with them Purpose: guide the design of pay systems, standard for judging success of the pay system Basic compensation objectives Efficiency Improving performance Increasing quality Delighting customers & shareholders Controlling labor costs Fairness Recognizes employee contributions & needs Compliance Following federal & state regulations & laws Ethics Meaning the organization cares about how it achieves results  The Pay Model: Compensation Objectives Medtronic Whole Foods Support Medtronic mission Increase long-term and increased complexity of shareholder value the business Earn profits daily through Minimize increases in fixed voluntary exchange with costs customers Attract and engage top talent Through profits, create Emphasize personal, team, capital for growth, prosperity, and company performance opportunity, job satisfaction Recognize personal & family & security total well-being Support team member Ensure fair treatment happiness and excellence Acknowledge team outcomes are collective The Pay Model: Four Policy Choices Internal alignment refers to comparisons among jobs or skill levels inside an organization – Pay relationships affect all three compensation objectives External competitiveness refers to pay comparisons with competitors and affect objectives in two ways – Employees must perceive their pay as competitive or they may leave – Controlling labor costs keeps the company’s products competitive Employee contributions or nature of the pay mix is a key decision – Make the external competitiveness and employee contribution decision jointly Management means ensuring the right people get the right pay for achieving the right objectives in the right way – This is not referencing a hierarchical structure of management. It is in reference to how the compensation and reward related policies are managed The Pay Model: Techniques Techniques tie the objectives to the policy. Techniques are introduced throughout the textbook & semester teachings  The Pay Model Homework Reference Chapter 2 ‘The Pay Model Guides Strategic Decisions’ regarding Whole Foods for additional examples Compensation Chapter 2 Strategy  The Pay Model Techniques tie the objectives to the policies  Similarities & Differences in Strategies All three have pay strategies that support their business strategies Loading… All emphasize outstanding employee performance and commitment Google – continues to position itself as a feisty startup with stock options & benefits beyond the norm Nucor Steel – emphasizes high productivity, high quality, and low cost with bonuses that raise wages above average. No layoffs Merrill Lynch – relies heavily on human capital and pays to attract, motivate, and retain the best talent  Different Strategies within the Same Industry Google Microsoft SAS Generous stock Scaled back Work/life balance options stock awards (35 hrs/wk) Unique benefits Replaced stock Lower cash comp awards with cash Pay for Leading benefits Limited bonuses performance No stock awards  Different Strategies within the Same Company Sometimes units within the same corporation face different competitive conditions, adopt different strategies, and fit different compensation strategies Example Loading… Strategy refers to the fundamental direction(s) an organization chooses ©McG ©McG Support Business Strategy A current popular theory leads managers to align pay systems with the organization’s business strategy. Compensation that supports an innovator strategy places less emphasis on evaluating skills/jobs and emphasizes incentives. The cost cutter focuses on efficiency and increased productivity, so their system details steps in a job and uses variable pay. The customer focused strategy stresses delighting customers and bases employee pay on how well they do this.  Support HR Strategy Researchers Boxall and Purcell found a commonly used performance theory they refer to as “AMO theory.” Performance (P) is a function (f) of three factors: ability (A), motivation (M), and opportunity (O) Compensation is key to attracting, retaining, and motivating employees with the abilities necessary to execute the business strategy Compensation strategy and HR strategy are central to successful business strategy execution  The Pay Model Guides Strategic Pay Decisions Using the pay model, these are the five strategic compensation choices managers face. Objectives: How should compensation support business strategy and adapt to the cultural and regulatory pressures in a global market? Internal Alignment: How differently should the different types and levels of skills and work be paid within the organization? External Competitiveness: How should total compensation stack up against competitors? What forms of compensation should be used? Employee Contributions: Should pay increases be based on individual and/or team performance, on experience and/or continuous learning, on improved skills, on changes in cost of living, on personal needs, and/or on each business unit’s performance? 