Module 4: Compensation and Benefits 19% PHR 13% SPHR 4-1© SHRM Any student use of these slides is...

Module 4: Compensation and Benefits

19% PHR13% SPHR

4-1© SHRM

Any student use of these slides is subject to the same License Agreement that governs the student’s use of the SHRM Learning System materials.

Compensation Legislation

• Requires prevailing wages/benefits on federal construction projects

Davis-Bacon Act

• Precludes federal contractors from inducing employees to give up any part of compensation

Copeland “Anti-Kickback” Act

• Extends prevailing wages to federal suppliers

• Stipulates overtime pay

Walsh-Healey Act

• Requires prevailing wages/benefits on all federal contracts

Service Contract Act

4-2© SHRM

Fair Labor Standards Act (Wage and Hour Law)

• Applies to organizations with employees who engage in interstate commerce, produce goods for interstate commerce, or handle, sell, or work on goods/materials that have been moved in/produced for interstate commerce.

• Applies to employers with at least $500,000 in annual dollar volume of business.

• Under FLSA, an employer has no ongoing obligations to independent contractors.

4-3© SHRM

Which of the following factors would indicate independent contractor status?A. Opportunity for profit and loss

B. Regular oral and written reports presented to a manager

C. Right to end the relationship with the organization at any time without incurring liability

D. Services provided to a single organization

4-4© SHRM

IRS Independent Contractor Test

© SHRM 4-5

Behavioral control

Financial control

Type of relationship

Exempt and Nonexempt Employees

Type of Employee Importance:

Exempt Excluded from minimum wage and overtime pay requirements of the law.

Nonexempt Are not excluded from minimum wage requirements and are entitled to overtime.

Overtime is guaranteed to employees who are paid less than $23,660 per year or $455 per week.

4-6© SHRM

FLSA Exemptions

An exempt employee must meet three requirements.

Minimum salary

Paid on a salary basis without improper deductions

Exempt duties

4-7© SHRM

A primary duty is the main or most important duty and is an important part of exemption.

No particular percentage of exempt duties is required under the FLSA.

The lower the total percentage, the greater the legal risk if challenged.

4-8

Primary Duty Issue

© SHRM

Executive Exemption

Have a primary duty of managing an organization, department, or subdivision.

Direct the work of at least two full-time employees or their equivalent.

Have the authority of the employer to hire and fire.

Affect promotion decisions.

4-9© SHRM

An employee must:

Administrative Exemption

Requires performance of office or nonmanual work directly related to the management or general business operations of the employer or the employer’s customers.

Includes the exercise of discretion and independent judgment related to “matters of significance.”

4-10© SHRM

Learned

profession

als

• Requires advanced knowledge in a field of science or learning that is acquired by prolonged instruction.

• Work is intellectual in nature and requires exercise of discretion and judgment.

Creative

profession

als

• Must meet minimum salary requirements.• Perform work that requires invention, imagination, originality,

or talent. • Perform in a recognized field of creative or artistic endeavor.

Professional Exemptions

© SHRM 4-11

Highly Compensated Exemption

A highly compensated employee must: Be paid total annual compensation of

$100,000 or more that includes at least $455 per week paid on a salary or fee basis.

Perform one of the duties of an exempt executive, administrative, or professional employee.

4-12© SHRM

Computer Employees

Must meet the salary minimum with a salary of $455 per week or $27.63 per hour.

Employee’s pay cannot be subject to deductions inconsistent with the salary basis requirement.

Primary duties must fall into one of four categories.

4-13© SHRM

Outside Sales

An employee must: Have a primary duty involving making sales

or obtaining orders and contracts. Be customarily and regularly engaged away

from the employer’s place of business.

Outside sales employees are not subject to the minimum salary requirements of other exemptions.

4-14© SHRM

Employers that make improper deductions will lose the exemption if they did not intend to pay on a salary basis.

Example: An exempt employee is normally not subject to deductions for illness in less than full-day increments. (An FMLA exception may occur.)

© SHRM 4-15

Improper Deductions

Safe Harbor

A “safe harbor” exists if: The employer has a clearly

communicated policy prohibiting improper pay deductions.

