Chapter9:managingCompensation

Compensationconsistsofthreemaincomponents.Direct
compensationencompassesemployeewagesandsalaries,
incentives,bonuses,andcommissions.Indirectcompensation
comprisesthemanybenefitssuppliedbyemployers,and
nonfinancialcompensationincludesemployeerecognition
programs,rewardingjobs,organizationalsupport,work
environment,andflexibleworkhourstoaccommodatepersonal
needs.
Whatisstrategiccompensation?Simplystated,itisthe
compensationofemployeesinwaysthatenhancemotivationand
growth,whileatthesametimealigningtheireffortswiththe
objectivesoftheorganization.
Themorecommongoalsofastrategiccompensationpolicyinclude
thefollowing:
1.Torewardemployeespastperformance2.Toremaincompetitivein
thelabormarket3.Tomaintainsalaryequityamongemployees4.To
meshemployeesfutureperformancewithorganizationalgoals5.To
controlthecompensationbudget6.Toattractnewemployees7.To
reduceunnecessaryturnover.
Toachievethesegoals,policiesmustbeestablishedtoguide
managementinmakingdecisions.Formalstatementsofcompensation
policiestypicallyincludethefollowing:
Therateofpaywithintheorganizationandwhetheritisto
beabove,below,orattheprevailingmarketrate
Theabilityofthepayprogramtogainemployeeacceptance
whilemotivatingemployeestoperformtothebestoftheir
abilities
Thepaylevelatwhichemployeesmayberecruitedandthe

paydifferentialbetweennewandmoresenioremployees
Theintervalsatwhichpayraisesaretobegrantedandthe
extenttowhichmeritand/orsenioritywillinfluencetheraises
Thepaylevelsneededtofacilitatetheachievementofasound
financialpositioninrelationtotheproductsorservices
offered

payforperformancestandard:Astandardbywhichmanagerstie
compensationtoemployeeeffortandperformance

payequity:Anemployeesperceptionthatcompensationreceivedisequaltothe
valueoftheworkperformed

hourlyworkWorkpaidonanhourlybasis
pieceworkWorkpaidaccordingtothenumberofunitsproduced
nonexemptemployeesEmployeescoveredbytheovertimeprovisionsofthe
FairLaborStandardsAct

exemptemployeesEmployeesnotcoveredbytheovertimeprovisionsofthe
FairLaborStandardsAct

escalatorclausesClausesinlaboragreementsthatprovideforquarterlycostof
livingadjustmentsinwages,basingtheadjustmentsonchangesintheconsumerprice
index

realwagesWageincreaseslargerthanrisesintheconsumerpriceindex,thatis,the
realearningpowerofwages

jobevaluationAsystematicprocessofdeterminingtherelativeworthofjobsin
ordertoestablishwhichjobsshouldbepaidmorethanotherswithinanorganization

jobrankingsystemThesimplestandoldestsystemofjobevaluationbywhich
jobsarearrayedonthebasisoftheirrelativeworth

jobclassificationsystemssystemofjobevaluationinwhichjobsare
classifiedandgroupedaccordingtoaseriesofpredeterminedwagegrades

pointsystemAquantitativejobevaluationprocedurethatdeterminestherelative
valueofajobbythetotalpointsassignedtoit

workvaluationAjobevaluationsystemthatseekstomeasureajobsworth
throughitsvaluetotheorganization

chapter10:payforperformance:incentivesrewards

variablepayTyingpaytosomemeasureofindividual,group,ororganizational

performance

straightpieceworkAnincentiveplanunderwhichemployeesreceiveacertain
rateforeachunitproduced

differentialpiecerateAcompensationrateunderwhichemployeeswhose
productionexceedsthestandardamountofoutputreceiveahigherrateforalloftheir
workthantheratepaidtothosewhodonotexceedthestandardamount

standardhourplanAnincentiveplanthatsetsratesbasedonthecompletionof
ajobinapredeterminedstandardtime

bonusAnincentivepaymentthatissupplementaltothebasewage
spotbonusAnunplannedbonusgivenforemployeeeffortunrelatedtoan
establishedperformancemeasure