10  Management: How open and transparent should pay decisions be? Who Pay Model Guides Strategic Pay Decisions The five strategic compensation choices facing Whole Foods – Objectives –Loading… increase shareholder value, satisfy and delight customers, and seek employees who will help the company make money – Internal alignment –  store is organized Pay Model Guides Strategic Pay Decisions – External competitiveness – offers a unique total compensation package compared to competitors – Employee contributions – uses a shared fate technique and monthly performance affects team pay – Management – uses a “no-secrets”  Compensation Strategy A compensation strategy lays out the organization’s point of view on how it will determine pay and benefits for employees  Key Steps in Formulating a Total Compensation Strategy ©McG Total Compensation Strategy: Step One Step (1) is to assess total compensation implications – Business strategy and competitive dynamics – understand the business – HR strategy – pay as a supporting player or a catalyst for change? – Culture / Values – pay systems mirror image and reputation – Social and political context affects compensation choices – Union preferences – adapt pay strategies to the union-management relationship  Total Compensation Strategy: Step Two Step (2) is to map a total compensation strategy using the five elements of the pay model – Assign descriptors to each element and rate from high to low the level of importance of each descriptor The profile on the strategy map reflects a company’s “pay brand.” – At SAS, total compensation supports a work / life balance Decisions in the pay model work in  concert and the totality of decisions Total Compensation Strategy: Steps Three & Four Implement and Reassess Step (3): Implement the strategy through the design and execution of the compensation system Step (4): Reassess, Realign & Close the Loop – This step recognizes that compensation strategy must change to fit changing conditions – Periodic reassessment is needed to continuously learn, adapt, and improve  Sources of Competitive Advantage: Three Tests 1. Is it aligned? Is it aligned with the business strategy? With external conditions? Internally with the overall HR system? 2. Does it differentiate? How is the pay system managed? Each strategy is woven into the company’s overall HR strategy 3. Does it add value? Calculate the return on (pay) investments (ROI)  Shared Success Performance-based pay works best when there is shared success – Shared success improves employee attitudes, behaviors, and performance when coupled with other “high performance” practices – When organizational performance declines, performance- based pay plans do not pay off – with potentially negative effects – Unless increased risks are offset by larger returns, the risk- return imbalance will reinforce declining employee attitudes and speed the downward spiral  Group Exercise BE PREPARED TO DISCUSS AFTER BREAKOUT Using a familiar company (a company - one of your group members works for or previously worked for, OR a company you have some knowledge of), describe its compensation strategy as you all see it using the five dimensions: – Objectives - competitiveness Employee considerations/contributions - – Alignment - management  A Group Exercise Nike Company : objectives : performance based compensation, equity , suppliers Internal diverse environment Allignment : competitiveness ethicities : competitive salaries while maintaing pay equity across genders + Employee considerations : management : employee development , performance-based pay  Compensation Chapter 17 Government & Legal Issues in Compensation  Introduction There are also state and local laws Compliance issues fall into two areas: – Employment discrimination and wage and hour issues  Introduction In the U.S., three branches of federal government play a role in the legal and regulatory framework of compliance – The legislative branch passes laws – The executive branch enforces laws Loading… – The judicial branch interprets laws There are also state and local laws Compliance issues fall into two areas: – Employment discrimination and wage and hour issues  Government & the Employment Relationship Government’s usual interests in compensation: – Procedures for determining pay are fair (pay discrimination) – Safety nets for unemployed and disadvantaged are sufficient – Employees are protected from exploitation  Fair Labor Standards Act (FLSA) - 1938 FLSA’s major provisions – Minimum wage – Hours of work, including overtime – Recordkeeping – Loading… Child labor FLSA requires that records be kept of employees, their hours worked, and their pay – Employers have paid billions of dollars resulting from FLSA lawsuits and enforcement activity by the DOL Wage and  Fair Labor Standards Act (FLSA) - 1938 Minimum-wage legislation is intended to provide an income floor for workers in society’s least productive jobs – Enacted in 1938 at a rate of 25 cents per hour, now at $7.25. Last increase was in 2009 – $11.00 in AR, effective 01/01/21 – Many states have a higher minimum wage than federal Highest minimum wage: – Washington DC, California, Washington State Some of the states following federal rate: – Alabama, Oklahoma, Kansas, Kentucky, Louisiana, Pennsylvania, South Carolina – Georgia has a state minimum wage of $5.15 – must pay https://www.dol.gov/agencies/whd/minimum- federal wage  Minimum Wage Scenario As of April 2024, California requires businesses with fast food workers to pay a minimum wage of $20.00 (increase from $15.50) Roughly 1,200 workers laid off from two California Pizza Hut franchises ahead of increase A statement from one of the franchises: – "PacPizza, LLC, operating as Pizza Hut, has made a business decision to eliminate first-party delivery services and, as