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REWARD SYSTEMS SHOULD ENCOURAGE WORKERS TO:. JOIN AND REMAIN WITH THE ORGANIZATION Attraction & Membership Loyalty & Longevity PERFORM THEIR JOBS EFFECTIVELY Attendance and Required Behavior Accomplish Specific Results Do What is Expected

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REWARD SYSTEMS SHOULD ENCOURAGE WORKERS TO:

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Reward systems should encourage workers to l.jpg

REWARD SYSTEMS SHOULD ENCOURAGE WORKERS TO:

JOIN AND REMAIN WITH THE ORGANIZATION

Attraction & Membership

Loyalty & Longevity

PERFORM THEIR JOBS EFFECTIVELY

Attendance and Required Behavior

Accomplish Specific Results

Do What is Expected

ENGAGE IN SPONTANEOUS, INNOVATIVE BEHAVIOR ON BEHALF OF THE FIRM

Put Themselves Out by “Going the 2nd Mile”

Demonstrate Committed “We Care” Behavior

Doing the Unexpected, But Highly Appreciated

ORGANIZATIONAL CITIZENSHIP BEHAVIOR


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COMPENSATION ISSUES

HOW TO DIVIDE THE COMPENSATION DOLLAR

Base Wages

Incentives

Benefits

DISTRIBUTIVE JUSTICE PRINCIPLE

Pay system remunerates/rewards on what basis… Equality? Need? Seniority? Job Demands? Performance (Merit)? Social Worth?

ABILITY TO PAY COMPETITIVE WAGES

SET PAY AT, ABOVE, ORBELOW THE GOING RATES IN THE INDUSTRY

What can we afford? What other compensation do we provide?

CONFIDENTIALITY OF THE PAY SYSTEM

Is it secret, or are the scales and criteria public information?


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COMPENSATION ISSUES, CONTD

PAY EQUITY (Fairness)

INTERNAL

Compared to other jobs within the organization

EXTERNAL

Compared to similar jobs outside the organization

PHILOSOPHY OF EXECUTIVE COMPENSATION

Wage differences between the top and bottom jobs in the firm (“multiples”)

What is minimum pay in this company? What is the maximum pay allowed?

PHILOSOPHY OF WAGE PROGRESSION

Number of pay grades and amount of overlap between them

Number of steps within each grade?

On what basis is each move (step) granted? Merit? Seniority? Experience?


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THREE POSSIBLE BASE PAY SYSTEMS

A SINGLE RATE FOR EACH JOB

There is no range, this job pays $12.00/hr

There are no pay increments awarded for either seniority or merit

A PAY RANGE FOR EACH JOB

The pay for this job ranges from $11.00 to $17.00/hr

On what basis do employees progress through the range?

SENIORITY? TIME-IN-GRADE? MERIT?

How large should each step or increment be? $.50? $1.00? $2.00?

A PAY GRADE SYSTEM

Several jobs are grouped together into a single pay grade

All these jobs will share a common pay range

Painters, mechanics, and truck drivers are paid from $10.50 to 16.85/hr


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INTERNAL JOB EVALUATION METHODS

RANKING

Manager rank-orders all jobs in descending order of importance

Used in small organizations with a limited number of different jobs

CLASSIFICATION SYSTEM

Jobs are grouped together into clusters with similar difficulty

A generic “description” is written for each cluster or grade (classification)

US Postal Service…all jobs are slotted into one of 16 job grades

FACTOR COMPARISONS

Key jobs selected and ranked on four or five job factors (skills, effort, resp, work cond)

Allocate the base wage for each key job across factors (eg, $4 for skill, $3 for effort, etc)

Assemble benchmarks into a manual which can be used to set pay for other non-key jobs

POINT SYSTEM

Establish criteria (compensable factors) on which to evaluate all jobs

Write degree descriptions which illustrate the variability of demand for each factor

Assign weights to each factor; then assign points to each degree descriptor

Assemble into a point manual, which can act as a standard to evaluate all jobs

The more points allocated to the job, the higher the base wage should be


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FACTOR COMPARISONS

PROCEDURES

SELECT KEY JOBS (well-known jobs which we believe are fairly-paid)

CREATE RANK ORDERINGS OF THE KEY JOBS WITHIN EACH OF THE UNIVERSAL COMPENSABLE FACTORS

Skills

Effort (Physical and Mental)

Responsibility

Working Conditions

ALLOCATE THE KEY JOB PAY ACROSS THE COMPENSABLE FACTORS

How much of the total wage do you pay for “skills?” …How much for “effort?”

CREATE A FACTOR COMPARISON MANUAL USING YOUR MONETARY ALLOCATIONS TO BENCHMARK THE VALUE OF EACH KEY JOB.

USE THIS FACTOR COMPARISON “MANUAL” TO ASSIGN BASE PAY VALUES TO THE NON-KEY JOBS WITHIN THE ORGANIZATION.

THE FACTOR COMPARISON SYSTEM COMPARES JOBS TO JOBS…THERE REALLY ISN’T ANYTHING SPECIFIC IN THE MANUAL TO PRECISELY DEFINE WHAT “SKILLS” IS.