Employees are reimbursed for any improper deductions.

The organization makes a good-faith effort to comply in the future.

4-16© SHRM

Sets rate of overtime pay (1.5 times regular pay after 40 hours worked).

Requires overtime on time worked, not time compensated.

Sets workweek as any fixed, recurring period of 168 consecutive hours (7 days 24 hours).

© SHRM 4-17

FLSA Basic Overtime Provisions

Discussion question

4-18© SHRM

If a nonexempt employee works unauthorized overtime, does the employee have to be paid for that time?

Can an employee who is not paid for his lunch break be expected to sit at his desk and answer emails?

An employer pays an employee a $40 attendance bonus for working a full 40-hour workweek. If the worker works 45 hours during that week, what will the employee’s gross paycheck be if her hourly rate is $10?

A. $495.00

B. $509.50

C. $515.00

D. $517.25

4-19© SHRM

To calculate the total pay for the week, you must add the bonus to the hours worked at base pay (45 $10/hour = 450 + $40 bonus = $490). To get the average straight time hourly earnings (ASTHE), the $490 is divided by the total hours worked, 45, to yield $10.89. Pay calculation:45 hours base pay ($450) + bonus ($40) = $490.00ASTHE = $490/45 hours = $10.89Overtime premium = $10.89 0.5 = $5.45 5 = $27.25Total gross pay = $517.25

4-20© SHRM

Compensatory Time

• Overtime usually must be paid in cash.• Public-sector employers may grant

compensatory time off.• Public employees can accumulate

“comp” time. Must be earned at a rate of not less than 1 ½ hours for each hour for which OT is required.

4-21© SHRM

$ $

Presently, compensatory time is not allowed for private-sector nonexempt employees.

FLSA Child Labor Provisions

Restrict hours and conditions of employment for minors.

Age FLSA Regulations Under age 14

Prohibited from most nonfarm work May be employed by parents Certain jobs permitted (e.g., actors, newspaper

carriers)

Ages 14-15

During school hours: 3 hours/day, 18 hours/week

During school vacations: 8 hours/day, 40 hours/week

Work hours restricted

Ages 16-17

Prohibited from hazardous jobs No other restrictions

4-22© SHRM

Minimum Wage Provisions

4-23© SHRM

Fair Minimum Wage Act of 2007

Raised minimum wage to $7.25 per hour in three phases

Provides $2.13 per hour cash wage if claiming a tip credit

Minimum Wage Exceptions

• Employees younger than 20 years old during first 90 days of employment

• Tipped employees ($2.13/hour plus tips must equal minimum wage)

• Full time students employed in retail, service, agriculture or institutions of higher education (ER must obtain a DOL certificate under the Full-time student program)

• Student learners at least 16 years old and employed on a part-time basis pursuant to a bona fide vocational training program (ER must obtain student learner DOL certificate)

• Workers impaired by physical or mental disability (DOL certificate required)

4-24© SHRM

Penalties

• An employer who violated the FLSA’s overtime requirements is liable to an employee in the amount of the unpaid overtime compensation as well as an additional equal amount

• Statute of limitation is two years• Employee entitled to recover reasonable attorney fees• Criminal penalties of not more than $10,000 and 6

months imprisonment may be imposed for willful violations

4-25© SHRM

Discussion question

• When state and federal laws differ, which law takes precedence?

4-26© SHRM

Portal-to-Portal Act

• Amends FLSA and defines general rules for hours worked.

• Provides guidelines on:– On-call/standby time.– Preparatory/concluding activities.– Waiting time.– Meals and breaks.– Training time (4 conditions).– Travel time

4-27© SHRM

© SHRM 4-28

Day

Friday

Saturday

Sunday

Activity

Travels to conference and works en route

Works at conference

Travels from conference and does not work en route

7 8 9 10 11 12 1 2 3 4 5 6 7AM PM

Normal Work Hours

Time

Total Paid Hours

5

12

4

Paid time

Unpaid time

Travel Pay

Equal Pay Act (EPA)

Mandates equal pay for equal work.

