Course Manualfor

Compensation Management

by

Machelle SchroederProfessor of Business Administration

University of Wisconsin-PlattevilleBachelor of Science in Business Administration

UW-Platteville

Distance Learning Center

D L C

Course Manual for Business Administration 3100Compensation Management

Course Instructor: Machelle Schroeder

© 2009 by Department of Business and AccountingCollege of Business, Industry, Life Science and AgricultureUniversity of Wisconsin-Platteville

All rights reserved. No part of this course manual may be reproduced, in any form or by any means, without permission in writing from the University of Wisconsin-Platteville Distance Learning Center.

Distance Learning Center University of Wisconsin-Platteville 1 University PlazaWisconsin 53818-3099 Phone: 608.342.1468Toll free: 800.362.5460E-mail: disted@uwplatt.eduWebsite: www.uwplatt.edu/disted

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About the Instructor

Machelle K. SchroederDr. Machelle Schroeder was an assistant professor of business administration at the University of Wisconsin-Platteville from 1990 to 2002, an associate professor from 2002 to 2007, and a professor since 2007. She teaches undergraduate and graduate level courses in Human Resource Management, Compensation Management, Employee Training and Development, Employee Recruitment and Selection, and Labor-Management Relations.

Machelle received her Bachelor of Science in Business Administration from the University of Wisconsin-Whitewater in 1979, her Master’s in Business Administration from the University of Wisconsin-Parkside in 1986, and her doctoral degree in Continuing and Vocational Education from the University of Wisconsin-Madison in 2001. Machelle has a lifetime certification as a Senior Professional in Human Resources (SPHR) through the Society for Human Resource Management (SHRM).

Machelle’s work experience includes eight years in quality assurance managerial positions for a medical device manufacturing division of Bristol-Myers Squibb Corporation and four years as human resource manager for public and private sector organizations. She has authored and coauthored papers on the subjects of employee selection, performance appraisals, the Americans with Disabilities Act, and learning in computer-mediated classes.

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Table of Contents

About the Instructor .............................................................................................................................................iii

Introduction .............................................................................................................................................................1Course Rationale ......................................................................................................................................................1Course Outcomes ....................................................................................................................................................2Course Manual Organization ................................................................................................................................3Textbook Information .............................................................................................................................................3Course Grading Criteria .........................................................................................................................................4Instructor Contact Information .............................................................................................................................4

Unit 1: Introduction to the Pay Model and Compensation Strategies .........................................................5Unit 1 Rationale .......................................................................................................................................................5Unit 1 Learning Outcomes .....................................................................................................................................5Lesson 1: The Pay Model and Compensation Strategy ......................................................................................6Lesson 2: Defining Internal Alignment ................................................................................................................9Lesson 3: Job Analysis ...........................................................................................................................................12Unit 1 Examination Information .........................................................................................................................15

Unit 2: Job Evaluation and Determining External Competitiveness ..........................................................17Unit 2 Rationale .....................................................................................................................................................17Unit 2 Learning Outcomes ...................................................................................................................................17Lesson 4: Job Evaluation .......................................................................................................................................18Lesson 5: Assuring External Competitiveness ..................................................................................................39Unit 2 Examination Information .........................................................................................................................51

Unit 3: Employee Contributions: Determining Individual Pay ..................................................................53Unit 3 Rationale .....................................................................................................................................................53Unit 3 Learning Outcomes ...................................................................................................................................53Lesson 6: Pay-For-Performance: The Evidence .................................................................................................54Lesson 7: Pay-For-Performance Plans ................................................................................................................57Lesson 8: Performance Appraisal ........................................................................................................................61Unit 3 Examination Information .........................................................................................................................63

Unit 4: Employee Benefits ...................................................................................................................................65Unit 4 Rationale .....................................................................................................................................................65Unit 4 Learning Outcomes ...................................................................................................................................65Lesson 9: Employee Development ......................................................................................................................66Lesson 10: Compensation of Special Groups ....................................................................................................70Lesson 11: Legal Issues in Compensation ..........................................................................................................72Lesson 12: Compensation Administration .........................................................................................................74Unit 4 Examination Information .........................................................................................................................76

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IntroductionBusiness Administration 3100, Compensation Management

Course Rationale

Business Administration 3100, Compensation Management, will help you study and understand current compensation issues and practices. The course presents a comprehensive overview of the field of compensation management and facilitates your ability to apply the techniques discussed in real-life situations.