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FACTOR COMPARISONS

KEY JOBS“Fair” Base Pay Rate

Systems Programmer$ 20/hr

Plumber$ 18/hr

Carpenter$ 17/hr

Painter$ 14/hr

Office Secretary$ 13/hr

BENCHMARKS

SKILLEFFORTRESPONSIBWORK COND

Programmer $ 10Plumber $ 6Programmer $ 6Plumber $ 4.50

Secretary $ 6Carpenter $ 5.50Secretary $ 4.50Painter $ 4

Carpenter $ 5Painter $ 5Carpenter $ 3.50Carpenter $ 3

Plumber $ 4.50Programmer $ 3Plumber $ 3Secretary $ 1.50

Painter $ 3Secretary $ 1Painter $ 2Programmer $ 1


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POINT METHOD

PROCEDURES

Establish criteria (more specific examples of compensable factors) on which to evaluate all jobs

Write degree descriptions to illustrate the variability of demand for each factor

Assign weights to each factor

Assign points to each degree descriptor in harmony with the weightings

Assemble these descriptions and points into a manual, which can act as a standard to evaluate all jobs

Validate the manual by evaluating “KEY JOBS” on each criterion.

Allocate the corresponding points, run a regression analysis on the assigned points and the “fair” base pay for each key job. If the regression is a good statistical fit, and at least 90% of the key jobs stay within 10% of the calculated regression line, the manual has been validated, and can be used to assign base pay rates to all non-key jobs in the organization.

The more points allocated to the job, the higher the base wage should be.


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Developing Factors for a Job Evaluation Manual

EDUCATION (20%)

Education represents the knowledge required to perform the duties involved in the job; usually acquired through formal education. Consider only what the job requires, not the education of the current employee on the job. Exclude consideration of on-the-job experiences for this factor. The degrees are expressed in terms of formal education for convenience.

DegreePointsDefinitions

120Able to read and follow simple oral and written instructions. Can add and subtract. Can fill out simple reports and forms. Equivalent to an eighth grade elementary education.

235Able to give clear oral and written instructions. Writes reports. Makes simple computations and comparisons. Can multiply and divide, equivalent to skills acquired by a tenth grade education.

350Good knowledge of high school subjects such as algebra, geometry, physics, chemistry, English, computing or knowledge of commercial, mechanical, or vocational subjects equivalent to a typical high school graduate.

480One year of college or vocational/technical training beyond the high school level in a specific technical or theoretical subject area.

5115Two years of specific subject knowledge beyond high school is required. Specialized subject knowledge may demand registration, certification, or licensure. Required education is equivalent to an AS degree.

6155A specialized baccalaureate degree is required.

7200A specialized master's degree is required.


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A Job Evaluation Manual (outline/illustration) - 1

I. EDUCATION (20%)

1 (20)Able to read, do simple math (add/subtract), and follow instructions (eighth-grade level)

2 (35)Makes comparisons, computes (multiply/divide), writes instructions & reports (tenth grade level)

  • (50)Good knowledge of math, chemistry, English, or computing equivalent to a high school graduate

  • (80)One year of specific subject knowledge – technical or trade school equivalent

  • (115)Two years of specific subject knowledge – certification/licensure required – equivalent to an AS degree

  • (155)Bachelor’s degree – specialized degree required

    7 (200)Master’s degree – specialized degree required

    II. EXPERIENCE (10%)

  • (10)No previous experience required – can learn on the job

  • (40)Three to six months previous experience is required

  • (80)At least one year of previous experience is required

  • (100)Must have at least two years previous experience

  • SUPERVISION (18%)

  • (18)None

  • (45)Informal supervision, provides advice and guidance to 1-4 coworkers

  • (90)Formal supervision, schedules and appraises 1-4 workers

    4 (140)Formal supervision of 5-9 workers

    5 (180)Formal supervision of ten or more workers

    IV. PHYSICAL DEMANDS (17%)

  • (17)Mostly sits; visual demands less than 20% of the day; no required standing or walking

  • (35)Sits about 75% of the day; visual demands less than 50% of the day; stands or walks about 25% of the day

  • (85)High visual demands more than 50% of the day; constant finger motion; moderate standing/walking (<50%)

  • (130)Rapid hand coordination much of the day; stands more than 50% of the day; occasionally carries loads up to 30 lbs

    5 (170)Regularly lifts/carries loads > 60 lbs; stands, pushes, crawls; very strenuous activity much of the day


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A Job Evaluation Manual (outline/illustration) - 2

V. PROPERTY/LIABILITY (10%)

1 (10)Potential loss is minimal < $100; cash, equipment, product quality

2 (30)Potential loss up to $1000 per incident; cash, equipment, product quality

3 (70)Potential loss up to $5000 per incident; cash, equipment, product quality, lawsuit

  • (100)Potential loss up to $10000 per incident; cash, equipment, products, lawsuit

