CHAPTER 14Risk Management and Worker Protection.docx

CHAPTER 14
Risk Management and Worker Protection

© 2017 Cengage Learning®. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole
or in part.

duplicated, or posted to a publicly accessible Web site, in
whole or in part.
Learning Objectives
Understand risk management and identify its components
Discuss important legal areas regarding safety and health
Outline the basic provisions of the Occupational Safety and
Health Act of 1970 and recordkeeping and inspection
requirements

whole or in part.
Learning Objectives
List three workplace health issues and highlight how employers
are responding to them
Define workplace security concerns and discuss some elements
of an effective security program
Describe the nature and importance of disaster preparation and
recovery planning for HR

whole or in part.
Risk Management
Risk management: Involves the responsibility to consider
physical, human, and financial factors to protect organizational
and individual interests

whole or in part.
Risk Management
Health
Safety: Condition in which people’s physical well-being is
protected
Security: Protection of employees and organizational facilities
from forces that may harm them

whole or in part.
Health: General state of physical, mental, and emotional well-
being
Safety: Condition in which people’s physical well-being is
protected
Security: Protection of employees and organizational facilities
from forces that may harm them
5
Safety and Health Regulations

Major legal concerns:
Workers’ Compensation Legislation
Americans with Disabilities Act
Child Labor Laws
Occupational Safety and
Health Act

whole or in part.
Workers’ Compensation
Employers purchase insurance to compen-sate employees for
injuries received while on the job
Require payments be made to an
employee for:
Time away from work because of an injury
Payments to cover medical bills
Retraining if a new job is required as a result of the incident

whole or in part.
Americans with Disabilities Act (ADA) and Safety Issues
When making accommodations for injured employees through
restricted duty work, essential job functions are undercut

whole or in part.

Employers try to return injured workers to work to reduce
workers’ compensation costs
HR professionals understand ADA guidelines as they affect
physical disabilities
It becomes difficult where mental illness is at issue
8
Child Labor Law Restrictions
Source: Adapted from Department of Labor,
http://www.dol.gov/whd/childlabor.htm.

whole or in part.
Fair Labor Standards Act (FLSA) set restrictions on work for
younger workers
Penalties for violating restrictions can be costly
Work-related injuries of teenage workers is a significant issue
Proper training of managers and employees is critical
9
Legal Issues Related to
Work Assignments
Reproductive Health - Employers should not prevent employees
from working in jobs hazardous to reproductive concerns, but
should:
Maintain the safest working methods
Comply with safety laws
Inform employees of risks

Document employee acceptance of risks
Employees can refuse unsafe work

whole or in part.
Hazards that can reduce fertility in women
cancer treatment drugs, including antineoplastic drugs
lead
ionizing radiation, including x-rays and gamma rays
nitrous oxide (N2O)
Hazards that can disrupt the menstrual cycle and/or sex
hormone production
a variety of pesticides
carbon disulfide (CS2)
polychlorinated biphenyls (PCBs)
organic solvents
jet fuel
shift work
10
Occupational Safety and
Health Act
Enacted to ensure that the health and safety of workers is
protected
Occupational Safety and Health Administration (OSHA)
administers provisions of the law

whole or in part.
National Institute for Occupational Safety and Health (NIOSH)
develops safety standards
Occupational Safety and Health Review Commission (OSHRC)
reviews OSHA actions
11
OSHA Enforcement Actions
and Results
OSHA enforces safety regulations
Since 2003, incidences have declined
Employers must adhere to:
Provide safe and healthy working conditions
Notification and posters are required of employers
Report recordable cases

whole or in part.
Determining
Recordability
of Cases
under the
Occupational
Safety and
Health Act

Categories of Injuries
Death
Injuries Causing Days Away from Work
Injuries or Illness Causing Job Transfer or Restricted Duty
Other Recordable Cases
13
Nonfatal Occupational Injury and
Illness
Incidence
Rates,
2004–2013
Source: Adapted
from OSHA.gov.

whole or in part.
Workplace Fatalities, 2004–2013
Source: Adapted from OSHA.gov.

whole or in part.
OSHA Inspections
Compliance officers - Conduct on-the-spot inspections
Dealing with an inspection

Check inspector’s credentials
Initial conference with the compliance officer
Review of safety records
On-the-spot inspection
Citations issued for any violations

whole or in part.
Citations and violations
Imminent danger - Reasonable certainty that the condition will
cause death or serious physical harm if not corrected
immediately
Serious - Condition could probably cause death or serious
physical harm, and the employer should know of the condition
Other than serious - Impact employees’ health or safety but
probably would not cause death or serious harm
De Minimis – Condition not directly and immediately related to
employee safety or health
Willful and Repeated – Issued to employers that have been
previously cited
Most common violations are related to fall protection, hazard
communication, scaffolding, respiratory protection, and
powered industrial trucks
16
Source: Based partly on
http://www.fit2wrk.com/_
forms/ARTICLE_Fit2wrk_
ClinicalEd_vol1-16.pdf.
Costs of Accidents

whole or in part.
Figure 14-7: Examples of Direct, Indirect, and Immeasurable
Costs of Accidents
17
Safety Management
Steps to reduce accidents:
Organizational commitment to safety
Safety policies, discipline, and record keeping
Safety training and communication
Effective safety committees
Inspection, investigation, and evaluation
Accident reduction using ergonomics

whole or in part.
Organizational Commitment to Safety
Top management support is critical
Safety Policies, Discipline, and Recordkeeping
Frequent reinforcing of safe behavior is important
Safety Training and Communication
Training and communicating procedures reduces accidents
Effective Safety Committee
Key best practices:
Senior leaders must endorse and managers must actively assist
Safety advocates should be on committees
Management and employees should be represented
Inspection, Investigation, and Evaluation
Regular inspections should be performed

