©orion hr group, llc compensation tchra 2013 larry morgan, sphr, gphr, mair orion hr group, llc

©Orion HR Group, LLC

Compensation

TCHRA2013

Larry Morgan, SPHR, GPHR, MAIROrion HR Group, LLC

Tonight

Review any questions on workforce planning and employment exam

Compensation

Total Rewards

Compensation and Benefits 19% PHR 13% SPHR

What areas are covered on the exam?

Legal and legislative issues Direct compensation

Job analysis and evaluationPay surveys and structureData analysisPayroll issuesPay methods and issuesExecutive compensation

Covered on exam, continued

Indirect compensation covered under benefits module

International issues Employee communication

A Total Compensation System

Total compensation

+Direct

compensationIndirect

compensation

Pay systems

Benefit programs

Total Compensation Overview

o Legal/legislative considerationso Direct Compensation (cash, capital

accumulation); programs, methods, rationale, pros and cons, etc.

o Indirect Compensation (health and welfare, retirement, paid time off, etc)

o Relational Returns (affiliation, coworker relationship, challenging assignments, training, location, etc)

o Communication (policies, methods, programs)

Objectives of a Total Compensation System

Compatible with organizational mission, values and strategy

Compatible with corporate culture Entitlement Performance based / contribution oriented

Appropriate for the workforce Attract and retain talent Externally equitable Internally equitable Compliant Easy to communicate and understand Cost effective

Relationship of Compensation to Organizational Market or Product Life Cycle

Compensation

Element

Introduction Growth Maturity Decline

Base Salary Competitive, low end

Moderate High, relatively speaking

High, may need to reduce

Incentives (Long and Short Term)

Stock/equity Bonus – based on objectives, options/combination plans

Bonus – retention based plans and equity in smaller portions

Reduced bonuses basis is cost-savings most commonly

Benefits Basic package Moderate package Comprehensive package

Limit costs; freeze, change or eliminate programs

Compensation Design Criteria and Issues

Determine Compensation Philosophy: Match, lead or lag the market? Match = median, middle of pack Lag decision may occur due to ability to pay/compete; and/or if strong

emphasis on performance and variable pay Lead decision may presuppose higher caliber employees; is this true? Consider union factors, if any

Fairness elements (perception)•Contributions recognized; no negative rewards; lingerers as example. Why? Manager reluctance. May include lack of differentiation for merit pay. And, employee reaction to rater inconsistency •Internal and external equity•Non-discrimination•Meet employee needs for fair wage/adequate benefits (living wage issue)

Basic Elements of Compensation Plan Administration

Design – plan features, main elements, mix (base versus variable, etc.) Base pay Variable pay (individual / team / group / organization) Benefits Pay Mix issues

Funding – how to pay for it, how much it costs. Frequency of changes Administration – policies, practices, procedures. Communication – message emphasis, delivery method,

format, frequency.

Key Legislation and Regulations

Davis Bacon Act, 1931Copeland Act, 1934Walsh Healey Act, 1936Fair Labor Standards Act 1938Service Contract Act, 1965Equal Pay Act 1963Fair Pay Act 2008

Legal Risks FLSA (overtime) Tax Issues (withholding) Benefits Workers’ Compensation Unemployment

Common Misconceptions But the individual wants to be a contractor But we’ve always done it this way But it saves time and money

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Employee vs. Contractor

How the IRS looks at employee vs. contractor

◦Behavioral ControlType of instructions givenDegree of instructionEvaluation systemsTraining

◦FinancialSignificant investmentUnreimbursed expensesOpportunity for profit or lossServices available to the market

Method of payment

◦Type of Relationship

Written contractEmployee benefitsPermanency/Length of the relationship

Key activity of the business

Similar tests used by other agencies and with other laws

Student Interns

Employees or contractors? Common misconceptions

“…but they get credit” They are learning something Minimum wage and overtime are not required “…but we pay a stipend”

New audits IRS and DOL standards

Type of internship Credit provided? Productive work performed?

