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Date Created: 11/09/15
Study Guide 1 HRM/531 Version 7 Week Two Study Guide: Compensation and Benefits Strategies Readings and Key Terms Ch. 11 of Managing Human Resources o Organizational reward systems o Determinants of pay structure and level o Federal labor laws o Pay planning o Performance incentives Ch. 12 o Benefit programs o Incomemaintenance laws o Total compensation o Benefits strategies o Costs and cost containment Content Overview Components and objectives of organizational reward systems o Financial rewards Direct payments (salaries) Indirect payments (benefits) o Nonfinancial rewards Protection programs Employee involvement programs in decision making Effective supervision Recognition Training opportunities Supportive and nurturing organizational culture Determinants of pay structure and level o Labor market conditions A labor market being loose or tight has an impact on wage and pay levels. Copyright © 2012, 2011, 2010, 2009, 2008, 2007 by University of Phoenix. All rights reserved. Study Guide 2 HRM/531 Version 7 Certain skills are high in a low or tight market while wage amounts tend to decrease when skill supply is high. The payment of wage premiums is used by employers to attract new talent. o Legislation Federal agencies required to administer four major federal labor laws that impact compensation levels Fair Labor Standards Act of 1938 (FLSA), Equal Pay Act of 1963, SarbanesOxley Act of 2002 (SOX), and Title VII of the American Recovery and Reinvestment Act of 2009 (ARRA) o Collective bargaining Union and nonunion firms are impacted by collective bargaining that works to gain loyalty and services for workers. Two key factors of collective bargaining are the level of wages and behavior of workers in aligned labor markets. o Management attributes and an organization’s ability to pay Management desires to maintain or improve morale, gain highcaliber workers, lower turnover rates, improve employees standard of living ability Ability for an organization to pay higher wages during low market trends or times of high supply of skilled workers Policy issues in pay planning and administration o Pay secrecy Hard not to hide the pay amount for specific job positions Pay openness versus secrecy: advantages and disadvantages for management and potential employees o Effect of inflation All organizations should account for annual inflation in salary increases. It is hard to attract or maintain good employees when organizations do not account for inflation in pay increases. o Pay compression Generally, a problem that is related to inflation that narrows pay ratios between job positions and pay grades Suggested solution to pay compression is to implement equity adjustments o Pay raises Pay raises can sometimes not exceed that of inflation, which cause annual pay to decrease considering the cost of living increases. Copyright © 2012, 2011, 2010, 2009, 2008, 2007 by University of Phoenix. All rights reserved. Study Guide 3 HRM/531 Version 7 Increased salary ranges will cut effect of inflation increases and avoid pay compression. Organizationwide incentives o Profit sharing Organizations pay out if profit margins or targets are met for a predetermined period of time—monthly, quarterly, semiannually, or annually. Not all job positions are eligible, which impacts productivity and motivation of some employees. o Gain sharing Resultsbased Links to performance results at the facility level, which not all employees are able to see or benefit from Different names for gainsharing plans Three elements of gainsharing plans o Employee stockownership programs (ESOPs) More typical in small to mediumsized companies Geared toward increasing employee decisionmaking involvement Strategic considerations in the design of benefit programs o Longterm strategic business plans Outlines an organization’s desired direction Projected rate of employment growth, downsizing, market conditions, geographic conditions, acquisitions, and so forth o Diversity in the workforce means diversity in benefits preferences Age of an employee will impact the desired type of benefits chosen—direct pay versus retirement plans, and so forth Differences in medical benefits for employees with children versus no children o Legal requirements Government controls laws that regulate benefits package designs and options Four major incomemaintenance laws: Social Security Act of 1935, Federal Unemployment Tax Act of 1935, Workers’ Compensation, Employment Retirement Income Security Act of 1974 (ERISA) o Competitiveness of benefits offered Senior management more concerned with cost while employees want more value Lower costs means more expense to the employee and less value, which lowers productivity Copyright © 2012, 2011, 2010, 2009, 2008, 2007 by University of Phoenix. All rights reserved. Study Guide 4 HRM/531 Version 7 o Total compensation strategy Design of compensation programs should focus on salary and benefits that promote value and achievement of organizational goals Direct and indirect compensation—higher salary versus salary plus higher bonus or benefits Components of the benefits package o Security and health, payments for time not worked, and employee services Life insurance Workers’ compensation Disability insurance Hospitalization, surgical, and maternity insurance HMOs Sick leave Pension Social security Unemployment insurance Supplemental insurance options Severance and so forth Cost containment strategies for benefits o Bands together with other organizations to build a purchasing coalition to negotiate lower purchasing agreements with insurance providers Key strategy for small to mediumsized organizations Assist in lowering administration costs o Deals with hospitals and insurers as with any other suppliers Provides insurance benefit information online available to employees Provides quick information references to employees o Encourages the use of generic drugs Lowers employee and organization insurance premium costs Same drug with a nonbrand name o Audits the eligibility of dependents under company health plans Removes ineligible people from benefits rolls Recent changes in family dynamics cause higher number of ineligible people on employee insurance plans o Uses a managedcare approach Copyright © 2012, 2011, 2010, 2009, 2008, 2007 by University of Phoenix. All rights reserved. Study Guide 5 HRM/531 Version 7 Acts as a gatekeeper approach to controlling insurance costs Primary care provider writes prescriptions, writes needed referrals, recommends surgical procedures, and so forth Copyright © 2012, 2011, 2010, 2009, 2008, 2007 by University of Phoenix. All rights reserved.
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