a result, the elimination of all delivery driver positions," the WARN Act notice stated, implying that these stores would instead be relying on third-party delivery services. Keith Miller, franchisee advocate consultant: – “A Domino’s or Pizza Hut franchisee would be paying $20 an hour to their delivery drivers, but DoorDash drivers aren’t getting that $20 on the hour,” Miller said. “They obviously did the equation of what it costs to pay the in-house drivers, and have the liability insurance, car reimbursement, etc. and figured it makes more sense to do it that way…. The workforce is changing.” August 2024 – according to new state & federal employment data, CA’s fast food industry has actually added jobs every month this  month this year Minimum Wage Scenario Gov. Newsome states “what’s good for workers is good for business, and as California’s fast food industry continues booming every single month our workers are finally getting the pay they deserve”. Some complications exist – Higher wages contributed to an increase in menu prices with many companies passing on the cost to consumers – 98% of limited-service restaurants have reported already raising menu prices – 92% of owners think this will adversely affect customer foot traffic Unexpected benefit – Lower employee turnover – More stable and skilled workforce  Minimum Wage Discussion What are the pros of raising minimum wage? What are the cons of raising minimum wage? Does minimum wage affect the economy? Explain. How does minimum wage affect small businesses? How does it affect large businesses?  Overtime & Hours of Work FLSA requires time-and-a-half for over 40 hours per week – State laws may go beyond FLSA - employees working more than 8 hours a day are elligible For overtime Some employees may be exempt from overtime (meaning they are not eligible to receive overtime because their job qualifies as exempt and is paid a salary vs by the hour. – One of the qualifications is that the pay must be $684/wk or $35,568 annually  Overtime & Hours of Work - Factors What time is covered? – Breaks are not required; though are paid by the employer (e.g., 5-20 min) – may vary by state – The Portal-to-Portal Act provides that time spent on activities before beginning the “principal activity” is not compensable What income is covered? – The Worker Economic Opportunity Act allows stock options and bonuses to be exempt Loading… from inclusion in overtime pay calculations Compensatory time off – Private sector employers are not allowed to offer ‘comp time’ Overtime & Hours of Work - Consequences  Exemptions FLSA has strict criteria that, if met, allows certain jobs to be exempt from minimum-wage and overtime provisions Standards are given for certain jobs: – Executive – Administrative – Professional – Computer Employee – Outside Sales https://www.dol.gov/sites/dolgov/files/WHD/le gacy/files/fs17a_overview.pdf  Exemptions All requirements must be met for each exemption Executive Exemption Salary basis of $684/wk Primary duty – managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise Customarily and regulary direct the work of at least two or more other full-time employees Authority to hire/fire, or recommendations on hiring/firing/advancement/promotion must be given particular weight Administrative Exemption Salary basis of $684/wk Primary duty – performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers Primary duty – includes the exercise of discretion and independent judgment with respect to matters of significance  Exemptions Professional Exemption (all of the following must be met) Salary basis of $684/wk Primary duty – performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment The advanced knowledge must be in a field of science or learning, and The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction Note: the requirement of a degree for a job does not automatically indicate it is salaried.  Employee vs Independent Contractor Employers must pay Social Security, unemployment, and workers’ compensation taxes on wages and salaries – Not required for independent contractors – Independent contractors do not typically receive other benefits Six factor test (effective January 2024) – The degree to which the employer controls how the work is done – The worker’s opportunity for profit/loss – The amount of skill and initiative required for the work – The degree of permanence of the working relationship – The worker’s investment in equipment or materials required for the task – The extent to which the service rendered is an integral part of the employer’s business 2021 – 2024 Two general criteria involved behavioral and control fir m has more likely the IRS considers the person an employee. financial control (rescinded) - The more the , the IRS considers relationship , - also the including permanence. – The more control the firm has, the more likely the IRS considers the person  Prevailing Wage Laws Prevailing wage laws set pay for work done to produce goods and services contracted by the federal government – Prevents contractors from using their size to drive down wages The law was passed in response to conditions on projects such as construction of the Hoover Dam during the Depression – To comply, contractors must determine the “going rate” for construction labor in the area – the union rate is the “going rate.” – It distorts market wages and drives up cost