1. Managing Compensation Chapter 10
MGT 3513
“The thermometer of success is merely the jealousy of the malcontents.” Salvador Dali

2. ANNOUNCEMENTS

3. Questions on Compensation
What are the three components of total compensation? Explain each.
How much of a cost does compensation represent to most firms?

4. Dr. Marler’s Unsolicited Advice on the “JOB SEARCH”
Use Salary.com
Information on salary (national & local)
Base pay (direct pay)
Pay incentives
Benefits (indirect pay)

7. View results then skip advertisement

8. What is the median salary?

9. Go to the benefits tab

10. What is the base pay?
What are the pay incentives?
What are benefits worth?

11. Cost of Living Calculator
It will compare salary & cost of living in two locations
It will tell you how much you would have to earn in a new location to maintain the same standard of living.

12. Cost of Living Calculator – enter median salary & 2 locations

13. What is the net change in income?

14. Figure 10.2 in textbook is a useful outline for the chapter
Internal / External
Fixed / Variable
Performance / Membership
Job / Individual Pay
Egalitarianism / Elitism
Below-Market / Above-Market Compensation
Monetary / Nonmonetary
Open / Secret
Centralization / Decentralization of Pay Decisions

15. 1) Internal / External How do we know if we are paid a fair amount?
Equity
internal equity
external equity
What happens if we decide that our pay is NOT fair?

16. 1) Internal / External Distributive justice model of pay equity
Input/outcome ratio
Labor market model of pay equity
Wage rate = intersection of supply & demand
“going rate”

17. Practice Question
Kayla makes $20 an hour as a fitness instructor; however, she becomes frustrated to learn that an employee with less seniority is making $25 an hour. What type of equity comparison is she making ?
Internal
External

18. Practice Question
My company is conducting a market survey to make sure their current pay rates are competitive. What type of equity applies to this situation?
Internal
External

19. 2) Fixed / Variable What is fixed pay? What is variable pay?
Which form (fixed or variable) do most U.S. companies use? Why?

20. 3) Performance / Membership
What is performance-contingent compensation?
What is a piece-rate plan?
What is membership-contingent compensation?
In your opinion, what is potentially a major disadvantage of this type of compensation system?

21. 4) Job / Individual Pay
Skill-based approach – What is the ________ worth?
Job-based approaches – What is the ______ worth?

22. 5) Egalitarianism / Elitism
What is an egalitarian pay system?
What is an elitist pay system?

23. 6) Above the market / below the market
Quality of applicant = ___________
Turnover = __________
Below the market

24. 7) Monetary / Nonmonetary
What are monetary rewards?
What are nonmonetary rewards?
Give examples

25. 8) Open / Secret
What is secret pay?
What is open pay?

26. 9) Centralization / Decentralization of Pay Decisions
Contrast centralized and decentralized pay decisions

27. Compensation Tools Job-based approaches
How does a company know what a job is worth?
Achieving internal equity
Job evaluation = the process of evaluating the relative ____________ or contribution of different jobs to an organization
Achieving external equity
Market surveys =

28. Internal Equity - - Job Evaluation
Conduct _____________
Write __________, including job specifications
Rate worth of all jobs using a predetermined system
Create a _____________
Classify jobs by grade levels

29. Internal Equity – Rating the Worth of Jobs (Job evaluation)
Point factor method
Assigns points to jobs based on ____________________.
Skill
Effort
Responsibility
Working conditions

30. Internal Equity – Rating the Worth of Jobs (Job evaluation)
Point factor method example
Nurse
Tree Climber
Part-time Office Assistant
Skill
200
100
Effort
150
Responsibility 50
Working Conditions
400
Total Points
800
300

31. Pay Structure $Pay Pay Range 200-400 401-600 601-800
$37,000
Pay Grade 3
__________
$30,000
$Pay
$32,000
Pay Grade 2
$25,000
Pay Range
$27,000
Pay Grade 1
__________
$20,000
Job evaluation points

32. Terms to Know
Pay Grade
Pay Range
Compensable factors
Job hierarchy

33. External Equity -- Market survey
Identify benchmark or key jobs
Benchmark job =
Establish a pay policy
Decision to pay _______________
_______________

34. FLSA Fair Labor Standards Act ______________
“exempt” vs. “nonexempt” employees

35. Questions on the FLSA Minimum wage
Why do some believe that it should be raised?
Why do some argue that it should not be raised?
Is it possible for employers to be required to pay a minimum wage that is higher than the federal minimum wage? If so, why?

36. Additional Information about the Minimum Wage
Current minimum wage = $7.25
Oregon’s minimum wage = $9.75
Workers who receive tips
Minimum wage = $2.13
Rate established in 1991

37. Questions on the FLSA (continued)
How many hours must a person work to receive overtime pay?
What is the minimum pay rate for overtime pay?
Why is overtime pay an attractive option to employers?

38. Common Exemptions from FSLA
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