    VI. CONFIDENTIAL INFORMATION ( 5%)

  • ( 5)No exposure to or potential loss of confidential information

  • (20)Exposure to or potential loss of semi-confidential information

  • (50)Exposure to or potential loss of highly confidential information

    VII. PUBLIC CONTACTS (10%)

  • (10)Deals only with departmental personnel; rarely has contact with people in other departments

  • (25)Has several important contacts within the organization (other departments); occasionally meets publics (outsiders)

  • (55)Many public contacts (>50%) and many internal contacts; most contacts are friendly (>95%)

  • (80)Constant public contacts (>75%) and many internal contacts; 90% of contacts are friendly, tact needed

  • (100)Constant public and internal contacts; > 15% of contacts are stressful; tact and negotiating skills essential

    VII. WORK ENVIRONMENT (10%)

  • (10)Pleasant, well-lit, climate-controlled environment; safe

  • (35)Workplace is a bit uncomfortable, cramped; dirty/dim/damp; noisy environment; hot/cold

  • (60)Minor injury possible if care is not exercised; exposure to sharp surfaces, minor cuts, slippery floors, sprains and strains

  • (100)Major injury possible if care is not exercised; exposure to fumes, falls, unguarded equipment; safety equipment required


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To Validate the Job Evaluation (Point) Manual…

1---SELECT 10-15 “KEY JOBS” FROM WITHIN THE ORGANIZATION.

--a “KEY” job is one that has a well-known job description, and is fairly paid…

in other words, we believe the current pay for the job is correct/fair.

2---EVALUATE EACH KEY JOB, USING THE JOB DESCRIPTION AND THE POINT MANUAL

3---FOR EACH COMPENSABLE FACTOR, ASSIGN THE APPROPRIATE “DEGREE” AND THE APPROPRIATE POINT VALUE ASSOCIATED WITH IT.

4---ONCE COMPLETE, TOTAL UP THE POINTS ASSIGNED TO EACH KEY JOB.

5---REPORT THE CURRENT PAY FOR EACH POSITION (…which we assume is fair/correct).

6---PLOT EACH KEY JOB ON A GRAPH (Points assigned on the bottom, Pay rate on the left)

7---RUN A REGRESSION ANALYSIS OF THE DATA.

8---IF THE REGRESSION MODEL IS STATISTICALLY APPROPRIATE, THE MANUAL IS USABLE


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Evaluate the Job and Assign Degrees (and Points)

COMPENSABLE FACTORSFINISH SPRAYER

(Job Specifications)ExplanationAssign degreePoints

EducationAble to read, write, and make simple math calculations120

ExperienceNo previous experience needed, can learn on-the-job110

SupervisionNo supervisory duties118

Physical DemandsLifts 60 lbs or more, stands constantly, must turn pieces by hand5170

Property/LiabilityKeep equip unclogged; paint mistakes cause rework + lost production230

Confidential Information No exposure to confidential information1 5

Public ContactsWorks alone… all work-related contacts are internal110

Work EnvironmentExposed to fumes and overspray, must wear respirator at all times4100

TOTAL POINTS ASSIGNED363


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VALIDATING THE POINT MANUAL1 - Graph the Key Jobs


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VALIDATING THE POINT MANUAL2 - Plot the Regression Line


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VALIDATING THE POINT MANUAL3 - Graph 10% Above and Below the Regression LineAre >90% of Key Jobs Within the Bounds?


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VALIDATING THE POINT MANUAL4 - Graph 15% Above and Below the Regression LineAre ALL Key Jobs Within the Bounds?


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CREATING PAY GRADES AND RANGESBuild Pay Grades 50 Points Wide Between the High and Low Regression Lines


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DISPLAY FINAL PAY GRADES AND RANGES(Point Method Pay System is now Complete)


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PLOT NON-KEY JOBS ON GRAPHWITH PAY GRADES AND RANGES


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WHAT SHOULD BE DONE ABOUT UNDERPAID JOBS?(Green Circle Rates)


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WHAT SHOULD BE DONE WITH OVERPAID JOBS?(Gold Circle Rates)


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WHAT SHOULD BE DONE WITH OVERPAID JOBS?(Silver Circle Rates)


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WHAT SHOULD BE DONE WITH OVERPAID JOBS?(Red Circle Rates)


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STRATEGIES FOR HANDLING DEVIATIONS ABOVE AND BELOW THE RECOMMENDED BASE PAY RATE

GREEN CIRCLE RATES

RAISE PAY UP AS SOON AS POSSIBLE TO THE APPROPRIATE LEVEL

GOLD CIRCLE RATES

LEAVE RATE AS IS…DO NOT ADJUST…CONTINUE GIVING RAISES & COLAs

SILVER CIRCLE RATES

LEAVE RATE AS IS…DO NOT ADJUST, CONTINUE COLAs BUT NOT RAISES

RED CIRCLE RATES

MUST BRING RATES DOWN TO THE PROPER LEVEL


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RED CIRCLE STRATEGIES

BRING RATES IMMEDIATELY DOWN INTO LINE

Give proper notification first

PAY A “LUMP SUM” SETTLEMENT

Bring rates into line, but pay a one-time severance settlement

PROVIDE AN “ADDER” SUPPLEMENT

Bring rates into line, but issue a supplemental check each pay period that is gradually reduced over time

FREEZE PAY RATE IMMEDIATELY

No raises given for seniority or COLA

Eventually, the entire organizational pay structure will rise (due to COLAs and wage surveys) which will bring the pay rate back into range, at which time the worker will again get raises and COLAs.