Research on prevention should be arranged
18
Approaches for Effective Safety Management

whole or in part.
Accident Reduction Using Ergonomics
Ergonomics: Study and design of work environment to address
physical demands placed on individuals as they perform their
jobs

whole or in part.
20
Substance Abuse
Alcohol and drug abuse
Greater risk for accidents, injuries, disciplinary problems, and
involuntary turnover

whole or in part.
By 2013, 25 million Americans are current illicit drug users
https://www.drugabuse.gov/publications/drugfacts/nationwide-
trends
40% of all industrial workplace fatalities are caused by
substance abusers. https://bradfordhealth.com/workplace-
accidents-drug-alcohol-abuse/
Estimated that companies lose over $7,000 per year for every
employee who abuses alcohol or drugs
https://www.drugabuse.gov/publications/drugfacts/marijuana
21
Other Employee Health Concerns
Employee Health
Emotional/
Mental Health
Stress
Smoking
at Work
Employee Health
Emotional/
Mental Health
Stress
Smoking
at Work

Emotional/Mental Health
Affected employees can be referred to outside resources through
employee assistance programs

whole or in part.
Up to 25 percent of medical claims filed can be tied to mental
and emotional illnesses
5.4 percent of American adults have a serious mental illness
that substantially interferes with one or more major life
activities
23
Stress
Stress: Harmful physical or psychological reaction that occurs
when people are subject to excessive demands or expectations
Stress is most common reason for long-term work absence

whole or in part.
24
Three Components of Stress
Includes three main components:

Some environmental force affecting the individual, which is
called a stressor
The individual’s psychological or physical response to the
stressor
In some cases, an interaction between the stressor and the
individual’s response

whole or in part.
Stress Management Programs or Interventions (SMIs)
Any activity, program, or opportunity initiated by an
organization, which focuses on reducing the presence of work-
related stressors or on assisting individuals to minimize the
negative outcomes of exposure to these stressors
Stress management interventions (SMI) are popular
Two important issues have yet to be completely addressed:
The definition of stress
The effectiveness of SMIs
25
Organizational Stressors
Factors intrinsic to the job
Organizational structure and control
Reward systems
Human resource systems
Leadership

whole or in part.
Factors intrinsic to the job
Role conflict or ambiguity
Workload
Insufficient control
Surgeon, lawyer, bartender, patrol officer…
Organizational structure and control
Red tape politics: Red tape is an idiom that refers to excessive
regulation or rigid conformity to formal rules that is considered
redundant or bureaucratic and hinders or prevents action or
decision-making. It is usually applied to governments,
corporations, and other large organizations.
Rigid policies
Reward systems
Faulty and infrequent feedback
Inequitable rewards
Human resource systems
Inadequate career opportunities
Lack of training
Leadership
Poor relationships
Lack of respect
26
Exercise: How Are You Dealing with Stress?
Fill out the survey.

Was this survey and the follow-up information helpful to you?
What has worked best for you in dealing with stress in your
life?

whole or in part.
Stress Management Programs or Interventions
Educational Interventions are designed to inform the employee
about:
The sources of stress
What stress feels like
How the individual can better cope with stress
Skill-acquisition interventions are designed to
Provide employees with ways to cope with stressors
Help keep the effects of stress in check

whole or in part.
Issues Guiding SMIs
Look for specific issues with employees—instead of talking
generally about “stress,” determine what specifically is going
on with employees
Assessment—What evidence is there of a problem, and how
widespread is it?
Specific and focused solutions

What will work in a particular organization?
Where should the intervention be targeted?
Strategic intervention
How does this intervention relate to other HR and
organizational practices?
Do other things in the organization need to change first?
Evaluation and feedback
What will be evaluated?
How will this guide future actions?
28
How to make stress your friend

whole or in part.
Health Promotion
Employee assistance program (EAP): Provides counseling and
other help to employees having emotional, physical, or other
personal problems

whole or in part.
EAPs help improve employee performance
Reduce expenses associated with benefits

Enhance organizational well-being
Most common employee issues dealt with in EAPs
Child care and elder care
Mental health and substance abuse
Relationship issues
Legal and financial problems
Career advice
30
Employee wellness programs or health promotion programs
Encourage individuals to adopt lifestyles that maximize overall
well-being

whole or in part.
Health promotion: Supportive approach of facilitating and
encouraging healthy actions and lifestyles among employees
Wellness programs: Programs designed to maintain or improve
employee health before problems arise
Level I Programs
Primarily cover educational activities
Level II Programs
Attempt to bring about direct behavioral change
Level III Programs
Try to create an organizational environment that helps
employees maintain healthy lifestyles
31

Security Concerns at Work
Security Concerns
Security Management
Workplace Violence
Employee Screening and Selection
Security Personnel

whole or in part.
Security Management
Security management involves:
Performing a security audit: Comprehensive review of
organizational security
Controlling physical access to the facilities of the organization
Controlling access to HR data
Screening job applicants
Providing trained security personnel

whole or in part.
Security Management
Violence prevention training – Managers, HR staff members,
supervisors, and employees should be trained on:
How to recognize the signs of a potentially violent employee
What to do when violence occurs

Levels of Workplace Violence Warning Signs
Source: Adapted from DOL
.gov, http://www.dol.gov/oasam
/hrc/policies/dol-workplace-
violence-program.htm.

whole or in part.
Workplace incivility: Rude behavior that offends other
employees
Bullying: Behavior that the victim perceives as oppressive,
humiliating, threatening, or infringing that occurs over an
extended time
35
Dealing with Workplace Violence
Develop policies and practices for trying to prevent and respond
to it
Train managers, especially with examples
Create a violence response team
Develop post-violence response plans
CSU Policy On Workplace Violence