Enacted by Congress in 1938 to guarantee minimum wages and overtime standards among private employers

Part of the economic recovery of the Great Depression—ensuring a livable wage for large numbers of employees

Amendments throughout its history such as:> Retail and service industry amendments in 1961 > Extended to public sector employees in 1985> Redefinition of exemption test for IS professionals in 2002> Fair Pay Act 2005> Fair Pay Act 2009

Provisions relate to areas such as:> Minimum wage > Child Labor Regulations> Compensable time > Rest and Meal Periods> Record Keeping > Exemption Status

State FLSAs—often similar but can differ (e.g., MN tip credit)

Objectives and Brief History of FLSA

Generally, the more generous (to employee) controls (state vs. federal) $7.25/hour federal minimum wage vs. lower

Minnesota wage Minnesota no offset of minimum wage for “tips” Final wages paid within 24 hours of involuntary

termination after demand or next payday for voluntary

Additional regulations on employment hours for minors

Federal vs. State regulations

Overtime after 40 hours in a workweek Comp time only for public sector 8 and 80 hour rule (health care) Union contracts Overtime paid based on the “regular rate”:

TOTAL REMUNERATION IN A WORKWEEK(except statutory exclusions)

÷ TOTAL HOURS ACTUALLY WORKED

=REGULAR HOURLY RATE OF PAY

Overtime

Overtime—Regular Rate

What’s Remuneration? Commissions Non-cash compensation Nondiscretionary bonuses Shift Differential On-call pay Blended rate issues

Not included: Discretionary bonuses Gifts or gratuities Tuition or loan forgiveness programs Pay for time not worked (vacation, sick leave and

holidays) Profit-sharing, pension and welfare payments

Overtime Calculation

An employer pays an employee a $40 attendance bonus for working a full 40-hour workweek. If the worker works 45 hours during that week, what will the employee’s gross paycheck be if her hourly rate is $10?

A.$495.00

B.$509.50

C.$515.00

D.$517.25

Answer: D

To calculate the total pay for the week, you must add the bonus to the hours worked at base pay (45 x $10/hour = 450 + $40 bonus = $490). To get the average straight time hourly earnings (ASTHE), the $490 is divided by the total hours worked, 45, to yield $10.89.

Pay calculation:45 hours base pay ($450) + bonus ($40) = $490.00ASTHE = $490/45 hours = $10.89Overtime premium = $10.89 x 0.5 = $5.45 x 5 = $27.25

Total gross pay = $517.25

Nonexempt Employees (3 years)

Record Keeping Requirements

1. Full Name2. Home Address3. Zip Code4. Birth Date (if under 19)5. Gender6. Occupation in Which

Employee is Employed7. Time and Date on Which

the Work Week Begins8. Regular Hourly Rate of

Pay9. Basis on Which Wages are

Paid10. Hours Worked Each Day

11. Total Hours Worked Each Work Week

12. Total Daily or Weekly Straight Time Earnings or Wages

13. Total Weekly Overtime Compensation

14. Total Deductions from Wages for Each Pay Period

15. Total Wages Paid Each Pay Period

16. Date of Payment and the Pay Period Covered by the Payment

Exempt Employees (3 years)Some of the same:

1. Full Name2. Home Address3. Zip Code4. Birth Date (if under 19)5. Gender6. Occupation in Which Employee is Employed

As well as records reflecting basis on which wages are paid, including enough to permit calculation, for each pay period, of the employee’s total compensation (wages, fringe benefits, etc.)

Record Keeping Requirements

Exempt = normally salaried, no overtime Nonexempt = normally hourly, entitled to

overtime Duties and role control, not title or

“designation”. You may have a salaried employee who is

nonexempt and therefore entitled to OT What if employee performs both exempt and

nonexempt work? What if exempt puts in significantly more

hours than anticipated?

