PDF 2014 – Pearson – ISBN: 1292058862 – Strategic Compensation: A Human Resource Management Approach, Global Edition (8th Edition) by Joseph J. Martocchio # 4640
English | 2014 | , 0133457109 | 408 pages | PDF | 39 MB
For graduate and undergraduate courses in compensation, staffing, and human resources.
The art and science of compensation practice.
Strategic Compensation: A Human Resource Management Approach illustrates the art and science of compensation practice and its role in promoting a company’s competitive advantage.
MyManagementLab for Strategic Compensation is a total learning package. MyManagementLab is an online homework, tutorial, and assessment program that truly engages students in learning. It helps students better prepare for class, quizzes, and exams—resulting in better performance in the course—and provides educators a dynamic set of tools for gauging individual and class progress.
This program will provide a better teaching and learning experience—for you and your students. Here’s how:
Improve Results with MyManagementLab: MyManagementLab delivers proven results in helping students succeed and provides engaging experiences that personalize learning.
A flexible format: Cover topics based on your semester schedule.
Real-world topics that are relevant to all business majors: Numerous cases and interesting, engaging material will apply and appeal to all business students regardless of their major.
Part I Setting the Stage for Strategic Compensation 19
C hapter 1 Strategic Compensation 20
A Component of Human Resource Systems 20
Exploring and Defining the Compensation Context 21
What Is Compensation? 21
Core Compensation 21
Employee Benefits 23
A Historical Perspective on Compensation: The Road toward
Strategic Compensation 25
Strategic versus Tactical Decisions 27
Competitive Strategy Choices 29
Tactical Decisions that Support the Firm’s Strategy 30
Compensation Professionals’ Goals 30
How HR Professionals Fit into the Corporate Hierarchy 30
How the Compensation Function Fits into HR Departments 31
The Compensation Department’s Main Goals 35
Stakeholders of the Compensation System 36
Employees 36
Line Managers 36
Executives 37
Unions 37
U.S. Government 37
◼ Compensat ion in Action 37
Summary 38 • Key Terms 38 • Discussion Questions 38
◼ Case: Competitive Strategy at Sportsman Shoes 39
- Endnotes 39
C hapter 2 C ontextual Influences on Compensation
Practice 41
Employment Laws that Influence Compensation Tactics 42
Income Continuity, Safety, and Work Hours 43
Pay Discrimination 47
Civil Rights Act of 1964 49
Accommodating Disabilities and Family Needs 53
Prevailing Wage Laws 54
Laws that Guide Discretionary Employee Benefits 55
Internal Revenue Code 55
Employee Retirement Income Security Act of 1974 (ERISA) 56
Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) 57
Continuation of Coverage under COBRA 58
6 Contents
Health Insurance Portability and Accountability Act of 1996 (HIPAA) 58
Pension Protection Act of 2006 58
Patient Protection and Affordable Care Act of 2010 (PPACA) 59
Contextual Influences on the Federal Government as an Employer 60
Labor Unions as Contextual Influences 61
Market Influences 63
◼ Compensat ion in Action 65
Summary 65 • Key Terms 65 • Discussion Questions 66
◼ Case: Exempt or Nonexempt? 66
- Endnotes 67
Part II Bases for Pay 69
C hapter 3 T raditional Bases for Pay 70
Seniority and Merit 70
Seniority and Longevity Pay 70
Historical Overview 71
Who Participates? 72
Effectiveness of Seniority Pay Systems 72
Design of Seniority Pay and Longevity Pay Plans 72
Advantages of Seniority Pay 74
Fitting Seniority Pay with Competitive Strategies 74
Merit Pay 75
Who Participates? 75
Exploring the Elements of Merit Pay 75
Performance Appraisal 78
Types of Performance Appraisal Plans 78
Exploring the Performance Appraisal Process 83
Strengthening the Pay-for-Performance Link 87
Link Performance Appraisals to Business Goals 87
Analyze Jobs 87
Communicate 87
Establish Effective Appraisals 87