CSU Active Shooter Safety Training

whole or in part.
Disaster Preparation and Recovery Planning
Pre-crisis: Identify how crises can be avoided through proper
preparation, risk assessment, and disaster prevention
Crisis: Craft a plan that enables the firm to adequately identify
and respond to a crisis
Post-crisis: Identify how the organization can better respond to
the same or a similar crisis if it were to happen again

whole or in part.
Elements of a Disaster Plan

whole or in part.
Disaster Preparation and Recovery Planning
Disaster Training Topics
First Aid/CPR
Hazardous Materials Containment
Disaster Escape Means
Employee Contact Methods

Organization Restoration Efforts
When the Fire Starts

whole or in part.
https://www.ready.gov/wildfires
https://www.fema.gov/media-library-data/1527866703522-
0c3242fc628e2979e6fd98e35d338cc2/Wildfire_May2018.pdf
40
Managing Employee
Benefits
1
Copyright ©2016 Cengage Learning. All Rights Reserved. May
not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
1
Learning Outcomes
Distinguish between mandated and voluntary benefits and list
three examples of each
Discuss the trends in retirement plans and compare defined
benefit and defined contribution plans
Explain the importance of managing the costs of health benefits
and identify some methods of doing so

2
Describe the growth of financial, family-oriented, and time-off
benefits and their importance to many employees
2
Benefits
Benefit: Tangible indirect rewards provided to an employee or
group of employees for organizational membership
3
Part-Time Employee Benefits
Part time employees:
Most do not receive employee benefits
Employers create their own full- and part-time thresholds
4

Based on generally accepted standards likely held by the
Department of Labor and the Internal Revenue Service,
“consistently working” 35 hours per week is a common
threshold for the designation of employees as full time.
4
Flexible Benefits Plan
Employers offer both legally mandated and voluntary benefits
Flexible Benefits Plan (Cafeteria benefit plan)
Employees are given a budget and can purchase the bundle of
benefits most important to them from the “menu” of options
offered by the employer
5
Core vs. Non-core Benefits Core Benefits (Traditional) Non-
core Benefits (Voluntary – Elective)Health
InsuranceDentalPrescription DrugsVisionBasic Life
InsuranceSupplement Life, Dependent LifeVacation Long-term
care insuranceHolidaysAuto-homeowners insuranceSick
PayMortgage services/discountsDisabilityOn-site
daycareTuition reimbursementYes, even Pet Insurance
6

Typically, employees are offered a basic or core benefits
package of life and health insurance, sick leave, and vacation.
Requiring a core set of benefits ensures that employees have a
minimum level of coverage to protect against unforeseen
financial hardships.
Employees are then given a certain amount of funds to purchase
whatever other benefits they need through the plan.
6
Administering Benefits
Program can be costly and time consuming
Managing the benefits program on an online platform becomes
easier
7
7
Types of Benefits
8
The Age Discrimination in Employment Act of 1967 Older
Workers Benefits Protections Act (OWBPA) The OWBPA,
which is part of the Age Discrimination in Employment Act
(ADEA), safeguards older workers' employee benefits from age

discrimination. Among other things, this means that employers
must take certain precautions when seeking a release from older
workers that waives rights under the ADEA.
Military Leave of Absence
XYZ is committed to protecting the job rights of employees
absent on military leave. In accordance with federal and state
law, it is the Company’s policy that no employee or prospective
employee will be subjected to any form of discrimination on the
basis of that person's membership in or obligation to perform
service for any of the Uniformed Services of the United States.
Specifically, no person will be denied employment,
reemployment, promotion, or other benefit of employment on
the basis of such membership. Furthermore, no person will be
subjected to retaliation or adverse employment action because
such person has exercised his or her rights under applicable law
or this policy. If any employee believes that he or she has been
subjected to discrimination in violation of this policy, the
employee should immediately contact the Employee Benefits
Representative responsible for the employee's division, or the
Representative's supervisor if the Representative is unavailable
or unable to be of assistance.
Bereavement leave is leave taken by an employee due to the
death of another individual, usually a close relative. The time is
usually taken by an employee to grieve the loss of a close
family member, prepare for and attend a funeral, and/or attend
to any other immediate post-death matters. Currently, there are
no federal laws that require employers to provide employees
either paid or unpaid leave. Also, only one state, Oregon, has
passed a law requiring employers to provide bereavement leave
(it took effect January 1, 2014). The other 49 states, plus the
District of Columbia, do not require employers to provide
employees either paid or unpaid bereavement leave.

Employers, at their discretion, may maintain bereavement leave
policies or practices and, in certain circumstances, may be
obligated to comply with their established policy or practice.
Employers must comply with bereavement leave policies that
are part of individual employment contracts or collective
bargaining agreements.
8
Social Security Benefits
It includes:
Retirement benefits
Retirement age: 67
Fully insured
Disability benefits
Disability has lasted or is expected to last for at least one year
or to result in death.
Survivor’s benefits
The amount depends on the worker’s age at death and lifetime
earning
Watch: Franklin Roosevelt Social Security
9
Employees and employers share in the cost of Social Security
through a tax on employees’ wages or salaries.
In 2018, you receive one credit for each $1,320 of earnings, up
to the maximum of four credits per year.

