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CHAPTER 11: ESTABLISHING PAY STRUCTURE DECISIONS ABOUT PAY EMPLOYER/ORG SIDE ON PAY Powerful tool for meeting the orgs goals Impacts employee attitudes and behaviors Influences the kinds of people who are attracted to or remain with the org EMPLOYEE SIDE ON PAY Care about fairness in pay Attach great importance to pay decisions when they evaluate their relationship with their employer Pay is a large primarily fixed cost to orgs so it must be managed. Relative Pay + Average Amount = Pay Structure * PAGE 362 for Issues in developing pay structure Job Structure + Pay Level = Pay Structure Job Structure : The relative pay for different jobs within the org Pay Level : The average amount the org pays for a particular job Pay Structure : The pay policy resulting from job structure and pay level decisions. Job Based Pay approach is developing a pay structure for jobs or groups of jobs which is a traditional and most widely used technique. LEGAL REQUIREMENTS FOR PAY Government Regulations affect pay in five areas: 1. EQUAL PAY ACT Employers must not base pay differences on an protected status -- race, sex, national origin, ethnicity, age, disability. Any differences in pay must be tied to business-related considerations as job responsibilities or performance. 2. MINIMUM WAGE MW is the lowest hourly amount that employers may pay Fair Labor Standards Act (FLSA) - Federal law that establishes a minimum wage and requirements for overtime pay and child labor. Establishes a min wage of $7.25/hr as of July 2009 (States can set higher wage but not lower) Permits lower "Training Wages": paid workers <20 yrs old for up to 90 days. Approximately 85% of min wage. 3. OVERTIME PAY Overtime under FLSA is 1.5 the employees usual hourly rate, including any bonuses and piece- rate payments. OT is required, whether or not the employer specifically asked or expected the employee to work more than 40 hrs. Compensatory time off (Comp time) not allowed in place of wages even if the employee prefers it. Exempt Employees - Are NOT covered by FLSA overtime pay Non-exempt Employees - Are covered by the FLSA overtime pay 4. CHILD LABOR FLSA protects the health, safety, and educational opportunities of children under 18 Such as mining, meat-packaging, heavy equip. Exemptions for farm labor, babysitting, acting, newspaper delivery 5. PREVAILING WAGES Two Federal Laws that govern pay policies of federal contractors 1. Davis-Bacon Act 1931 - Construction 2. Walsh-Healy Public Contracts Act 1936 - All Contractors
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Employees must be paid at rates at least equal to the prevailing wages in the area, which are determined by 30% of the local labor force Effect = both acts raise the lower limit of pay ECONOMIC INFLUENCES ON PAY Orgs cannot make spending decisions independent of the economy. They must keep cost low enough to sell products
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This note was uploaded on 03/15/2012 for the course ACCOUNTING 210 taught by Professor Mckittrick during the Spring '12 term at N.C. State.

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