Exempt vs. nonexempt

Determining exemption category

When in doubt….

Burden of proof is on employer to justify exempt status

Employer must demonstrate: Paid minimum salary of $455 / week (for most)

without deductions based on quantity or quality of work

AND

Primary duties fall into one or more exempt categories, including: Executive Administrative Learned or creative professional Highly Compensated Computer professional Outside sales

General requirements for exempt status

Compensated on a salary basis at a rate not less than $455/week

Primary duty must be managing the enterprise or managing a customarily recognized department or subdivision;

Must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent;

Must have the authority to hire or fire other employees, or whose suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight

Executive Standard Duties Test

Compensated on a salary or fee basis (as defined by the regulations) at a rate not less than $455/week

Primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and

Primary duty includes the exercise of discretion and independent judgment with respect to matters of significance i.e. “comparison and evaluation of possible courses of conduct and acting or making a decision.

Often employees who are responsible for significant staff functions or key employees without supervisory duties (e.g., accounting, HR, public relations)

Administrative Standard Duties Test

Learned Professional Compensated on a salary basis not less than $455 per week

Primary duty must be the performance of work requiring knowledge of an advanced type (defined as work which is predominantly intellectual in character, and which includes work requiring the consistent exercise of discretion and judgment)

Advanced knowledge must be in a field of science or learning

Advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction

Professional Standard Duties Test

Creative Professional Compensated on a salary basis not less than $455 per

week

Primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor

Professional Standard Duties Test (cont.)

Highly Compensated

Perform office or non-manual work; Paid total annual compensation of $100,000

or more (including at least $455 each week); AND

Customarily and regularly perform at least one of the duties of an exempt executive, administrative or professional employee identified in the standard tests for those exemptions.

Computer Employee Standard Duties Test

Compensated either on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week OR if compensated on an hourly basis, at a rate not less than $27.63 per hour

Must be employed as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field performing specific duties described in the law and regulations (generally not your office IT person)

Primary duty must be making sales or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer, and

The employee must be customarily and regularly engaged away from the employer’s place of business

Outside Sales Employees Standard Duties Test

Losing Exempt Status: Salary Basis

No reductions for variations in quality / quantity work

Exceptions: Personal leaves for one or more full days Full day absences for sickness/disability if part of

bona fide plan Penalties for infractions of major safety rules Unpaid full day disciplinary suspensions for

infractions of written workplace conduct rules Employees commencing or leaving employment

mid-week Intermittent FMLA leave

When is fining an employee justified?

Safe Harbor Protections

Clearly communicated policy

Prohibit improper pay deductions - good faith commitment to comply with law

Include complaint mechanism

Reimburse employees for improper deductions

Traps – Be Wary Docking of pay/ out of PTO Time cards with employee signature Take home training Blended rates Supervisors doing non-exempt work “Donning and doffing”- prep and cleanup

time Bonus awards for non-exempts

Traps, continued On call time Travel Time Employee Volunteers Tip credit First responders Comp time

Normal commuting time does not count as time worked Additional travel time to client work site is compensable Travel may be compensable if person is performing

work (driving, piloting, writing reports, etc) If person is passenger or free to engage in other

activities, not necessarily compensable Time at conferences and trade shows Normal work schedule is critical

Person normally works 8am – 5pm All travel within 8am – 5pm is paid, regardless of day

of week Time outside of these hours (regardless of day of

week) is not required to be paid if work not performed

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Travel Time-Portal-to-Portal Act provides guidance

Travel Pay

Non-Discrimination Laws

Civil Rights Act; protected class concept; difference between disparate treatment and disparate impact – that concept applies to compensation and benefits as well.

