BENEFITS AND COMPENSATION

BENEFITS

     Employee benefits typically refers to retirement plans, health life insurance, life insurance, disability insurance, vacation, employee stock ownership plans, etc. Benefits are increasingly expensive for businesses to provide to employees, so the range and options of benefits are changing rapidly to include, for example, flexible benefit plans.

     Benefits are forms of value, other than payment, that are provided to the employee in return for their contribution to the organization, that is, for doing their job. Some benefits, such as unemployment and worker's compensation, are federally required. (Worker's compensation is really a worker's right, rather than a benefit.)

     Prominent examples of benefits are insurance (medical, life, dental, disability, unemployment and worker's compensation), vacation pay, holiday pay, and maternity leave, contribution to retirement (pension pay), profit sharing, stock options, and bonuses. (Some people would consider profit sharing, stock options and bonuses as forms of compensation.)

     You might think of benefits as being tangible or intangible. The benefits listed previously are tangible benefits. Intangible benefits are less direct, for example, appreciation from a boss, likelihood for promotion, nice office, etc. People sometimes talk of fringe benefits, usually referring to tangible benefits, but sometimes meaning both kinds of benefits.

     You might also think of benefits as company-paid and employee-paid. While the company usually pays for most types of benefits (holiday pay, vacation pay, etc.), some benefits, such as medical insurance, are often paid, at least in part, by employees because of the high costs of medical insurance.

COMPENSATION

     Compensation includes topics in regard to wage and/or salary programs and structures, for example, salary ranges for job descriptions, merit-based programs, bonus-based programs, commission-based programs, etc. (Also see the Related Info (including Benefits).)

     Compensation is payment to an employee in return for their contribution to the organization, that is, for doing their job. The most common forms of compensation are wages, salaries and tips.

     Compensation is usually provided as base pay and/or variable pay. Base pay is based on the role in the organization and the market for the expertise required to conduct that role. Variable pay is based on the performance of the person in that role, for example, for how well that person achieved his or her goals for the year. Incentive plans, for example, bonus plans, are a form of variable pay. (Some people might consider bonuses as a benefit, rather than a form of compensation.) Some programs include a base pay and a variable pay.

     Organizations usually associate compensation/pay ranges with job descriptions in the organization. The ranges include the minimum and the maximum amount of money that can be earned per year in that role.

     Employees have certain monies withheld from their payroll checks, usually including federal income tax, state income tax, FICA (social security) contributions, and employee contributions to the costs of certain benefits (often medical insurance and retirement).

Exempt and Non-Exempt
     Jobs in organizations have two classifications, exempt and non-exempt.

     Professional, management and other types of skilled jobs are classified as exempt. Exempt jobs get a salary, that is, a fixed amount of money per time interval, usually a fixed amount per month. It's not uncommon for exempt positions to receive higher compensation and benefits than non-exempt jobs, although non-exempt jobs often can make more money than exempt jobs simply by working more hours.

     Unskilled or entry-level jobs are usually classified as non-exempt. Non-exempt jobs usually get a wage, or an amount of money per hour. Non-exempt jobs also get paid over-time, that is, extra pay for hours worked over 40 hours a week or on certain days of the week or on holidays.

     Each job must have the same pay range for anyone performing that job, that is, one person can't have a higher maximum pay than someone else doing that same job.

COMPENSATION PLANNING FOR YOUR EMPLOYEES

Compensation - what you pay someone to entice them to continue to do work for your company - is a critical facet of any manager's job.

     Often, unless you are the president or owner of the company, you have others helping you deal with compensation issues - like a human resources department or consultant.

     Compensation includes many things beyond straight salary. It also includes benefits, perks, stock options, etc. You have to balance what these cost against what your employees perceives as their value, and that varies by employee.

     You have to measure compensation levels against other employees in the company, against other employees in other companies in similar positions, and against performance.

     You have to determine salary ranges for existing positions and adjust those periodically to compensate for economic factors (cost of living changes, inflation) and competitive pressures (industry demand for that type of employee, profit margins).

     You often have to determine a salary for a new position, or if you promote someone to new responsibilities.

     Plus you have to comply with government regulations regarding discrimination, contractor versus employee determinations, and union or other contractual obligations.

     However, as if all of this isn't enough to keep you awake at night, the most important aspect of a compensation plan for your employees is:You have to keep them motivated to do the job the best they can.

CHAPTER 7: GENERAL PRACTICES IN PERSONNEL SELECTION

     Personnel management's critical function is making decisions about assigning individuals to specific jobs or positions or a bout training individuals for specific jobs. This function is "matching" individuals to jobs, considering on the one hand the actual or potential qualifications of individuals and on the other hand the requirements of jobs.

TYPES OF PERSONNEL ACTIONS

     Personnel selection refers to choosing, from a number of available candidates, who are to be employed.

• Placement - focuses on choosing from a number of possible jobs the one presumable best suited to a given candidate.
• Classification - applies to a situation in which there is a pool of individuals and a pool of jobs and refers to the assignment of the individuals to the jobs in order to optimize, collectively, the matches between the two.
• Promotions - advancement of individuals to higher-level jobs.

