Human Resource Management Compensation and Benefits.
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Transcript of Human Resource Management Compensation and Benefits.
Hot or Warm Topics
Executive compensation - Are corporate executives overpaid or underpaid?Sex discrimination and comparable worthOpen vs. secret pay plansSkill-based compensation plansTeam vs. individual pay
Executive Compensation (2012)
Rank Name Company Pay ($mil) 5-Yr Pay ($mil)
1 John H Hammergren McKesson 131.19 285.02
2 Ralph Lauren Ralph Lauren 66.65 204.06
3 Michael D Fascitelli Vornado Realty 64.40
4 Richard D Kinder Kinder Morgan 60.94 60.94
5 David M Cote Honeywell 55.79 96.11
6 George Paz Express Scripts 51.525 100.21
7 Jeffery H Boyd Priceline.com 50.185 90.3
8 Stephen J Hemsley UnitedHealth Group 48.835 169.3
9 Clarence P Cazalot JrMarathon Oil 43.71 67.23
10 John C Martin Gilead Sciences 43.19 214.92
11 John D Wren Omnicom Group 42.625 110.41
12 James Dimon JPMorgan Chase 41.995 140.92
http://www.forbes.com/lists/2012/12/ceo-compensation-12_land.html
Executive Compensation (2008)
Average compensation for 200 chief executives at America's largest public companies was $10.8 million
Sanjay Jha Motorola $104.4 million
Larry Ellison Oracle $84.6 million
Robert Iger Walt Disney $51.1 million
Kenneth ChenaultAmerican Express $42.8 million
Vikram Pandit Citigroup $38.2 million
Mark Hurd Hewlett-Packard $34.0 million
Jack Fusco Calpine $32.7 million
Rupert Murdoch News Corp. $30.1 million
David Cote Honeywell International $28.7 million
A.G. Lafley Procter & Gamble $25.6 million
CEO Compensation Compared to Average Production Worker
2011 380 to 12007 344 to 12006 364 to 12005 465 to 12004 431 to 12003 301 to 12001 525 to 11990 107 to 11982 42 to 11970 28 to 1
Since 1990, if the minimum wage rate had risen at the same rate as CEO pay, minimum wage would now be $23.03 instead of $7.25.
http://money.cnn.com/2012/04/19/news/economy/ceo-pay/index.htm/
Europe's 25 Highest-Paid CEOs(2005)
1. Lindsay Owen-Jones, L'Oreal (France), $28.3M2. John Browne, BP (Britain), $14.0M3. Arun Sarin, Vodaphone (Britain), $12.2M4. Henri De Castries, AXA (France), $9.1M5. Josef Ackermann, Deutsche Bank (Germany), $8.4M
http://www.timeinc.net/fortune/information/presscenter/fortune/press_releases/20050627H_europe.html
(2013) EurosMartin WinterkornVolkswagen (VW) 16,596,206Joseph Jimenez Novartis 12,544,596Alfredo Saenz Abad Bank of Santander 10,723,000Bernard Arnault LVMH 10,696,670Peter Voser Royal Dutch Shell 10,208,000
http://www.topafric.com/index.php/en/site-map/421-top-10-best-paid-ceos-in-europe.html
% Change CEO Pay/Relative to1988-2005 Worker Pay (2005)*US CEO (2005)
Australia 292% 15.6 33% Belgium 157 18 46 Canada 152 23.1 49 France 197 22.8 56 Germany 187 20.1 55 Italy 232 25.9 53 Japan 8 10.8 25 Netherlands118 17.8 40 New Zealand -- 24.9 18 Spain 98 17.2 32 Sweden 304 19.2 44 Switzerland172 19.3 64 UK 161 31.8 55 US 169 39
* Ratio of CEO compensation to the compensation of manufacturing production workers.Source: Authors’ analysis of Towers Perrin (1988, 2003, and 2005).
