PDF 2014 - Pearson - ISBN: 1292058862 - Strategic Compensation: A Human Resource Management Approach, Global Edition (8th Edition) by Joseph J. Martocchio # 4640 - Digital Library (2023)

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

PDF 2014 - Pearson - ISBN: 1292058862 - Strategic Compensation: A Human Resource Management Approach, Global Edition (8th Edition) by Joseph J. Martocchio # 4640 - Digital Library (1)


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.

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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

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