4-29© SHRM

Skills Effort

Responsibility Working Conditions

Comparable worth

• Law does not address• Deals with pay differentials between men and

women who perform comparable –but not equal- work.

• Looks at different jobs that men and women hold that require comparable skills, effort, responsibility and working conditions.

4-30© SHRM

Exceptions to Equal Pay Act

• Seniority• Merit System• Difference in quality or quantity of work• Geographic work differential• Any factor other than gender

4-31© SHRM

Module 4 Reinforcement Activity

Case 1: A tenured female associate professor in the industrial technology department is employed at a salary lower than male colleagues who are the same rank and teach similar courses at the same location. She is the second-lowest-paid professor in a department of close to 20, despite the fact that she has a higher rank and more seniority than four male colleagues. Does the scenario violate the Equal Pay Act?

Module 4, Activity 1, Slide 32© SHRM


Case 1: Tenured female associate professor

She will have a strong case if she alleges discrimination because of the substantial equality of work she is performing.



Case 2: A female part-time employee is doing work equal to that of a male full-time employee. In exchange for the flexibility of a part-time position, she is paid a lower hourly rate. Does the scenario violate the Equal Pay Act?



Case 2: Part-time female employee

Unless the wage rate differs because of seniority or performance levels, the female employee will have a strong case if she alleges discrimination.



Case 3: A male bartender in a restaurant is paid more than a female bartender for the same job. Under what circumstances would this be legal?



Case 3: Male bartender

This would be legal if:• The male bartender has more seniority.• The male bartender works a different shift. • The male bartender has more work experience.• A bona fide merit system is in place.• There is a system in place that measures earnings

by production.• There is a legitimate nondiscriminatory reason.


Which of the following is true under the Equal Pay Act?

A. Seniority systems cannot result in pay disparity.

B. Companies should provide all employees with the same working conditions.

C. Employees doing equal work should receive the same pay.

D. Jobs filled primarily by women should have the same salary as similar jobs filled by men.

4-38© SHRM

Federal tax credit to encourage employers to hire targeted groups of job seekers.

Administered by the DOL’s Employment and Training Administration (ETA) and the IRS.

Includes individuals from 9 categories.

© SHRM 4-39

Work Opportunity Tax Credit (WOTC)

Additional Compensation Legislation

4-40© SHRM

• States that the statute of limitations on pay discrimination lawsuits resets as each allegedly discriminatory paycheck is issued

Lilly Ledbetter Fair Pay Act

• States required communications related to executive compensation at publicly traded companies

Dodd-Frank Wall Street Reform and Consumer Protection Act

• Provides guidelines regarding the determination of reasonable compensation for executives of nonprofit organizations

IRS Intermediate Sanctions

Job Evaluation

• Determines the relative worth of each job by establishing a hierarchy.

• Follows job analysis, which focuses on job descriptions and specifications.

4-41© SHRM

Job Evaluation Methods

Nonquantitative Methods

Quantitative Methods

Job-to-job comparison

Job ranking

Factor comparison

method

Job-to-predetermined-standard comparison

Job classification

Point-factor method

4-42© SHRM

Nonquantitative (Whole-Job) Evaluation

• Establishes a relative order of jobs. • Does not assign numeric values.

Jobranking

Pairedcomparison

Jobclassification

Job-to-jobcomparison

Job-to-predetermined-standard comparison

4-43© SHRM

Quantitative Evaluation

• Uses a scaling system to evaluate the value of one job is as compared to another.

• Provides a score.

Point-factormethod

Factor comparisonmethod

Less complex, commonly used

Most complex, used infrequently

4-44© SHRM

Point-Factor Method

• Each job receives a total point value, and relative worth can be compared.

• Examples: Guide Chart-Profile (Hay Plan) and the U.S. government Factor Evaluation System (FES).

• Points often determine pay grade assignment.

May 4, 2011 Nov 2, 2011220 600300 400 500 700 800 900 1,100

Job A Job B Job D Job E

Points

Job C

4-45© SHRM

Market-Based Evaluation

4-46© SHRM

Prices jobs in the labor market(s)in which an organization competes.