2005 $31,858 $41,386 $9,528 77.0%
2004* $32,285 $42,160 $9,875 76.6%
2003 $30,724 $40,668 $9,944 75.5%
2002 $30,203 $39,429 $9,226 76.6%
2001 $29,215 $38,275 $9,060 76.3%
2000 $27,355 $37,339 $9,984 73.3%
1999 $27,208 $37,701 $10,493 72.2%
1998 $27,290 $37,296 $10,006 73.2%
1997 $26,720 $36,030 $9,310 74.2%
1996 $25,919 $35,138 $9,219 73.8%
1995 $25,260 $35,365 $10,105 71.4%
1994 $25,558 $35,513 $9,955 72.0%
1993 $25,579 $35,765 $10,186 71.5%
1992 $25,791 $36,436 $10,645 70.8%
The Wage Gap Over Time
Year Women's Men's Dollar Percent Earnings Earnings Difference
2011 $37,118 $48,202 $11,084 77.0%
2010 $36,931 $47,715 $10,784 77.4%
2009 $36,278 $47,127 $10,849 77.0%
2008 $35,745 $46,367 $10,622 77.1%
2007 $35,102 $45,113 $10,011 77.8%
2006 $32,515 $42,261 $9,476 76.9%
1991 $25,457 $36,440 $10,983 69.9%
1990 $25,451 $35,538 $10,087 71.6%
1989 $25,310 $36,855 $11,545 66.0%
1988 $24,774 $37,509 $12,735 66.0%
1987 $24,663 $37,389 $12,726 65.2%
1986 $24,479 $38,088 $13,609 64.3%
1985 $23,978 $37,131 $13,153 64.6%
1984 $23,453 $36,842 $13,389 63.7%
1983 $22,961 $36,106 $13,055 63.6%
1982 $22,367 $36,224 $13,857 61.7%
1981 $21,830 $36,854 $15,024 59.2%
1980 $22,279 $37,033 $14,754 60.2%
1979 $22,446 $37,622 $15,176 59.7%
The Wage Gap Over Time
Year Women's Men's Dollar Percent Earnings Earnings Difference
1978 $22,617 $38,051 $15,005 59.4%
1977 $21,743 $36,901 $15,158 58.9%
1976 $21,738 $36,114 $14,376 60.2%
1975 $21,297 $36,207 $14,910 58.8%
1974 $21,419 $36,456 $15,037 58.8%
1973 $21,397 $37,381 $15,984 56.6%
1972 $21,185 $36,614 $15,429 57.9%
1971 $20,691 $34,771 $14,080 59.5%
1970 $20,567 $34,642 $14,075 59.4%
1969 $20,156 $34,241 $14,085 58.9%
1968 $18,836 $32,389 $13,553 58.2%
1967 $18,241 $31,568 $13,327 57.8%
1966 $17,874 $31,055 $13,181 57.6%
1965 $17,852 $29,791 $11,939 59.9%
The Wage Gap Over Time
Year Women's Men's Dollar Percent Earnings Earnings Difference
http://www.pay-equity.org/info-time.html
Median Annual Earnings of Full-time Workers (Bureau of Labor Statistics, 2000 census)
Physicians, surgeons $140,000 88,000Lawyers 90,000 66,000Judges, magistrates 88,000 50,000Actuaries 80,000 56,000Pharmacists 70,000 63,000Teacher assistants 20,000 15,000Cooks 17.000 15,000
Male Female
http://gblakely.com/BADM553/censr-15.pdf
Compensation Goals
Attracting good employees
Retaining good employees
Motivating employees
Complying with the law
Having a cost effective compensation system
Compensation and theThree Equities
External EquityAttracting good employees
Internal EquityRetaining good employees
Individual or Employee EquityMotivating employees
External Equity
Attracting good employees
Labor Market Model
Market Surveyshttp://www.bls.gov/emp/ep_data_occupational_data.htm
http://www.bls.gov/oes/current/oes_nat.htm
http://swz.salary.com/
Pay strategy/policies
Internal Equity
Retaining good employeesJob EvaluationGeneral Basis
SkillEffortResponsibilityWorking Conditions
Internal Equity
Job Evaluation TechniquesRanking
Jobs are compared to each other based on their overall worth to the company. The ‘worth’ of a job is usually measured by judgments of skill, effort, responsibility, and working conditions.The advantage of the ranking method is that it is simple.The disadvantages, similar to the ranking method of performance appraisal, are that the intervals between the ranks are assumed to be equal, the judgments are global, and as the number of jobs for evaluation increases it becomes increasingly difficult. Also, the evaluators must have knowledge of all jobs.