meritguidelinesGuidelinesforawardingmeritraisesthataretiedto
performanceobjectives

straightsalaryplanAcompensationplanthatpermitssalespeopletobepaid
forperformingvariousdutiesthatarenotreflectedimmediatelyintheirsalesvolume

straightcommissionplanAcompensationplanbasedonapercentageof
sales

combinedsalaryandcommissionplanAcompensationplanthat
includesastraightsalaryandacommission

salaryplusbonusplanAcompensationplanthatpaysasalaryplusabonus
achievedbyreachingtargetedsalesgoals

teamincentiveplanAcompensationplaninwhichallteammembersreceive
anincentivebonuspaymentwhenproductionorservicestandardsaremetorexceeded

gainsharingplansProgramsunderwhichbothemployeesandtheorganization
sharefinancialgainsaccordingtoapredeterminedformulathatreflectsimproved
productivityandprofitability

profitsharingAnyprocedurebywhichanemployerpays,ormakesavailableto
allregularemployees,inadditiontobasepay,specialcurrentordeferredsumsbasedon
theprofitsoftheenterprise

Chapter11:EmployeeBenefits

flexiblebenefitsplans(cafeteriaplans)Benefitplansthatenable
individualemployeestochoosethebenefitsthatarebestsuitedtotheirparticularneeds

workerscompensationinsuranceStatemandatedinsuranceprovidedto

workerstodefraythelossofincomeandcostoftreatmentduetoworkrelatedinjuriesor
illness

TypesofPensionPlans

Therearetwomajorwaystocategorizepensionplans:(1)
accordingtocontributionsmadebytheemployerand(2)
accordingtotheamountofpensionbenefitstobepaid.
contributoryplanApensionplaninwhichcontributionsaremadejointlyby
employeesandemployers

noncontributoryplanApensionplaninwhichcontributionsaremadesolely
bytheemployer

definedbenefitplanApensionplaninwhichtheamountanemployeeisto
receiveonretirementisspecificallysetforth

definedcontributionplanApensionplanthatestablishesthebasisonwhich
anemployerwillcontributetothepensionfund

VestingAguaranteeofaccruedpensionbenefitstoparticipantsatretirementage,
regardlessoftheiremploymentstatusatthattime

Chapter12:PromotingSafetyandHealth

righttoknowlawsLawsthatrequireemployerstoadviseemployeesaboutthe
hazardouschemicalstheyhandle

fitnessfordutyevaluationsEvaluationsrandomlyconductedtodetermine
anemployeesphysical,mental,andemotionalfitnessforajob

recordablecaseAnyoccupationaldeath,illness,orinjurytoberecordedinthelog
(OSHAForm300)

emergencyactionplanAplananorganizationdevelopsthatcontainsstepby
stepproceduresfordealingwithvariousemergencysituations

cumulativetraumadisordersInjuriesinvolvingtendonsofthefingers,
hands,andarmsthatbecomeinflamedfromrepeatedstressesandstrains

MaterialSafetyDataSheets(MSDSs)Documentsthatcontainvital
informationabouthazardoussubstances

StressAnyadjustivedemandcausedbyphysical,mental,oremotionalfactorsthatre
quirescopingbehavior

EustressPositivestressthataccompaniesachievementandexhilaration
DistressHarmfulstresscharacterizedbyalossoffeelingsofsecurityandadequacy
BurnoutAseverestageofdistress,manifestingitselfindepression,frustration,and
lossofproductivity

DepressionAnegativeemotionalstatemarkedbyfeelingsoflowspirits,
gloominess,sadness,andlossofpleasureinordinaryactivities