Empower Employees 87
Differentiate among Performers 89
Possible Limitations of Merit Pay Programs 89
Failure to Differentiate among Performers 89
Poor Performance Measures 89
Supervisors’ Biased Ratings of Employee Job Performance 89
Lack of Open Communication between Management and Employees 89
Undesirable Social Structures 89
Factors Other than Merit 90
Undesirable Competition 90
Little Motivational Value 90
◼ Compensat ion in Action 91
Summary 91 • Key Terms 91 • Discussion Questions 92
◼ Case: Appraising Performance at Precision 92
- Endnotes 93
Contents 7
C hapter 4 I ncentive Pay 95
Exploring Incentive Pay 95
Contrasting Incentive Pay with Traditional Pay 96
Individual Incentives 98
Defining Individual Incentives 99
Types of Individual Incentive Plans 99
Advantages of Individual Incentive Pay Programs 101
Disadvantages of Individual Incentive Pay
Programs 102
Group Incentives 102
Defining Group Incentives 103
Types of Group Incentive Plans 103
Advantages of Group Incentives 108
Disadvantages of Group Incentives 109
Companywide Incentives 109
Defining Companywide Incentives 109
Types of Companywide Incentive Plans 110
Designing Incentive Pay Programs 112
Group versus Individual Incentives 112
Level of Risk 112
Complementing or Replacing Base Pay 113
Performance Criteria 113
Time Horizon: Short Term versus Long Term 113
◼ Compensat ion in Action 114
Summary 115 • Key Terms 115 • Discussion Questions 115
◼ Case: Individual or Team Reward? 116
- Endnotes 116
C hapter 5 P erson-Focused Pay 118
Defining Person-Focused Pay: Competency-Based,
Pay-for-Knowledge, and Skill-Based Pay 118
What Is a “Competency”? 120
Usage of Person-Focused Pay Programs 120
Reasons to Adopt Person-Focused Pay Programs 121
Technological Innovation 121
Increased Global Competition 122
Varieties of Person-Focused Pay Programs 123
Contrasting Person-Focused Pay with
Job-Based Pay 127
Advantages of Person-Focused Pay Programs 129
Advantages to Employees 129
Advantages to Employers 130
Disadvantages of Person-Focused Pay Programs 130
◼ Compensat ion in Action 131
Summary 132 • Key Terms 132 • Discussion Questions 133
◼ Case: Person-Focused Pay at Mitron Computers 133
- Endnotes 134
8 Contents
Part III Designing Compensation Systems 135
C hapter 6 Building Internally Consistent Compensation
Systems 136
Internal Consistency 136
Job Analysis 138
Steps in the Job Analysis Process 138
Legal Considerations for Job Analysis 143
Job Analysis Techniques 145
U.S. Department of Labor’s Occupational Information Network (O*NET) 145
Job Evaluation 150
Compensable Factors 150
The Job Evaluation Process 151
Job Evaluation Techniques 152
The Point Method 153
Alternative Job-Content Evaluation Approaches 156
Alternatives to Job Evaluation 157
Internally Consistent Compensation Systems and Competitive
Strategy 157
◼ Compensat ion in Action 158
Summary 159 • Key Terms 159 • Discussion Questions 159
◼ Case: Internal Consistency at Customers First 160
- Endnotes 161
C hapter 7 Building Market-Competitive Compensation
Systems 162
Market-Competitive Pay Systems: The Basic Building Blocks 162
Compensation Surveys 163
Preliminary Considerations 163
Using Published Compensation Survey Data 164
Compensation Surveys: Strategic Considerations 167
Compensation Survey Data 169
Updating the Survey Data 174
Integrating Internal Job Structures with External
Market Pay Rates 176
Compensation Policies and Strategic Mandates 179
Pay Level Policies 179
Pay Mix Policies 180
◼ Compensat ion in Action 181
Summary 182 • Key Terms 182 • Discussion Questions 182
◼ Case: Nutriment’s New Hires 183
- Endnotes 183
C hapter 8 Building Pay Structures that Recognize Employee
Contributions 193
Constructing a Pay Structure 193
Step 1: Deciding on the Number of Pay Structures 194
Step 2: Determining a Market Pay Line 194
Step 3: Defining Pay Grades 194
Contents 9
Step 4: Calculating Pay Ranges for Each Pay Grade 196
Step 5: Evaluating the Results 200
Designing Merit Pay Systems 201
Merit Increase Amounts 201