Classification methodJobs are classified into a grade/category structure. Each tier of the structure has a description and associated job titles. For example, the Westinghouse system had:
– Grade 1 Unskilled ex. File clerk– Grade 2 Skilled ex. Typist, lathe operator– Grade 3 Interpretive ex. Chief clerk– Grade 4 Creative ex. Engineers, sales reps– Grade 5 Executive ex. Department heads– Grade 6 Administrative ex. Chief engineer, Director of R&D– Grade 7 Policy ex. Vice-president of Marketing
Each job is assigned to the grade/category providing the closest match to the job. Standards are developed mainly along occupational lines. The standards help identify and describe key characteristics of occupations that are important for distinguishing different levels of work.Pay ranges are then assigned to grades.
– See http://www.opm.gov/oca/08tables/html/gs.asp
The advantages of this method are that it is simple and has been in use for many years.Its disadvantages include the fact that classification judgments are subjective, and the standard used for comparison may have built-in biases. Also, some jobs may fit into more than one grade/category or their descriptions are so broad that they do not relate to specific jobs.
Factor ComparisonSelect benchmark jobs.
Sets of compensable factors are identified as determining the worth of jobs. The number of factors is usually four or five and typically relate to skill, responsibility, effort and working conditions.
Jobs are then ranked on each factor.
Wages are then allocated to the factors. The organization’s other jobs are then compared to the benchmark jobs and rates of pay for each of the other jobs.
Factor comparison has the advantage that the value of the job is expressed in monetary terms, and the method is applicable to a wide range of jobs.
The method’s disadvantages are that the pay points for each factor is based on subjective judgments.
Point MethodThe point method is an extension of the factor comparison method. Usually between eight and fourteen compensable factors (typically related to skill, effort, responsibility, and working conditions) are identified as determining the worth of jobs.
– Examples of compensable factors include» education, experience, knowledge, physical
demands, mental demands, responsibility for equipment & work processes, responsibility for materials & products, responsibility for safety, responsibility for the work of others, responsibility for financial resources, job hazards, etc.
Factors are divided into degrees
Points are assigned the degrees
Benchmark jobs are compared to market rates
JOB ATTRIBUTE RANKINGPlease rank, from 1 to 10 in order of importance, with 1 being the most important, the following job attributes. In the first column indicate the rank in terms of your own preferences and in the second column indicate how you think others will rank these same job attributes.
Your Ranking Others' Ranking
Advancement _____ _____
Benefits _____ _____
Company _____ _____
Co-workers _____ _____
Hours _____ _____
Pay _____ _____
Job Security _____ _____
Supervisor _____ _____
Type of Work _____ _____
Working Conditions _____ _____
JOB ATTRIBUTE RANKINGThe following median rankings are based on the responses of 39,788 job applicantsThe following median rankings are based on the responses of 39,788 job applicants (Minneapolis Gas Company).(Minneapolis Gas Company).