Chapter13:EmployeeRightsandDiscipline

employeerightsGuaranteesoffairtreatmentthatbecomerightswhentheyare
grantedtoemployeesbythecourts,legislatures,oremployers

negligenceThefailuretoprovidereasonablecarewhensuchfailureresultsininjury
toconsumersorotheremployees

psychologicalcontractExpectationsofafairexchangeofemployment
obligationsbetweenanemployeeandemployer

employmentatwillprincipleTherightofanemployertofireanemployee
withoutgivingareasonandtherightofanemployeetoquitwhenheorshechooses

wrongfuldischargeAdischarge,ortermination,ofanemployeethatisillegal
whistleblowingComplaintstogovernmentalagenciesbyemployeesabouttheir
employersillegalorimmoralactsorpractices

constructivedischargeAnemployeesvoluntaryterminationofhisorher
employmentbecauseofharsh,unreasonableemploymentconditionsplacedonthe
individualbytheemployer

impairmenttestingAlsocalledfitnessfordutyorperformancebasedtesting,
itmeasureswhetheranemployeeisalertenoughtowork

progressivedisciplineTheapplicationofcorrectivemeasuresbyincreasing
degrees

positive,ornonpunitive,disciplineAsystemofdisciplinethatfocuseson
earlycorrectionofemployeemisconduct,withtheemployeetakingtotalresponsibility
forcorrectingtheproblem

dueprocessProceduresthatconstitutefairtreatment,suchasallowinganemployee
totellhisorherstoryaboutanallegedinfractionanddefendagainstit

AlternativeDisputeResolutionProcedures

alternativedisputeresolution(ADR)Atermappliedtodifferent

employeecomplaintordisputeresolutionmethodsthatdonotinvolvegoingtocourt

1.

stepreviewsystemAsystemforreviewingemployeecomplaintsanddisputesby
successivelyhigherlevelsofmanagement

2.

peerreviewsystemAsystemforreviewingemployeecomplaintsthatutilizesa
groupcomposedofequalnumbersofemployeerepresentativesandmanagement
appointees.Thegroupweighsevidence,considersarguments,and,afterdeliberation,
votestorenderafinaldecision

3.

opendoorpolicyApolicyofsettlinggrievancesthatidentifiesvariouslevelsof
managementabovetheimmediatesupervisorforemployeecontact

4.

ombudsmanAdesignatedindividualfromwhomemployeesmayseekcounselfor
resolutionoftheircomplaints

5.

mediationTheuseofanimpartialneutraltoreachacompromisedecisionin
employmentdisputes

6.

mediatorAthirdpartyinanemploymentdisputewhomeetswithonepartyandthen
theotherinordertosuggestcompromisesolutionsortorecommendconcessionsfrom
eachsidethatwillleadtoanagreement

ethicsAsetofstandardsofconductandmoraljudgmentsthathelptodetermineright
andwrongbehavior

Chapter14:TheDynamicsofLaborRelations

unfairlaborpractices(ULPs)Specificemployerandunionillegalpractices
thatdenyemployeestheirrightsandbenefitsunderfederallaborlaw

laborrelationsprocessAlogicalsequenceoffiveevents:(1)workersdesire

collectiverepresentation,(2)theunionbeginsitsorganizingcampaign,(3)theNLRB
representationprocessbegins,(4)collectivenegotiationsleadtoacontract,and(5)the
contractisadministered

unionshopAprovisionofthelaboragreementthatrequiresemployeestojointhe
unionasarequirementfortheiremployment

authorizationcardAstatementsignedbyanemployeeauthorizingauniontoact
asarepresentativeoftheemployeeforpurposesofcollectivebargaining

bargainingunitAgroupoftwoormoreemployeeswhosharecommon
employmentinterestsandconditionsandmayreasonablybegroupedtogetherfor
purposesofcollectivebargaining

exclusiverepresentationThelegalrightandresponsibilityoftheunionto
representallbargainingunitmembersequally,regardlessofwhetheremployeesjointhe
unionornot

craftunionsUnionsthatrepresentskilledcraftworkers
industrialunionsUnionsthatrepresentallworkersskilled,semiskilled,
unskilledemployedalongindustrylines

employeeassociationsLabororganizationsthatrepresentvariousgroupsof
professionalandwhitecollaremployeesinlabormanagementrelations

unionstewardAnemployeewhoasanonpaidunionofficialrepresentsthe
interestsofmembersintheirrelationswithmanagement

businessunionismAtermappliedtothegoalsofU.S.labororganizations,which
collectivelybargainforimprovementsinwages,hours,jobsecurity,andworking
conditions

