Managing the System Chapter 17 The Governments Role

Managing the System Chapter 17 The Government’s Role in Compensation Chapter 18 Budgets and Administration Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 1

STRATEGIC ISSUES CONSISTENCY COMPETITIVENESS STRATEGIC OBJECTIVES TECHNIQUES Work Descriptions analysis Evaluation certification Market Surveys definitions Policy lines INTERNAL STRUCTURE PAY STRUCTURE EFFICIENCY Performance Quality Customer Cost EQUITY CONTRIBUTORS ADMINISTRATION Irwin/Mc. Graw-Hill Seniority based Performance based Merit guidelines INCENTIVE PROGRAMS COMPLIANCE Planning Budgeting Communication EVALUATION © The Mc. Graw-Hill Companies, Inc. , 1999 2

Chapter 17 The Government’s Role in Compensation Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 3

Overview of Federal Regulation Legislation establishes a minimum wage, governs overtime pay, protects employees from discrimination, regulates benefits, and determines how compensation is taxed. Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 4

Minimum Wages and Overtime • • • The federal government sets standards relative to how much and how employees are paid in: Davis-Bacon Act (1931) Copeland “Anti-Kickback” Act (1934) Walsh-Healey Act (1936) Fair Labor Standards Act (1938) Service Contract Act (1965) Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 5

Fair Labor Standards Act (1938) The Fair Labor Standards Act (FLSA) regulates employee status, child labor, minimum wage, overtime pay, record keeping, and other administrative requirements. Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 6

Employee Status Under FLSA When someone is classified as an employee, the organization must: • Withhold federal/state/local income taxes • Match Social Security/Medicare withholding Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 7

Employee Status (continued) • Include the person in the company benefit programs • Pay for unemployment insurance and workers’ compensation • Allow up to 12 weeks of unpaid leave for family emergencies • Provide any other state or federally mandated benefits Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 8

Contractor Status Under FLSA • • • To be classified as a contractor, a person must: Have the ability to set own hours and determine sequence of work Work off-site Work by the project rather than have a continuous relationship with the employer Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 9

Contractor Status (continued) • • Be paid by the job Have an opportunity for profit and loss Furnish own tools and training Be self-employed or work with a leasing company Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 10

Exempt and Non-Exempt Status Under FLSA • Non-exempt employees are included in FLSA regulations and have full protection of the law. • Exempt employees are excluded from FLSA minimum wage or overtime provisions. Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 11

• There are four classifications of exempt employees: – Executives – Administrative Employees – Outside Salespeople – Professionals Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 12

Child Labor Provisions The FLSA restricts the hours and conditions of employment for minors. Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 13

Minimum Wage Under FLSA • The federal minimum wage was raised on September 1, 1997 to $5. 15 per hour. Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 14

FLSA Basic Overtime Provisions • All non-exempt workers must be paid one and one-half times their regular rate of pay for hours worked in excess of 40 in any workweek. • Regular rate of pay includes basic pay plus non-discretionary bonuses, shift premiums, production bonuses, and commissions. Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 15

Overtime (continued) • Overtime is paid on time worked, not time compensated. • A workweek is any fixed, recurring period of 168 consecutive hours 1998 Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 16

Compensatory Time Under FLSA • Compensatory time off may sometimes be offered instead of cash overtime. • The rate is the same as for cash. • Public employees can accumulate compensatory time. • In the private sector, the practice of allowing compensatory time must be part of an established plan. Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 17

FLSA Compliance: Enforcement. • The Wage and Hour Division of the U. S. Department of Labor enforces FLSA minimum wage and overtime provisions. • The Equal Employment Opportunity Commission (EEOC) enforces equal pay provisions. Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 18

When State Laws Differ • Pay frequency, minimum wage, severance or vacation pay, or unclaimed wages may be governed by the individual states. • The rule of thumb is: Whenever state and federal laws differ, follow the regulation that most benefits the employee. Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 19

Antidiscrimination acts include the following: • • • Equal Pay Act (1963) Civil Rights Act (1964) Age Discrimination in Employment Act (1967) • Wage Garnishment Act (1968) • Americans with Disabilities Act (1990) Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 20

Equal Pay Act (1963) The Equal Pay Act of 1963 prohibits wage discrimination by requiring equal pay for equal work. Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 21

Equal work. • Equal work is defined by equal skills, equal effort, equal responsibility, and equal working conditions - all performed at the same location. Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 22

What is discriminatory? • A plaintiff would have a prima facie case if he/she received a lower wage than members of the opposite sex for performing the work that requires substantially the same skills, effort, and responsibilities under similar working conditions - all performed at the same location. Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 23

Exceptions: • are based on seniority, merit, performance differences in the quality or quantity of work, geographic work differentials, and any factor other than sex. Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 24

Not permitted: • are defenses such as union rules or that the wage is the prevailing pay for the market. Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 25

Civil Rights Act Title VII of the Civil Rights Act of 1964 prohibits discrimination in all terms and conditions of employment on the basis of race, religion, ethnic group, sex, or national origin. It defines two types of discrimination - disparate treatment and disparate impact. Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 26

Disparate treatment: • occurs when an employee who is a member of a protected group is intentionally paid less. Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 27

Disparate impact: • occurs when an apparently neutral compensation practice results in unintentional wage discrimination for a protected group. Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 28

Compensation practices which may be discriminatory: • include extra pay plans, leave policies, maternity leave, and pension policies. Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 29

Defenses: • include seniority, merit, performance, geographic differentials, or systems to measure the quality and/or quantity of work. Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 30

Age Discrimination in Employment Act (1967) This act prohibits discrimination on the basis of age for workers at least 40 years of age in all conditions of employment. Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 31

ADEA (continued) • Coverage. The act applies to all private employers with 20 or more employees for 20 or more weeks per year. • Exceptions. Seniority systems or use of factors other than age are permissible. • Beware of career stage literature that assumes a decline in productivity with older workers. Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 32

Americans with Disabilities Act • The ADA prohibits discrimination in employment against individuals who can perform essential job functions with reasonable proficiency. Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 33

ADA (continued) • To be protected by the ADA, an employee must have an impairment which substantially limits one or more major life functions. • Reasonable accommodation must be taken by employers to accommodate employees with disabilities. • Undue hardship. Employers are exempt from taking action if the accommodation involves significant expense or difficulty. Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 34

Pay Discrimination and Dissimilar Jobs • The U. S. Supreme Court, in Gunther v. County of Washington, determined that pay differences for dissimilar jobs may reflect discrimination Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 35

Comparable Worth Establishing a comparable worth plan typically involves the following four basic steps: • Adopt a single job evaluation plan for all jobs within a unit. • All jobs with equal job evaluation results should be paid the same. • Identify general representation (percentage male and female employees) in each job group. • The wage-to-job evaluation point ratio should be based on the wages paid for male-dominated jobs since they are presumed to be free of pay discrimination. Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 36

Possible Determinants of Pay Differences in Organizations Differences in Employee Work Behaviors Differences in Work Irwin/Mc. Graw-Hill Differences in employees Differences in Pay Differences in Unions Discrimination Differences in Labor Market Conditions © The Mc. Graw-Hill Companies, Inc. , 1999 37