Pay for Performance and Employee Benefits
Fundamentals of Human Resource Management：
Pay for Performance and Employee Benefits
中国经济管理大学/中國經濟管理大學
ANNOTATED OUTLINE
I. Individual Employee Incentive Plans
Financial incentives are financial rewards paid to workers whose production exceeds some predetermined standard. Productivity is the ratio of outputs (goods and services) divided by the inputs (resources such as labor and capital). Variable pay usually means an incentive plan that ties a group’s pay to company profitability.
A. Individual Incentive Plans: Piecework Plans Piecework involves paying the worker a sum (piece rate) for each unit he/she produces. Straight piecework entails a strict proportionality between results and rewards regardless of output. With a standard hour plan, the worker gets a premium equal to the percent by which his/her performance exceeds the standard.
B. Employee Incentives and the Law There are several legal implications for incentive pay. For example, under the Fair Labor Standards Act, incentives for non-exempt employees must be included in overtime payments.
C. Merit Pay as an Incentive Merit pay or a merit raise is any salary increase the firm awards to an employee based on his/her individual performance. It is different from a bonus in that it usually becomes part of the employee’s base salary, whereas a bonus is a one-time payment.
D. Incentives for Professional Employees Professional employees are those whose work involves the application of learned knowledge to the solution of the employer’s problems, such as lawyers, doctors, economists, and engineers. Making incentive pay decisions for professional employees can be challenging because such employees are usually paid well anyway.
E. Nonfinancial and Recognition-Based Awards “Recognition programs” usually refers to formal programs such as employee-of-the-month programs. “Social recognition” programs are more informal manager-employee exchanges, including praise and approval. Performance feedback is similar but provides quantitative or qualitative information on performance in order to change the performance or maintain it. Most employers combine both financial and non-financial incentives to motivate employees.
F. Social Media and HR Various apps let employees showcase their awards, contributions, and praise from coworkers.
G. Job Design Job design can be a primary driver of employee engagement. As a result, job design can be a useful part of an employer’s total rewards program.
H. Incentives for Salespeople Sales commission plans may focus on salary, commissions, or some combination.
1. Salary Plan Some companies pay salespeople a fixed salary. This makes sense when the main task involves prospecting or account servicing.
2. Commission Plan Straight commission plans pay salespeople only for results.
I. Incentives for Managers and Executives Executive pay should align with the company’s strategic aims.
1. Sarbanes-Oxley Makes executives and board members personally liable for violating their fiduciary responsibilities to their shareholders.
J. Short-Term Managerial Incentives and the Annual Bonus Is aimed at motivating the short-term performance of managers and executives.
1. Eligibility Usually includes both top and lower-level managers.
2. Fund size Refers to the total amount of bonus money the firm makes available. A nondeductible formula is where employers use a straight percentage (usually of the company’s net income) to create the short-term incentive fund. A deductible formula assumes that the fund should start to accumulate only after the firm has met a specified level of earnings.
3. Individual Performance and Formula Typically, a target bonus (as well as a maximum amount) is set for each eligible position, and the actual award reflects the person’s performance. The employer may use a formula to base the bonus system on, specific measures that are identified as critical to the company.
K. Executive’s Strategic Long-Term and Incentives To avoid a manager boosting short-term profits, employers use long-term incentives to inject a long-term perspective into executives’ decisions.
1. Stock Options The right to purchase a stated number of shares of a company stock at today’s prices at some time in the future.
2. Other Stock Plans The trend is toward tying rewards more explicitly to performance goals.
II. Team and Organization-Wide Incentive Plans
A. How to Design Team Incentives Most organizations tie rewards to some overall standard of group performance. Many employers offer organization-wide incentive plans in which all or most employees can participate, and which generally tie the reward to some measure of company-wide performance.
B. Profit-Sharing Plans Profit-sharing plans are plans in which all or most employees receive a share of the firm’s annual profits. With current profit-sharing or cash plans, employees share in a portion of the employer’s profits quarterly or annually. With deferred profit-sharing plans, the employer puts cash awards into trust accounts for the employees’ retirement.
C. Gainsharing Plans Gainsharing is an incentive plan that engages many or all employees in a common effort to achieve a company’s productivity objectives, with any resulting cost savings (gains) shared among employees and the company.
D. At-Risk Pay Plans Plan that puts some portion of the employees’ normal pay at risk if they don’t meet their goals, in return for possibly obtaining a much larger bonus if they exceed their goals.
