Chapter #11

Strategic Pay Plans

Fair Labor Standards Act

Are you

Exempt or Non exempt ???????

Employee compensation refers to all forms of pay or rewards

Direct financial payments Wages

• Slalaries• Incentives

Indirect Financial payments Benefits

Legal Considerations in Compensation 1931 Davis Bacon Act 1936 Walsh Healey Public Contract Act 1938 Fair Labor Standards Act

Exempt or Non exempt (Poster) Min wage 5.15$ Overtime Child Labor 16 yrs (14 yr OK) Violations, Punitive and compensatory, loss of

contracts

Laws continued 1963 Equal Pay Act 1974 ERISA Employee Retirement

Age Discrimination and Employment Act ADEA

Civil Rights Act 1986 Tax Reform Act

Decrease # of tax bracket to #• 15% - 28% - 31%• Increase benefits to blue collar and decreased white

collar benfits

More Laws ADA Workers Comp FMLA SSI ACT

26 weeks of unemployment

FLSA 2003 CHANGES collected 143 million in back wagea

for 251,568 workers through enforcement of the FLSA

Targets were child labor and low wage ee, agriculture, health care

BestBuy $5.4 million Einstien Bagels $495,930.93

Revisions 2004 by Wage and Hour Division of DOL Why? They were out of date Need to reflect change in

technology. Too much misclassifying, firms do

not want to pay overtime so made ees salaried

Law has been ignored by ers for too long

Exempt or Non Exempt? Exempt if

Directs work of two or more. Has authority to hire or fire or change status

of others in employ. Devotes more than 20% of time to duties of

exempt work $425.00 per week Position of responsibility. Performs work of high level of skill or training

Administrative Exemption Primary duty of performing office or

non manual work Includes Tax, Finance, Accounting, Auditing,

Quality Control, Purchasing, Advertising, Safety, HR, Public Relations, Labor Relations

Other Exemptions Learned professionals, requiring

knowledge of advanced type in a field of science or intellectual instruction

Creative Professionals, Work requiring invention, talent in recognized field or creativity

$425.00 perweek

Others to be exempt Computer employees, application

and design of systems, analysts Making $455.00 per week

Outside Sales personnel, paid by commission

No minimum pay rate

Most common mistakes Must have written permission to

withhold signed by ee. Must have written Commission

Agreement signed by ee. Failure to document Time Worked

Liquidated Damages OK Regs require courts to impose

double damages with no discretion if the court finds that wages are owed and approximately 2 months have passed

ER can used bona fide dispute defense but must send a letter to ee that er disputes the ee’s payment request

Regional Pay Scales Oklahoma (low)

New York (higher)

www.dol.gov

Other influences on pay Corporate Policies and Competitive

strategy. Aligned reward strategy

Salary compression Two tiered systems Longer term workers get paid less that

entering workers

Pay Equity Internal and External

Do salary surveys Determine jobs worth Groups into pay grades Price jobs by pay grades Fine tune pay-grades

Establishing Pay Rates

Step #1 Conduct survey (dol.gov)• Salary survey • Benchmark jobs

Step #2 Job Evaluation• Compensable Factors• Ranking method

• Obtain job information• Select jobs• Select compensable factors• Combine ratings• Choose pay grades

• Grade definitions• Point Method• Factor comparison method• Computerized Job evaluations

Step #3 Pay grades. Step #4 Price Each Pay Grade

Wage Curve Step #5 Fine Tune Pay Rates Correct Out of line Rates

Pricing Managerial and Professional Jobs Fixed Salary Short tem incentives Long term incentives Benefits Perks

Skill based Pay Broadbanding Comparable Worth