Wage and Hour
I. Legal Considerations
- Federal Laws regulating wages, hours, and conditions
- State Laws regulating wages, hours, and conditions
II. Theoretical Considerations
- A theory of Equity
- Types of equity
III. Practical Considerations
- Job evaluation methods
- Incentive pay methods
LEGAL CONSIDERATIONS: Notes
Classes of gainfully employed persons in the United States?
Those who work for themselves - Self-employed - examples
Those who work for others - employed
Federal and State Tax Laws determine whether one is legally an employee or self- employed. What are other names for self- employed persons?
Only the wages and hours of employed persons are regulated by state and federal laws. Self- employed persons may negotiate without conditions, but they must meet the criteria of self-employed persons under the law tax law.
What are the implications of being classed as employee vs. self employed?
The Federal law regulating hours and wages is the Fair Labor Standards Act. - administered by Wage and Hour Division of Dept. of Labor.
- Right to legally mandated benefits vs. no right. SDI, SUI, SS
Fair Labor Standards Act regulates:
Minimum Wage _______
Maximum Hour _______
Child Labor _______
State Labor Code
Federal and State Law - Federal Supremacy and Preemption
- Policies are established by the Industrial Welfare Commission through a lengthy process of hearings.
- Enforcement is by Department of Labor Standards Enforcement - Labor Commissioner
Because many of you will take a test coveringfFederal law we need to be clear on some aspects of federal law.
1. FLSA (Fair Labor Standards Act)
- Exempt Employees:
- Administrative People
- Outside Sales (off premises)
Other Federal wage laws:
- Non Exempt employees (one class only)
- Minimum Wage
- Maximum hours
- Overtime pay
- Compensatory time - in public sector only at choice of employer.
- Exceptions to Minimum Wage - severely disabled, training wage
- Waivers - employees can't waive their rights
2. California Labor Codes: State exempts virtually the same as federal
- Davis Bacon - requires payment of prevailing wage on public works projects. Prevailing wage = wage at the 30th percentile rank.
- Walsh- Healy Act applies to government contract suppliers. Requires prevailing wage and overtime after 8 hours in a day or 40 hours in a week.
- Non-exempts. 14 separate classes. Specific rules are found on Work Orders by Industry or Occupation. See Example. Posting requirements.
- Most of the major working conditions are standard across industry. In general
overtime must be paid for hours in excess of any of the following:
- 8 hours in any day- time and one-half
- 40 hours in a week- time and one-half
- 7th consecutive day- time and one-half
- 12 hours in any day- double time
- 8 hours on the 7th day- double time
State law permits comp time if:
- Compensatory Time - Comp Time Time off for overtime worked.
- Federal law permits comp time in the week the overtime was worked.
Comp Time is not appropriate for exempt workers. Exempt workers work until the work is done without overtime. Accounting for comp time undermines the philosophy of the exemption and threatens the exemption. In my judgment it is assumed that exempt workers have discretion over their work. That includes discretion about when to come and go. At SSU if I am out of town for a week end, I have been told that I should not take a comp day on Monday; I should show up for work . . . for at least 10 minutes. There should be no problem if the employee arranges her work schedule. There may be a problem if the supervisor arranges a work schedule to include comp time.
- Employee requests time in place of money in writing prior to work being performed
- At applicable rate
- Time off is during the same or next pay period
- Time off is during the normal work week
- Employer keeps accurate records
Compressed work weeks are permissible without an overtime obligation if:
- The compressed work week is discussed and approved by a 2/3 majority.
- The agreement is written.
- Reasonable accommodations are made for those whom would experience a hardship
- Decision may be revisited by petition of 1/3 of employees after 1 year.
NOTE: CONDITIONS ARE NOT UNIFORM ACROSS ALL ORDERS OF THE IWC.
Other conditions that are addressed in work orders include:
- Is considered deferred compensation
- Accrues at end of each working month
- Cannot be taken away, but employer can force employee to use it.
- Must be paid out on termination.
- A cap on maximum vacation accumulated is legal.