of government projects  Equal Pay Act The Equal Pay Act (EPA) of 1963, part of FLSA, forbids wage discrimination on the basis of gender for equal work – Jobs are equal if they require equal skill, effort, and responsibility and are performed under similar working conditions Differences in pay are legal if differences are based on any of four criteria, called an affirmative defense – Seniority – Merit or quality of performance – Quality or quantity of production – Some factor other than sex  Equal Pay Act - Definitions Definition of equal – Schultz v. Wheaton Glass, 1970 – There were two job classifications for the same job – male and female – The female job paid 10% less than the male job – The court ruled jobs need only be substantially equal, not identical – The actual work performed must be used to decide job equality Definition of skill, effort, responsibility, working conditions  – Skill – experience, training, education, and Equal Pay Act – Other Factors Factors other than sex include the following: – Shift differentials – Temporary assignments – Bona fide training programs – Differences based on ability, training, or experience – Other reasons of “business necessity.” “Reverse” discrimination when adjusting women’s pay – Viewed collectively, the courts have provided reasonable interpretations of the Equal Pay Act – However, 58% of all women are in jobs not equal to jobs of men So, they are not covered by the Equal Pay Act  Title VII of the Civil Rights Act & Related Laws Title VII prohibits discrimination on the basis of sex, race, color, religion, or national origin in any employment condition The Age Discrimination in Employment Act (ADEA) employers cannot discriminate against workers age 40 and above. Americans with Disabilities Act (ADA) prohibits covered employers from discriminating against people with disabilities in all employment- related activities, including hiring, pay, benefits, firing and promotions. Covered employers include private businesses, educational institutions, employment agencies, labor organizations, and state and local government entities with 15 or more employees.  Title VII of the Civil Rights Act & Related Laws Title VII cases typically focus on differences in pay, promotions, pay raises, and performance reviews The Lilly Ledbetter Fair Pay Act increased compliance challenges – Discrimination occurs, starting a new statute of limitations, each time a discriminatory paycheck is issued Title VII Discrimination Behavior Theories Disparate Treatment Disparate Impact Applies different standards to different Practices having a differential effect are employees illegal Example, asking women but not Unless work-related differences men if they plan to have children Griggs v. Duke Power Co. Unequal treatment may prove Intent to discriminate is irrelevant intention to discriminate Employer’s must demonstrate a If a woman must have higher personnel decision is work-related performance to be promoted, that is disparate treatment No intention to discriminate. ©McG Walmart $20 Mill Settlement – August 2020 WM & EEOC settle nationwide sex-discrimination complaint for $20 Mill (~1200 women) EEOC alleged a physical abilities test for order filler roles led to disparate impact WM agreed to stop using the physical abilities test & provide training to hiring managers Abilities test in question required potential employees to lift up to 80 lbs ©McG Scenario Five Star Utility Company has an opening for a night shift Systems Operator When Tom received pre-screened resumes from HR, he told them they could keep any that were female because he didn’t believe females should be working an overnight shift with male employees What is this an example of? Disparate Treatment  FMLA (Family Medical Leave Act) The FMLA entitles eligible employees of covered employers to take unpaid, job- protected leave for specified family and medical reasons with continuation of group health insurance coverage under the same terms and conditions as if the employee had not taken leave. Eligible employees are entitled to: Twelve workweeks of leave in a 12- month period for: · Placement we the employee of a child for adoption · careforfamilymemberwseriousis as a · Military leave the birth of a child and to care for the  newborn child within one year of birth; Pay Discrimination & Dissimilar Jobs Pay differences for dissimilar jobs may reflect discrimination – The courts continue to uphold use of market data to justify pay differences for different jobs – A second approach to determining pay discrimination on dissimilar jobs hinges on finding a standard to compare the value of jobs It must permit jobs with dissimilar content to be declared equal It must permit pay differences for dissimilar jobs that are not comparable Job evaluation has become that standard  Mechanics of Comparable-Worth Plans Adopt a single “gender neutral” point job evaluation plan for all jobs within a unit – The key is a single job evaluation plan for dissimilar job content All jobs with equal job evaluation results should be paid the same – If total points are equal, wage rates must also be equal Identify the percent of male/female employees in each job group Loading… – A group of positions with similar duties, requiring similar qualifications, filled by similar recruiting practices, and paid under the same schedule The wage-to-job evaluation point ratio should be