TRANSFER THE WORKER TO A HIGHER-RATED JOB


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COMPENSATION SURVEYS

  • Needed to attract and retain workers with scarce skills

  • Develops a sense of external equity and fairness

  • Helps the firm maintain an adequate pay structure

    DETERMINING THE SCOPE OF THE SURVEY

    Where are we having trouble retaining workers?

    Where are market rates likely to be different from internal rates?

    Which jobs are the most difficult to fill?

    Where are we adding new positions to our organization?


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SHOULD WE USE STANDARD WAGE SURVEYS?

PROS:

Minimal time investment needed for the individual firm

Data is based on large samples – adequate representation

Surveys conducted by experts…people who know how to do it

Data is summarized, categorized, easy to interpret

CONS:

There may be a fee (cost) for access to the data

You can’t select the specific companies surveyed

Can’t control the type of data reported (which jobs? benefits?)

Data summaries may mask differences you want to examine


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COLLECTING YOUR OWN WAGE SURVEY DATA

PHONE INTERVIEW -- (easiest)

+ Quick and relatively easy to do

+ Job content can be clarified to ensure the jobs are comparable

+ Can build rapport with respondent over time. Future contacts will be easier.

- Puts a burden on the responder to reply immediately (to a possible stranger)

- May yield incomplete answers because the respondent didn’t anticipate your call

- Long phone calls are not welcome. You can’t get much data in five minutes.

MAILED QUESTIONNAIRE -- (most common)

+ Can collect data on many different job titles, benefits, etc

+ Responses aren’t rushed – allows time for careful thought before answering

- Response rates may be very low

- Misunderstanding or confusion about comparable jobs cannot be clarified

- Only gathers responses to specific questions posed - if you forgot to ask – too bad!


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COLLECTING WAGE SURVEY DATA, CONTD

INTERVIEW – (most reliable)

+ Can ask questions, clarify job titles, etc

+ Gathers data with minimum impact on respondent

+ Builds relationships which can make future data exchange easier

- Very time consuming to make and set appointments, conduct interviews, etc

- Costly method; the expense of travel, etc

CONFERENCE -- (least used, but promising)

+ Takes advantage of professional meetings and conferences of HR personnel

+ Agenda of jobs to be reviewed, etc. established ahead of time—people come prepared

+ Face-to-face meetings allow clarification and detailed discussion of jobs, benefits, etc

- Meetings can be time consuming and tiring, after a day of conference activities

- Determining when and where to gather requires coordination with several other firms


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THE WAGE SURVEY PACKAGE

  • Introductory letter or contact

  • Explain purpose and solicit cooperation

  • Assure confidentiality

  • Offer to share a summary of results

    INFORMATION PROVIDED

    Job titles and summary of duties section

    INFORMATION SOUGHT

    Comparable job titles in the surveyed organization

    Base pay ranges (bottom, midpoint, top)

    Benefits (is the medical, pension, etc. contributory?)

    Incentives (how large and based on what?)

    ADDITIONAL CONSIDERATIONS

    Use of stratified samples?

    Will reminders be sent?


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HOW TO ENCOURAGE EXCELLENCE?

ARE WE TAKING FULL ADVANTAGE OF THE REWARDS WE CONTROL?

HAVE WE THOUGHT THROUGH THE FULL IMPACT THAT OUR REWARD SYSTEM HAS ON THE ORGANIZATION?

DO EMPLOYEES HIGHLY VALUE THE REWARDS WE MAKE AVAILABLE TO THEM?

DO EMPLOYEES KNOW WHAT THEY MUST DO TO OBTAIN THESE REWARDS?

IN SHORT, DO WE REWARD EXCELLENCE OR MEDOCRITY?


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USE INCENTIVE PAY TO REWARD:

  • PRODUCTIVITY

  • ACHIEVEMENTS & ACCOMPLISHMENTS

  • ACQUISITION OF NEW SKILLS

  • LONGEVITY WITH THE FIRM

    HOW TO ADMINISTER INCENTIVE PAY

    A.ADD IT TO THE REGULAR PAYCHECK

    ONCE ACQUIRED…FOREVER PAID…NEVER IS “EARNED” AGAIN

    INCENTIVE PAY MIXED WITH BASE PAY…WORKERS LOSE MOTIVATION

    B.PAY IT ALL OUT AS A LUMP-SUM AT ONE TIME

    LARGE CASH OUTFLOWS ARE DIFFICULT FOR THE FIRM TO MANAGE

    OPPOSED BY UNIONS BECAUSE ANNUAL WAGES DON’T GROW


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“INCENTIVE” PLANS AND PERFORMANCE-BASED REWARDS -- 1

1.SENIORITY & LONGEVITY SYSTEMS

  • Rewards loyalty to the firm…not productivity or performance

  • Workforce more likely to possess obsolete skills

  • Increments must be granted each year (no limit or “cap”)

    2.ACQUIRED SKILLS & KNOWLEDGE INCENTIVES

  • The size of pay increments for each added skill

  • Labor costs go up…but does productivity improve?