Uses prevailing rates as the relative “worth” of the jobs.

Not a true job evaluation system; can be used to develop a job-worth hierarchy.

Pay Surveys

4-47© SHRM

Externalpublished

survey data

Full control of the survey (e.g., design, administration)

Ability to: Participate in

survey Provide some input

to survey design

Example:Local HR association contracts with a compensation firm

Limited participation, if any (e.g., may submit salary data)

No control/no input to survey design

Examples: Mercer Towers Watson

No participation No control/no input to

survey design Widely available May need to purchase

survey data

Internal custom survey outsourcedto a consulting firm

External surveyoutsourced to aconsulting firm

External surveyconducted by aconsulting firm

Examples: DOL surveys BLS surveys SHRM surveys

Internal External

Data Analysis

• Salary data may need to be aged, leveled, and/or factored for geography.– Aging uses movement in market rates to

adjust outdated salary data.– Leveling adjusts salaries when surveyed jobs

are similar but not identical to jobs in the organization.

– Since wage rates will vary by location, the organization should factor for geography any national salary survey data.

4-48© SHRM

Sorting Salary Data

Frequency distributions and tables sort salary data.

Mean Salary

Number of Incumbents

$55,000$60,000$65,000$70,000$75,000

21251

• Frequency distribution− Lists the grouped

data, from lowest to highest.

• Frequency table− Shows the number of

incumbents who receive a particular salary.

4-49© SHRM

Salary Data: Measures of Central Tendency

Unweighted average gives equal weight to every salary.

Weighted average considers the number of people who receive each salary.

Median is the middle number in the range.

Mode is the most frequently occurring wage. Unweighted Average = $65,000

Weighted Average = $65,909

Annual Salary

# of Incumbents

Total Salary

$55,000$60,000$65,000$70,000$75,000

21251

$110,00060,000

130,000350,00075,000

Totals 11 $725,000

4-50© SHRM

Module 4 Reinforcement ActivityCompensation Computation

$20,000 $30,000 $50,000

$25,000 $35,000 $55,000

$30,000 $40,000 $55,000

$30,000 $40,000 $60,000

What is the mode of the salaries listed?

What is the median salary?



$20,000 $30,000 $50,000

$25,000 $35,000 $55,000

$30,000 $40,000 $55,000

$30,000 $40,000 $60,000

What is the mode of the salaries listed?

$30,000

What is the median salary?

$20,000

$25,000

$30,000

$30,000

$30,000

$35,000

$40,000

$40,000

$50,000

$55,000

$60,000

$60,000



Position Salary Staff

Grade 5 $26,000 5

Grade 6 $30,000 2

Grade 7 $40,000 3

What is the unweighted average of the salaries?

What is the weighted average?



Position Salary Staff

Grade 5 $26,000 5

Grade 6 $30,000 2

Grade 7 $40,000 3

What is the unweighted average of the salaries?

$26,000$30,000$40,000$96,000/3 = $32,000

What is the weighted average?

$26,000 * 5 = $130,000 $30,000 * 2 = $60,000 $40,000 * 3 = $120,000

$310,000/10 $31,000


Quartiles and Percentiles

• Show how groups relate to each other.• Show if an organization leads, lags, or

matches the job market.

$55,000Entry wage

1st quartile

$65,000Midpoint

$75,000Maximum wage

$60,000 $70,000

0% 50% 100%2nd quartile 3rd quartile 4th quartile

4-55© SHRM

Creating a Pay Structure

Establish pay grades.• Group jobs that have the same relative internal or

external worth.• Pay the same rate or within the same pay range.

Set pay ranges.

• Set upper/lower bounds of possible compensation for individuals whose jobs fall in a pay grade.

• Market data from surveys used to determine a midpoint.

4-56© SHRM

Range Spreads

• Subtract the range minimum from range maximum and then divide by the range minimum

• Typical range spread:

Nonexempt positions 40%

Exempt positions 50%

Executive positions 60%

4-57© SHRM

Compa-ratios

• When pay ranges are based on the target market rate, compa-ratios are an indicator as to how actual wages match, lead or lag behind the target markets

4-58© SHRM

Compa-Ratios

• Divide the pay rate of an employee by the midpoint of the range.

