Dessler Fund5 11

Fundamentals of Human Resource
Management
Fifth Edition
Chapter 11
Pay for Performance
and Employee
Benefits
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
6th ePortfolio submission (out of 7)
The New Pay Plan (p. 328)
•  Answer questions 10-20 to 10-23.
•  The term “seat-of-the-pants” means informal, or
going by one’s intuition (feeling) and experience
•  Send your complete answers to
mariakasuncion@gmail.com
Learning Objectives (1 of 2)
1.  Discuss the main incentives for individual
employees.
2.  Name and define the most popular organization-
wide incentive plans.
3.  Define employee benefits.
4.  List and discuss the main pay for time not
worked and insurance benefits.
Learning Objectives (2 of 2)
5.  Describe the main retirement benefits.
6.  List and discuss the popular personal services
and family-friendly benefits.
7.  Explain how to use benefits to improve
engagement, productivity, and performance.
Discuss the main incentives for individual
employees
Individual Employee Incentive Plans (p. 336)
•  Financial incentives: financial rewards paid to
workers whose production exceeds some
predetermined standard
•  Productivity: the ratio of outputs (goods and
services) divided by the inputs (resources such as
labor and capital)
•  Variable pay: any plan that ties pay to productivity
or profitability, usually as one-time lump payments
•  Piecework Plans: a system of pay based on the
number of items processed by each individual
worker in a unit of time, such as items per hour or
items per day
•  Straight piecework: an incentive plan in which a
person is paid a sum for each item he or she
makes or sells, with a strict proportionally between
results and rewards; similar to “commission”
•  Standard hour plan: a hourly rate but is paid an
extra percentage of his/her rate for production
•  Merit pay (or merit raise): any salary increase
awarded to an employee based on his/her
individual performance
–  Used more commonly for “white collar”
employees
–  For example: professional, office and clerical
employees (administrative or backroom)
•  The downside is if the company isn’t doing well, it
won’t be fair for employees who might not be
able to get a merit raise
Merit Plan Example
TABLE 11.1 Merit Award Determination Matrix (an Example)
The The The The The The
Employee’s Company’s Company’s Company’s Company’s Company’s
Performance Performance Performance Performance Performance Performance
Rating (Weight = (Weight = (Weight = (Weight = (Weight =
(Weight = 0.50) for 0.50) for 0.50) for 0.50) for 0.50) for
0.50) Outstanding Excellent Good Marginal Unacceptable
Outstanding 1.00 0.90 0.80 0.70 0.00
Excellent 0.90 0.80 0.70 0.60 0.00
Good 0.80 0.70 0.60 0.50 0.00
Marginal
Unacceptable
Note: To determine the dollar value of each employee’s award: (1) multiply the employee’s annual, straight-time wage or
salary as of June 30 times his or her maximum incentive award (as determined by management or the board—such as, “10%
of each employee’s pay”) and (2) multiply the resultant product by the appropriate percentage figure from this table. For
example, if an employee had an annual salary of $40,000 on June 30 and a maximum incentive award of 7% and if her
performance and the organization’s performance were both “excellent,” the employee’s award would be $2,240: ($40,000 ×
0.07 × 0.80 = $2,240).
•  Providing for professional employees may be
challenging
•  Perhaps employees who work more difficult
projects can receive higher incentives
•  Dual-career ladders: turning professionals into
managers
•  Nonfinancial and Recognition-Based Awards:
–  Social recognition program
–  Performance feedback
Most Used Rewards for Motivation (p. 338)
•  Employee recognition •  Training programs
•  Gift certificates •  Work/life benefits
•  Special events •  Variable pay
•  Cash rewards •  Group travel
•  Merchandise incentives •  Individual travel
•  E-mail/print •  Sweepstakes
communications
Social Recognition and Related Positive Reinforcement (p. 339)
•  Challenging work assignments •  Being provided with ample encouragement
•  Freedom to choose own work activity •  Being allowed to set own goals
•  Having fun built into work •  Compliments
•  More of preferred task •  Expression of appreciation in front of others
•  Role as boss’s stand-in when he or she is
•  Note of thanks
away
•  Role in presentations to top management •  Employee-of-the-month award
•  Job rotation •  Special commendation
•  Encouragement of learning and continuous
•  Bigger desk
improvement
•  Bigger office or cubicle
Social Recognition and Related Positive Reinforcement Managers Can Use