Not all employees work in jobs covered by Social Security.
Examples of some of these employees are: • Most federal
employees hired before 1984 (since January 1, 1983, all federal
employees have paid the Medicare hospital insurance part of the
Social Security tax); • Railroad employees with more than 10
years of service; 6 • Employees of some state and local
governments that chose not to participate in Social Security; or
• Children younger than age 21 who do household chores for a
parent (except a child age 18 or older who works in the parent’s
business).
SSA looks at your income in the 35 highest-earning years of
your career (capping the figures at the maximum taxable amount
for each year and adjusting them for inflation). Then it takes the
average of those 35 adjusted income figures and divides it by 12
to produce your "average indexed monthly earnings," or AIME.
Your AIME is then plugged into a formula to determine your
primary insurance amount -- that is, the monthly benefit you'll
be eligible to receive at your full retirement age. As of 2017, a
retiree's primary insurance amount is determined by adding up
the following:
90% of the first $885 in AIME
32% of AIME between $885 and $5,336
15% of AIME above $5,336
I'll spare you the mathematics of calculating the highest
possible Social Security benefit: At full retirement age, the
maximum benefit is $2,687. However, since you can earn a
delayed-retirement credit of 8% per year for waiting, until as
late as age 70, people reaching this age now can get a maximum
benefit of $3,547 per month.
The average monthly retirement benefit was recently $1,368.
That amounts to $16,416 per year. If your earnings have been
above average, you'll collect more than that -- but the overall
maximum monthly Social Security benefit for those retiring at
their full retirement age in 2017 is still just $2,687 -- or about

$32,000 for the whole year.
9
Medicare
Medicare – government-operated health insurance for
Americans 65 and older
Taxed on both employer and employee
Social security tax is 6.2% (total of 12.4%)
Medicare tax is 1.45% (total of 2.9%)
Additional 0.9% Medicare tax for higher-income employees
10
An additional Medicare tax of 0.9% for individuals who earn
higher incomes was instituted in 2013; employers are expected
to withhold this tax for compensation that exceeds $200,000 per
year.
10
Workers’ Compensation Insurance
State-mandated insurance where employers purchase private or
state-funded insurance to cover employees injured at work
Covers:
Injuries on the job, regardless of fault
Work-related illnesses
What is Workers Compensation Insurance?
11

Rates based on the company’s frequency and severity of
employee injuries
Workers’ compensation regulations require employers to
provide cash benefits, medical care, and rehabilitation services
to employees for injuries or illnesses that occur within the
scope of their employment. In exchange, employees give up the
right to pursue legal actions and awards.
Workers’ compensation programs are funded at the employer’s
expense; workers cannot be required to make financial
contributions for this coverage.
11
Unemployment Insurance
Provides employees with some income continuation during
periods of involuntary unemployment
Workers fired for misconduct or those not actively seeking
employment are generally ineligible.
Apply for UI Benefits in California
12
Funded by employers who pay combined federal and state tax
Tax varies based on organization’s unemployment experience:
the more layoffs, the higher the rate
workers fired for misconduct or those not actively seeking
employment are generally ineligible.

The minimum weekly benefit amount is $40 and the maximum
weekly benefit amount is $450. For more information about how
the Department calculates a UI claim, review, How
Unemployment Benefits are Computed (DE 8714AB), A Guide
to Benefits and Employment Services (DE 1275A), and
the California Employer’s Guide (DE 44).
12
Family and Medical Leave Act (FMLA)
Requires employers with 50 or more employees to allow up to
12 weeks of unpaid leave for family or medical reasons
On return from FMLA leave, employee must be restored to his
original job or to an equivalent job
13
FMLA covers:
Employers with 50 or more employees who live within 75 miles
of the workplace
Employees who have worked at least 12 months and 1,250 hours
in the previous year
FMLA leave provisions:
Maximum of 12 weeks of unpaid, job-protected leave during
any 12-month period for the following situations:
Childbirth and newborn care within one year of birth
Adoption or foster care placement of a child
Caring for a spouse, child, or parent with a serious health
condition
13

Retirement Programs
14
14
The Three-Legged Stool of Retirement Income
15
While traditional pension plans that provided a defined amount
for retirement at a defined age were the norm for decades, since
the early 1980s, fewer companies have provided these plans.
Instead, employee-funded retirement accounts have become
standard.
in 1979, of all private-sector employees, 62% of those who had
retirement benefits were enrolled solely in pension plans, 16%
were enrolled solely in defined contribution plans, and 22%
were utilizing both programs. In comparison, by 2011, a mere
7% had pension plans, 69% had defined contribution plans, and
a percentage similar to the one reported in 1979 participated in
both programs.
15

Retirement Programs
No law mandating retirement age in United States for most
professions
Phased retirement: Program that allows its employees to
gradually cut their hours before retiring
16
Phased retirement programs allow employees to work part time
and withdraw some retirement funds at the same time.
16
Retirement Plan Concepts
Vesting: Benefit that cannot be taken away
No pension rights accrue if they have not been employed long
enough to be vested
Portability: Retirement plan feature that allows employees to
move their retirement benefits from one employer to another
17
Comparison of Defined Benefit and Defined Contribution
Retirement Plans
18

18
Types of Retirement Plans
19
Employees are promised a pension amount based on age and
years of service
Defined Benefit Plan
Employer and/or employee makes an annual payment to
employee’s retirement account.
The actual amount of retirement benefits provided to an
employee depends on the amount of the contributions as well as
the gains or losses of the account.
Defined Contribution Plan
A defined benefit plan that defines the benefit in terms of a
stated account balance.
Cash Balance Plan
Defined-Benefit Pension Plans A “traditional” pension plan, in
which the employer makes the contributions and the employee
will get a defined amount each month upon retirement, is no
longer the norm in the private sector. Through a defined-benefit
plan, employees are promised a pension amount based on age
and service. A defined-benefit plan gives employees greater
assurance of benefits and greater predictability in the amount of
benefits that will be available for retirement. Defined-benefit
plans are often preferred by workers with longer service, as well