E. Employee Stock Ownership Plans (ESOPs) A qualified, tax deductible stock bonus plan in which employers contribute stock to a trust for eventual use by employees.
III. Benefits and Services: The Benefits Picture Today
Benefits are an important part of every employee’s compensation. Employee benefits account for about 37% of wages and salaries. While many employers offer health-care insurance, the costs are rising.
IV. Pay for Time Not Worked and Insurance Benefits
A. Unemployment Insurance All states have unemployment insurance or compensation acts (that follow federal guidelines), which provide for weekly benefits if a person is unable to work through some fault other than his/her own. The benefits derive from an unemployment tax on employers that can range from 0.1% to 5% of taxable payroll in most states. An employer’s unemployment tax rate reflects its rate of personnel terminations.
B. Vacations and Holidays The number of paid employee vacation days and holidays varies considerably from employer to employer. Firms have to address several holiday- and vacation-related policy issues. There are a myriad of laws that affect benefits. Vacation and holiday pay legal issues are discussed.
C. Sick leave Provides pay to employees when they’re out of work due to illness. Most sick leave policies grant full pay for a specified number of permissible sick days. To minimize employees using their sick leave as extensions to their vacations, some employers are repurchasing unused sick leave at the end of the year by paying their employees a daily equivalent sum for each sick leave day not used or creating a leave bank or paid time off (PTO).
D. Social Media and HR Employees posting on social media when they are on sick leave can cause problems for themselves. Employers use several tactics to reduce excessive sick leave absences.
E. Parental Leaves and the Family Medical Leave Act The law stipulates that: 1) private employers of 50 or more employees must provide eligible employees up to 12 weeks of unpaid leave for their own serious illness, the birth or adoption of a child, or the care of a seriously ill child, spouse, or parent; 2) employers may require employees to take any unused paid sick leave as part of the 12-week leave provided in the law; 3) employees taking leave are entitled to receive health benefits while they are on unpaid leave, and 4) employers must guarantee employees the right to return to their previous or equivalent position with no loss of benefits at the end of the leave; however, the law provides a limited exception from this provision.
F. Severance Pay As a one-time payment when terminating an employee, severance is considered a humanitarian gesture, and good public relations. Most managers expect employees to give them at least one or two weeks’ notice if they plan to quit; it therefore seems appropriate to provide at least one or two weeks’ severance if an employee is being dismissed. A severance plan may be subject to ERISA if the employer has a legal obligation to make severance payments, as is the case under some union contracts. Even voluntary plans could become subject to ERISA if the employer identifies it as a plan established or maintained by the employer in employee handbooks.
F. Supplemental Unemployment Benefits These supplement the employee’s unemployment compensation and help the person maintain his/her standard of living for a time while he/she is out of work due to layoffs, reduced workweeks, and relocations. They are becoming more prevalent in union agreements.
G. Insurance Benefits Employers also provide various required or voluntary insurance benefits, such as workers’ compensation and health insurance.
H. Workers’ compensation Refers to the sure, prompt income, and medical benefits provided in work-related accidents to the victims or their dependents, regardless of fault. Every state has its own workers’ compensation law and administrative commission, and some run their own insurance programs. Most states require employers to carry workers’ compensation insurance. Neither the state nor the federal government contributes any funds for workers’ compensation.
1. Controlling Workers’ Compensation Costs The costs of insurance premiums depend on the number and dollar amount of claims, thus minimizing such claims is important. Some ways to reduce such claims is to screen out accident-prone workers, reduce accident-causing conditions in your facilities, and institute effective safety and health programs, and comply with government standards on these matters. Many firms institute rehabilitation programs to get injured employees back on the job as fast as possible, since workers’ compensation costs accumulate as long as the person is out of work.
I. Hospitalization, Health, and Disability Insurance These are benefits aimed at providing protection against hospitalization costs and loss of income arising from accidents or illness occurring from off-the-job causes. They are offered by most employers because medical care and insurance are so expensive. Employer health and hospitalization plans must comply with the Americans with Disabilities Act. Accidental death and dismemberment coverage provides a lump-sum benefit in addition to life insurance benefits when death is accidental. Disability insurance provides income protection for loss of salary due to illness or accident. A health maintenance organization (HMO) is a medical organization consisting of several specialists operating out of a community-based health care center. Preferred provider organizations (PPOs), a cross between HMOs and the traditional doctor/patient arrangement, are groups of health care providers that are contracted to provide medical care services at a reduced fee. The costs of mental health treatment are rising because of widespread drug and alcohol problems. There is an increase in the number of states requiring employers to offer a minimum package of mental health benefits. The Mental Health Parity Act of 1996 sets minimum mental health care benefits at the national level.