Source: Bob Nelson, 1001 Ways to Reward Employees, New York: Workman Pub., 1994, p. 19; Sunny C. L. Fong and
Margaret A. Shaffer, “The Dimensionality and Determinants of Pay Satisfaction: A Cross-Cultural Investigation of a Group
Incentive Plan,” International Journal of Human Resource Management, 14, no. 4, June 2003, p. 559.
Other Employee Incentive Plans (p. 342)
•  Annual bonus: plans that are designed to motivate
short-term performance of managers and which
are tied to company profitability
•  Stock option: the right to purchase a stated
number of shares of a company stock at today’s
price at some time in the future
•  Group incentive plan (p. 344): incentives are given
to a group is they exceed production standard
•  Organizationwide incentive plan (p. 355)
Other Employee Incentive Plans (p. 346)
•  Employee stock ownership plan (ESOP): a
qualified, tax deductible stock bonus plan in which
employers contribute stock to a trust for eventual
use by employees
Employer Costs for Employee Compensation
Some Required and Discretionary Benefits
Benefits: indirect financial and nonfinancial payments
employees receive for continuing their employment
with the company
TABLE 11.3 Some Required and Discretionary Benefits
Benefits Required by Federal or Most State Law Benefits Discretionary on Part of Employer*
Social Security Disability, health, and life insurance
Unemployment insurance Pensions
Workers’ compensation Paid time off for vacations, holidays, sick
leave, personal leave, jury duty, etc.
Leaves under Family Medical Leave Act Employee assistance and counseling
programs, “family-friendly” benefits for child
care, elder care, flexible work schedules, etc.,
executive perquisites
*Although not required under federal law, all these benefits are regulated in some way by federal law, as explained
in this chapter.
Pay For Time Not Done and Insurance Benefits (p. 347)
•  Supplemental Pay Benefits: benefits for time not

worked such as unemployment insurance,
vacation and holiday pay, and sick pay
•  Unemployment Insurance (employment insurance
in Canada [EI]): provides benefits if a person is
unable to work through some fault other than his
or her own
Unemployment Insurance Cost-Control Checklist (p. 348)
TABLE 11.4 Unemployment Insurance Cost-Control Checklist

•  Keep documented history of lateness, absence, and warning notices.
•  Warn chronically late employees before discharging them.
•  Have rule that three days’ absence without calling in is reason for automatic discharge.
•  Request doctor’s note on return to work after absence.
•  Make written approval for personal leave mandatory.
•  Stipulate date for return to work from leave.
•  Obtain a signed resignation statement.
•  Mail job abandonment letter if employee fails to return on time.
•  Document all instances of poor performance.
•  Require supervisors to document the steps taken to remedy the situation.
Unemployment Insurance Cost-Control Checklist (p. 348)
TABLE 11.4 Unemployment Insurance Cost-Control Checklist

•  Document employee’s refusal of advice and direction.
•  Require all employees to sign a statement acknowledging acceptance of firm’s policies
and rules.
•  File the protest against a former employee’s unemployment claim on time (usually within
10 days).
•  Use proper terminology on claim form and attach documented evidence regarding
separation.
•  Attend hearings and appeal unwarranted claims.
•  Check every claim against the individual’s personnel file.

•  Routinely conduct exit interviews to produce information for protesting unemployment
claims.
Pay for Time Not Worked (p. 348)
•  Vacations and Holidays
–  90% of full-time workers and 40% of part-timers
get paid holidays
–  e.g., New Year’s Day, Memorial Day,
Independence Day, Labor Day, Thanksgiving
Day and Christmas Day
•  Sick Leave: provides pay to an employee when he
or she is out of work because of illness
Family Medical Leave Act (p. 350)
Pregnancy Discrimination Act
Family Medical Leave Act of 1993 (FMLA)
•  50 or more employees
•  Up to 12 weeks of unpaid leave
•  Leave for serious illness; birth or adoption of a child;
serious illness of a child, spouse, or parent
•  Worked for 12 months or 1,250 hours in past consecutive
12 months
American with Disabilities Act (ADA) law may apply
Pay for Time Not Worked and Insurance Benefits (p. 351)
•  Severance Pay: a one-time payment some