as by small business owners
Defined-Contribution Pension Plans In a defined-contribution
plan, the employer makes an annual payment to an employee’s
pension account. The key to this plan is the contribution rate;
employee retirement benefits depend on fixed contributions and
employee earnings levels.
Some employers have changed traditional pension plans to
hybrids based on ideas from both defined benefit and defined
contribution plans. One such plan is a cash balance plan, a
retirement program in which benefits are based on accumulated
annual company contributions, expressed as a percentage of
pay, plus interest credited each year. With these plans,
retirement benefits accumulate at the same annual rate until an
employee retires. Since cash balance plans spread funding
across a worker’s entire career, these plans work better for
mobile younger workers. The plans are gaining in popularity,
especially among small businesses, which account for 84% of
these plans.
A cash balance pension plan is a pension plan under which an
employer credits a participant's account with a set percentage of
his or her yearly compensation plus interest charges. A cash
balance pension plan is a defined-benefit plan. As such, the
plan's funding limits, funding requirements and investment risk
are based on defined-benefit requirements: as changes in
the portfolio do not affect the final benefits to be received by
the participant upon retirement or termination, the company
solely bears all ownership of profits and losses in the portfolio.
Although the cash balance pension plan is a defined-benefit
plan, unlike the regular defined-benefit plan, the cash balance
plan is maintained on an individual account basis, much like a
defined-contribution plan. The cash balance plan acts similar to
a defined-contribution plan also because changes in the value of

the participant's portfolio does not affect the yearly
contribution.
Read more: Cash Balance Pension
Planhttps://www.investopedia.com/terms/c/cashbalancepensionp
lan.asp#ixzz5HZaoqfWA
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Planhttps://www.investopedia.com/terms/c/cashbalancepensionp
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19
Common Defined Contribution Plans
401(k) plan: Plan allows for a percentage of an employee’s pay
to be withheld and invested in a tax-deferred account
403(k) plan
Profit-Sharing Plans: A profit-sharing plan accepts
discretionary employer contributions.
Employee Stock Ownership Plans (ESOPs)
20
Health Care Benefits
21

21
Key Provisions
of Patient Protection and Affordable Care Act
Congress has attempted to repeal the ACA, but it is still the law
of the land.
22
Consolidated Omnibus Budget Reconciliation Act (COBRA)
Requires that most employers with 20 or more full-time and/or
part-time employees offer extended health care coverage to
certain groups
Understanding COBRA Health Insurance
23
The Consolidated Omnibus Budget Reconciliation Act
(COBRA) requires that most employers (except churches and

the federal government) with 20 or more full-time and/or part-
time employees (partial count based on hours needed to work
for full-time status, or hours worked/full-time hours) offer
extended health care coverage to certain groups, as follows:42 •
Employees who voluntarily quit or are terminated • Widowed or
divorced spouses and dependent children of former or current
employees • Retirees and their spouses and dependent children
whose health care coverage ends • Any child who is born or
adopted by a covered employee • Other individuals involved in
the plan such as independent contractors and agents/directors
23
The Health Insurance Portability and Accountability Act
(HIPAA)
Care Legislation
Allows employees to switch their health insurance plans when
they change employers, and to get new health coverage with the
new company regardless of preexisting health conditions.
24
Requires employers to:
Provide privacy notices to employees
Not disclose of health information without authorization
Consider an entity that handles health information a business
associate
Consider any disclosure of information a breach
24
Controlling Health Care
Benefit Costs

ng Prescription Drug Programs
25
25
Increasing Employee Contributions
Managed care: Approaches that monitor and reduce medical
costs through restrictions and market system alternatives
Most common forms of managed care:
Health maintenance organizations (HMO)
Preferred provider organizations (PPO)
26
Managed Care Plans
HMO VS. PPO
Generally speaking, the difference between HMO and PPO plans
includes the size of the plan network, ability to see specialists,
plan costs, and coverage for out-of-network service.
https://abcmedicareplans.com/hmo-vs-ppo/
27

Containing Medical Benefits Costs
Health Savings Accounts (HSA)
Individual employees can set aside pretax amounts for medical
care into an HSA.
Unused amounts in an individual’s account can be rolled over
annually for future health expenses.
Health Reimbursement Account (HRA)
Employer sets aside money in a health reimbursement account
to help employees pay for qualified medical expenses.
28
A type of savings account that lets you set aside money on a
pre-tax basis to pay for qualified medical expenses. By using
untaxed dollars in a Health Savings Account (HSA) to pay for
deductibles, copayments, coinsurance, and some other expenses,
you can lower your overall health care costs.
An HSA can be used only if you have a High Deductible Health
Plan (HDHP) — generally any health plan (including a
Marketplace plan) with a deductible of at least $1,350 for an
individual or $2,700 for a family. When you view plans in the
Marketplace, you can see if they’re "HSA-eligible."
For 2018, you can contribute up to $3,450 for self-only HDHP
coverage and up to $6,900 for family HDHP coverage. HSA
funds roll over year to year if you don't spend them. An HSA
may earn interest, which is not taxable.
28

Containing Medical Benefits Costs (con’t)
Flexible Spending Account (FSA)
Employees can divert some pretax income into flexible spending
accounts to fund certain additional benefits.
At the end of the year or grace period, you lose any money left
over in your FSA.
29
Wellness Programs
Sponsored by employers
Designed to encourage employees to maintain and improve
health and well-being by
Getting regular checkups
Eating properly
Exercising
Managing stress levels
30
30
Employee Assistance Programs
Provides diagnosis, counseling, and referral for advice or
treatment related to alcohol or drug abuse, emotional
difficulties, financial or family difficulties

31
Services provided by employers to help workers cope with a
wide variety of problems that interfere with the way they
perform their jobs
31
Voluntary Employee Benefits
32
32
Life Insurance
Paid Time-Off
Family-Based Benefits
Long-Term Care Insurance
Disability Insurance