• Given a range of $16 to $20 an hour, a midpoint of $18, and a salary of $16 an hour, the compa-ratio is:

$16 ÷ $18 = .89 or 89%.• Compa-ratios below 1.00 mean wages are

below the midpoint; compa-ratios greater than 1.00 mean wages exceed the midpoint.

4-59© SHRM

Discussion question

• What are the reasons that might cause the compa-ratio to be below 100%

4-60© SHRM

An employee earns $9 an hour, and the pay range is $8 to $12. What is the compa-ratio?A. 66%

B. 80%

C. 90%

D. 111%

4-61© SHRM

Broadbanding

• Combines several salary grades or job classifications.

4-62© SHRM

Management

$105,000$50,000

Supervisory

$68,000

Technical

$22,000

Service Experts

$38,000$17,000124%

209%

110%

Broadbanding Advantages and Disadvantages

Advantages Disadvantages

• Provides wider ranges.• Reduces the number of

job grades.• Supports de-layering.• Provides more autonomy

to line managers.• Enhances employee

mobility.

• Reduces the value of ranges.

• Affords less control.• Creates overly broad

ranges. • Difficult to maintain

perception of equity.• Reduces the opportunity

for promotion.• Can lead to divergence

from the market.

4-63© SHRM

Payroll Functions and Systems

Completing paychecks

Record keeping and retention

Payroll systems

© SHRM 4-64

Base-Pay Systems

4-65© SHRM

Develop a pay determination system that helps attract, motivate,

and retain employees.

Most employee

s receive

base

pay in

the form of an

hourly wage or salary.

$$$

Single- or Flat-Rate System

• Employees receive the same rate of pay, regardless of performance or seniority.

• Typically used for elected jobs in the public sector or union hourly positions.

• Generally corresponds to target market survey data for the job.

• There may be a training wage in a flat-rate job.

4-66© SHRM

Time-Based Step-Rate System

• Rate is based on longevity.• Pay increases occur on a

predetermined schedule.– Automatic step-rate– Step-rate with variability-

based performance– Combination step-rate

and performance

12

3

45

4-67© SHRM

Performance-Based/Merit Pay System

• Individual performance is the basis for pay.

• Increases are tied to performance and job mastery.

• Employers must be able to defend performance appraisal methods and differences in salary increases.

4-68© SHRM

Productivity-Based System

Pay is determined by employee’s output.• Straight piece-rate

− Base wage rate plus additional compensation for output

• Differential piece-rate− One piece rate up to the standard and a higher rate

after the standard is exceeded

• Works best in assembly and manufacturing situations.

4-69© SHRM

Person-Based System

• Employee’s characteristics determine pay.• Superior knowledge or skill mastery is

rewarded.– Knowledge-based (scientists whose pay is based on

knowledge in a field or domain)– Skill-based (machine operators cross-trained on a

variety of production equipment)– Competency-based (professionals who excel at

defined competencies)

4-70© SHRM

A window manufacturer guarantees its installers a base wage plus an extra $25 for each job completed to specifications. The employer is using a

A. merit pay system.

B. productivity-based system.

C. competency-based system.

D. flat-rate system.

4-71© SHRM

Pay Variations

4-72© SHRM

• Rates above the range maximumRed-circle rates

• Rates below the range maximum

Green-circle rates

• Small differences in pay regardless of experience, skills, level, or seniority

Pay compression

Discussion question

• When can red circle rates happen?• What can cause green circled rates?• When does a pay compression occur?

4-73© SHRM

Pay Adjustments

Pay adjustment

matrixCOLAs

General pay increase Seniority

Lump-sum increases

Market-based increases

4-74© SHRM

Examples:

© SHRM 4-75

Based on when an employee works.

Except for overtime, FLSA does not require differential pay.