MEN MEN WOMEN WOMEN
SelfSelf OthersOthers SelfSelf OthersOthers AdvancementAdvancement 3.33.3 3.83.8 5.35.3 4.3 4.3 BenefitsBenefits 6.86.8 5.25.2 8.08.0 5.9 5.9 CompanyCompany 4.54.5 6.86.8 4.64.6 7.1 7.1 Co-workersCo-workers 6.06.0 7.77.7 5.25.2 7.3 7.3 HoursHours 7.67.6 5.45.4 6.96.9 5.0 5.0 PayPay 5.65.6 2.12.1 6.06.0 2.1 2.1 Job SecurityJob Security 2.52.5 3.63.6 4.94.9 5.4 5.4 SupervisorSupervisor 6.36.3 7.47.4 5.35.3 7.0 7.0 Type of WorkType of Work 3.33.3 4.94.9 1.51.5 3.5 3.5 Working ConditionsWorking Conditions 7.97.9 6.96.9 6.56.5 6.86.8
What Do Workers Want From Their Jobs?
Supervisors WorkersSupervisors Workers
Good working conditionsGood working conditions 4 4 99Feeling "in" on thingsFeeling "in" on things 10 10 22Tactful discipliningTactful disciplining 7 7 1010Full appreciation for work doneFull appreciation for work done 8 8 11Management loyalty to workersManagement loyalty to workers 6 6 88Good wagesGood wages 1 1 55Promotion and growth with companyPromotion and growth with company 3 3 77Sympathetic understanding of personal problems 9Sympathetic understanding of personal problems 9 33Job securityJob security 2 2 44Interesting workInteresting work 5 5 66
1 = most important in job1 = most important in job10 = least important in job10 = least important in job
(From Lawrence Lindahl, " What Makes a Good Job?", Personnel, (January 1949)
What do new graduates value in jobs?
Company culture 6.2 Advancement opportunities 6.0 Nature of work (e.g., challenging) 5.9 Training provided 5.7 Work/non-work balance 5.5 Monetary compensation 5.3 Benefits 5.2 Location 5.0 Vacation time 4.6 Level of job security 3.9 Size of company 3.7 International assignments 3.3
Rated on seven point scale (1 = not important to 7 = very important).Source: Human Resource Management (2003), 42, p. 23-37.
What do applicants with college degrees want in jobs?
1993 1978
Type of work 2.2 1.5
Advancement 4.6 3.6
Co-workers 5.1 5.2
Company 5.7 4.4
Security 5.8 5.5
Location 6.2
Supervisor 6.3 5.5
Pay 6.3 5.2
Working conditions 7.2 7.2
Benefits 7.4 7.9
Hours 9.3 8.0 1993 sample = 623, 1978 sample = 4,535Source: Journal of Occupational & Organizational Psychology (2003) , 66, p. 71-81
Individual or Employee Equity
Motivating performanceAt the individual level
Pluses and minuses
Methods/techniques
At the organization levelPluses and minuses
Methods/techniques
Compensation and the Legal Environment
The Fair Labor Standards Act of 1938Minimum Wage
Exempt vs. Non-exempt and overtimehttp://www.ewin.com/articles/exneot.htm
http://www.dol.gov/elaws/esa/flsa/screen75.asp
As of 2005, < $23,660/year are guaranteed to be paid overtime and > $23,660/year are exempt if they have some “professional, administrative, or executive duties”
The Equal Pay Act of 1963
Benefits
The Cost of BenefitsMandatory
Workers’ Compensationhttp://www.wvinsurance.gov/Default.aspx?tabid=73
Unemployment InsuranceFamily Medical LeaveSocial Security http://www.ssa.gov/
Retirement incomeDisability incomeMedicareSurvivor benefits2010 rates
– Social security 6.2% on first $106,800– Medicare 1.45% unlimited
Benefits
Non-mandatoryInsurance
Health– Cost escalation– COBRA– HIPAA– Types of health insurance
» Traditional indemnity plans» HMO» PPO
Retirement ERISA (1974)
– Vesting» Full vesting after 5 years» 20% per year after 3 years
– Fiduciary standards– Pension Benefit Guarantee Corporation
Defined benefitDefined contribution
– 401(k), 403(b)» http://invest-faq.com/articles/ret-plan-401k.html
– IRA– SEP– Keogh
http://www.dallasfed.org/ca/wealth/3.htmlhttp://www.dol.gov/ebsa/faqs/faq_compliance_pension.html