Time-Off and Other Benefits
Time-Off and Other Benefits
Vacation and Holiday Pay
Family and Sick Leave
Leaves of Absence
Paid-Time-Off (PTO) Plans
Employee-Paid Group Benefits
Vacation and Holiday Pay
33
33
Payment for Time Not Worked (con’t)
Sabbaticals
Paid (or unpaid) time away from a job for 4 or more weeks
employees take off to renew themselves before returning to
work
Supplemental unemployment benefits (SUBs)
Plan that enables an employee who is laid off to draw weekly
benefits from the employer
34
34

Insurance Benefits
Common Types of Insurance Benefits
Life Insurance
Disability Insurance
Long-term care insurance
35
Legal insurance – Employees (or employers) pay a flat fee for a
fixed number of hours of legal assistance each month
Life Insurance – Typical level of coverage is one and one-half
or two times an employee’s annual salary
Disability Insurance – Provide continuing income protection for
employees who become disabled and are unable to work
Long-term care insurance – Allow employees to purchase
insurance to cover costs for long-term health care in a nursing
home, assisted-living facility, or at a home
35
Family-Care Benefits
Family-Based Benefits
Adoption Benefits
Child-Care Assistance
Elder-Care Assistance
36

Other Benefits and Services
Credit unions
Serve financial needs of employees and attract potential
employees
Educational assistance
Proactive employers view educational assistance programs
CSU as an example
37
Incentive Plans
1
1
In This Session:
We’ll look at how the goals and performances of individuals,
teams/units/departments, and organizations might be more
effectively linked.
We’ll examine the underlying concepts that distinguish
effective incentives from ineffective ones.
2

Effective rewards acknowledge what the organization wants to
reward. Ineffective rewards do not reward what is hoped for by
the organization and, in fact, reward the very things the
organization doesn’t want. Kerr’s article, The Folly of
Rewarding A While Hoping for B, is a good launching point for
discussion of this (next slide).
2
A Variety of Possible Incentives
3
Individual Incentives
Necessary Conditions For Individual Incentive Plans
Individual performance must be identified
Individual competitiveness must be desired
Individualism must be stressed in the organizational culture
4
Individual Incentive Plans – Piece-rate
Straight piece-rate:
Employees receive a certain rate for each unit produced
Differential piece-rate:
Pays employees one piece-rate wage for units produced up to a
standard output and a higher piece-rate wage for units produced
over the standard
5

Managers often determine the quotas or
standards by using time and motion studies. For example,
assume that the
standard quota for a worker is set at 300 units per day and the
standard rate is
14 cents per unit. However, for all units over the standard, the
employee
receives 20 cents per unit. Under this system, the worker who
produces 400
units in one day would get $62 (300 × 14¢) + (100 × 20¢). Many
possible
combinations of straight and differential piece-rate systems can
be used,
depending on situational factors.
5
Individual Incentive Plans - Bonuses
Bonuses: One-time payment that does not become part of the
employee’s base pay
Spot bonus: An unplanned bonus given to an employee for
exceptionally good behavior
6
Individual Incentive Plans - Merit Pay
Merit pay is normally an annual pay increase tied to
performance
Becomes part of base pay once issued regardless of future
performance
7

Individual Incentive Plans - Awards and Recognition
Awards and Recognition
When giving awards, organizations should describe clearly how
those receiving the awards were selected
Management professor named winner of ‘Golden Apple,’
CSUSB’s top teaching award
8
Work Unit or Team Incentive Plans - Team Compensation
Team incentive plans: All team members receive an incentive
bonus payment when production or service standards are met or
exceeded
Approaches in establishing team incentive payments
Set performance measures upon which incentive payments are
based
Determine the size of the incentive bonus
Create a payout formula and should be explained to employees
in detail
9
Conditions for Effective Work Unit or Team Incentives
10
Challenges with Work Unit/team Incentives

Challenges with work unit/team incentives:
Rewards distributed in equal amounts to all members may be
perceived as unfair
Free rider: Member of the group who contributes little
Group size: Individual efforts of employees have little effect on
the total performance of the group in large groups
11
Organizational Incentives: Profit Sharing
s employees on goals
Primary Objectives
Challenges
12
Organizational Incentives: Employee Stock Plans
Stock option plan: Gives employees the right to purchase a
fixed number of shares of company stock at a specified price for
a limited period of time
Employee stock ownership plan (ESOP): Gives employees
significant stock ownership in their organizations

13
Microsoft: “We have an employee stock purchase plan (the
"Plan") for all eligible employees. Shares of our common stock
may be purchased by employees at three-month intervals at 90%
of the fair market value on the last trading day of each three-
month period. Employees may purchase shares having a value
not exceeding 15% of their gross compensation during an
offering period.”
Advantages
Favorable tax treatment for ESOP earnings
Employees motivated by their ownership stake in the firm
Employees have a voice in important matters
Disadvantages
Wages and retirement benefit tied to the firm’s future
performance
13
**Levels of Variable Pay
14
Sales Incentive Plans
Permits salespeople to be paid for performing various duties
that are not reflected immediately in their sales volume
Straight salary plan
Receives a percentage of the value of the sales the person has
made
Straight commission plan

Includes a straight salary and commission
Combination salary and commission plan
Pays a salary plus a bonus achieved by reaching targeted sales
goals
Sales plus bonus plan
15
Watch and Think
How To Improve Your Sales Incentives
Questions:
What are the tips mentioned in the video?
From your point of view, which of them is most important?
16
Use regular tactical incentives on top of year end target
Set achievable goals for employees of all levels, not just your
top performers
Personalize your message of rewards to make it relevant and
attainable to everyone
Use gamification to encourage participation
Incorporate educational modules and quizzes
Recognize those who live your brand values everyday
16
Elements of Executive Compensation Packages
17
Handled differently from employee pay
CEO responsibilities:

Establish strategic direction for the organization
Create shareholder value
Ensure the sustainability of the enterprise
Controversy
Should include an element of risk for the executive
When organization underperforms, executive payouts should
fall
But compensation can get excessive because:
It is often based on peer group practices rather than rational
compensation strategy
It increases as companies pay above average
CEOs have input as board members of other companies
17
The Executive Pay Package - Base Salaries and Benefits
Executive base salaries
Represents 30 or 40 percent of total annual compensation
Executive benefits
Include programs for health insurance, life insurance, retirement
plans, and vacations
Supplemental benefits that other employees do not receive
18
The Executive Pay Package - Incentives
Executive short-term incentives
Annual bonuses form the main element
Bonus payment in form of cash or stock and may be paid
immediately, deferred for a short time, or deferred until
retirement
Executive long-term incentives
Is used to tie the incentives to the long term success of the
organization

19
The Executive Pay Package - Perks
Perks or perquisites: Special nonmonetary benefits given to
executives
Allow the executives to be seen as “very important people”
May include a car, entertainment expenses, and club
memberships, services such as free medical examinations, low-
cost loans, and financial or legal counseling
20
Design Issues for Performance-Based
Incentives and Rewards
To be effective, incentive and reward systems must:
Specify and measure performance.
Specify the level of aggregation for reward distribution in the
organization’s hierarchy.
Specify the type of reward.
Gain employee acceptance.
21
Legal Considerations
Discrimination:
Must apply same decision rules to all employees eligible for the
reward or incentive.
Employees protected by Title VII and Equal Pay Act.
Taxes and accounting rules:
There may be some unanticipated or unplanned tax
consequences for employees.

22
Like any employment decision, employers must make sure that
incentives and rewards are equitably administered. If a group of
employees are eligible to receive a reward, the criteria must be
applied equitably across all employees in that group. Note that
the criteria must be applied equitably, not equally. This does
not mean that all employees should receive the same reward; the
process, however, must be applied fairly and the outcomes
distributed fairly, based on the set of performance standards set
and achieved.
In addition, depending on employers’ choices of the types of
incentives and rewards they offer, there may be some
unanticipated or unplanned tax consequences for employees. For
example, with incentive stock options, tax is deferred as long-
term capital gains (15 percent) when the stock is actually sold
by the employee. For employees with non-qualified stock
options, the spread (i.e., the difference between the price at
which the employee bought the stock and the current market
value) is viewed as income and is treated as compensation,
which is taxed at a rate higher than 15 percent. If the instructor
is knowledgeable in this area, they could offer other tax and
accounting issues that employers and employees might consider
as they decide the mix of rewards.
22
Watch and Think
Steven Levitt - Why Incentives Don't Work
23

Total Rewards
and Compen$ation
1
Learning Objective
Explain the major laws governing employee compensation
Outline strategic compensation decisions
Illustrate the steps in developing a base pay system
2
Nature of Total Rewards
and Compensation
Total rewards: Monetary and nonmonetary rewards provided by
companies to attract, motivate, and retain employees
3
Elements
of Total
Rewards
4
Source: Adapted from WorldatWork
(http://www.worldatwork.org).
4

Legal Constraints on
Pay Systems
Fair Labor Standards Act (FLSA) - Primary federal law
affecting compensation
Provisions focus on the areas covering:
Minimum wage
Limits on the use of child labor
Overtime provisions (exempt and nonexempt status)
5
For example, Walmart was assessed almost $5 million in back
wages and penalties for overtime violations resulting from
improperly classifying employees as exempt from overtime, and
Staples was fined $42 million to settle similar claims
5
Fair Labor Standards Act (FLSA)
Minimum wage (currently $7.25 an hour )
Has to be paid to a broad spectrum of covered employees
Child labor provisions
Sixteen- and 17-year-olds may be employed for unlimited hours
in any occupation other than those declared hazardous.
6
The current minimum wage of $7.25 an hour was set as part of
the Fair Minimum Wage Act of 2007. A lower minimum wage
of $2.13 an hour is set for “tipped” employees, such as
restaurant servers, but their compensation must equal or exceed

the minimum wage when average tips are included.
Power-driven meat and poultry processing machines (meat
slicers, meat saws, patty forming machines, meat grinders, and
meat choppers), commercial mixers and certain power-driven
bakery machines. Employees under 18 years of age are not
permitted to operate, feed, set-up, adjust, repair, or clean any of
these machines or their disassembled parts
Balers and Compactors. Minors under 18 years of age may not
load, operate, or unload balers or compactors. Sixteen- and 17-
year-olds may load, but not operate or unload, certain scrap
paper balers and paper box compactors under certain specific
circumstances. (See Fact Sheet #57, in this series, Hazardous
Occupations Order No. 12. Hazardous Occupations Order No.
12, Rules for Employing Youth and the Loading, Operating, and
Loading of Power-Driven Balers and Compactors under the Fair
Labor Standards Act (FLSA)).
Motor Vehicles. Generally, no employee under 18 years of age
may drive on the job or serve as an outside helper on a motor
vehicle on a public road, but 17-year-olds who meet certain
specific requirements may drive automobiles and trucks that do
not exceed 6,000 pounds gross vehicle weight for limited
amounts of time as part of their job. Such minors are, however,
prohibited from making time sensitive deliveries (such as pizza
deliveries or other trips where time is of the essence) and from
driving at night. (See See Fact Sheet #34: Child Labor Provision
and the Driving of Automobiles and Trucks under the Fair
Labor Standard Act.)
Children under 14 years of age may not be employed in non-
agricultural occupations covered by the FLSA, including food
service establishments. Permissible employment for such
children is limited to work that is exempt from the FLSA (such
as delivering newspapers to the consumer and acting). Children
may also perform work not covered by the FLSA such as
completing minor chores around private homes or casual baby-

