a plan in which contributions are made solely by the employer. unit 4: compensation & benefits...

A plan in which contributions are made solely by the employer.

Unit 4: Compensation & Benefits

Noncontributory pension plans

A theory of motivation built around the need for achievement and its influence on behavior. The characteristics of high need achievers are (1) personal responsibility, (2) moderate risk taking, and (3) a desire

for immediate feedback. Money and incentives are a form of feedback.

McClelland’s achievement need

A health plan that focuses on reducing health care costs, often through negotiated

cost reductions.

Managed health care

A procedure for developing a wage structure that involves placing the various jobs in a hierarchy of job worth and then

assigning monetary values to them.

Job-ranking method

The process of deciding how much each job should be paid by determining which labor grade the job falls within and the pay range

for that labor grade.

Job pricing

One of the major decisions that must be considered in the development of a compensation system. This decision

considers the issue of whether individuals performing the same job should all receive the same rate of pay or whether individuals

who have more seniority, experience, or higher productivity should receive higher

Individual wage decision

A pay-for-performance plan of improved productivity through sharing. Individual

incentives are increased as workers accomplish more work in less time.

Improshare

The line on a wage structure graph that shows higher levels of pay associated with

higher-level jobs.

Wage curve

A savings plan that enables participants to pay health care and dependent care

expenses with pretax dollars deducted from an employee’s income by the

employer rather than after-tax dollars.

Flexible spending account (FSA)

A theory of motivation based on a hierarchy of five needs: physiological,

safety, social, esteem, and self-actualization. Money is viewed as

something that primarily satisfies lower-level needs.

Maslow’s need hierarchy

The most popular job-evaluation method for developing a wage curve. The

compensable factors of key jobs are added up and used to develop the wage curve.

Point method

Responsibilities of the person who manages a pension fund.

Fiduciary responsibilities

A method for developing a wage structure in which benchmark jobs are broken down and compared item by item. It determines how much money should be paid for each

Factor comparison

A rating computed for each employer that is based on the number of accidents or the number of employees laid off. This rating is

used to adjust the unemployment compensation and workers’ compensation

tax rates for each employer.

Experience rating

A program that allows employees to share in the profits of a company based upon the

profitability of the company and an allocation formula determining each

employee’s share.

Profit sharing

A court-issued order that instructs a plan administrator how to pay all or a portion of a pension plan benefit to a divorced spouse

or to a child.

Qualified Domestic Relations Order (QDRO)

A cluster of jobs along the hierarchy of job worth that are all paid the same rate of

Pay grade

A plan in which both the employees and the employer make contributions to the

pension fund.

Contributory pension plans

Employer-provided reimbursements for medical expenses that are excluded from taxable income, but subject to maximum

dollar limits for a coverage period. Unused funds at the end of the period can be

carried forward to subsequent periods.

Health reimbursement arrangement

A controversy that centers on the issue of whether organizations should be required to establish a common set of criteria for

evaluating the worth of jobs and to provide equal pay for jobs of similar worth.

Comparable-worth controversy

A process theory of motivation in which people decide what to do by subjectively estimating the probability of being able to

perform an activity and whether that activity will be rewarding.

Expectancy theory

An arrangement whereby employees can own shares in the company, the same as if they were ordinary shareholders in a joint-

stock company.

Employee Stock Ownership Plan (ESOP)

The aspects associated with the different jobs that justify paying one job more than

another. Responsibility, education, and skill are usually considered the most important.

Compensable factors

This legislation was designed to ensure that employees covered under private pension plans and employee welfare

benefit plans would receive the benefits promised. If an employer chooses to have a

pension plan, it must comply with strict requirements.

Employee Retirement Income Security Act (ERISA)

A theory of job satisfaction suggesting that people compare their inputs and outputs

with the inputs and outputs of others. Inputs include such things as knowledge,

skills, education, training, and effort. Outputs include such things as

compensation, benefits, and intrinsic satisfaction.

Equity theory

A profit-sharing plan in which an employee’s share is held until a later

period, usually retirement.

Deferred profit-sharing plan

A piece-rate incentive plan that provides a low piece rate for individuals who produce

less than the standard and a high piece rate for individuals who meet or exceed the

standard.

Differential piece-rate plan

A procedure used to develop a wage structure in which the job description for

each job are compared with a sorting scheme that ranks the jobs in a hierarchy

of job worth.

Classification method

A budgeting method that requires each program to be justified from the ground up each fiscal year. The alternative is to use

the prior funding level for that program as the basis for further adjustments.

Zero-based budgeting

An individual pension fund created for each employee into which the company and usually the employee invest a specified amount of money each year until the

individual retires. The amount of money available to the retiree is determined by

how much was contributed and how successfully the money was invested.