Unit 1 provides background information on why compensation is important to employers and employees and on the basic components of an employee reward system. The topics of job analysis and the development and uses of job descriptions are also covered.

Unit 2 presents information on the primary job evaluation methods and the wage survey process. It also covers how the data gathered through a wage survey is used to develop an organization’s pay structure.

Unit 3 discusses employee motivation as it relates to compensation management, pay-for-performance plans, and the role of performance appraisals in making compensation decisions.

Unit 4 provides information on employee benefits determination options, compensation of special employee groups, compensation-related legislation and compensation program administration.

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Course Outcomes

Upon completion of the course, you will be able to

1. Understand the various components of an organization’s employee reward system and the effects of compensation on employees and organizations.

2. Develop job descriptions from raw data gathered via job analysis.

3. Evaluate jobs using the job evaluation methods of ranking, classification, and point methods.

4. Develop a pay structure using raw data gathered using a wage survey.

5. Understand the rationale for and methodology of using team-based and performance-based pay systems.

6. Understand the short-term and long-term incentive and employee benefits and service options available to organizations.

7. Understand the options and rationales for compensation systems for various special employee groups such as executives and professionals.

8. Review the legislation which applies to compensation management in the United States and to interpret the Fair Labor Standards Act in classifying jobs by exemption status.

9. Analyze jobs using several job analysis methods.

10. Demonstrate knowledge of the material presented in the course by providing correct responses to true/false, multiple-choice, and short answer test questions.

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Course Manual Organization

This course manual is organized into units and lessons, each covering a conceptual area of the course. The units and lessons integrate related material and parallel textbook treatment of the subject matter. Each unit is composed of lessons with competencies corresponding to one or more chapters in the textbook. Unit structure is composed of three elements: (1) unit rationale, (2) unit learning outcomes, and (3) individual lessons. Each lesson within a unit consists of three elements: (1) learning outcomes, (2) vocabulary, and (3) learning activities. The composition of each element is as follows:

The Unit Rationale briefly explains the inclusion of the material in the course. You are thereby apprised of the relevance of the material to be studied.

The Unit and Lesson Learning Outcomes state what you should be able to do after you complete the unit or lesson.

The Lesson Vocabulary list specifies terms you should understand. Definitions and descriptions of the items on the vocabulary list are available in the textbook chapters.

For the Lesson Learning Activities, you are expected to read specific assignments by chapter as indicated in each lesson. In addition, optional internet activities are provided for students who have internet access. You also are expected to complete the written activities that are assigned for each lesson.

Textbook Information

The textbook required for this course is George T. Milkovich & Jerry M. Newman, Compensation, 9th edition (McGraw-Hill Irwin, 2008), ISBN 978-0-07-296941-2.

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Course Grading Criteria

Your final grade is based on total points accumulated from unit examinations and lesson written activities. These factors have the following values:

Undergraduate

Graded Item Possible PointsUnit Exams 4 @ 50 points 200 pointsWritten Activities 346 points

Total 546 points

A = 90% - 100% of 546 pointsB = 80% - 89% of 546 pointsC = 70% - 79% of 546 pointsD = 60% - 69% of 546 pointsF = below 60% of 546 points

Instructor Contact Information

Please contact your instructor if you have any questions concerning the course. You may contact the instructor through the following means:

Mail: Dr. Machelle Schroeder 1113 Ullsvik Hall UW-Platteville 1 University Plaza Platteville, WI 53818-3099

Phone: 608.342.1459

Fax: 608.342.1466

E-mail: schroema@uwplatt.edu

Do not send your completed written activities to the Distance Learning Center, as this will delay their receipt by the instructor. Make sure that you include your name, the date, unit number, and lesson number on each page of an assignment that you mail to your instructor.

Please request exams from the Distance Learning Center at least ten days before the date you want to schedule the examination with your proctor. This allows time to process your request and for regular first-class U.S. mail delivery. Your proctor must return the exam to the Distance Learning Center within 30 days.

For more information, see the Examination Information at the end of each unit.