Base Pay The basic compensation that an employee receives, usually as

a wage or a salary, is called base pay. Many organizations use two base
pay categories, hourly and salaried, which are identified according to
the way pay is distributed and the nature of the jobs. Hourly pay is the
most common means and is based on time.
Employees paid hourly receive wages, which are payments calculated
based on time worked. In contrast, people paid salaries receive the same
payment each period regardless of the number of hours worked. Being
paid a salary has typically carried higher status for employees than has
being paid a wage. However, overtime may have to be paid to certain
salaried employees as well as most wage earners as defined by federal
and state laws.
The major federal law affecting compensation is the Fair Labor Standards Act (FLSA),
which was originally passed in 1938.

• Minimum Wage The FLSA sets a minimum wage to be paid to the broad spectrum of
covered employees. 

Từ ngày 01/01/2019, lương tối thiểu vùng sẽ tăng từ 160.000 đồng - 200.000 đồng
theo Nghị định 157/2018/NĐ-CP. Mức lương tối thiểu vùng 1 là 4.180.000
đồng/tháng; Vùng 2 là 3.710.000 đồng/tháng; Vùng 3 là 3.250.000 đồng/tháng;
Vùng 4 là 2.920.000 đồng/tháng.

Variable Pay Another type of direct pay is variable pay, which is

compensation linked directly to individual, team, or organizational
performance. The most common types of variable pay for most
employees are bonuses and incentive program payments. Executives
often receive longer-term rewards such as stock options. There is reason
to believe that performance-based policies for rewarding top managers
that link equity-based incentives to performance are effective. Some
companies such as Best Buy and Kimberly Clark are already using such
programs.
Benefits Many organizations provide rewards in an indirect manner.
With indirect compensation, employees receive the tangible value of the
rewards without receiving actual cash. A benefit is a reward—for
instance, health insurance, vacation pay, or a retirement pension—given
to an employee or a group of employees for organizational membership,
regardless of performance. Often employees do not directly pay for all
of the benefits they receive.

Chapter 12: Incentive Plan & Executive Compensation

Define variable pay and identify three elements of successful pay-for-

performance plans. 

Discuss three types of individual incentives. 

Identify key concerns that must be addressed when designing group/team variable
pay plans. 

Discuss why profit sharing and employee stock ownership are common
organizational incentive plans. 

Explain three ways that sales employees are typically compensated. 

Identify the components of executive compensation and discuss criticisms of
executive compensation levels. 


Summary

Variable pay, also called incentives, is compensation that can be linked to

individual, group/team, and/or organizational performance. 

Effective variable pay plans fit both business strategies and
organizational cultures, appropriately award actions, and are administered
properly. 

Metrics for measuring the success of variable pay plans are crucial. • 

Piece-rate and bonus plans are the most commonly used individual
incentives. 

The design of group/team variable pay plans must consider how the
incentives are to be distributed, the timing of the incentive payments, and who will
make decisions about the variable payout.
Organization-wide rewards include profit sharing and stock ownership plans.


Sales employees may have their compensation tied to performance on a
number of criteria. Sales com- pensation can be provided as salary only, commis-
sion only, or salary-plus-commission or bonuses.
Measuring the effectiveness of sales incentive plans is a challenge that may
require the plans to be adjusted based on success metrics.
Executive compensation must be viewed as a total package composed of
salaries, bonuses, benefits, perquisites (perks), and both short- and long-term
performance-based incentives.
Performance-based incentives often represent a significant portion of an
executive’s compensa- tion package.
A compensation committee, which is a subgroup of the board of directors,
generally has authority over executive compensation plans.

Chapter 13: Manager employee benefits

• Define a benefit and identify four strategic benefits considerations. 


• Summarize why benefits management and communications efforts are important. 


• Distinguish between mandated and voluntary benefits and list three examples of each.



• Explain the importance of managing the costs of health benefits and identify some
methods of doing so. 


• Discuss the shift of retirement plans from defined-benefit to defined-contribution and

cash balance programs. 


• Describe the growth of financial, family-oriented, and time-off benefits and their
importance to many employees. 


Summary
• Benefits provide additional compensation to some employees as a reward for
organizational membership. Because benefits generally are not taxed, they are
highly desired by employees. 


• Strategic considerations for benefits include their value in creating a competitive

advantage and aiding in attracting and retaining employees. 


• Benefits design and cost-control actions are crucial to strategic benefits efforts. 


• Flexible benefits plan, which can be tailored to individual needs and situations, are
increasing in popularity. 


• Because of the variety of benefit options avail- able and the costs involved, employers
must develop effective systems to communicate benefits information to their
employees. 


• Benefits can be viewed as mandatory or voluntary. The general types of benefits

include security, health care, retirement, financial, family oriented, and time off.



• Three prominent security benefits are workers’ compensation, unemployment

 compensation, and severance pay. 


• Because health care benefits costs have increased significantly, employers are
managing their health benefits costs more aggressively. 


• Efforts to control the costs of health benefits have included changing employee
copayments and employee contributions, using managed care, and switching to
consumer-driven health (CDH) plans.

• Organizations provide retirement benefits through defined-benefit, defined-contribution,

or cash balance plans.

• The pension area is a complex one that is governed by the Employee Retirement
Income Security Act (ERISA) and other laws.

• Use of defined-contribution plans and individual retirement accounts is growing.

• Various types of financial services, insurance benefits, relocation assistance,

educational assistance, and other benefits enhance the appeal of an organization to
employees.

• Family-oriented benefits include complying with the Family and Medical Leave Act
(FMLA) of 1993 and offering adoption benefits, child-care assistance, and elder-care
assistance.

• Holiday pay, vacation pay, various leaves of absence, and paid-time-off plans are
another means of providing benefits to employees.