collectivebargainingprocessTheprocessofnegotiatingalaboragreement,
includingtheuseofeconomicpressuresbybothparties

bargainingzoneAnareainwhichtheunionandtheemployerarewillingto
concedewhenbargaining

interestbasedbargainingProblemsolvingbargainingbasedonawinwin
philosophyandthedevelopmentofapositivelongtermrelationship

bargainingpowerThepoweroflaborandmanagementtoachievetheirgoals
througheconomic,social,orpoliticalinfluence

arbitratorAthirdpartyneutralwhoresolvesalabordisputebyissuingafinal
decisioninthedisagreement

unionsecurityagreementWhereanemployerandtheunionagreeonthe
extenttowhichtheunionmaycompelemployeestojointheunionandhowthedueswill
becollected

grievanceprocedureAformalprocedurethatprovidesfortheuniontorepresent
membersandnonmembersinprocessingagrievance

rightsarbitrationArbitrationoverinterpretationofthemeaningofcontract
termsoremployeeworkgrievances

fairrepresentationdoctrineAdoctrineunderwhichunionshavealegal
obligationtoassistbothmembersandnonmembersinlaborrelationsmatters

offshoringworkthatwaspreviouslycarriedoutinonecountryismovedtoanother
country

Chapter15:internationalHumanResourceManagement

culturalenvironmentThecommunications,religion,valuesandideologies,
education,andsocialstructureofacountry

hostcountryAcountryinwhichaninternationalcorporationoperates
internationalcorporationAdomesticfirmthatusesitsexisting
capabilitiestomoveintooverseasmarkets

multinationalcorporation(MNC)Afirmwithindependentbusiness
unitsoperatinginmultiplecountries

globalcorporationAfirmthathasintegratedworldwideoperationsthrough
acentralizedhomeoffice

transnationalcorporationAfirmthatattemptstobalancelocal

responsivenessandglobalscaleviaanetworkofspecializedoperatingunits

1.

expatriates,orhomecountrynationalsEmployeesfromthehome
countrywhoareoninternationalassignment

1.
2.

hostcountrynationalsEmployeeswhoarenativesofthehostcountry
thirdcountrynationalsEmployeeswhoarenativesofacountryotherthan
thehomecountryorthehostcountry

workpermit,orvisaAgovernmentdocumentgrantingaforeignindividual
therighttoseekemployment

1.
2.

guestworkersForeignworkersinvitedtoperformneededlabor
transnationalteamsTeamscomposedofmembersofmultiplenationalities
workingonprojectsthatspanmultiplecountries

3.

globalmanagerAmanagerequippedtorunaninternationalbusiness
coreskillsSkillsconsideredcriticaltoanemployeessuccessabroad
augmentedskillsSkillshelpfulinfacilitatingtheeffortsofexpatriate
managers

failurerateThepercentageofexpatriateswhodonotperformsatisfactorily
cultureshockPerpetualstressexperiencedbypeoplewhosettleoverseas
repatriationTheprocessoftransitionforanemployeehomefroman
internationalassignment

1.

globalcompensationsystemAcentralizedpaysystemwherebyhost
countryemployeesareofferedafullrangeoftrainingprograms,benefits,andpay
comparablewithafirmsdomesticemployeesbutadjustedforlocaldifferences

2.

homebasedpayPaybasedonanexpatriateshomecountryscompensation
practices

3.

balancesheetapproachAcompensationsystemdesignedtomatchthe
purchasingpowerinapersonshomecountry

4.

splitpayAsystemwherebyexpatriatesaregivenaportionoftheirpayinthelocal
currencytocovertheirdaytodayexpensesandaportionoftheirpayintheirhome
currencytosafeguardtheirearningsfromchangesininflationorforeignexchange
rates

5.

hostbasedpayExpatriatepaycomparabletothatearnedbyemployeesina
hostcountry

6.

localizationAdaptingpayandothercompensationbenefitstomatchthatofa
particularcountry

7.

codeterminationRepresentationoflaborontheboardofdirectorsofa
company