  • Once all skills are mastered…what motivates the worker?

  • There are no rewards for work performance


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“INCENTIVE” PLANS AND PERFORMANCE-BASED REWARDS -- 2

3.PIECE RATES & COMMISSIONS

  • Setting “fair” standards

  • Changing standards and rates

  • Who controls work outcomes?

  • Are there rewards for all the essential duties of the job?

    WHEN IS IT FEASIBLE TO USE PIECE RATES?

    1.UNITS OF WORK ARE EASY TO DISTINGUISH AND MEASURE

    2.QUALITY IS OF LESSER IMPORTANCE THAN QUANTITY

    3.WORKER INVOLVEMENT IS A MAJOR DETERMINANT OF PRODUCTIVITY

    4.THE WORKER CONTROLS WORK SPEED…NOT MACHINE-PACED

    5.CLOSE SUPERVISION IS IMPRACTICAL

    6.CHANGES IN WORK PROCESSES ARE INFREQUENT

    7.YOU HAVE EXPERTS TO SET AND EVALUATE YOUR WORK STANDARDS

    8.COMPETITION REQUIRES THAT UNIT LABOR COSTS BE PREDICTABLE


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“INCENTIVE” PLANS AND PERFORMANCE-BASED REWARDS -- 3

  • MERIT REVIEW PLANS

    WHY DO MERIT PLANS FAIL? (HAMNER, 75)

  • Appraisal ratings seem invalid or biased

    • APPROPRIATE MEASURES?

    • OBJECTIVITY OR RATERS?

  • Pay adjustments not seen as being related to performance

  • Supervisors more concerned about satisfaction than performance

  • Incentives offered (type and size) aren’t motivating

    • ARE THESE REWARDS HIGHLY DESIRED?

    • SMALL INCREMENTS DO NOT MOTIVATE

  • Usually added to base pay as a percentage

    • EARNED ONCE…KEPT FOREVER

  • Trust and openness about pay and merit increases is very low


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“INCENTIVE” PLANS AND PERFORMANCE-BASED REWARDS -- 4

5.SUGGESTION SYSTEMS

  • Origin of the idea…who should get the credit?

  • Some workers can’t write their ideas down

  • Does management follow up on the ideas submitted?

  • Supervisors criticized…suggests they’re incompetent

    6.COST-REDUCTION (GAINSHARING) PLANS

    • SCANLON, KAISER, RUCKER, IMPROSHARE

  • Sensitive cost data must be revealed to workers

  • Middle management is left out

  • Unions use the system to criticize management

  • Usually a complex formula for distributing rewards

  • Weakened link between rewards & individual performance


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“INCENTIVE” PLANS AND PERFORMANCE-BASED REWARDS -- 5

7.PROFIT-SHARING PLANS

  • Is there a real link to worker performance?

  • Impact of economic decline…what happens to motivation?

  • Determining the formula for distribution

    8.STOCK OWNERSHIP PLANS

  • Dilution of control over the company

  • Impact of changes in the tax laws and economic cycles

  • Any real link to worker performance?

  • SPECIAL CONTESTS AND AWARDS

    ABSENTEEISM, SALES PROMOTIONS, OUTSTANDING SERVICE AWARDS

  • Are the consequences of the spirit of competition anticipated?

    JEALOUSY, UNCOOPERATIVENESS, COMPETITION WITHIN TEAMS AND GROUPS

  • Only the “Best” receives a reward…what about # 2?

  • Awards are often seen as “rights” (I earned it!), not as gifts


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FOR INCENTIVE SYSTEMS TO BE SUCCESSFUL

  • PERFORMANCE INDICATORS MUST BE CLEARLY DEFINED

  • STANDARDS MUST BE COMMUNICATED TO WORKERS

  • WORKERS MUST BE ABLE TO INFLUENCE PERFORMANCE ACHIEVEMENT

  • PERFORMANCE MUST BE ACCURATELY EVALUATED

  • REWARDS MUST BE BASED ON WORKER PERFORMANCE

  • REWARDS OFFERED MUST BE HIGHLY VALUED BY WORKERS

  • WORKERS AND MANAGEMENT MUST TRUST EACH OTHER


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BENEFITS LEGISLATION REVIEW

1911 – WORKER’S COMPENSATION

BENEFITS FOR ON-THE-JOB INJURIES

1935 – UNEMPLOYMENT COMPENSATION

NO-FAULT LOSS OF JOB BENEFITS; 6.2% of first $7000, w/ 5.4% to State

1935 – SOCIAL SECURITY ACT

7.65% paid by employee, 7.65% matched by employer; 13.2% for self-employed

1974 – EMPLOYEE RETIREMENT INCOME & SECURITY ACT (ERISA)

EMPLOYERS MUST SET ASIDE PENSION OBLIGATIONS ANNUALLY

1985 – CONSOLIDATED OMNIBUS BUDGET RECONCILIATION ACT (COBRA)