based on the wages paid for male-dominated jobs Exhibit 17.10: Job Evaluation Points and Salary ©McG Exhibit 17.14: Sources of Earnings Gaps ©McG Executive Order 11246 (Affirmative Action) Issued in 1965 by President Lyndon Johnson Requires government contractors to file affirmative action plans and assess their outreach and recruitment programs for underrepresented members of their workforce. Compliance steps include: – Written affirmative action plans – Desk audits and in person investigations – Complaints January 24, 2025 – President Trump rescinded EO 11246 – The disability and protected veterans components remain Laws that prohibit discrimination remain in tact: – Title VII of the Civil Rights Act – Americans with Disabilities Act – Age Discrimination in Employment Act  Compliance: A Proactive Approach Compliance with laws and regulations can be a constraint and/or an opportunity for a compensation manager – A proactive compensation professional can influence the nature of regulations and their interpretation A compensation professional can do the following to be proactive: – Join professional associations to stay informed on emerging issues – Constantly review compensation practices and their results The fair treatment of all employees is the goal of a good pay system, the same goal of legislation  Compensation Scenario - Barista Wendy works at an upscale coffee shop that is part of a nationwide chain. She started as a barista but later moved up to the role of store manager. Wendy is expected to work 55 hrs/wk. Her boss explains she needs to be in the store to get to know the customers and because as a manager Wendy needs to make sure everything runs smoothly. The store manager role is classified as exempt (salaried), therefore, Wendy is not eligible for overtime. After reflecting on the duties she performs, Wendy realizes she spends a lot of time making drinks, taking orders, checking supplies and even cleaning restrooms. Wendy provides training to employees and often interviews candidates. But her boss likes to select who will work for the store. From what you’ve studied about Fair Labor Standards Act (exempt vs non-exempt), what are your thoughts on this scenario? If you suggest reclassifying the position to nonexempt, what cost considerations would be involved? Are there concerns on Wendy feeling overworked & underpaid? What are they? If Wendy filed a lawsuit against the coffee shop, what are the implications?  Compensation Scenario – Lady Gaga’s Assistant Jennifer O’Neill was a personal assistant to Lady Gaga for 13 months. O’Neill sued Gaga’s touring company in the U.S. District Court for the Southern District of New York, alleging violations of the FLSA and New York State Labor Law O’Neill was paid $75,000/yr She stated she had to cater to Lady Gaga’s ‘every whim’, related to finances, scheduling, food, etc. at any hour and even on tours O’Neill states there were no breaks and often no time for meals or sleep. She was expected to be available at the ‘earliest waking hour to spontaneous matters in the middle of the night’ O’Neill alleges she worked 6,656 hours of overtime over the course of 56 weeks. She was seeking $359,956.48 for unpaid overtime in the lawsuit A judge dismissed Gaga’s claim that the allegation was without merit and ruled for a jury trial. Gaga’s team settled out of court for an undisclosed amount Would O’Neill be considered exempt or nonexempt under the FLSA? Which exemption would you reference for validation? Because a settlement was reached outside of court, does this imply that Gaga was in violation of the FLSA? Explain the various reasons someone might settle out of court.  Compensation Scenario – Retaliation Charge In 2019, a former Tyson employee attended a Tyson job fair where she was interviewed and offered employment in Tyson’s x-ray department. This was her third time to apply since her prior employment with them in 2016. After receiving the offer, she disclosed she had worked for them before. The interviewer looked at her record and checked her rehire eligibility. Tyson had decided not to rehire her because of an EEOC charge of pregnancy discrimination which was filed against the company in 2016 & resolved in 2018. The EEOC filed suit against Tyson in the U.S. District Court for the Middle District of Alabama after the EEOC office completed an investigation and first attempted to reach a pre-litigation settlement. EEOC is seeking back pay, compensatory damages, and punitive damages for the applicant, and injunctive relief to prevent such conduct in the future. What do you think about Tyson offering the job and then rescinding the offer? How could they have avoided this situation? If an employee is not eligible for rehire, does the EEOC have a right to pursue a charge? If a former employee previously filed a discrimination charge against an employer, why should the employer consider rehiring the employee?  Compensation Scenario – Gender Discrimination In 2017, three women filed a complaint against Google, accusing the company of underpaying female workers citing a wage gap of $17,000. Complaint also alleges lower career tracks leading to less pay and lower bonuses in comparison to male counterparts. The suit ended up with about 15,500 women involved The company states that it is “absolutely committed to paying, hiring and leveling all employees fairly and equally” and that it makes “upward adjustments” if it finds a pay parity between male and female employees. Google settled the class action lawsuit for $118 million How can Google insure pay is being administered fairly across the board? Is it difficult to pay equitably due to the size of the company? Because Google is settling the case outside of court, do you believe they are assuming guilt? Explain your response.  