PERSONNEL SPECIFICATIONS

     The objective of setting up personnel specifications is to state those items of personal data that are "valid" for selecting individuals for the job.

 TWO CLASSES:

1. Specifications that are reasonably intrinsic to the job (aptitudes and sensory and physical abilities)
2. Other specific requirements associated with labor market conditions

TYPES:

1. Work experience
2. Education
3. Training
4. Biographical data
5. Physical data
6. Information on various abilities, personality, interests, and other characteristics

SPECIFICATIONS FOR TRAINED VS UNTRAINED PERSONNEL

     Trained personnel's focus of specifications is on the nature, length, and quality of any relevant training, education, or experience required for the job. On the other hand, untrained personnel's focus of specifications is on those qualities presumed to reflect their potentialities for the job.

SOURCES OF RELEVANT PERSONNEL DATA

1. Personnel tests and inventories
2. Application forms and other personal data questionnaires
3. Physical examinations
4. Interviews
5. Letters of reference

TYPES OF RELIABILITY COEFFICIENTS

1. Coefficient of Stability - based on the use of the same type of measurement instrument administered at two points in time to a sample of people, the results of these two administrations usually being correlated.
2. Coefficient of Equivalence - based on data from two samples of the "universe" of the behaviors or events being measured.
3. Coefficient of Internal Consistency - various parts or items of a test of some behavior or attribute all should measure essentially the same thing.

VALIDITY

     Validity is the appropriateness of inferences from test scores or other forms of assessment.

TYPES:

1. Criterion Related Validity - determined by comparing test scores with one or more independent criteria.
2. Construct Validity - evaluated by investigating what psychological qualities a test measures.
3. Content Validity - applies to various types of achievement tests, job knowledge tests or job performance tests
4. Job Component Validity - predicated on the assumption that the human requirements of any given job activity or "component" would be comparable in any job in which that activity or component occurred in equal degree.

     In personnel selection, the most approved validity is criterion-related validity.

JOB STATUS METHOD OF TEST VALIDATION

     When this method is used, the test scores of employees on each of two or several jobs are compared to ascertain whether there are significant differences.

FACTORS DETERMINING THE FUNCTIONAL VALUE OF PERSONNEL TESTS

1. Reliability
2. Validity
3. Percentage of present employees who are "satisfactory" on the job

CHAPTER 6: ORGANIZATIONAL STRUCTURE (Topic Facilitation Summary)

     People work for many reasons, and to understand this, we must know why people are motivated to work.

     Motivation is the individual's desire to show the behavior and might be thought of as the "will do" factors influencing the display of work-related behaviors. Work motivation is define as the conditions which influence the arousal, direction, and maintenance of behaviors relevant in work settings.

     There are four problems facing the understanding of behavior:

1. Diversity of reasons
2. Stereotypes

• internal state (motivation as a personal trait)
• external state (conditions of the work environment and the job)

     3.  Different reasons for behaviors at different times

     4.  Different behaviors in the work setting that are of interest

THEORIES OF WORK MOTIVATION

1. Need Theories

• Need Hierarchy Theory (Maslow) - as lower needs were satisfied, the individual shifted his or her concern to higher order needs.

          *Physiological Needs (basic needs)

          *Safety Needs (protection)

          *Social Needs (needs for belonging)

          *Ego Needs (self-esteem)

          *Self-Actualization (need for realizing one's own potentialities)

• ERG Theory (Alderfer) - more than one need may operate at one time and satisfaction of a need may or may not lead to a progression to the next higher need.

          *Existence Needs (physical existence)

          *Relatedness Needs (interpersonal needs)

          *Growth Needs (needs for personal development and improvement)

• Need for Achievement (McClelland and Atkinson) - addressed achievement-oriented activity.  This is influenced by the result of a conflict between two opposing tendencies, the tendency to achieve success (n-Ach) and the tendency to avoid failure (n-AF).

2. Balance Theories

• Equity Theory (J. Stacy Adams) - if a comparison is equitable, no tension exists; the individual is satisfied and should have little desire to change the outcome/input ratio. Inequity creates tension and, with it, a desire by the individual to reduce the tension by altering one or more elements of the ratios to bring the comparison back to equality. Examples of inequality are underpayment and overpayment.
• Consistency Theory (Korman)

        *Balance Notion (states that individuals will engage in and find satisfying those behaviors which  maximize their sense of cognitive balance or consistency. They will be motivated to perform in a manner consistent with their self-image).

          *Consistency Notion (predicts that high self-esteem people tend to perform better than those with low self-esteem which prefer to behave in a manner consistent with their low self-image).

3. Two-Factor Theory (Herzberg) - proposed a theory of job satisfaction. Motivator factors that are associated with high job attitudes and Hygiene factors that are associated with low job attitudes.