1. Mental Health Benefits The Mental Health Parity Act sets minimum mental health care benefits and prohibits employer group health plans from adopting mental health benefits limitations without comparable limitations on medical and surgical benefits.
J. Know Your Employment Law
1. Patient Protection and Affordable Care Act of 2010 Employers with at least 50 full-time equivalent employees are required to offer minimum levels of affordable health-care coverage or pay a penalty.
2. COBRA Comprehensive Omnibus Budget Reconciliation Act requires that most private employers must make continued health benefits available to terminated or retired employees and their families for a period of time, generally 18 months. The former employee must pay for the coverage, if desired, as well as a small fee for administrative costs.
3. Other Laws The Employee Retirement Income Security Act (ERISA) sets minimum standards for health and pension plans. The Health Insurance Portability and Accountability act (HIPPA) provides privacy rules.
K. Tools for Health Care Cost Control Many employers are changing their medical plans and using cost-containment specialists to reduce health care costs. Also, consumer education is among the most important initiatives in health administration. Employees must know the costs of health choices in order to make better decisions. More employers are requiring employees to pay higher premiums and co-payments. Clinical prevention programs include mammograms, immunizations, and routine checkups.
1. Wellness programs Offering preventative services.
2. Claim Audits Aggressively auditing claims may be the most direct way to reduce employer health care costs.
L. Long-term care is a new benefit aimed at supporting people in their old age. The Health Insurance Portability and Accountability Act (HIPAA), enacted in 1996, lets employers and employees deduct the cost of long-term care insurance premiums from their annual income taxes.
M. Life Insurance Most employers provide group life insurance plans, which usually accept all employees, regardless of health or physical condition.
N. Benefits for Part-Time and Contingent Workers About 19 million people work part-time (less than 35 hours a week). Most firms provide holiday, sick leave, and vacation benefits to part-timers, and more than 70% offer some form of health care benefits to them.
V. Retirement and Other Benefits
A. Social Security Provides three types of benefits: retirement benefits, survivor’s (death) benefits, and disability payments. Retirement benefits provide an income if you retire at age 62 or thereafter and are insured under the Social Security Act. Survivor’s (death) benefits provide monthly payments to your dependents regardless of your age at death if you were insured under the Social Security Act. Disability payments provide monthly payments to employees who become totally disabled (and their dependents) if they work and meet certain requirements. The Social Security system also administers the Medicare program, which provides a wide range of health services to people 65 or older.
B. Pension Plans There are a variety of pension plans. Defined benefit plans contain a formula for determining retirement benefits. Defined contribution plans specify what contributions the employer will make to the employee’s retirement or savings fund. Many federal laws govern pensions.
1. 401(k) Plans This is a popular defined contribution plan in which the employee can have money deducted from his or her paycheck and deposited in the account before payroll taxes.
2. Other Plans In a savings thrift plan, employees contribute a portion of their earnings to a fund. The employer usually matches this contribution in whole or in part. In deferred profit sharing plans, employers contribute a portion of their profits to the pension fund. An employee stock ownership plan (ESOP) is a tax-deductible stock bonus plan. Cash balance plans are a hybrid; they have defined benefit plans’ more predictable benefits with defined contribution plans’ portability advantages.
C. Pension Planning and the Law The Employee Retirement Income Security Act (ERISA) restricts what companies can, cannot, and must do in regards to pension plans.
1. PBGC The Pension Benefit Guarantee Corporation oversees and insures pensions should a plan terminate without sufficient funds.
2. Vesting Vested funds are the money employer and employee placed in the latter’s pension fund that cannot be forfeited for any reason.
D. Pensions and Early Retirement The company opens up (for a limited time only) the opportunity for employees to retire earlier than usual, with a financial incentive, which is generally a combination of improved or liberalized pension benefits plus a cash payment.
E. Benefits Communications and Web sites Employers are adding new benefits services to their Web sites. In addition to offering things like self-enrollment, the insurance company USAA’s Web site (www.usaa.com) helps employees achieve better work–life balance.
VI. Personal Benefits and Family-Friendly Benefits
A. Personal services are being provided by many companies. Options may include credit unions, legal services, and counseling. Employee Assistance Programs (EAPs) provide employees with counseling and/or treatment for problems such as alcoholism, gambling, or stress.