Compensation Scenario – Kyte Baby A female employee at Kyte Baby claims she was fired after not returning from maternity leave in order to care for her newly adopted son. He was premature, weighed 1 pound and was in NICU nine hours away from her home. According to Kyte Baby’s policy, an employee that had been with the company less than 6 months is allowed two weeks of paid leave. When the time was up, her request to work remotely was denied. Following public backlash and potential boycotting, the company made two apologies. In the second apology they stated they would continue to pay the mom and offered her a position with the company, though she declined the offer to return. According to FMLA provisions, Kyte Baby was not required to provide additional leave. What is a reason they should have agreed to remote work? What is a reason they should not have agreed to remote work? Does this set a precedence for similar situations going forward? Why or why not? Do you agree with the mom’s decision to decline the offer of rehire?  Hotel Chain Strike 09/01/24 - @10,000 hotel workers across the U.S. on strike Unite Here union in contract negotiations with several large hotel chains, including Hilton, Hyatt, Marriott, and Omni Union is seeking higher wages, fairer workloads and reversal of pandemic era job cuts Room rates have hit record highs according to the Unite Here union Strikes are scheduled to last up to three days at each of the hotels Union urges travelers to avoid eating, sleeping or meeting at any hotel where workers are striking Hyatt states they are still willing to negotiate and disappointed the union chose to strike Compensation Chapter 4 Job Analysis  Job Analysis Job analysis is the systematic method of discovering and describing differences and similarities among jobs Two products result from job analysis A job description is the list of tasks, duties, and responsibilities that make up a job – observable actions - what of the job A job specification is the list of knowledge, skills, abilities, and other characteristics necessary to perform the job well - who of the job Summarizes the characteristics of someone able to do the job well Description vs Spec Loading… Structures Based on Jobs, People or Both  Job Analysis The process of job analysis begins by looking at people at work Job-based structures look at what people Loading… are doing and the expected outcomes Skill- and competency-based structures look at the person  Job Analysis collect + Summarize work content info that identifies similarities ↓ differences - Determine what to The underlying purpose of each value phase of the process remains the same for both job and - person based structures Assess the relative value - Translate the relative value into an internal Structure  Job Analysis - Job Based Approach: Most Common Provides the underlying information and identifies the content of the job, leading ultimately to an internal structure – Used for job descriptions, job evaluation, and job structure Major decisions in designing a job analysis – Why are we performing job analysis? – What information do we need? – How should we collect it? – Who should be involved? – How useful are the results? Exhibit 4.3: Determining the Internal Job Structure  Why Perform a Job Analysis Provides a work-related rationale for pay differences because it is based on job related information job analysis has2 critical issues in compensation · , Employees who understand the rationale can see where their work fits into the bigger picture – It can direct their behavior toward organization objectives.  Job Analysis Procedures Job analysis collects information about specific tasks or behaviors – Broadly similar jobs combine into a job family Example: HR Director, Recruiter, HR Generalist – Identical positions make up a job Loading… Groups of tasks performed by a person makes up the total work assigned Example, customer service representative – A task is the smallest unit of analysis, a specific statement of what a person does. E.g., answer the phone.  What Information Should Be Collected? Start by reviewing information already collected – Job titles, major duties, task dimensions and work flow information may already exist – It may no longer be accurate so verify existing information Collect sufficient information to adequately identify, define, and describe a job Categorize information by: – The job – job identification and job content – The employee – characteristics and both internal and external relationships Exhibit 4.6: Typical Data Collected for Job Analysis  What Information Should Be Collected? Job identification includes: – Job titles, departments, the number of people who hold the job and whether it is exempt from the Fair Labor Standards Act Job content is the heart of job analysis – Data involves the elemental tasks or units of work, with emphasis on the purpose of each task – There is also an emphasis on the objective of the task actual work outcomes Task Data-Reveals the