Equal Pay Act / Fair Pay Act – Started as gender based, now expanded to include all forms including Title VII, ADEA, ADA. Expanded time frame to 180/300 days to each paycheck

Various tax and work program/disadvantaged and socio-economically affected groups

Work Opportunity Tax Credit (and laws similarly named): applies tax credits based on hiring certain kinds of disadvantaged workers; defined by regulation.

Other legislation

Dodd Frank Wall Street Reform and Consumer Protection Act Executive compensation disclosure Compensation committee

independence Clawback provision Shareholder voting rights

IRS Intermediate Sanctions

Job Analysis

Definition: systematic study of jobs to determine activities, relationships, qualifications, conditions.

Used in multiple ways: - Job design and organization structure- Recruitment, selection, placement- New employee orientation and training- Performance appraisal- Career development- Identifies job families- Compliance (FLSA, ADA as examples)

Documented output is a job description.

Methods of Conducting Job Analysis

Observation Interview Open ended or highly structured questionnaire Work diary or log PAQ (Position Analysis Questionnaire) FJA – functional job analysis (government),

using DOT as basis (Dictionary of Occupational Titles)

Benchmark job concept

Job Descriptions

Elements typically include:

- Summary (purpose)- Essential functions, non-essential functions- Knowledge, skills, abilities- Any supervision- Working conditions- Success measures or performance factors (rare)- Disclaimer; standard- ADA requirements

Job Evaluation Method to determine worth/value of a job by a hierarchical

approach- Internal vs. external equity- Can be quantitative or qualitative. Types: 1. Ranking; simple ranking based on organizational hierarchy2. Quantitative; Factor comparison, point factor3. Paired Comparison; Ranking using paired comparison (two jobs,

compared to each other, a pair at a time, including job evaluated compared to every other job rated)

4. Classification; using benchmark jobs as basis, organizing into a hierarchy with grades

5. Market based evaluation (not a true internal factor job evaluation system, is based on external data)

Job Evaluation Methodology Examples

Point Factor: Typically evaluates compensable factors on a scale, with total points added at end of the process. Uses a management / HR committee to evaluate, may be HR alone. Most widely recognized in the period of widespread use was Hay Guide Chart Profile method.

Typical factors may include job knowledge (education, experience); complexity (degrees of how routine duties are or freedom to solve novel problems, with a continuum; and impact, results or accountability – the measured or observed impact of a job on revenue, cost, or things like efficiency, customer interactions, etc.)

Education Example – Job Requirements and Rating Scale (This is a compensable factor, one of several):

High school = 5 pointsPost secondary = 10 pointsBachelor degree = 15 pointsMasters degree = 20 pointsPh.D. = 25 points

Job Evaluation Methods

Method Pros Cons

Ranking Simple to use, basic Limited to small organizations, limited value

Classification Basic, allows internal hierarchy, common in public sector

Limited value

Paired Comparison Easy to use Subjective, only use in small organizations

Factor Comparison Organization specific, ties to values and culture

Subjective, assumes proper factors determined and evaluated

Point Factor Provides perception of “scientific method”, helps with unusual positions

Complex, requires training and administration with committees, may not tie to market

Market based Assists with recruitment and retention, easy to understand

Must purchase surveys, leveling and aging, assume matches

Job Pricing and Developing a Pay Structure

Pay surveys: sources include government, published, purchased, custom. Some are collected by geography, occupational type, company size, industry, for example.

Considerations: design factors; which information is key?; application? Need to know and understand basic statistics. Averages, weighted and simple; median. Know basic concepts of advanced statistics; frequency tables, regression formula – simple or linear.

Data for example: Assume rates reported for a given job are as follows –

$25,000 – 1 incumbent$28,000 - 2 incumbents$30,000 – 3 incumbents$36,000 – 4 incumbents

Simple Average: Take the sum of the rates divided by 4, the number of reporting organizations – this results in a $29,750 rate. This is also called unweighted simple or

non weighted average.

Job Pricing (cont’d)

Using same example, a weighted average is derived by using the number

of incumbents in the calculation.