B. Family-Friendly (Work-Life) Benefits There are more families in which both adults work, more one-parent households, more women working, and more people over 55 working.
1. Subsidized Child Care An increasingly desirable benefit, which tends to improve recruiting results, lower absenteeism, improve morale, garner favorable publicity, and lower turnover.
2. Sick Child Benefits Unexpected absences due to last-minute child care emergencies can be problematic for employers, who then need to hire temporary help or cope with reduced productivity. Emergency child care benefits are being offered by more employers.
C. Other Job-Related Benefits Employers often provide various other job-related benefits such as elder care or non-cash benefits.
1. Family-Friendly Benefits and the Bottom Line It is hard to evaluate the “profitability” of such programs. Many employers are cutting back.
2. Domestic Partner Benefits Employees’ same-sex or opposite-sex domestic partners are eligible to receive the same benefits as do the husband, wife, or legal dependent of one of the firm’s employees.
D. Executive Perquisites Include management loans, financial counseling, or relocation benefits among other substantial or insignificant perks.
E. Flexible Benefits Programs When given the opportunity to choose, employees do prefer flexibility in their benefits plan.
1. Fleible Work Schedles Flexitime is a plan whereby employees’ workdays are built around a core of mid-day hours. Compressed workweeks include fewer days each week. Workplace flexibility means providing the information technolgy tools employees need to get their jobs done wherever they are.
2. Other Flexible Work Arrangements Job sharing allows two or more people to share a single full-time job. Work sharing refers to a temporary reduction in work hours by a group of employees during economic downturn to avoid lay-offs.
VII. Employee Engagement Guide for Managers
A. Costco’s Compensation Plan Costco’s HR strategy is to pay its employees more producing more employee engagement, higher productivity, and better customer services. Costco’s employee benefits are also highly competitive, particularly relative to the typically sparse offerings in the retail industry.
KEY TERMS
Financial incentives Financial rewards paid to workers whose production exceeds some predetermined standard.
Productivity The ration of outputs (goods and services) divided by the inputs (resources such as labor and capital).
Variable pay Any plan that ties pay to productivity or profitability, usually as one-time lump payments.
Piecework A system of pay based on the number of items processed by each individual worker in a unit of time, such as items per hour or items per day.
Straight piecework An incentive plan in which a person is paid a sum for each item he or she makes or sells, with a strict proportionality between results and rewards.
Standard hour plan A plan by which a worker is paid a basic hourly rate, but is paid an extra percentage of his or her base rate for production exceeding the standard per hour or per day. Similar to piecework payment but based on a percent premium.
Merit pay (merit raise) Any salary increase awarded to an employee based on his or her individual performance.
Annual bonus Plans that are designed to motivate short-term performance of managers and which are tied to company profitability.
Stock option The right to purchase a stated number of shares of a company stock at today's price at some time in the future.
Golden parachute A payment companies make in connection with a change in ownership or control of a company.
Team- (or group-) incentive A plan in which a production standard is set for a specific work plan group, and its members are paid incentives if the group exceeds
the production standard.
Organization-wide Plans in which all or most employees can participate, and which
incentive plan generally tie the reward to some measure of company-wide performance.
Profit-sharing plan A plan whereby employees share in the company's profits.
Gainsharing plan An incentive plan that engages employees in a common effort to achieve productivity objectives and share the gains.
Earnings at-risk Plan that puts some portion of the employees’ normal
pay plans pay at risk if they don’t meet their goals, in return for possibly obtaining a much larger bonus if they exceed their goals.
Employee stock ownership A qualified, tax deductible stock bonus plan in which employers plan (ESOP) contribute stock to a trust for eventual use by employees.
Benefits Indirect financial and nonfinancial payments employees receive for continuing their employment with the company.
Supplemental pay Benefits for time not worked such as unemployment insurance,
benefits vacation and holiday pay, and sick pay.
Unemployment insurance Provides benefits if a person is unable to work through some
(or compensation) fault other than his or her own.
Sick leave Provides pay to an employee when he or she is out of work because of illness.
Severance pay A one-time payment some employers provide when terminating an employee.
Supplemental Provide for a ”guaranteed annual income” in certain industries
unemployment benefits where employers must shut down to change machinery or due to reduced work. These benefits are paid by the company and supplement unemployment benefits.
Workers’ compensation Provides income and medical benefits to work-related accident victims or their dependents regardless of fault.