Defined contribution plan

A analysis of the wages, salaries, and benefits offered by different organizations.

Wage surveys

A major decision in the design of a compensation system that examines how

much money is paid for different jobs within the same organization.

Wage-structure decision

A reduction in the relative wage differentials between high- and low-paying

jobs. Upper-level jobs do not provide sufficient incentives to justify the higher

levels of responsibility and skill required to perform them.

Wage compression

The employer’s right to receive the money contributed to his or her pension fund by

an employer even if the employee terminates employment with the employer.

Vesting

Three components of the expectancy theory of motivation.

ExpectancyInstrumentality

Valence

An individual incentive plan that provides a fixed rate of incentive pay for each item

produced.

Straight piecework

A legal document required by ERISA for each welfare benefit plan offered by an

employer that describes the plan’s eligibility requirements, a summary of the

benefits provided, the procedures for claiming benefits and appealing claim

denials, circumstances that could result in a loss of benefits, and the participant’s

rights under ERISA.

Summary Plan Document (SPD)

A company-wide incentive plan that combines profit sharing with a suggestion

system.

Scanlon plan

One of the major decisions involved in designing a compensation system; compares the wages paid in one

organization with the pay in other organizations for employees performing

similar work.

Wage-level decision

A company-wide incentive plan which compensation is based on a ratio of income

to value added by the employees in the production process.

Rucker Share-of-Production plan

The practice of producing less than is possible. This occurs when peer-group

norms establish an arbitrarily low standard of performance.

Restriction of output

Jobs that are overpaid relative to the amount the wage curve indicates ought to

be paid for them.

Red-circle jobs

An employee becomes partially vested in a retirement plan after an initial period of

time, then becomes vested in an additional percentage each year until fully vested.

Graded vesting

A special kind of HMO consisting of a collection of physicians, hospitals, and

clinics that combine to provide health care services for member. The members pay a

capitated monthly fee and the staff members are paid a fixed salary rather

than an amount based on the number of patients they see in a day.

Group health cooperatives

A widely-used job evaluation method that uses three compensable factors - knowledge, problem solving, and

accountability - to determine how many points should be assigned to different job.

Guide Chart-Profile method/ Hay method

An incentive plan where the workers receive a guaranteed hourly wage plus a

percentage of the wage for any time saved.

Halsey Premium plan

Jobs that are considered equitably paid and are used in the point method to develop a wage structure. The pay levels for other

jobs are determined from the wage curve that was developed using these jobs.

Benchmark jobs/ Key jobs

Creating wide labor grades so that there are fewer labor grades with more jobs in

each one.

Broadbanding

An employee becomes fully vested in a retirement plan after a specified period of

Cliff vesting

An individual or group incentive plan that pays a fixed rate per hour where the hour is measured by an hour’s worth of work rather than by a standard sixty minutes.

Standard hour plan

Health-care plans that are similar to PPOs except for the presence of a gatekeeper

who monitors the services rendered.

Point of service (POS)

A motivation theory that identifies two types of needs. Motivators are associated with the content of the job and contribute to individual motivation. Hygiene factors

cause dissatisfaction when they are deficient but do not create motivation

when they are present. Money is a hygiene.

Herzberg’s hygiene/motivator theory

Someone who owns more than five percent of the company or earns over a specified

amount. Employee benefits cannot discriminate in favor of these employees.

Highly-compensated employees

The ability to transfer pension monies from one pension fund to another when an

employee changes employers.

Portability

Provides health care services emphasizing preventive medicine at a fixed monthly

Health maintenance organization (HMO)

A pension plan that provides a retirement income to retirees based on a formula that

usually combines the retiree’s years of service and average annual income for the

last five years.

Defined benefits plan

A number that compares a person’s pay rate with the midpoint of the pay range. It is determined by taking their pay divided by the midpoint of the labor grade times

Compa-ratio

Health-care plans that contract with health-care providers to purchase services at a

discounted rate.

Health plan purchasing cooperatives

Workers who do not have an ongoing expectation of full-time employment, such

as part-time workers, independent contractors, temporaries, consultants, “life-of-the-project” workers, leased employees,

and subcontractors.

Contingent workers

Health-care plans that consist of contractual arrangements between health

care providers and an employer or insurance company to provide fee-for-

service health care, usually at a discount.

Preferred provider organizations (PPO)

a plan in which contributions are made solely by the employer. unit 4: compensation & benefits...

unemployment compensation

compensation benefitsmaslows

compensation system

workers compensation

higher pay

minimum wage

pay range

wage structure graph

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