• Shift pay• Emergency-shift pay• Premium pay• Hazard pay

• On-call or call-back pay• Reporting pay• Travel pay

Time-Based Differential Pay

Geographic Differential Pay• Differentials for labor

costs• Differentials to attract

workers to certain locations

• Differentials for foreign pay

© SHRM 4-76

Geographic Differential Pay

$

$

Incentive Pay

• Paying for performance beyond expectations.

• Motivates employees to perform at higher levels.

• May be a factor when determining overtime pay.

Research tax ramifications before implementing any incentive pay plan.

4-77© SHRM

Plan criteria

• Must be in concert with other organizational programs

• Must be in employee’s line of sight• Must have a sunset clause• Must incorporate short and long term

perspectives

4-78© SHRM

Individual Incentive Plans

• Improve individual performance.• Kept separate from base pay.

4-79© SHRM

Provide extra cash compensation based on performance

Examples: lump sum awards, piece rates, commissions Cash

awards

Merit awards used to recognize performance, special contributions, length of service

Examples: gifts, awards, trips, prizes

Noncash

award progra

ms

Group Incentive Plans

• Gainsharing– Organization shares a portion of the gains

realized from group effort.• Scanlon, Rucker, and Improshare

• Group performance– Group is rewarded for meeting or exceeding

performance standards.• Typically, each person receives the same amount

as a percentage of pay or flat dollar award.

4-80© SHRM

Organization-Wide Incentive Pay Plans

Profit-sharing plans

• Allow employees to share in profits.

• Include cash and deferred profit sharing.

Performance-sharing plans

• Use predetermined criteria and standards to measure results.

• Create a fund for incentive awards.

• Can be based on factors such as customer satisfaction and quality.

4-81© SHRM

Stock-Based Plans

• Encourage employees to share in the success of the organization.

• Stock may be purchased or earned.• Organization may facilitate stock purchase

through payroll contributions.• Organization may structure stock purchase as a

form of ERISA-governed qualified retirement plan (ESOP).– Nonleveraged ESOPs– Leveraged ESOPs

4-82© SHRM

Long-Term Executive Incentives

Stock option plans (ISOs and NQSOs)

Stock purchase plans

Phantom stock

Restricted stock grants

Restricted stock units

Performance grants

SPHR only

4-83© SHRM

Direct Sales Compensation

Straight commission

Salary pluscommission

Straight salary

More time is spent on service than sales.

There is a long sales cycle.

Goal is to increase volume and control costs.

Use when:

Organization needs to reward behaviors that support strategy.

Plan needs to be adaptable.

4-84© SHRM

Compensation for Professionals

Dual career ladder

Allows senior technical

personnel to earn as much as

management personnel.

Maturity curves

Correlate pay with time spent in the

field.

Used for teachers, engineers, and

technical personnel.

4-85© SHRM

Controlling Costs

4-86© SHRM

Setting ranges

•Setting upper and lower compensation bounds.•Using compa-ratios to evaluate if policies are being implemented appropriately.

Budgeting

•Top-down approach is best at controlling costs.

Auditing

•Monitoring of expenditures.

Benefits of Qualified Deferred Compensation Plans

4-87© SHRM

Allow organizations to recruit and retain employees.

Allow people to retire, creating opportunities for others.

Provide tax deferrals for plan participants if plans comply with ERISA and IRS Code.

Characteristics of Qualified Plans

• Under ERISA, plans must:– Be in writing and be communicated to

employees.– Be established for exclusive benefit of

employees/beneficiaries.– Satisfy rules concerning eligibility, vesting,

and funding.– Not favor officers, shareholders, or HCEs.

4-88© SHRM

Defined Benefit Plans

• Benefit amount is based on a formula.

• Employer funds the plan and bears the risk.

• Insured by the PBGC.

Flat-dollar formula

Career-averageformula

Final-pay formula

Cash balance plan




Flat-dollar formula


Final-payformula

Cash balance plan

4-89© SHRM

Defined Contribution Plans




Flat-dollar formula


Final-pay formula

Cash balance plan

• Employees and/or employers pay a specific amount per person into the fund.

• Benefits are determined by amounts contributed and fund performance.