Health maintenance A prepaid health care system that generally provides routine
organization (HMO) round-the-clock medical services as well as preventative medicine in a clinic-type arrangement for employees, who pay a nominal fee in addition to the fixed annual fee the employer pays.
Preferred provider Groups of health care providers that contract with employers’
organization (PPO) insurance companies or third-party payers to provide medical care services at a reduced fee.
Group life insurance Provides lower rates for the employer or employee and includes all employees, including new employees, regardless of health or physical condition.
Social Security Federal program that provides three types of benefits: retirement income at age 62 and thereafter; survivor or death benefits payable to the employee's dependents regardless of age at time of death; and disability benefits payable to disabled employees and their dependents. These benefits are payable only if the employee is insured under the Social Security Act.
Pension plans Plans that provide a fixed sum when employees reach a predetermined retirement age or when they can no longer work due to disability.
Defined benefit A plan that contains a formula for determining retirement
pension plan benefits.
Defined contribution A plan in which the employer's contribution to employee's
pension plan retirement or savings funds is specified.
Portability Making it easier for employees who leave the firm prior to retirement to take their accumulated pension funds with them.
401(k) plan A defined contribution plan based on section 401(k) of the Internal Revenue Code.
Savings and thrift plan Plan where employees contribute a portion of their earnings to a fund; the employer usually matches this contribution in whole or in part.
Employee stock ownership A qualified, tax-deductible stock bonus plan in which employers
Plan (ESOP) contribute stock to a trust for eventual use by employees.
Cash balance plans Defined benefit plans under which the employer contributes to a percentage of employees’ current pay to employees’ pension plans every year, and employees earn interest on this amount.
Employee Retirement Signed into law by President Ford in 1974 to require that Security Income Act of pension rights be vested and protected by a government agency, 1975 (ERISA) the PBGC.
Pension Benefits Established under ERISA to ensure that pensions meet vesting
Guarantee Corporation obligations; also insures pensions should a plan terminate (PBGC) without sufficient funds to meet its vested obligations.
Early retirement window A type of offering by which employees are encouraged to retire early, the incentive being liberal pension benefits plus perhaps a cash payment.
Employee assistance A formal employer program for providing employees with
program (EAP) counseling and/or treatment programs for problems such as alcoholism, gambling, or stress. .
Family friendly Benefits such as child care and fitness facilities that make it (work-life) benefits easier for employees to balance their work and family
responsibilities.
Flextime A plan whereby employees’ workdays are built around a core of midday hours, such as 11:00 a.m. to 2:00 p.m.
Compressed workweek Schedule in which an employee works fewer but longer days each week.
Workplace flexibility Arming employees with the information technology tools they need to get their jobs done wherever they are.
Job sharing Allows two or more people to share a single full-time job.
Work sharing Refers to a temporary reduction in work hours by a group of employees during economic downturns as a way to prevent layoffs.
DISCUSSION QUESTIONS
11-1. Compare and contrast six types of incentive plans. Various types of incentive plans were presented in the text, including piecework plans, straight and guaranteed plans, standard hour plans, plans for salespersons (commissions and combination plans), and group incentive plans. With the piecework plans, earnings are tied directly to what the individual worker produces, and are more appropriate in a manufacturing organization. Commissions are more appropriate for salespeople in situations where they are largely unsupervised. In group incentive plans like the Scanlon Plan, all workers involved in developing and implementing cost savings share in the benefits of the suggestions.
11-2. What is merit pay? Do you think it's a good idea to award employees merit raises? Why or why not? This item can be assigned as a Discussion Question in MyManagementLab. Student responses will vary.
11-3. You are applying for a job as a manager and are at the point of negotiating salary and benefits. What questions would you ask your prospective employer concerning benefits? Describe the benefits package you would try to negotiate for yourself. This item can be assigned as a Discussion Question in MyManagementLab. Student responses will vary.
11-4. What is unemployment insurance? Is an organization required to pay unemployment benefits to all dismissed employees? Explain how you would go about minimizing your organization's unemployment insurance tax. Unemployment insurance provides benefits to an individual who is unable to work through some fault other than his/her own. An organization is not required to pay unemployment benefits to all dismissed employees. You could minimize your organization’s unemployment insurance tax by making sure that all your managers understand the unemployment insurance code, training managers and supervisors on discipline and discharge, conducting exit interviews, verifying employment claims, filing protests against a former employee's claim on a timely basis, knowing your local unemployment insurance official, and auditing the annual benefit charges statement.
