aPHR test study guide – Compensation and Benefits (14%)

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Total Rewards / Returns
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All returns to an employee, including financial compensation, benefits, oportunities for social interaccion, security, status and recognition, work variety, appropriate workload, importance of work, authority/control/autonomy, advancement opportunities, feedback, hazard-free working conditions, and opportunities for personal and professional development. An effective compensation system will utilize many of these returns
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Employee benefits
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Compensation in forms other than cash. Benefits contribute to attracting, retaining, and motivating employees.
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Employee benefits required by law
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Social security, Unemployment insurance, Worker’s Compensation Insurance, Family and Medical Leave, Health Care
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Social security
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Is the Federal Old age, Survivors, Disability, and Health Insurance (OASDHI) program, which combines old age ( retirement) insurance, survivors insurance, disability insurance, hospital insurance ( Medicare Part A) and supplementary medical insurance ( Medicare Part B) for the elderly
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Unemployment Insurance
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A federal mandated program to minimize the hardships of unemployment through payments to unemployed workers, help in finding new jobs, and incentives to stabilize employment
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Experience Rating
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The number of employees a company has laid off in the past and the cost of providing them with unemployment benefits The size of the unemployment insurance tax imposed on each employer depends on the employer’s experience rating
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Conditions workers must meet to receive unemployment insurance benefits
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1- demonstrating they have been employed ( often 52 weeks or four quarters of work at a minimum level of pay ) 2- They are available for work 3- They are actively seeking work ( includes registering at the local unemployment office) 4- They were not discharge for cause ( such as willful misconduct ), did not quit voluntarily, and are not out of work because of a labor dispute ( such as a union member on strike)
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Worker’s Compensation
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State programs that provide benefits to workers who suffer work related injuries or illnesses, or to their survivors
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(FMLA) Family and Medical Leave Act
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Federal law requiring organization’s with 50 or more employees to provide up to 12 weeks of unpaid leave after childbirth or adoption; to care for a seriously ill family member, or for an employee’s own serious illness; or to take care of urgent needs that arise when a spouse, child, or parent in the National Guard or Reserve is called to active Duty
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Optional benefits Programs
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Other types of benefits are optional. These include various types of insurance, retirement plans, and paid leave,
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Time Off Benefits
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-lunch and Rest breaks – vacation – holidays – family leave – medical and sick leave – paid time off – military reserve time off – jury duty leave – personal business leave –
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Paid Leave
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The mayor category of paid leave are : Vacations, holidays, sick leave. Employers also should establish policies for other situations that may require time off. Org often provide for paid leave for jury duty, funerals of family members, and military duty. Time off to vote, or donate blood.
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Group insurance
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Medical, life, and disability insurance
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Medical Insurance
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The policies typically cover three basic types of medical expenses: hospital expenses, surgical expenses, and visits to physicians . Some employers offer additional coverage, such as dental vCard, vision care, birthing centers, and prescription drugs programs . Employers that offer medical insurance must meet the requirements of the Consolidated Omnibus Budget Reconciliation Act ( COBRA). This federal law requires employers to permit employees to extend their health insurance coverage at group rates for up to 36 months following a qualifying event ( termination, except for gross misconduct, a reduction in hours, and the employee death
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Health Maintenance Organization (HMO)
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A health care plan that requires patients to receive their medical care from the HMO’s health care professionals, who are often paid a flat salary, and provides all services on a prepaid basis
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Preferred Provider Organization (PPO)
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A health care plan that contracts with health care professionals to provide services at a reduce fee and gives patients financial incentives to use network providers
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Flexible Spending Account
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Employee-controlled pretax earnings set aside to pay for certain eligible expenses such as health care expenses, during the same year
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Employee Wellness Program (EWP)
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A set of communications, activities, and facilities designed to change health- related behaviors in ways that reduce health risks
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Life insurance
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Employers may provide life insurance to employees or offer the opportunity to buy coverage at low group rates. With a term life insurance policy, if the employee dies during the term of the policy, the employees beneficiaries receive a payment called the death benefit.