1 x $25,000 = $25,0002 x $28,000 = $56,0003 x $30,000 = $90,0004 x $36,000 = $144,000

Sum = $315,000. Divide by 10 (total incumbents). Weighted avg. is $31,500.

Median = middle most point in data set. 50% of data falls above the median and 50% falls below it. We have 10 incumbents. So 5 will be above, 5 below. Median is $30,000.

Job Pricing (cont’d) Calculating the median:

1. Count total number of elements given (10).2. Arrange the elements in ascending order. $25,000 to $36,000, enter

one for each incumbent. This is also called a frequency distribution.3. 10 elements divided by 2 (since half fall above and half below) = 5. 4. Numbers in the fifth and sixth position are both $30,000. 5. $30,000 + $30,000 = $60,000/2 = $30,000. This is the median.

Percentiles: good surveys also report 25th and 75th, and may report other points besides the median, simple and weighted average. Also, good surveys define specific terms and methodology for sampling size; must be statistically significant to report (i.e., enough data to be valid).

Job Pricing (cont’d)

Some surveys use statistical regression, utilizing a frequency table and frequency distribution to graphically plot and calculate a correlation to metrics, like company size. This is common in executive pay, where there is a historical correlation between pay levels and size of the

organization.

- Simple regression uses a frequency table, plots a trend line.

- Linear regression uses a formula to predict pay along the trend line.

Pay Structures: Grades and Ranges

Example range: $16,000 - $20,000 - $24,000 (Min) (Midpt) (Max)

80% of Midpoint = Minimum100% = Midpoint of range120% of Midpoint = Maximum

Traditionally, midpoint is used as the theoretical point at which a fully competent and qualified employee is paid, assuming the right amount of previous and/or current organization experience. It is usually attained over a period of time.

Range spread is Maximum – Minimum / Minimum

Broadbanding – An Alternative

Concept is to widen ranges beyond traditional, for specific reasons. Leads to fewer grades, less employee “dynamics” in associating their

pay with the grade number, or the perception relative to a midpoint. Leads to more mobility, easier to move people around. At some point, the range loses its significance – so wide as to be

difficult to explain.

Example

$16,000 - $27,200 (Uses only a minimum and maximum) – a 70% spread

Relies heavily on market survey data to pinpoint where to pay someone within.

Some terms used in compensation Compa-ratio; term used to describe actual pay relative to the

range assigned. Salary divided by midpoint is traditional calculation.

Red Circled: pay is over the range maximum. Can solve via freeze/lump sum in lieu of base merit raise; lump sums also called “performance bonus” sometimes.

Green Circled: pay is under the range minimum.

Pay Compression: new hire gets higher starting salary than existing employees. This is typically a market phenomena or may occur with first line supervisors.

Base Pay

Various ways to provide: - Single pay rate (or flat rate)- Time based- Time based with performance element

Performance Based or Merit Pay - Historically the philosophy most organizations choose. But there are

challenges that are inherent, not easily solved. Inextricably tied to management practices.

Productivity Based (historical, when economy was more manufacturing based)- Straight and differential piecework: examples. - Historical perspective; times have greatly changed prevalence.

Person BasedFocus is on the worker, not a system. Includes “skill based pay” and “competency

based” pay.

Solutions to Compensation Problems

Management training. Strengthen pay link to performance. Truly differentiate higher performers. Recognition and non cash rewards

- Observation: A guide chart is helpful but is just an administrative aid, and most often used to control the budget as much as anything.

- Business cycles make pay for performance even more of a challenge.

- Does money motivate? See next slide and topic.

Motivation/Pay/Performance

Historically, several management and industrial psychology theories as shown on following slide. Does money motivate? A decades-long debate.

Different thought leadership continues, some historical, some present. See next slide

Class poll: Does merit pay work?

Key Motivation Theories –

Maslow’s hierarchy of needs. Pyramid. Theory is that where someone is on the pyramid will determine what reward will be effective with that person.