Timing 202
Recurring versus Nonrecurring Merit Pay Increases 202
Present Level of Base Pay 203
Rewarding Performance: The Merit Pay Grid 203
Merit Pay Increase Budgets 204
Designing Sales Incentive Compensation Plans 207
Alternative Sales Compensation Plans 207
Sales Compensation Plans and Competitive Strategy 209
Determining Fixed Pay and the Compensation Mix 209
Designing Person-Focused Programs 210
Establishing Skill Blocks 211
Transition Matters 212
Training and Certification 213
Pay Structure Variations 214
Broadbanding 214
Two-Tier Pay Structures 215
◼ Compensat ion in Action 217
Summary 217 • Key Terms 218 • Discussion Questions 218
◼ Case: A New Sales Representative 218
- Endnotes 219
Part IV E mployee Benefits 221
C hapter 9 Discretionary Benefits 222
An Overview of Discretionary Benefits 222
Components of Discretionary Benefits 224
Protection Programs 224
Paid Time Off 227
Services 228
The Benefits and Costs of Discretionary Benefits 231
◼ Compensat ion in Action 232
Summary 233 • Key Terms 233 • Discussion Questions 233
◼ Case: Time Off at Superior Software Services 234
- Endnotes 235
C hapter 10 E mployer-Sponsored Retirement Plans
and Health Insurance Programs 236
Exploring Retirement Plans 236
Origins of Employer-Sponsored Retirement Benefits 237
Trends in Retirement Plan Coverage and Costs 237
Qualified Plans 238
Minimum Standards for Qualified Plans 238
Defined Benefit Plans 240
Minimum Funding Standards 240
Benefit Limits and Tax Deductions 241
10 Contents
Defined Contribution Plans 241
Individual Accounts 242
Investments of Contributions 242
Employee Participation in Investments 242
Minimum Funding Standards 242
Contribution Limits and Tax Deductions 242
Types of Defined Contribution Plans 242
Section 401(k) Plans 242
Profit Sharing Plans 243
Stock Bonus Plans 243
Employee Stock Ownership Plans 243
Hybrid Plans: Cash Balance Plans 244
Defining and Exploring Health Insurance Programs 244
Origins of Health Insurance Benefits 244
Health Insurance Coverage and Costs 245
Fee-for-Service Plans 246
Features of Fee-for-Service Plans 247
Managed Care Plans 249
Health Maintenance Organizations 249
Features of Health Maintenance Organizations 249
Preferred Provider Organizations 251
Features of Preferred Provider Organizations 251
Deductibles 251
Coinsurance 251
Point-of-Service Plans 251
Specialized Insurance Benefits 251
Prescription Drug Plans 252
Mental Health and Substance Abuse 252
Features of Mental Health and Substance Abuse Plans 252
Consumer-Driven Health Care 253
◼ Compensat ion in Action 254
Summary 255 • Key Terms 255 • Discussion Questions 256
◼ Case: A Health Savings Account at Frontline PR 256
- Endnotes 257
C hapter 11 Legally Required Benefits 258
An Overview of Legally Required Benefits 258
Components of Legally Required Benefits 259
Social Security Act of 1935 259
State Compulsory Disability Laws (Workers’ Compensation) 265
Family and Medical Leave Act of 1993 269
The Benefits and Costs of Legally Required Benefits 270
Designing and Planning the Benefits Program 271
Determining Who Receives Coverage 271
Financing 272
Employee Choice 272
Cost Containment 274
Communication 274
Contents 11
◼ Compensat ion in Action 277
Summary 277 • Key Terms 278 • Discussion Questions 278
◼ Case: Benefits for Part-Time Workers 278
- Endnotes 279
Part V C ontemporary Strategic Compensation
Challenges 281
C hapter 12 C ompensating Executives 282
Contrasting Executive Pay with Pay for Nonexecutive Employees 283
Principles of Executive Compensation: Implications for Competitive
Strategy 283
Defining Executive Status 283
Who Are Executives? 283
Key Employees 285
Highly Compensated Employees 285
Executive Compensation Packages 285
Components of Current Core Compensation 285
Short-Term Incentives 287
Components of Deferred Core Compensation 287
Employee Benefits: Enhanced Protection Program Benefits and
Perquisites 291
Principles and Processes for Setting Executive Compensation 292
The Key Players in Setting Executive Compensation 293