employers provide when terminating an employee
•  Workers’ Compensation: provides income and
medical benefits to work-related accident victims
or their dependents regardless of fault
•  Hospitalization, Health, and Disability Insurance:
helps protect employees against hospitalization
costs and the loss of income from the off-the-job
accidents or illness
Percentage of Employers Offering Some
Health Benefits
TABLE 11.5 Percentage of Employers Offering Some Popular Health Benefits
Dental insurance 96%
Prescription drug coverage 96%
Mental health coverage 91%
Mail-order prescription program 88%
Vision insurance 87%
Accidental death and dismemberment
85%
insurance (AD&D)
Preferred provider organization (PPO) 85%
Contraceptive coverage 83%
Chiropractic coverage 81%
Long-term disability insurance 80%
Employee assistance plan (EAP) 79%
Short-term disability insurance 74%
Medical flexible spending accounts 69%
Trends in Employer Health Care Cost Control (p. 357)
•  Wellness programs
•  Long-term care
•  Life Insurance
–  Group life insurance: provides lower rates for
the employer or employee and includes all
employees, including new employees,
regardless of health or physical condition
•  Benefits for Part-Time and Contingent Workers
–  Not often provided with benefits
Retirement and Other Benefits (p. 359)
•  Canadian Retirement:
–  Canada Pension Plan (CPP)
–  RRSPs (Registered Retirement Savings Plan)
–  Other retirement planning from Government of
Canada:
https://www.canada.ca/en/financial-consumer-
agency/services/retirement-planning.html
–  Old Age Security (OAS): for 65 years or older
Personal Services and Family-Friendly Benefits (p. 362)
•  Personal Services
–  EAP or Employee Assistance Program
•  Other Job-Related Benefits
–  Elder-Care Services
–  Domestic Partner Benefits
•  Family Friendly (Work-Life) Benefits
–  Subsidized Child Care
–  Sick Child Benefits
Other Benefits (p. 363-364)
•  Flexible Benefits Programs/Cafeteria Benefits Plan
•  Flexible Work Schedules
–  Flextime
–  Compressed Workweek
•  Workplace Flexibility
–  Job Sharing
–  Work Sharing
Employee Engagement: Example (p. 366)
•  Costco’s Compensation Plan
–  90% of health insurance costs paid by Costco
–  Average wage $21 per hour
–  Other available benefits
§ Health, dental, pharmacy, vision
§ 401(k), dependent care assistance, care
network, disability insurance, life insurance
•  These have helped with engagement, productivity
and making workers provide better customer
service
Summary
1.  Incentive programs for individual employee
incentives
2.  Team and organization-wide incentive plans
3.  Various benefits
4.  Pay for time not worked and insurance benefits
5.  Social Security and other retirement plans
6.  Family-friendly benefits
7.  Employee engagement
7th ePortfolio submission (out of 7)
Revising the Benefits Package (p. 371)
•  Create a benefits package in keeping with the size and
requirements of the following firm
•  Maria Cortes runs a small personnel recruiting office in
Miami and has decided to start offering an expanded
benefits package to her 24 employees. Right now, the only
benefits are 7 paid holidays per year & 5 sick days per
year
•  Send your complete answers to mariakasuncion@gmail.com
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Dessler Fund5 11

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Fundamentals of Human Resource

Social Recognition and Related Positive Reinforcement Managers Can Use

•  Supplemental Pay Benefits: benefits for time not

TABLE 11.4 Unemployment Insurance Cost-Control Checklist

TABLE 11.4 Unemployment Insurance Cost-Control Checklist

•  Check every claim against the individual’s personnel file.

•  Severance Pay: a one-time payment some

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Dessler Fund5 11

Uploaded by

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Copyright

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Dessler Fund5 11

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Copyright:

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Fundamentals of Human Resource

Social Recognition and Related Positive Reinforcement Managers Can Use

• Supplemental Pay Benefits: benefits for time not

TABLE 11.4 Unemployment Insurance Cost-Control Checklist

TABLE 11.4 Unemployment Insurance Cost-Control Checklist

• Check every claim against the individual’s personnel file.

• Severance Pay: a one-time payment some

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•  Supplemental Pay Benefits: benefits for time not

•  Check every claim against the individual’s personnel file.

•  Severance Pay: a one-time payment some