>20+ Employees; Separated workers can stay on medical insurance for 18 months

1993 – FAMILY AND MEDICAL LEAVE ACT

>50+ Employees; Unpaid leave for up to 12 weeks for family/medical emergencies

2010 – PATIENT PROTECTION & AFFORDABLE CARE ACT (PPACA)

HEALTH INSURANCE REFORM, 26 yr old dependents covered, Pre-existing conditions eliminated


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LEGALLY REQUIRED BENEFITS

SOCIAL SECURITY -- 40 Quarters –Earn $500+ per qtr

RETIREMENT

DISABILITY

SURVIVOR

HEALTH INSURANCE

UNEMPLOYMENT COMPENSATION – 26 wks + 13

NO-FAULT JOB LOSS

WORKER’S COMPENSATION

JOB-RELATED INJURIES


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EXPECTED BENEFITS

PAYMENT FOR TIME NOT WORKED

HOLIDAYS

VACATIONS

SICK PAY

FUNERAL LEAVE, ETC.

INSURANCE PLANS

HEALTH

DENTAL

VISION

LIFE

RETIREMENT PLANS

PENSION


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RETIREMENT PLANS

SOCIAL SECURITY – mandated by the federal government

PRIVATE PENSION PLANS

DEFINED BENEFIT vs DEFINED CONTRIBUTION PLANS

CONTRIBUTORY vs NONCONTRIBUTORY PLANS

INIDIVIDUAL RETIREMENT ACCOUNTS (IRAs)

PROFIT SHARING PLANS

EMPLOYEE STOCK PLANS

Stock Grants

Stock Options

ESOPs

EMPLOYEE RETIREMENT INCOME SECURITY ACT of 1974 (ERISA)

ADEQUATE FUNDING OF PRIVATE PENSION PLANS

VESTING REQUIREMENTS

REPORTING & DISCLOSURE


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FAMILY & MEDICAL LEAVE ACT - 1993

ORGANIZATIONS WITH 50 OR MORE EMPLOYEES

EMPLOYED FOR ONE YEAR PRIOR TO LEAVE REQUEST

UP TO 12 WEEKS OF UNPAID LEAVE FOR:

CHILDBIRTH

ADOPTION

SERIOUSLY ILL FAMILY MEMBER (Child, Spouse, Parent)

EMPLOYEE’S OWN ILLNESS

EMPLOYERS MUST CONTINUE HEALTH COVERAGE

MUST ALLOW RETURN TO SAME/COMPARABLE POSITION

“KEY” EMPLOYEES EXEMPTED (Highest paid 10%)


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Patient Protection and Affordable Care Act - 2010

National Federation of Independent Business v. Sebelius 2012

U.S. Supreme Court ruled most of the law is legal.

Health insurance must cover all pre-existing conditions (excl. Tobacco)

Premiums cannot be adjusted for gender, age, or geographic location

Up to 26 yrs old can stay on parents insurance coverage

ORGANIZATIONS WITH > 50 EMPLOYEES MUST “PLAY or PAY”

Do you have employees at < 400% of poverty-level wages? If an employee can claim a government subsidy for health insurance, the employer will be assessed $2000 per claimant, plus penalty (50-30)*$2000.

Some employers will drop health insurance and pay penalty… it’s cheaper!

Others will increase part-time work (< 30 hrs/wk) and avoid the penalties.

** Medicare taxes up .9% >$200,000 ; Unearned income tax increases 3.8%

“Cadillac” plans w/b taxed 40% (if plan costs >$10,200 indiv/$27,100 family)


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NON-FINANCIAL COMPENSATION

THE JOB ITSELF

CHALLENGING

MEANINGFUL

RESPONSIBLE

POTENTIAL FOR ADVANCEMENT

INTRINSICALLY REWARDING

THE WORK ENVIRONMENT

COMPETENT SUPERVISION

CONGENIAL COWORKERS

APPROPRIATE STATUS SYMBOLS

ENLIGHTENED MANAGERIAL PHILOSOPHY & PROGRAMS


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ENLIGHTENED PROGRAMS

WORK SCHEDULES

COMPRESSED WORKWEEK

FLEXTIME

JOB SHARING/PART-TIME WORK

TELECOMMUTING/WORK-AT-HOME

INNOVATIVE COMPANY POLICIES

ALL-SALARY WORKFORCE

OVERTIME FOR EXEMPT EMPLOYEES

DAYCARE & ELDERCARE BENEFITS

COMMUTER ALLOWANCES

FLEXIBLE (CAFETERIA) BENEFIT PLANS

MEDICAL TRAVEL OPTIONS


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FLEXIBLE BENEFIT PLANS(CAFETERIA BENEFIT PLANS)

TYPES OF FLEXIBLE PLANS

CORE

MODULAR ( BASE + PACKAGES)