Theoretical Explanations for Setting Executive Compensation 294
Executive Compensation Disclosure Rules 296
Other Benefits 298
Say on Pay 299
Executive Compensation: Are U.S. Executives Paid Too Much? 300
Comparison between Executive Compensation and Compensation
for Other Worker Groups 300
Strategic Questions: Is Pay for Performance? 300
Ethical Considerations: Is Executive Compensation Fair? 300
International Competitiveness 302
◼ Compensat ion in Action 302
Summary 303 • Key Terms 304 • Discussion Questions 304
◼ Case: CEO Pay in the News 304
- Endnotes 305
C hapter 13 C ompensating the Flexible Workforce 307
Contingent Employees and Flexible Work Schedules 307
The Contingent Workforce 308
Groups of Contingent Workers 308
Reasons for U.S. Employers’ Increased Reliance on Contingent Workers 313
Pay and Employee Benefits for Contingent Workers 315
Part-Time Employees 316
Temporary Employees 317
Leased Workers 318
Independent Contractors, Freelancers, and Consultants 318
12 Contents
Flexible Work Schedules: Flextime, Compressed Workweeks,
and Telecommuting 319
Flextime Schedules 321
Compressed Workweek Schedules 321
Telecommuting 321
Flexible Work Schedules: Balancing the Demands of Work Life and
Home Life 322
Pay and Employee Benefits for Flexible Employees 322
Pay 323
Employee Benefits 323
Unions’ Reactions to Contingent Workers and Flexible
Work Schedules 324
Strategic Issues and Choices in Using Contingent and Flexible
Workers 325
◼ Compensat ion in Action 326
Summary 327 • Key Terms 327 • Discussion Questions 327
◼ Case: Telecommuting at MedEx 328
- Endnotes 328
Part VI C ompensation Issues around the World 331
C hapter 14 C ompensating Expatriates 332
Competitive Advantage and How International Activities
Fit In 333
Lowest-Cost Producers’ Relocations to Cheaper Production Areas 333
Differentiation and the Search for New Global Markets 333
How Globalization Is Affecting HR Departments 333
Complexity of International Compensation Programs 334
Preliminary Considerations 334
Host Country Nationals, Third Country Nationals,
and Expatriates: Definitions and Relevance for
Compensation Issues 334
Term of International Assignment 335
Staff Mobility 335
Equity: Pay Referent Groups 335
Components of International Compensation Programs 336
Setting Base Pay for U.S. Expatriates 336
Methods for Setting Base Pay 336
Purchasing Power 337
Incentive Compensation for U.S. Expatriates 338
Foreign Service Premiums 338
Hardship Allowances 338
Mobility Premiums 339
Establishing Employee Benefits for U.S. Expatriates 339
Standard Benefits for U.S. Expatriates 340
Enhanced Benefits for U.S. Expatriates 341
Balance Sheet Approach for U.S. Expatriates’ Compensation
Packages 342
Housing and Utilities 343
Goods and Services 344
Contents 13
Discretionary Income 344
Tax Considerations 344
Repatriation Pay Issues 345
◼ Compensat ion in Action 346
Summary 347 • Key Terms 347 • Discussion Questions 347
◼ Case: Jenkins Goes Abroad 348
- Endnotes 349
C hapter 15 P ay and Benefits outside the United States 350
North America 351
Canada 351
Mexico 354
South America 355
Brazil 355
Europe 356
Germany 357
Asia 358
India 358
People’s Republic of China 360
◼ Compensat ion in Action 362
Summary 362 • Discussion Questions 363
◼ Case: North American Expansion for Threads Apparel 363
- Endnotes 364
Epilogue 367
C hapter 16 C hallenges Facing Compensation Professionals 368
Fallout from the “Great Recession” 369
What Is an Economic Recession? 369
Underemployment: Implications for Compensation 370
The Compensation–Productivity Gap 372
Executive Compensation 374
Rising Wages in China 374
Challenges in Health Care Reform 375
Workforce Demographic Shifts 376
Labor Force Diversity 376
Relevance for Employee Benefits 376
Considerations for Employee Motivation 377
Marriage between Same-Sex Individuals and the U.S. Supreme
Court Ruling on the Defense of Marriage Act 377
Summary 379 • Key Terms 379 • Discussion Questions 380
- Endnotes 380
Glossary 381
Author Index 399