Final Exam Study Guide
Chapter 12
1. Identify forms of direct and indirect compensation
Indirect:
- Time not worked
Vacations
Breaks
holidays
- Insurance plans
Medical
Dental
life
- Security plans (pensions)
- Employee services
Educational assistance
Recreational programs
Direct:
- Wages and salaries
- Commissions
- Bonuses
- gainsharing
2. Describe the difference between exempt and nonexempt jobs
Fair pay Rules (2004)
- Overtime must be paid to employees earning less than $455 a week, or
$26,660 annually
- To be exempt, Administrative personnel must have primary duties that
include the exercise of discretion and independent judgement with respect
to matters of significance.
White collar exemptions from the FLSA overtime provisions
3. Explain how organizations design pay structures related to jobs.
Job evaluation: administrative procedure for measuring relative internal worth of
the organization’s jobs
- Job evaluation process:
1. Define the jobs
2. Identify which factors are most important to the organization
3. Rank the jobs based on the factors chosen
4. Establish a job hierarchy
5. Establish and price the salary structure
- 5 characteristics of a job that the organization values and chooses to pay
for:
1. Experience
2. Education
, 3. Complexity
4. Working conditions
5. responsibility
Pay policy line: graphed line showing the mathematical relationship between job
evaluation points and pay rate.
Pay grades: sets of jobs having similar worth or content, grouped together to
establish rates of pay.
Pay ranges: a set of possible pay rates defined by a minimum, maximum, and
midpoint of pay for employees holding a particular job or a job within a particular
pay grade.
4. What is the cause of “red circle” rates of pay?
Red-circle rate: pay at a rate the falls above the pay range for the job.
5. What is broadbanding?
Chapter 13
1. What are the requirements for effective incentive plans?
Performance measures are linked to the organization’s goals.
Employees believe they can meet performance standards.
The organization gives employees the resources they need to meet their goals.
Employees value the rewards given
Employees believe the rewards system is fair.
The pay plan takes into account that employees may ignore any goals that are not
rewarded.
2. Identify the types of and reasons for implementing individual incentive plans.
Piecework rates: a wage based on the amount workers produce
- Straight piecework plan: incentive pay in which the employer pays the
same rate per piece, no matter how much the worker produces.
- Differential Piece Rate: incentive pay in which the piece rate is higher
when a greater amount is produced.
Standard hour plan: an incentive plan that pays workers extra for work done in
less than a preset “standard time”.
- Encourages employees to work as fast as they can, but not necessarily to
care about the quality or service.
Merit pay: a system of linking pay increases to ratings on performance
appraisals.
Performance bonuses: not rolled into base pay, the employee must re-earn them
during each performance period. Sometimes the bonus is a one time reward.
Sales Plans
- Straight salary
- Straight commission
- Salary and commission combinations
Chapter 12
1. Identify forms of direct and indirect compensation
Indirect:
- Time not worked
Vacations
Breaks
holidays
- Insurance plans
Medical
Dental
life
- Security plans (pensions)
- Employee services
Educational assistance
Recreational programs
Direct:
- Wages and salaries
- Commissions
- Bonuses
- gainsharing
2. Describe the difference between exempt and nonexempt jobs
Fair pay Rules (2004)
- Overtime must be paid to employees earning less than $455 a week, or
$26,660 annually
- To be exempt, Administrative personnel must have primary duties that
include the exercise of discretion and independent judgement with respect
to matters of significance.
White collar exemptions from the FLSA overtime provisions
3. Explain how organizations design pay structures related to jobs.
Job evaluation: administrative procedure for measuring relative internal worth of
the organization’s jobs
- Job evaluation process:
1. Define the jobs
2. Identify which factors are most important to the organization
3. Rank the jobs based on the factors chosen
4. Establish a job hierarchy
5. Establish and price the salary structure
- 5 characteristics of a job that the organization values and chooses to pay
for:
1. Experience
2. Education
, 3. Complexity
4. Working conditions
5. responsibility
Pay policy line: graphed line showing the mathematical relationship between job
evaluation points and pay rate.
Pay grades: sets of jobs having similar worth or content, grouped together to
establish rates of pay.
Pay ranges: a set of possible pay rates defined by a minimum, maximum, and
midpoint of pay for employees holding a particular job or a job within a particular
pay grade.
4. What is the cause of “red circle” rates of pay?
Red-circle rate: pay at a rate the falls above the pay range for the job.
5. What is broadbanding?
Chapter 13
1. What are the requirements for effective incentive plans?
Performance measures are linked to the organization’s goals.
Employees believe they can meet performance standards.
The organization gives employees the resources they need to meet their goals.
Employees value the rewards given
Employees believe the rewards system is fair.
The pay plan takes into account that employees may ignore any goals that are not
rewarded.
2. Identify the types of and reasons for implementing individual incentive plans.
Piecework rates: a wage based on the amount workers produce
- Straight piecework plan: incentive pay in which the employer pays the
same rate per piece, no matter how much the worker produces.
- Differential Piece Rate: incentive pay in which the piece rate is higher
when a greater amount is produced.
Standard hour plan: an incentive plan that pays workers extra for work done in
less than a preset “standard time”.
- Encourages employees to work as fast as they can, but not necessarily to
care about the quality or service.
Merit pay: a system of linking pay increases to ratings on performance
appraisals.
Performance bonuses: not rolled into base pay, the employee must re-earn them
during each performance period. Sometimes the bonus is a one time reward.
Sales Plans
- Straight salary
- Straight commission
- Salary and commission combinations