11-5. Explain how ERISA protects employees’ pension rights. Under ERISA, pension rights must be vested under one of two vesting schedules; cliff vesting or graded vesting. Also, ERISA established the Pension Benefits Guarantee Corporation to help ensure that pensions meet vesting obligations. The PBGC also insures pensions should a plan terminate without sufficient funds to meet its vested obligations.
11-6. What is "portability"? Why do you think it is (or isn't) important to a recent college graduate? Portability is the ability of employees to take their retirement income when they leave an organization and roll it over into a new employer's savings plan or IRA. Today's college graduate may not think about it, but it is important to consider the question of portability. Most college graduates can expect to change employers several times during their career. Having portable retirement plans can help ensure that workers end up with a reasonable retirement income. If the plans are not portable, it will take exceptional planning on the employee's part to ensure adequate retirement income.
11-7. What are the main provisions of the FMLA? The FMLA provides the following: 1) private employers of 50 or more employees must provide eligible employees up to 12 weeks of unpaid leave for their own serious illness, the birth or adoption of a child, or the care of a seriously ill child, spouse, or parent; 2) employers may require employees to take any unused paid sick leave or annual leaves as part of the 12-week leave provided in the law; 3) employees taking leaves are entitled to receive health benefits while they are on unpaid leave, under the same terms and conditions as when they were on the job; 4) employers must guarantee employees the right to return to their previous or equivalent position with no loss of benefits at the end of the leave; however, the law provides a limited exception from this provision to certain highly paid employees.
11-8. Describe the main retirement benefits. Social Security actually provides three types of benefits. First, the familiar retirement benefits provide an income if you retire. Second, are survivor’s or death benefits. Finally, there are disability payments. Pension plans provide income to individuals in their retirement, and just over half of full-time workers participate in some type of pension plan at work. We can classify pension plans in three basic ways: contributory versus noncontributory plans, qualified versus nonqualified plans, and defined contribution versus defined benefit plans. The most popular defined contribution plans are based on section 401(k) of the Internal Revenue Code, and are called 401(k) plans. An employee stock ownership plan (ESOP) is a qualified, tax-deductible defined contribution plan in which employers contribute stock to a trust for eventual use by employees who retire. Finally, cash balance plans are a hybrid; they have defined benefit plans with more predictable benefits with defined contribution plans’ portability advantages.
INDIVIDUAL AND GROUP ACTIVITIES
11-9. Working individually or in groups, develop an incentive plan for the following positions: chemical engineer, plant manager, used-car salesperson. What factors did you have to consider in reaching your conclusions? I would give the chemical engineer a merit raise system because he or she has little perceived control or impact over the production or profitability of the company. The plant manager should receive an annual bonus tied to the profitability of the plant, as well as a stock option plan to encourage long-term planning as well. The used-car salesperson would likely receive a straight commission plan because sales are more directly dependent on his or her ability to sell those cars to prospective customers.
11-10. A state university system in the southeast recently instituted a "Teacher Incentive Program" (TIP) for its faculty. Basically, faculty committees within each university’s college were told to award $5,000 raises (not bonuses) to about 40% of their faculty members based on how good a job they did teaching undergraduates and how many they taught per year. What are the potential advantages and pitfalls of such an incentive program? How well do you think it was accepted by the faculty? Do you think it had the desired effect? This program would put a premium on undergraduate teaching as opposed to research or graduate teaching. If it were to work, the best teachers would be motivated to teach at the undergraduate level in order to increase their earnings. The pitfalls are many. Some research or graduate faculty may actually earn more through consulting or other outside means, thus they will not be motivated by this system. If research is important to this organization, or the graduate programs are vital, this incentive plan could damage those programs. The awarding of the money is likely to be inconsistent because specific guidelines have not been spelled out. More likely, the rewarding of the raises may become more political as the committees who have other values determine the awards. It is very likely that the system was met with great opposition by the faculty.
11-11. The PHR and SPHR Knowledge Base Appendix (pages 483–491) lists the knowledge someone studying for the HRCI certification exam needs to have in each area of human resource management (such as in Strategic Management, Workforce Planning, and Human Resource Development). In groups of four to five students, do four things: (1) review that appendix now; (2) identify the material in this chapter that relates to the required knowledge the appendix lists; (3) write four multiple-choice exam questions on this material that you believe would be suitable for inclusion in the HRCI exam and (4) if time permits, have someone from your team post your team’s questions in front of the class, so the students in other teams can take each others’ exam questions. The material in this chapter that relates to the HRCI certification exam includes: unemployment insurance, vacations and holidays, sick leave, parental leave and FMLA, severance pay, supplemental unemployment benefits, workers’ compensation, hospitalization, health and disability insurance, life insurance, benefits for part-time workers, social security, pension plans, pension planning, pensions and the law, pension trends, executive perquisites, and flexible benefits programs. Multiple-choice questions should reflect material in this chapter and should have answer choices, which could appear plausible.