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Disability insurance
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Employees risk loosing their incomes if a disability makes them unable to work. disability ins Provides protection against this loss of income
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Short-Term Disability Insurance
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Insurance that pays a percentage of a disabled employee’s salary as benefits to the employee for six months or less
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Long -Term Disability Insurance
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Insurance that pays a percentage of a disabled employee’s salary after an initial period and potentially for the rest of the employees life
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Long -Term Care Insurance
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These policies provide benefits toward the cost of long-term care and related medical expenses
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Retirement Plans
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May be contributory plans or noncontributory plans
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Contributory plan
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Retirement plans funded by contributions from the employer and employee
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Noncontributory Plan
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Retirement plan funded entirely by contributions from the employer
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Defined-Benefit Plan
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Pension plan that guarantees a specified level of retirement income . Usually the amount of this defined benefit is calculated for each employee based on the employee’s years of service, age, and earning levels. Define-Benefit plans must meet the funding requirements of the EMPLOYEE RETIREMENT INCOME SECURITY ACT ( ERISA)
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Defined-contribution Plan
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Retirement plan in which the employer sets up an individual account for each employee and specifies the size of the investment into that account
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Kinds of Define- contribution plans available
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– MONEY PURCHASE PLAN- The employer specifies a level of annual contributions. The contributions are invested, and when the employee retires, he or she is entitled to receive the amount of the contributions plus the investment earnings “Money purchase ” refers to the fact that when employees retire, they often buy an annuity with the money, rather than taking it as a lump sum – PROFIT-SHARING AND EMPLOYEE STOCK OWNERSHIP PLANS- incentive pay may take the form of profit sharing and Employee Stock Ownership Plans ( ESOPs) These payments maybe set up so that the money goes to retirement plans – SECTION 401 (k) PLANS – employees contribute a percentage of their earnings, and employers may take matching contributions. The amount employees contribute is not taxed as part of their income until they receive it from the plan.
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Cash Balance Plans
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Retirement plan in which the employer sets up an individual account for each employee and contributes a percentage of the employee’s salary; the account earns interest at a predefined rate. The difference between this one and a 401(k) is that all the contributions come from the employer. If employees change jobs, they generally can roll over the balance into an individual retirement account ( IRA) It’s an increasingly popular way of combine the advantages of defined-benefit plans and defined-contribution plans
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Government requirements for vesting and communication
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ERISA guarantees employees that when they become participants in a pension and work a specified number of years, they earn a right to a pension upon retirement. These rights are called vesting rights. Employees whose contributions are vested have met the requirements ( enrolling and lengths of service) to receive a pension at retirement age, regardless of whether they remained with the employer until that time.
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Minimum Vesting schedules required
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1- the employer may vest employees after five years and may provide 0 vesting until that time 2- the employer may vest employees over a three- to seven-year period, with at least 20% vesting in the third year and at least an additional 20% in each year after the third year
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Summary Plan Description
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Report that describes a pension plan’s funding, eligibility requirements, risks, and other details. The employees must receive this report within 90 days of entering a plan.
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Family-friendly Benefits
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Include policies like family leave, child care, college saving ( like 529 saving plans) elder care,
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Tax Treatment of benefits
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The IRS provide more favorable tax treatment of benefits classified as “qualified plans”. The details vary from one type of benefit to another. In the case of retirement plans, The advantages include the ability for employees to to immediately take a tax deduction for the funds they contribute to the plans, no immediate tax in employees for the amount the employer contributes, and tax free earnings on the money in the retirement fund .
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Total Reward Statement
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A statement displaying for each employee a personalized accounting of the employee’s pay plus the value of each benefit he or she is receiving.
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Separation Benefits
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-Severance pay – Outplacement assistance – Resume Assistance – Benefits Continuation
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Compensation
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Refers to all forms of financial returns and tangible services and benefits employees receive as part of an employment relationship
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Job structure
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The relative pay for different jobs within the organization
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Payroll
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Payroll is the process by which employers pay an employee for the work they have done.
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Pay level
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The average amount (including wages, salaries, and bonuses) the organization pays for a particular job
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Pay structure
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The pay policy resulting from job structure and pay-level decisions. Helps the organization achieve goals relate to employee motivation, cost control, and the ability to attract and retain talented human resources. Establishing a pay structure simplifies the process of making decisions about individual employees’ pay by grouping together employees with similar jobs Human resource professionals develop this pay structure based on legal requirements, market forces, and organization’s goals
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Legal Requirements for pay
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EEO- the goal is to employers to provide “equal pay for equal work” Minimum Wage- the lowest amount that employers may pay under Federal or state law, stated as an amount of pay per hour FLSA- fair labor standard act establishes a minimum wage Overtime Pay- applies to the hours worked beyond 40 in one week
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Overtime rate
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The overtime rate under the FLSA is one and a half times the employee’s usual hourly rate , including any bonuses and piece -rate payments ( amounts paid per item produced)
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Exempt employees
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Managers, outside sales-people, and any other employee not covered by the FLSA requirement for overtime pay ( executive, professional, administrative, and highly compensated white- collar employees. Depends on the employee’s job responsibilities,salary level ( at least $455 per week ), and salary basis ( The emplome is paid a given amount regardless of the number off hours worked or quality of the work )
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Salary threshold
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Salary below which employees must be paid 1.5 times their regular rate of pay when they work 40 hours a week
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Nonexempt employees
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Employees covered by the FLSA requirements for overtime pay.
