The establishment of old-age insurance and unemployment insurance.

Workers’ compensation laws cover job-related injuries and death.

Medical Insurance

Disability Insurance

+ Defined benefit plan guarantees (“defines”) a specified retirement benefit level to employees based typically on a combination of years of service and age as well as on the employee’s earnings level. + Defined contribution plans do not promise a specific benefit level for employees upon retirement.+ One way to combine the advantages of defined benefit plans and defined contribution plans is to use a cash balance plan.

At first blush, paid vacation, holidays, sick leave, and so forth may not seem to make economic sense. The employer pays the employee for time not spent working, receiving no tangible production value in return. Therefore, some employers may see little direct advantage.

To ease employees’ conflicts between work and nonwork, organizations may use family-friendly policies (also known as policies that help balance work and family) such as family leave policies and child care.

Survey information on benefits packages is available from private consultants

1/ Health Care: Controlling Costs and Improving Quality2/ Staffing Responses to Control Benefits Cost Growth

Employers must also consider the specific demographic composition and preferences of their current workforces in designing their benefits packages.

1/ Employees Typically Underestimate the Value of their Benefits2/ Flexible Benefits Plans

As a general rule, all benefits packages must meet certain rules to be classified as qualified plans. The favorable tax treatment is designed to encourage employers to provide important benefits to a broad spectrum of employees. The nondiscrimination rules discourage owners or top managers from adopting plans that benefit them exclusively.

A concern for employers in ensuring legal treatment of men and women in the benefits area has to do with pension benefits. Women tend to live longer than men, meaning that pension benefits for women are more costly, all else being equal.

Employers must take care not to discriminate against workers over age 40 in the provision of pay or benefits.

Early retirement incentive programs need to meet the following standards to avoid legal liability

The theory emphasizes the importance of a person’s actual experience of a reward.

Focus on the link between rewards and behaviors, it emphasizes expected (rather than experienced) rewards.

Focus on the divergent interests and goals of the organization’s stakeholders and the ways that employee compensation can be used to align these interests and goals.

The amount of differentiation that makes sense will depend on the level of interdependence and cooperation desired in a particular context.

A key decision in designing pay-for-performance plans concerns incentive intensity, the strength of the relationship between performance and pay

+ Merit pay programs, annual base pay increases, are usually linked to performance appraisal ratings.+ Merit bonuses, a form of variable pay, is its ability to define and reward a broad range of performance dimensions.+ Individual incentives reward individual performance, but with two important differences. First, payments are not rolled into base pay. They must be continuously earned and re-earned. Second, performance is usually measured as physical output rather than by subjective ratings.+ Profit sharing, payments are based on a measure of organization performance (profits), and the payments do not become part of the base salary.+ Ownership (including stock options).+ Gainsharing programs offer a means of sharing productivity gains with employees.+ Group Incentives and Team Awards.

Involvement in the design and implementation of pay policies has been linked to higher pay satisfaction and job satisfaction, presumably because employees have a better understanding of and greater commitment to the policy when they are involved.

Most pay-related communications come through individual discussions with one’s supervisor, still ahead of the company website, e-mail, and discussions with the human resource department.

1/ Product Market Competition2/ Labor Market Competition

Because organizations have to compete in the labor market, they should consider their employees not just as a cost but also as a resource in which the organization has invested and from which it expects valuable returns.

Efficiency wage theory is when organizations have technologies or structures that depend on highly skilled employees.

To compete for talent, organizations use benchmarking, a procedure in which an organization compares its own practices against those of the competition:+ Rate ranges permits a company to recognize differences in employee performance, seniority, training, and so forth in setting individual pay.+ Key jobs (also known as benchmark jobs) have relatively stable content and—perhaps most important—are common to many organizations.+ In contrast to key jobs, nonkey jobs are, to an important extent, unique to organizations.

One typical way of measuring internal job worth is to use an administrative procedure called job evaluation.+ A job evaluation system is composed of compensable factors and a weighting scheme based on the importance of each compensable factor to the organization.

1/ Market Survey Data.2/ Pay Policy Line.3/ A third approach is to group jobs into a smaller number of pay classes, pay ranges, or pay grades.

One frequently used index of the correspondence between actual and intended pay is the compa-ratio.

Employee participation in compensation decision making can take many forms.

The importance of communication was found in a study of how an organization communicated pay cuts to its employees and the effects on theft rates and perceived equity.

1/ Encourage bureaucracy.2/ The structure’s hierarchical nature reinforces a top-down decision making and information flow.3/ The bureaucracy required to generate and update job descriptions and job evaluations can become a barrier to change.4/ The job-based pay structure may not reward desired behaviors.5/ Discourage lateral employee movement.

1/ Delayering and Banding.2/ Paying the Person: Pay for Skill, Knowledge, and Competency.

Comparable worth (or pay equity) is a public policy that advocates remedies for any undervaluation of women’s jobs.