WORK ORDERS COVER THE FOLLOWING TOPICS:
II. Theoretical Considerations:
- APPLICABILITY OF ORDER
- HOURS AND DAYS OF WORK
- MINIMUM WAGES
- REPORTING TIME PAY
- LICENSES FOR HANDICAPPED WORKERS
- CASH SHORTAGE AND BREAKAGE
- UNIFORMS AND EQUIPMENT
- MEAL & LODGING
- MEAL PERIODS
- REST PERIODS
- CHANGING ROOMS AND RESTING FACILITIES
- FILING REPORTS
- POSTING OF ORDER.
There is a theory of motivation that has direct implications for wage and salary administration. It is called equity theory. A good translation of equity is fairness. Equity theory is called a social comparison theory because notions of equity are derived from comparison that we make with each other, i.e. social comparisons.
The major tenant of equity theory is that human beings hate inequity and work to restore equity to inequitable situations. Since we have better control over our behavior than others, states of equity must be changed by our taking actions.
Let us consider equity implications for wage administration, though the implications are applicable to other situations as well.
Conditions of equity:
To make predictions let us simplify and analyze the situation
- A. Equity
- B. Inequitably low - I'm paid too little
- C. Inequitably high - I'm paid too much
How does an individual assess equity:
This can be expressed in a ratio O/I. Now feelings of equity derive from comparisons of your ratio with the typical worker in the work group.
- A. They calculate what they bring to the job -- inputs or investments -- things like education, skills, experience, maybe even personality characteristics
- B. Compare it to what they take from the job -- job outcomes, namely pay.
So what do people when they perceive inequity?
They alter their work.
Simple. They can change either the quality of their work or the quantity of their work?
Those exhaust the possibilities.
Which will they choose to do?
It depends on whether their current pay system is on an hourly basis or based on performance; piece or production work.
All of this can be summed up in a simple two by two table. Let's work through it.
So is it a valid theory? Research does support the theory. The effect is especially strong with under paid workers.
An anecdote: I have a friend who has a job like mine: Dept. Chair; works at home almost every night; has computer at home networked to his one at school; supervises 35 faculty members and 4 secretaries; works in HRM.
We were drinking a beer at a meeting in LA, and talking about equity theory. I said how much more do you work in a week than the professors you supervise. He responded at least 15 on average, maybe more. That's about 35% more. And what is the pay differential? His answer was about 15%.
Don't you feel underpaid in relation to your colleagues?
No, he said, money is pretty important to me and this job pays $10,000 more than theirs; its the price I have to pay to earn this salary. And there's no way I can do this job in 40 hours. To me its equitable, I want the extra money, I got to put in longer hours.
You should consider equity when you are designing your pay systems. Probably the higher the requirements of the job, the more important equity is:
1. Types of Equity:
Determining pay levels - Job evaluation
Classification method - Job classes with generic duties are developed as criteria for placement of job in a class. Individual jobs are compared with the job classes for best fit. In federal government the job classes are very limited GS 4-21.
- Ranking and Salary assignment
- Salary survey
In State Government the classes are endless - e.g. four classes of personnel director based on level of responsibility and size of organization. Five classes of clerical workers.
Point factor method: Comparing the ranking method with the point factor method and exercise.
2. Incentive pay methods:
- Incentive pay. - terms you need to be familiar with
- Individual plans, group plans, organizational plans
- Piece work - definition, type
- Differential piece work
- Standard hour plan - pay for a time allotted to complete the job, not time actually taken.
- Commission - definition, type
- Group bonus - e.g. target is to produce 200,000 per quarter; group receives 10% bonus for production over 250,000
- Gain sharing - programs in cost cutting, improved efficiency, profit sharing incentive programs.
- Profit sharing - self explanatory
- Scanlon plan - utilizes committees and mgt. by participation to cut costs and improve productivity. Gains are shared with employees. Is not strictly profit sharing.
- Merit pay not linked to objective criteria. Give examples. What are the pros; what are the cons?
- Union wage scales: What are they like? What are the pros? What are the cons?
- Lincoln Electric: An example of an extraordinary incentive pay program.
You may have discovered that Chapt 13 deals with compensation issues.
What went wrong with the Sears incentive plan. Describe situation and indicate problem.
- Skill or knowledge based pay.
- Pay secrecy - pros and cons
- Comparable Worth - pros and cons
- Pay Compression - what causes it and what harm does it do?
- Executive Pay
- Wages and Global Competition