FLEXIBLE SPENDING ACCOUNTS

HEALTH SAVINGS ACCOUNTS

ADVANTAGES

CAPS OR CONTAINS BENEFIT COSTS

RAISES CONSCIOUSNESS RE: BENEFIT COSTS

PROVIDES WORKERS ONLY THE BENEFITS THEY DESIRE

LIMITATIONS

COST OF BENEFITS FLUCTUATES (ADVERSE SELECTION)

PEOPLE MAKE IRRESPONSIBLE DECISIONS

IRS RULINGS & TAX LIABILITY ISSUES

BOOKKEEPING & ADMINISTRATIVE ISSUES


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MEDICAL TRAVEL OPTIONS(INTERNATIONAL OPTIONS & MEDICAL TOURISM)

GIVE EMPLOYEES THE OPTION TO TRAVEL ABROAD FOR ELECTIVE MEDICAL PROCEDURES

…knee replacements, dental work, cosmetic surgery, etc.

ADVANTAGES

TREATED AT JCI-ACCREDITED HOSPITALS BY PHYSICIANS TRAINED IN US OR EUROPE

COST OF PROCEDURES IS MUCH LESS…SAVES THOUSANDS ON INSURANCE

TRAVEL TO EXOTIC LOCATIONS…CAN TAKE VACATION BEFORE OR AFTER TREATMENT

MANY PLANS NOT ONLY PAY ALL TRANSPORTATION, BUT ALSO OFFER $$ INCENTIVES

LIMITATIONS

HAVING A SERIOUS HEALTH MATTER TREATED IN A “FOREIGN” ENVIRONMENT

DON’T KNOW THE PHYSICIAN BEFOREHAND

STAFF MAY NOT SPEAK ENGLISH VERY WELL

MAY NEED A LONG RECOUPERATION TIME BEFORE FLYING BACK HOME

COUNTRY MAY NOT ALLOW LAWSUITS IF NEGLIGENT TREATMENT OCCURS

GETTING GOOD AFTERCARE & REHABILITATION ONCE YOU RETURN HOME


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MEDICAL COST COMPARISONS: US & COSTA RICA

PROCEDURESUS PriceCosta Rica

Angioplasty$57,000$9,000

Heart Bypass Surgery$130,000$24,000

Heart Valve Replacement$160,000$15,000

Hip Replacement$43,000$12,000

Hysterectomy$20,000$4,000

Knee Replacement$40,000$11,000

Spinal Fusion$62,000$25,000

Breast Augmentation$5-8,000$2,700-$2,900

Dental Reconstruction$8,500-$10,000$2,500-$3,000

Facelift$7-9,000$4,600-$5,000

Gastric Bypass$30,000$10,500

Rhinoplasty$8-12,000$3,500-$3,900

Tummy Tuck$6-8,500$3,900-$4,200

(Tico Times Directory 2009)


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MEDICAL COST COMPARISONS – U.S. & ASIA(as of January 1, 2009)

PROCEDURESUS PriceIndiaThailandSingapore

Angioplasty$55,000$11,000$12,000$13,000

Heart Bypass Surgery$120,000$10,000$10,000$18,500

Heart Valve Replacement$165,000$9,000$9,000$12,500

Hip Replacement$80,000$9,000$10,000$11,000

Hysterectomy$21,000$3,000$4,000$6,000

Knee Replacement$65,000$8,500$9,000$13,000

Spinal Fusion$65,000$5,500$7,000$9,000

(Medical Tourism: Thailand 2009)

IS YOUR MEDICAL INSURER OR EMPLOYER WILLING TO SHARE SOME OF THE COST SAVINGS WITH YOU (… as an incentive) IF YOU OPT TO GO OVERSEAS FOR SURGERY?


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INTERNATIONAL HOSPITAL DESTINATIONS AND AFFILIATIONS

COSTA RICA

Hospital Clinica Biblica Affiliated with Ochster Medical Institute - New Orleans

INDIA

Apollo Hospitals Designated as a “Center of Excellence in Global Healthcare”

Wockhardt Hospitals Affiliated with Harvard Medical School

MALAYSIA

Panang Adventist Hospital Affiliated with Loma Linda University & Hospital

MEXICO

CIMA Hospitals Affiliated with CIMA hospitals in US

Grupo Christus Muguerza Affiliated with Christus Muguerza system in US

SINGAPORE

Gleneagles Hospital Affiliated with Johns Hopkins University & Hospital

THAILAND

Bumrungrad Hospital Designated a “Center for Excellence in Global Healthcare.” Has an American management team & 200+ US or UK doctors


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AMERICAN MEDICAL ASSOCIATION GUIDELINES

The AMA advocates that employers and insurance companies that facilitate or incentivize medical care outside the U.S. adhere to the following principles:

  • (a) Medical care outside of the U.S. must be voluntary.

  • (b) Financial incentives to travel outside the U.S. for medical care should not inappropriately limit the diagnostic and therapeutic alternativesthat are offered to patients, or restrict treatment or referral options.

  • (c) Patients should only be referred to institutions that have been accredited by recognized international accrediting bodies [e.g., the Joint Commission International (JCI) or the International Society for Quality in Health Care (ISQHC)].

  • (d) Prior to travel, local follow-up care should be coordinated and financing should be arranged to ensure continuity of care when patients return from medical care outside the US.