11-12. Working individually or in groups, research the unemployment rate and laws of your state. Write a summary detailing your state’s unemployment laws. Assuming Company X has a 30% rate of personnel terminations, calculate Company X’s unemployment tax rate in your state. Suggest that the students use the Internet to research the unemployment rate and laws for your state. In some states, if severance pay is involved, unemployment benefits will not begin until all vacation, severance, sick leave, and other forms of pay have been paid. In some cases, employers will arrange to pay employees in a lump sum so the employee may legally apply for unemployment benefits after their waiting week. Some states, notably Illinois and Louisiana, will offset the amounts paid through unemployment insurance if the unemployed person also receives social security benefits.
11-13. Assume you run a small business. Working individually or in groups, visit the website www.dol.gov/elaws. See the Small Business Retirement Savings Advisor. Write a two-page summary explaining: (1) the various retirement savings programs available to small-business employers, and (2) which retirement savings program you would choose for your small business and why. Based on what they learned from the chapter and the results of their Internet search, the students should include at a minimum a 401(k) plan that can be assessed online.
11-14. You are the HR consultant to a small business with about 40 employees. The owner has asked you to prepare a one page summary listing (1) the mandatory benefits the employer must provide, and (2) a strategy for figuring out what non-mandatory benefits the employer should also offer. Mandatory benefits for this business include unemployment insurance, worker’s compensation, and social security. The specific ones to recommend would depend partly on the profile of the employees of the firm. In the absence of that information, the least costly addition of benefits would be to add some sick leave (or personal days) and consider additional vacation and/or holidays. The next benefit that they might look to would be to add the availability of some kind of health plan that could include a contributory cost to the employee. This would be less expensive to the company and add real value to the employees because of group discounts.
Students can find the following assisted-graded writing questions at mymanagementlab.com:
11-15. Describe the nature of some important management incentives.
11-16. In this chapter, we listed a number of guidelines for instituting a pay-for-performance plan. Do you think these points make sense? Why or why not?
APPLICATION EXERCISES
HR in Action Case Incident 1: Striking for Benefits
11-17. Assume you are mediating this dispute. Discuss five creative solutions you would suggest for how the grocers could reduce the health insurance benefits and the cost of their total benefits package without making any employees pay more. It is suggested that you consider giving this exercise as a group assignment. Finding five creative solutions will be challenging, but things that should be considered include: altering deductibles but providing grandfathered employees extra pay to compensate; altering the pay schedule by increasing the pay for existing employees to compensate for additional health care costs passed on to them, but new employees not getting that pay increase; etc.
11-18. From the grocery chains’ point of view, what is the downside of having two classes of employees, one of which has superior health insurance benefits? How would you suggest they handle the problem? Morale is a critical problem. Anytime there are two classes, jealousy and resentment increase and morale decreases. Also, administration costs increase. Some of the suggestions in question #1 might avoid the two classes.
11-19. Similarly, from the point of view of the union, what are the downsides of having to represent two classes of employees, and how would you suggest handling the situation? The “lower class” employees will feel that they were “sold out” by the union and may lose faith in the value of the union. Initially the union will be safe because of the larger number of employees in the “better” group, but eventually that will change.
HR in Action Case Incident 2: Carter Cleaning Company: The Incentive Plan
11-20. Should this plan be extended to pressers in the other stores? No, not in its present form. While the piece-rate plan does make more effective use of Walt’s time and saves the company energy money, the quality control issue is a problem. An incentive for quality needs to be included.
11-21. Should other employees (cleaner/spotters, counter people) be put on a similar plan? Why? Why not? If so, how, exactly? It makes sense for some positions but not for others. Cleaner-spotters are production employees who could also benefit from a similar plan. It would have to have a quality incentive that makes sure they actually get the garments cleaned correctly! An incentive plan that focuses on customer satisfaction makes more sense for the counter people.
11-22. Is there another incentive plan you think would work better for the pressers? Describe it. Some ideas might include combination plans (salary plus piece-rate), profit sharing, or merit pay (higher pay for those who produce more).