Profit-sharing plans

Money purchase plans

ESOPs

401(k) plans;403(b) plans;Roth 401(k)/403(b) plans

4-90© SHRM

Individual retirement accounts (IRAs)

Roth IRAs

Simplified Employee Pensions (SEPs)

Savings Incentive Match Plan for Employees

(SIMPLE)

457 plans

Other Tax-Deferred Plans

© SHRM 4-91

529 Plans

• Referred to as qualified tuition programs (QTPs).

• Federal tax-free way to save money for college.– College savings plan

• Establishes an account for a future student.• May be used at any college.

– Prepaid tuition plan• Locks in future tuition at current price.• Used at participating in-state public colleges and

universities.

4-92© SHRM

Nonqualified Deferred Compensation Plans

• Provide additional benefits to key executives. • Do not qualify for favorable treatment under

ERISA.• Employees defer reporting income; not subject

to the limits placed on qualified plans.• Employer contributions are not deductible.• Funds are not protected by ERISA or PBGC.

Examples: Top hat plans, 457(f) plans, excess deferral plans, rabbi trusts

4-93© SHRM

Qualified Domestic Relations Orders (QDROs)

• Create or recognize the right of an alternate payee to receive all or a portion of pension benefits.

• Orders must relate to child support, alimony, or marital property rights and must be made under state domestic relations law.

4-94© SHRM

Related case: Kennedy v. Plan Administrators for Dupont Savings

Global Compensation and Benefits Considerations

• Standardization versus localization

• Culture• Competitive labor

market

SPHR only

4-95© SHRM

• Collective bargaining, employee representation, and government mandates

• Economic factors• Taxation• Laws and regulations

International Compensation Approaches

SPHR only

4-96© SHRM

Negotiation/ad hoc

Pure localization

Higher-of-home-or-host-country

Home-country-based balance sheet

Headquarters-based balance sheet

Lump-sum

Cafeteria

What is the advantage of paying an international assignee a differential between home-country costs and assignment costs?

A. It preserves purchasing power regardless of country of origin.

B. It requires minimal planning and is easy to administer.

C. It is more tax-effective for the employee.

D. It gives the international assignee a choice.

SPHR only

4-97© SHRM

International Benefit Variations

SPHR only

4-98© SHRM

Benefits that are government-provided

Benefits that are government-mandated

Benefits that are voluntary (discretionary)

Benefits that are market practice

Tax treatment of benefits

Nonsalary International Benefits

SPHR only

4-99© SHRM

Social security

Paid time off

Retirement

Severance

Health and welfare insurance (health care, disability, and life insurance)

Totalization Agreements

SPHR only

4-100© SHRM

International social security agreements.

Eliminate dual social security coverage and

taxes for employers and workers.

Fill gaps in benefit protection

for workers.

Evaluating the Compensation and Benefits System

• Is it in compliance?

• Is it compatible with the organization’s mission and strategy?

• Does it fit the culture? Is it appropriate for the workforce?

• Is it internally equitable?

• Is it externally competitive?4-101© SHRM

Required Communication

• ERISA requires:– Summary plan description, summary annual report, and

summary of material modifications.

– Filing Form 5500 with the DOL.

• Other required communications include:– FMLA policy.

– COBRA continuation of benefits notice.

– Special HIPAA enrollment rights and privacy rights.

– Medicare Part D notification.

– PPA notice and disclosure requirements for retirement plans.

– Explanation of stock options (SEC regulations).

– Posting of all required federal, state, and local employment laws.

4-102© SHRM

• Reduced administrative work for HR.

• Increased accuracy of employee data.

• Improved timeliness in information and employee transactions.

• Reduced dollars spent on other traditional HR delivery channels (e.g., paper-based transactions).

• Enhanced reputation as a “green,” environmentally conscious employer.

Self-Service Technology Benefits

4-104© SHRM

Module 4: Compensation and Benefits 19% PHR 13% SPHR 4-1© SHRM Any student use of these slides is...

Documents

Transcript of Module 4: Compensation and Benefits 19% PHR 13% SPHR 4-1© SHRM Any student use of these slides is...