Hygiene Motivator – Herzberg. Says there are hygiene factors in the workplace that affect performance such as policies and how administered; supervisory practices; working conditions.

Expectancy Theory – Vroom. Expectancy, Valence, Instrumentality.

Expectancy – estimate of probability that effort produces desired outcome Valence – how much the goal is valued by the person Instrumentality – what is likelihood that if the effort is there, reward will actually

occur

Equity Theory – Adams. Fairness is a matter of perception, based on perceived equity or inequity, this applies to pay as well as other aspects of employment relationship. Inputs = Outputs

Daniel Pink - DRIVE

Other Forms of Pay: Differential/Other Miscellaneous

Schedule/shift On call / call back Emergency shift Geographic differential Hazard pay Supplemental – any wages beyond base pay.

Required and non-required OT. Holiday and other premium pay. Emergency shift. Reporting pay. Travel pay.

NOTE: In the sample testing on the HRCI website, the terms “differential pay” and “variable pay” are interchangeable

Pay Plans for Selected Groups

Executive compensation. In today’s news, big-time. Mix is now in question, amount debated. Gets to very essence of a capitalist, free enterprise system.

Short term incentives Long term incentives Sarbanes Oxley Golden handcuffs Golden parachutes Section 409a Executive perquisites (perks) Taxation is key issue. Deferred compensation and non-

qualified deferred compensation. Must be “substantial risk of forfeiture” to avoid immediate taxation. Often placed in a Rabbi Trust.

Equity based compensation

Stock options Incentive Stock Options Non-Qualified Options

Restricted stock Stock Appreciation Rights Phantom Stock FAS 123R deals with expensing treatment May or may not have added performance

element. Appreciation of value is the key. No real

downside to employee, lots of upside potential.

Sales compensation

Sales - Straight salary- Straight commission (commission is

compensation expressed as a % of sales)- Draw- Combination (bonus/commission also can

be combined, terms used interchangeably at times but technical definitions are different)

Pay for Professionals and Outside Boards of Directors

Dual track concept – career and pay hierarchy structure; designed for technical populations.

Hot skill premium – additional pay based on current demand for limited skilsets.

Maturity curve surveys were originated by academic institutions – measuring pay correlated to experience post-degree, by occupation.

Boards of Directors – Outside Directors- Cash retainer; sometimes flat, other times broken down into meetings,

extra fees for chairing committees, etc.- Incentives (long term, not short term – a conflict with role)- Benefits – rare; larger companies only, for the most part- Perquisites’s

Recent years have brought Board role and pay into focus, like executive compensation.

Incentive Pay

Be careful in design; implementation also key, particularly in first measurement and payout period. Involve cross-functional representation to cover all business aspects.

Organizational readiness is key; circumstances must be right to implement.

Individual, group, organization-wide; all can be used in combination as well.

Forms of currency and time horizon are important considerations – overlap into benefits and capital accumulation, at some point blurring the lines between cash or direct compensation and indirect. If used for retention, represents form of “golden handcuffs”. Be careful with that. Be familiar with Deferred Compensation plans – those that defer some or all of pay into the future.

Line of sight is important concept; addresses the need to have employee ability to relate to the incentive by understanding specifically what they can do/how they can control and impact the results on which the incentive is based.

Gainsharing Plans

Scanlon – production environment. Focus on operations and cost. Employee involvement, committee. Formula based with discretion as to elements. When formula shows a dollar gain to company, an incentive pool is calculated and the money is then split between company and employees.

Improshare – industrial engineering based. Uses past production records as baseline, measures improvement in productivity. If a gain results that can be measured in dollars, it’s split again between the two parties.

Halsey – time based. Incentive pay occurs when job completion occurs in a time faster than standard, dollar gain then measured and workers share in gain with company. Only time based, not productivity, though they are linked.