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Child labor
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The FLSA restricts the use of child labor with the aims of protecting children’s health, safety, and educational opportunities. The restriction apply to children younger than 18 years. Children 16 and 17 may not be employed in hazardous occupations defined by the Department of Labor, such as mining, meatpacking, and certain kind of manufacturing using heavy machinery. Children aged 14 and 15 May work only outside schoolhouse in jobs defined as nonhazardous and for limited time periods
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Prevailing wages
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Two additional federal laws , the Davis-bacon act of 1931 and the Walsh-Healy Public Contracts Act of 1936, govern pay policies of federal contractors . Under these laws, federal contractors must pay their employees at rates at least equal to the prevailing wages in the area. The calculation or prevailing rates must be based on 30% of the lisa labor force. Davis-Bacon covers construction contractors that receives more than $2000 in federal money and Walsh-Healy covers all government contractors receiving $10000 or more in federal funds
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Hourly wage
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Rate of pay for each hour worked
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Piecework Rate
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Rate of pay for each unite produced
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Salary
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Rate of pay for each week, month, or year worked
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Pay policy line
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A graphed line showing the mathematical relationship between job evaluation points and pay rate
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Job evaluation
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An administrative procedure for measuring the relative internal worth of the organization’s jobs
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Pay Rates
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Regular Rate
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Is determined by dividing total earnings in the work week by the total numbers of hours worked in the workweek. Not included : gifts,npaymentsvforbtimebnotbworked, reimbursement for expenses, discretionary bonuses, profit sharing plans,retirement and insurance plans, overtime payments, stock options
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Variable pay
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Pay tied to productivity or some measure tha can vary with the firm’s profitability
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Pay grade
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One of the classes, levels or groups into which jobs of the same or similar values are grouped for compensation purposes . All jobs in a pay grade have the same pay range- maximum, minimum, and midpoint
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Pay Range
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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
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Pay Differential
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Adjustments to a pay rate to reflect differences in working conditions or labor markets
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Delayering
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Reducing the number of levels in the organization’s job structure
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Skill-based pay systems
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Pay structures that set pay according to the employees’ level of skills or knowledge and what they are capable of doing
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Incentive pay
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Forms of pay linked to an employee performance as an individual, group member, or organization member. This form of pay is specifically designed to energize, direct, or control employee behavior
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Effective incentive plans meet the following requirements
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1- performance measures are linked to the organization’s goal 2- employees believe they can meet performance standards 3- the organization gives employees the resources they need to meet their goals 4- employees value the rewards given 5- employees believe the reward system is fair 6- the pay plan takes into account that employees may ignore any goals that are not rewarded.
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Pay for Individual performance
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Organization’s may reward individual performance with a variety of incentives -Piecework Rates – Standard Hour Plans – Merit Pay – individual Bonuses – Sales commissions
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Piecework Rates
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A wage based on the amount workers produced
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Straight Piecework Plan
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Incentive pay in which the employer pays the same rate per piece, no matter how much the worker produces.
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Differential Piece Rates (also called rising and falling differentials)
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Incentive pay in which the piece rate is higher when a greater amount is produced
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Standard Hour Plan
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An incentive plan that pays workers extra for work done in less than a preset “standard time”
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Merit Pay
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A system of linking pay increases to ratings on performance appraisals
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Bonus
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A bonus is a lump sum payment to an employee in recognition of goal achievement.
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Performance Bonuses
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Like merit pay, performance bonuses reward individual performance, but bonuses are not rolled into base pay. The employee must re-earn them during each performance period
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Retention bonuses
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Is common for organization’s involved in an acquisition to pay retention bonuses—one-time incentives paid in exchange for remaining with the company — to top managers, engineers, top-performing sales people, and information technology specialists
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Sales Commissions
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Incentive pay calculated as a percentage of sales
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Pay for Group performance
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To win group incentives, employees must cooperate and share knowledge so that the entire group can meet its performance targets
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Gainsharing
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Group incentive programs that measures improvements in productivity and effectiveness and distributes a portion of each gain to employees
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Scanlon Plan
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A gainsharing program in which employees receive a bonus if the ratio of labor costs to the sales value of production is below a set standard
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Group bonuses and Team awards
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Group Bonuses reward the members of s group for attaining a specific goal, usually measured in terms of physical outputs. Team Awards are similar but they are more likely to use a broad range of performance measures, such as cost savings, successful completion of a project, or even meeting deadlines
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Pay for Organizational performance
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Incentive pay tied to organizational performance
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Types of pay for Organizational Performance
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-Profit sharing – Stock Options – Employee Stock Ownership Plans ( ESOPs)
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Profit Sharing
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Incentive pay in which payments are a percentage of the organization’s profits and do not become a part of the employees’ Base salary
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Stock Ownership
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A stock ownership plan makes employees part owners of the organization.
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Stock Options
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Rights to by a certain number of shares of stock at a specified price purchasing the stock is called “exercising the option”
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Employee Stock Ownership Plan ( ESOP)
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An arrangement in which the organization distributes shares of stock to all its employees by placing it in a trust managed on the employees behalf
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Balanced Scorecard
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A combination of performance measures directed toward the company’s long-and-short term goals and used as the basis for awarding incentive pay
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Processes that make incentives work
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-participation in decisions- employees have hands-on knowledge about the kinds of behaviors that can help the organization perform well -communication-
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Payroll
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Payroll is the process by which employers pay an employee for the work they have done. A

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