UARK MGMT 2103 - Exam 3 –
Questions and Answers
Internal Equity - -in the same firm
-job structure: primary factor when making internal comparisons
- External Equity - -in another firm
-pay level: primary factor when making external comparisons
- Market Pay Surveys - -provides information on going rates of pay among
competing organizations
-3 Issues to Consider:
1. Which employers should be included in the survey?
2. What jobs are included in the survey?
3. If multiple surveys are used, how are all the rates of pay weighted and
combined?
- Benchmarking - -comparing an organizations practices against those of
the competition
- Key Jobs - -benchmark jobs, used in pay surveys, that have relatively
stable content and are common to many organizations
- Non-Key Jobs - -jobs that are unique to organizations and that cannot be
directly valued or compared through the use of market surveys
- Job Evaluation - -a method for matching a salary with a job; administrative
procedure used to measure internal job worth
- Point System of Job Evaluation - -quantitative job evaluation that
determines the relative value of a job by the total points assigned to it
-permits jobs to be evaluated on the basis of compensable factors
(experience, education, complexity..) that constitute a job
- Pay Policy Line - -equation that describes the relationship between a job's
pay and its job evaluation points
- Pay Grades - -jobs of similar worth or content grouped together for pay
administration purposes
- Pay Structure: Pros - --More Grades: job differences more closely relate to
pay differences
-Fewer Grades: fewer, broader grades (broadbanding) increases simplicity
and equality
, - Pay Structure: Cons - --More Grades: job evaluations are costly, time
consuming, and create seemingly artificial distinctions
-Fewer Grades: decreased opportunity for promotion and weaker budgetary
control
- Broadbanding as it Relates to Compensation? - -having extremely wide
salary bands
-encourages the development of broad employee skills because non-
managerial jobs are appropriately valued and skill development is rewarded
100% difference between minimum and maximum salaries
- Executive Compensation Packages - --Base Salary:
-Executive Short-Term iIncentive - annual bonuses based on the pay for-
performance strategy
-Executive Long-Term Incentives: right to buy company stock at discounted
price (executive pay varies with performance of stock market)
-Stock Grants: stock given to employees as compensation/part of
compensation
-Executive Benefits: health insurance, life insurance, retirement plans, paid
vacations, payment of mortgage interest
-Executive Perquisites/Perks
- Equal Pay Act of 1963 - -men and women in the same firm who do "equal
work" must be paid equally
-equal in terms of skill, responsibility, and working conditions (requires a job
analysis)
-if these factors differ, pay can be unequal (differences in training, shift, and
seniority)
- Fair Labor Standards Act of 1938 - -established minimum wage and
overtime pay rate (overtime includes work that an employee is expected to
do)
- Salary - -compensation is computed on the basis of weekly, biweekly, or
monthly pay periods
- Exempt - -those employees (executive, professional, administrative and
outside sales, as well as certain "computer employees") not covered by the
FLSA and not eligible for overtime pay
- Non-Exempt - -employees that are covered under FLSA; includes most
hourly jobs
Questions and Answers
Internal Equity - -in the same firm
-job structure: primary factor when making internal comparisons
- External Equity - -in another firm
-pay level: primary factor when making external comparisons
- Market Pay Surveys - -provides information on going rates of pay among
competing organizations
-3 Issues to Consider:
1. Which employers should be included in the survey?
2. What jobs are included in the survey?
3. If multiple surveys are used, how are all the rates of pay weighted and
combined?
- Benchmarking - -comparing an organizations practices against those of
the competition
- Key Jobs - -benchmark jobs, used in pay surveys, that have relatively
stable content and are common to many organizations
- Non-Key Jobs - -jobs that are unique to organizations and that cannot be
directly valued or compared through the use of market surveys
- Job Evaluation - -a method for matching a salary with a job; administrative
procedure used to measure internal job worth
- Point System of Job Evaluation - -quantitative job evaluation that
determines the relative value of a job by the total points assigned to it
-permits jobs to be evaluated on the basis of compensable factors
(experience, education, complexity..) that constitute a job
- Pay Policy Line - -equation that describes the relationship between a job's
pay and its job evaluation points
- Pay Grades - -jobs of similar worth or content grouped together for pay
administration purposes
- Pay Structure: Pros - --More Grades: job differences more closely relate to
pay differences
-Fewer Grades: fewer, broader grades (broadbanding) increases simplicity
and equality
, - Pay Structure: Cons - --More Grades: job evaluations are costly, time
consuming, and create seemingly artificial distinctions
-Fewer Grades: decreased opportunity for promotion and weaker budgetary
control
- Broadbanding as it Relates to Compensation? - -having extremely wide
salary bands
-encourages the development of broad employee skills because non-
managerial jobs are appropriately valued and skill development is rewarded
100% difference between minimum and maximum salaries
- Executive Compensation Packages - --Base Salary:
-Executive Short-Term iIncentive - annual bonuses based on the pay for-
performance strategy
-Executive Long-Term Incentives: right to buy company stock at discounted
price (executive pay varies with performance of stock market)
-Stock Grants: stock given to employees as compensation/part of
compensation
-Executive Benefits: health insurance, life insurance, retirement plans, paid
vacations, payment of mortgage interest
-Executive Perquisites/Perks
- Equal Pay Act of 1963 - -men and women in the same firm who do "equal
work" must be paid equally
-equal in terms of skill, responsibility, and working conditions (requires a job
analysis)
-if these factors differ, pay can be unequal (differences in training, shift, and
seniority)
- Fair Labor Standards Act of 1938 - -established minimum wage and
overtime pay rate (overtime includes work that an employee is expected to
do)
- Salary - -compensation is computed on the basis of weekly, biweekly, or
monthly pay periods
- Exempt - -those employees (executive, professional, administrative and
outside sales, as well as certain "computer employees") not covered by the
FLSA and not eligible for overtime pay
- Non-Exempt - -employees that are covered under FLSA; includes most
hourly jobs