the job performs +  – Task data reveals the actual work Tasks The general formula for writing items is: Perform What? + to Whom? or What? + to produce What? or Why? How? E.g., Sort + incoming mail + into groups for distribution  Developing Tasks – Overly Specific Items could Tool change Replace specific items (e.g., Uses Excel to add, subtract, and divide subordinates’ timecards to calculate time and leave) with more general actions (e.g., Uses spreadsheets to track pay and leave) – Vague or Ambiguous Terms Replace subjective adjectives and adverbs (e.g., excellent, adequate, best, all, timely, accurately) with more descriptive terms (e.g., verify, provide, create)  Developing Tasks – Abbreviations and Acronyms Avoid using abbreviations and acronyms; spell out the term whenever possible to ensure others understand the item  Task Examples Example of a poorly-written task: – Makes a conscientious effort to check time reports for persons under own supervision for errors in addition and hours claimed within the NFC system, uses daily work summary sheets as a resource if necessary, signs time reports and/or payroll sheets, and routes to payroll department before pay period deadline in order to authorize payment for time worked. Fixed: – Audits employee time reports.  Employee Data Describe each factor of employee characteristics, and their internal/external relationships, and rate each for its importance to the job  Essential Elements of the ADA The Americans with Disabilities Act (ADA) requires the essential elements of a job be specified – Essential elements are those that cannot be reassigned to other workers – If an applicant can perform the essential elements, the applicant can perform the job – Reasonable accommodations must be made to enable qualified persons to perform those elements – The law does not make allowances for special pay rates or special benefits  Collecting the Information Conventional methods are questionnaires, interviews, and observation – Employee involvement increases their understanding of the process, however, the results are only as good as the people involved Quantitative methods move the questionnaire online for a quantitative job analysis (QJA) – statistical analysis is possible – Jobholders assess each item as to its importance to their job – Questions are grouped into factors, and subcategorized – Results help prepare a job profile based on Collecting the Information Knowledge Working conditions Accountability Questions grouped around 5 compensable factors Communication Reasoning Task Based Data - Example 3M Structured Interview Example Who Collects & Provides the Information? Analysis is best done by someone trained and thoroughly familiar with the organization and its jobs The decision on the source of the data hinges on ensuring consistent, accurate, useful, and acceptable data – Principal sources are the jobholders and supervisors – Managers two levels above give a valuable strategic view of jobs – Sometimes, subordinates or other employees that interact with the job may be included  Job Descriptions Summarize the Data The summary of the job itself is the job description – Provides a ‘word picture’ of the job (tasks, people, and things included with the job) Managerial or professional job descriptions often have detailed information on the job, its scope, and accountability – They capture the relationship between the job, the person performing it, and the organization objectives The final step in the job analysis is to verify the accuracy of the resulting job description  Using Generic Job Descriptions Occupational Information Network (O*NET) is a good source for ↳ generic job descriptions that O canNET - be further tailored to your organization Loading…  Reliability of Job Analysis Reliability is a measure of the consistency of results among various analysts, methods, sources of data, or over time Using multiple raters and average ratings increases reliability Outcome of a job analysis depends greatly on who conducts it Research on employee and supervisor agreement on the reliability of job analysis information is mixed To increase reliability is to understand and reduce differences  Validity & Acceptability of Job Analysis Validity examines the agreement of results among sources and methods – If several job holders, supervisors, and peers respond in similar ways, the information is likely valid If job holders and managers are dissatisfied with the process, they will likely not buy into the resulting job structure or pay rates – Analysts collecting information through interviews and observation are not always accepted due to the potential for bias – Quantitative approaches may not be accepted if they collect too much information for too many purposes  Currency & Usefulness of Job Analysis To be valid, acceptable, and useful, job information must be up to date – Out-of-date job information only hinders not only pay practices and decision-making, but also hiring, training, and development Develop a systematic protocol for evaluating when job information needs updated Usefulness refers to the practicality of the information collected – Job analysis provides information to help determine how much to pay for a job and whether the job is similar or different from other jobs – If done in a reliable, valid, acceptable way, job analysis can be used to make pay decision and is therefore useful