Caution: Overlap today into labor relations laws and use of employee committees must be done very carefully so as not to violate NLRB.

Historical basis – evolved during industrial times of the 50’s, 60’s and 70’s.

Incentive Plan Design Considerations

Alignment to organization values and strategies and direction.

Be careful about transplanting. Plans don’t necessarily work from organization to organization.

Must consider how data will be captured and administered, in up front planning.

First year is key – reasonable chance of payout is important.

Communication and understanding is key. Be careful what you ask for…..

International Compensation- SPHR

Key considerationsRegulations and tax issues vary

greatly from country to countryStandardization vs. localizationCultural issuesCompetitive labor marketCollective bargainingEconomic issuesTaxation

International, continued

Expatriate concept Duration of assignment Funding

Balance sheet Ad hoc / negotiation Pure locationization Higher of home or host country Lump sum Cafeteria

Totalization agreement Home vs host country

Payroll Administration Gross earnings = earnings before taxes and other

deductions. Taxable wages and witholding Know how to calculate overtime, other premium pay;

state and local tax administration compliance; required reporting to governmental authorities (identification verification, agency notifications, wage garnishment orders).

Voluntary deductions (union dues, health insurance, flexible spending accounts, retirement, charity)

Involuntary deductions (child support, garnishments, tax levies)

Payroll, continued

For our purpose, focus on knowing the options available and when each is typically used.

Administration In house Service bureau Outsourced

Considerations Cost Security People Compatibility

Administrative Controls

Salary ranges, guidelines, management of these. Green and red circling Pay compression Lump sum

Budgeting process is usually partnering with finance/accounting for forecasting compensation amounts, which are fixed versus variable, etc.

Auditing and reporting system must be in place, no matter if manual to some extent, or else visibility is lost and controls are considered weak, exposed.

One can always apply the “how’s it all working?” question.

Communication of Compensation Programs

Trend toward transparency

Public companies have SEC filings and disclosure rules through proxy statements.

Voluntary communications – most do some. Manuals, references in handbooks, manager training content; balance of too much versus too little.

Cannot discipline employees for discussing compensation

Dealing with concerns – develop a philosophy. Communicate and arm managers with this, proactively. A written policy is somewhat common.

Administrative Controls /Evaluating Whole System

Know the purposes of budgeting and where compensation planning fits.

Most companies have at least some compensation philosophy, policies and procedures in writing.

Merit pay means existence of performance measurement system

Is the program/system Effective Competitive (market), Equitable (fair and consistent in administration) Compliant with the regulations affecting compensation?

Key terms to be familiar with

Balance sheet Benchmark job Blended rate calculation Call back pay Compa ratio Comparable worth Compensable factors Consumer price index (CPI) Cost of living adjustment (COLA) Deferred compensation Draw Dual ladder career progression Equal Pay Act Emergency shift pay Equity Exempt Expatriates

Terms External Equity Fair Labor Standards Act (FLSA) Fair Pay Act Flat rate pay Frequency distribution General pay increase Geographic pay differential Golden handcuffs Golden parachute Green circle Hazard pay Incentive pay Independent contractor Internal equity Line of sight Long term incentive Lump sum increase

Terms Market pricing Mean Median Merit pay Minimum wage Mode Nonexempt Nonqualified deferred compensation On call pay Overtime pay Paired comparison method Pay compression Pay grades Performance pay Perquisites

Terms Person based pay Phantom stock Point factor method Portal to Portal Act Premium pay Prevailing wage Rabbi Trust Red circle Repatriation Restricted stock Salary structure Sarbanes Oxley Act (SOX) Service Contract Act Shift pay or shift differential

Terms

Short term incentive Stock options Total rewards Totalization agreements Travel pay Unweighted average Variable pay Work opportunity tax credit

Your questions?

Larry Morgan

952-210-0742

larry.morgan@orionhr.com

www.orionhr.com