11-23. A store manager’s job is to keep total wages to no more than 30% of sales and to maintain the fuel bill and the supply bill at about 9% of sales each. Managers can also directly affect sales by ensuring courteous customer service and by ensuring that the work is done properly. What suggestions would you make to Jennifer and her father for an incentive plan for store managers or front-desk clerks? Profit sharing, gainsharing, performance plans, annual bonus, recognition, and merit pay are all options.
Experiential Exercise: Revising the Benefits Package
Purpose: The purpose of this exercise is to provide practice in developing a benefits package for a small business.
Required Understanding: Be very familiar with the material presented in this chapter. In addition, review Chapter 10 to reacquaint yourself with sources of compensation survey information, and come to class prepared to share with your group the benefits package for the small business in which you work or in which someone with whom you’re familiar works.
How to Set Up the Exercise/Instructions: Divide the class into groups of four or five students. Your assignment is as follows: Maria Cortes runs a small personnel recruiting office in Miami and has decided to start offering an expanded benefits package to her 24 employees. At the current time, the only benefits are seven paid holidays per year and five sick days per year. In her company, there are two other managers, as well as seventeen full-time recruiters and five secretarial staff members. In the time allotted, your group should create a benefits package in keeping with the size and requirements of this firm.
The students should outline a complete package of benefits and explain the rationale for including each benefit option. For example, while health care insurance is not required by law, they may want to recommend providing it as most employers do provide it and it will help them be competitive with other organizations. They should also consider more traditional benefits such as retirement, along with benefits such as flexible work options.
WEB-e’s (WEB EXERCISES)
1. Based on sites such as www.nytimes.com/2008/06/12/nyregion/12indict.html, what events led up to the trench collapse accident discussed in the opening scenario, and how do you think it might have been avoided? Mr. Ortega was digging the foundation in a trench beside a home that Mr. Lattarulo also owned. The laundry’s foundation was to be much deeper than that of the home, requiring the underpinning of the home’s foundation to prevent a collapse. According to the authorities, Mr. Lattarulo was warned by a consultant, whom the prosecutor said he had been required to hire, that the new foundation was unstable. Instead of heeding those warnings, the authorities said Mr. Lattarulo told Mr. Ortega to keep digging. Moments later, part of a wall from the home next door collapsed and sent rubble spilling onto Mr. Ortega, killing him.
2. Use sites such as www.osha.gov/pls/oshaweb/owadisp.show_document?p_table=NEWS_RELEASES&p_id=16029 to explain the sorts of violations OSHA has levied large penalties for in the past few years, and what you think the employers could have done to avoid the violations. The OSHA website outlines the major violations as well as the fines and penalties that have been imposed. In several of these cases, the employer could have been more proactive in preventing accidents and more effectively communicated safety policy and procedures.
3. Con Edison supplies power to the New York metropolitan area. Using sites such as http://www.conedison.com/ehs/, what specifically are they doing to reduce employee accidents and improve employee safety? Con Edison’s commitment to the environment, and to the safety and well being of its employees and the public extends beyond its business operations. For example, the company hosts forums where environmental leaders can exchange ideas and share strategies for dealing with evolving environmental challenges. Con Edison also has a long tradition of providing support to environmental groups and educational organizations. In addition, the company pioneers pilot projects to demonstrate technologies with potential environmental benefits.
Additional Assignments
1. Many college graduates start their careers as salespeople. Discuss compensation considerations for recent college graduates when accepting a job as a salesperson. Students should be able to explain the basic components of incentives for salespeople including salary and commission. They should understand the risks associated with commission plans. As an entry-level salesperson, a compensation plan that offers a combination of salary and commission is more desirable. The students may also explore the benefits that an entry-level position might expect, such as basic health care insurance and retirement benefits.
2. What are strategies that employers can engage in to reduce their overall benefit costs? An employer can use strategies such as wellness programs and claim audits to reduce the cost of healthcare insurance benefits. The employer can reduce overall costs by only offering benefits that the employees find valuable. The employer can also explore offering non-cash benefits such as flexible work options.
中国经济管理大学|中国经济管理大学|中国经济管理大学|中国经济管理大学培训|MBA实战|中国经济管理大学|MBA培训|硕士研究生|职业资格|管理培训
中国经济管理大学 官网 ：www.eauc.hk 中国经济管理大学MBA公益课堂
中国经济管理大学 MOOC（慕课站） 美华管理传播网：www.mhjy.net
中國經濟管理大學版權所有