4. Behavior Modification (Skinner) - behavior is controlled by its consequences. The consequences of interest are reinforcers (anything that follows a behavior and influences the probability that behavior will be repeated in the future).

5. Expectancy Theory (Vroom) - based upon a rational-economic view of people. It is assumed that people are decision makers who choose among alternative courses of actions by selecting the action that appears most advantageous.

6. Intrinsic Motivation (Deci)

• White's Notion of Competence Motivation - assumes that in performance settings, people are motivated to do well in order to experience a sense of competence.
• Notion of Personal Causation - assumes that people need to feel responsible for their own actions. Responsibility for action is the freedom to choose among alternative courses of action.

LEVELS OF CONSIDERATION FOR WORK BEHAVIOR

1. Motivational Theories of Work Behavior
2. General Practices for Influencing Behavior in Organization

• Goal Setting - goals provide as a basis for motivation and they guide behaviors
• Participatory Decision Making - employees who participate in making decisions will be more committed to their decisions and will work harder to accomplish them
• Incentive Systems - items given to individuals that are designed to influence future behavior
• Job Design

     3. Specific Practices (MBO, Pay Schedules, Leadership Styles)

CHAPTER 5: BEHAVIORAL MEASUREMENT: GENERAL CONSIDERATIONS

     There are six classes of criteria that need to be considered in measuring the job-related behavior. The following are:

1. Performance Criteria - this is concern in the job performance that has two dimension: Quantity dimension, based on the number of "units" produced; Quality dimension which is difficult to measure because of the human error that is typical to happen.
2. Job Attendance Criteria - this is measured in three aspects, job tenure (how long people remain on their jobs), absenteeism, and tardiness.
3. Accident and Injury Criteria - it is used if it is concerned with matters of safety.
4. Physiological Criteria - used in studying the effects of environmental variables, physical work load, work periods, methods of work, and so forth.
5. Status Criteria - refers to individual's occupation, education, or position.
6. Subjective Criteria - examples of this are the opinions obtained by questionnaires, attitudes, and ratings of jobs.

     In selecting criteria, three considerations must be taken, the relevance (objectives for which measures are derived), the freedom from contamination (individual differences), and reliability (stability or consistency). There are certain problems in obtaining criterion, one of these is keeping it confidential.

     Criterion Dimensions can be multiple, but it must be used independently and should not be combined.

CHAPTER 4: JOBS AND JOB ANALYSIS

Jobs are the means by which people earn their daily living. Job analysis is therefore important because this obtains information about jobs.

Jobs are created to fulfill functions that are considered necessary to achieve the objectives of the organization.  The combination of actual work activities that comprise a job, the physical and social environment, and other job-related factors collectively predetermine the nature of job requirement.. Job requirement is also imposed by organization to determine the abilities of an individual. This is considered as the criteria that are needed to be passed to get the aimed job. 

Job analyst is the one responsible in hiring the person, but sometimes, supervisor or the incumbent does this. Using the applicant's information, he can be able to decide if it has the capacity to contribute in the company.

There are different methods of collecting job information. These are the observation of a worker by a job analyst, interview of a worker by a job analyst, work diaries that workers use in recording what they do during the time of work, records, etc.

CHAPTER 3: BEHAVIORAL RESEARCH

Behavioral research sometimes aimed at making predictions of relevant behavior. Hence, prediction require the use of two types of variable, the criterion (which is being predicted and is considered as the dependent variable) and the predictor (one used in predicting the criterion and is considered as the independent or controlled variable).

Both predictors and criteria can be measured differently. By using nominal scale (name and labels), ordinal scale (comparison), interval scale (using patterns and has no absolute zero), and the ratio scale (absolute, existing and has absolute zero). These scales are somewhat follows a hierarchical order, nominal scale on the lowest level, and ratio scale on the highest level.

The need for research arises because there are questions need to be answered. Like in science research, it also follows the same steps. 

Also, there are six treatment of variables in research:

I.  Do not measure:

     1. Ignore

     2. Randomization

II. Measure under the following conditions:

     1. With no manipulation

     2. Manipulated by:

          a. Holding constant

          b. Matching

          c. Creating specific levels or categories

Job-related behavior has two primary purposes. First, all psychological research in industrial psychology depends on the measurement of various aspects of behavior in the working environment. Second, certain personnel management functions (such as personnel evaluation) require the measurement in quantitative terms of work-related behavior, such as job performance.

CHAPTER 2: BASES OF JOB-RELATED BEHAVIOR

Behavior plays an important role in human work. It has two dimensions: Quantified wherein it can be measured, such as quantity and number of errors; and Qualitative wherein it can be scaled as "goodness-badness", like job satisfaction.

There are also certain kinds of factors suggested in job performance, the individual variable (aptitudes, personality characteristics, age, sex, education, etc) and situational variable which is classified into two classes, the job and working conditions (methods of work, physical work environment, etc) and the organizational and social variables (type of training received, union relations, etc).

By knowing the behavior of an individual, including his abilities and skills, we can be able to justify if he is suit in a particular job.