  • (e) Coverage for travel outside the U.S. for medical care must include the costs of necessary follow-up care upon return to the U.S.

  • (f) Patients should be informed of their rights and legal recourse prior to agreeing to travel outside the U.S. for medical care.

  • (g) Access to physician licensing and outcome data, as well as facility accreditation and outcomes data, should be arranged for patients seeking medical care outside the U.S.

  • (h) The transfer of patient medical records to and from facilities outside the U.S. should be consistent with HIPAA guidelines.

  • (i) Patients choosing to travel outside the U.S. for medical care should be provided with information about the potential risks of combining surgical procedures with long flights and vacation activities.


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TYPICAL MEDICAL TRAVEL PROCEDUREFOR A SELF-FUNDED HEALTH PLAN

SELF-FUNDED GLOBAL HEALTHCARE OPTION

INITIAL DIAGNOSIS PROVIDED BY AN IN-NETWORK PROVIDER

PATIENT MUST BE A GOOD CANDIDATE FOR TRAVEL

FOLLOW-UP CARE TO BE PROVIDED BY AN IN-NETWORK PROVIDER

COVERAGE COORDINATED THROUGH AN APPROVED MEDICAL TRAVEL AGENCY

DESTINATION MUST BE A JCI-ACCREDITED FACILITY

SERVICES MUST MEET THE COST-EFFECTIVE THRESHOLD (HOW MUCH WILL IT SAVE?)

BENEFITS TO THE PATIENT

UP TO A $10,000 EMPLOYEE INCENTIVE (TREATED AS TAXABLE INCOME)

TRAVEL PROVIDED FOR PATIENT AND COMPANION (PHYSICIAN, NURSE, OR FAMILY MEMBER)

ALL APPOINTMENTS, LODGING AND TRAVEL ARRANGED BY MEDICAL TRAVEL AGENT

TRAVEL FIRST-CLASS AND STAY IN NEAR-LUXURY FACILITIES

CAN VACATION IN AN EXOTIC LOCATION EITHER BEFORE OR AFTER PROCEDURE


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WHAT A SELF-FUNDED EMPLOYER CAN DO

MAKE THE TRAVEL BENEFIT A VOLUNTARY OPTION IF EMPLOYEES WANT IT

CAREFULLY SELECT THE MEDICAL TRAVEL AGENCY THAT WILL ARRANGE ALL APPROVED MEDICAL TRAVEL PLANS

IDENTIFY INTERNATIONAL PROVIDERS (Doctors and Hospitals) YOU TRUST AND LIST THEM AS “IN-NETWORK” PROVIDERS

PROVIDE A SIGNIFICANT INCENTIVE PAYMENT (Taxable) FOR ANY EMPLOYEE WHO TAKES ADVANTAGE OF THE MEDICAL TRAVEL OPTION

HAVE EMPLOYEES SIGN A LIABILITY WAIVER THAT PROTECTS THE COMPANY, INSURER, AND MEDICAL TRAVEL AGENCY

ARRANGE AND COORDINATE FOLLOW-UP CARE WITH IN-SYSTEM PROVIDERS WHEN PATIENT RETURNS HOME

JUST A FEW PARTICIPATING EMPLOYEES SHOULD SAVE THE EMPLOYER THOUSANDS OF $$$


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OTHER COMPENSATION CONCERNS – 1 MLH Chap 2

MEAL & REST BREAKS

LUNCH BREAKSRelieved of all work duties? Scheduled to work 4+ hours?

REST BREAKSLess than 20 minutes?

EXPRESS MILK BREAKS

TRAVEL TIME

DAY ONLYSubtract normal commute time?

OVERNIGHTPaid only for travel time during normal working hours

ON-CALL TIME

ON-PREMISES

OFF-PREMISESHow frequently called? How much time to respond?

Where can employee go? What can employee do?


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OTHER COMPENSATION CONCERNS – 2 MLH Ch 2

PAY DOCKING & SUSPENSIONS

WHAT’S WRONG WITH DOCKING PAY?EXEMPT v. NON-EXEMPT?

Treating an exempt worker like a non-exempt worker – jeopardizes the exempt status of the job

A salary is a fixed amount… not dependent on time

As long as some work is done during the week… they’re entitled to the full salary

GARNISHMENTS

LEGAL OBLIGATION TO DEDUCT $$$ FROM PAYCHECKChild support, tax debts, alimony

COLLECT DEBTS THE WORKER OWES THE COMPANYRent, salary advances, cafeteria

Can’t deduct so much money that a worker’s pay falls below the required minimum wage

Only garnish the amount the court orders

RECORD-KEEPING REQUIREMENTS

PERSONAL INFO,HOURS WORKED EACH DAY AND WEEK, TOTAL WEEKLY EARNINGS

REGULAR PAY RATE, OVERTIME PAY EACH WEEK, TOTAL PAID EACH PAY PERIOD

Need records to prove to the Department of Labor that you’ve complied with the law

KEEP ALL RECORDS FOR AT LEAST THREE YEARS (…after termination)


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