sitting.
6
7
7
Fair Labor Standards Act-Overtime Provisions
Overtime: 1.5 times the regular pay rate for all hours worked
over 40 in a week, except for exempt employees.
Exempt and nonexempt statuses
Exempt employees: Employees who are not paid overtime
Nonexempt employees: Employees who must be paid overtime
8
Employers are required to pay overtime for hourly jobs to
comply with the FLSA. Employees in positions classified
as salaried nonexempt are also entitled to overtime pay.
Salaried nonexempt positions sometimes include secretarial,
clerical, and salaried blue-collar positions (like shift supervisor)
A common mistake employers make is not paying overtime to
any salaried employees, even though some may qualify for
nonexempt status. Exempt status is not necessarily granted to
all salaried jobs; each job must be evaluated on a case-by-case
basis.
Companies should also keep job descriptions current and use
performance appraisals to help justify how jobs have been
classified.

There are other exceptions to the overtime requirements, such
as farm workers, but these exceptions are rare.
8
Exempt and Nonexempt Statuses
Under FLSA regulations, an employee is exempt from the right
to overtime pay if s/he meets the following 3 requirements:
Paid on a salary basis regardless of the number of hours
worked;
Receives a salary of at lease $455 /week or $23,660/year; and
Employees must meet certain tests regarding their job duties
9
The final rule amends the salary basis test to allow employers to
use nondiscretionary bonuses and incentive payments (including
commissions) to satisfy up to 10 percent of the new standard
salary threshold, provided these payments are made on a
quarterly or more-frequent basis.
9
Exempt and Nonexempt Statuses (cont.)
Classifies exempt jobs into five categories:
• Executive
• Administrative
• Professional (learned or creative)
• Computer employees
• Outside sales
10
Tests for Outside Sales Employees
Whose primary duty is making sales or obtaining orders or
contracts for services or for the use of facilities for which a
consideration will be paid by the client or customer; and

Who is customarily and regularly engaged away from the
employer’s place or places of business in performing such
primary duty.
Tests for Administrative Employees
Whose primary duty is the performance of office or non-manual
work directly related to the management or general business
operations of the employer or the employer’s customers; and
Whose primary duty includes the exercise of discretion and
independent judgment with respect to matters of significance.
10
Motivation Theories- Expectancy Theory
Expectancy theory: Employee’s motivation is based on the
probability that his or her efforts will lead to an expected level
of performance that is linked to a valued reward(Vroom,1964).
11
Motivation Theories-Equity Theory
Equity theory: Individuals judge fairness (equity) in
compensation by comparing their inputs and outcomes against
the inputs and outcomes of referent others
12
Equity
Theory
13

Source: Adapted from John Stacey Adams, “Inequity in Social
Exchange,” Advances in Experimental Social Psychology 62
(1965), 335–343.
13
Continuum of Compensation Philosophies
14
14
Compensation Quartile Strategies
15
Market Competitive Compensation
Lag-the-Market Strategy
Used when the employer is experiencing financial difficulties
Used when an abundance of workers is available
Lead-the-Market Strategy
Aggressive approach that enables a company to be more
selective when hiring
Match-the-Market Strategy
Attempts to balance employer cost pressures and the need to
attract and retain employees
16

Compensation Responsibilities
HR specialists and managers administer the organizational
compensation programs
HR develops and administers the compensation system
HR ensures pay practices comply with all legal requirements
Line managers evaluate employee performance and participate
in pay decisions
17
18
How to Find Out the Value of A Particular Job
The two general approaches for valuing jobs are job evaluation
and market pricing.
Job evaluation looks at pay levels within the company, and
market pricing looks outside the company.
19
19
Job Evaluation and Market Pricing
Job Evaluation
Job ranking system
Point factor system
Job classification system
Market Pricing
20

Job Evaluation Systems-Job Ranking System
The ranking method is a simple system that places jobs in order,
from highest to lowest, by their value to the organization.
Simple ranking
Paired Comparison Ranking
21JobReceptionistProject ManagerAccount ManagerSales
DirectorTotalReceptionistProject ManagerAccount
ManagerSales Director
21
Job Evaluation Systems-Point Factor System
Looks at compensable factors (e.g., skill, responsibilities, social
interaction, and working conditions) in a group of similar jobs
and assigns points to each factor.
Hay profile method uses three factors (know-how, problem-
solving ability and accountability) and measures the degree that
these three factors are required for each position.
22
Four steps:
Choose the compensable factors
Figure out the factor scales
Assign points to degrees
Apply to jobs
22
Job Evaluation Systems-Point Factor System
23
From https://www.shrm.org/resourcesandtools/tools-and-

samples/how-to-guides/pages/howtoestablishsalaryranges.aspx
Job Evaluation Systems-Job Classification System
Descriptions of job classes are written and then are put into the
grade that best matches the class description.
Each job is put into a grade according to the class it best
matches.
Classification System from Johns Hopkins University
24
Tied to each job are the basic function, characteristics, and
typical work of that job classification, along with pay range
data.
24
Valuing Jobs Using Market Pricing
Market pricing uses market pay data to identify the relative
value of jobs based on what other employers pay for similar
jobs.
Internet-based pay information is prevalent, such as
https://www.bls.gov/bls/blswage.htm
Advantages
Disadvantages
25
Advantages of Market Pricing: allows an employer to
communicate to employees that the compensation system is
truly “market linked”
Disadvantages of Market Pricing: pay survey data are limited or
may not be gathered in methodologically sound ways.

25
Pay Surveys
Pay survey: Collection of data on compensation rates for
workers performing similar jobs in other organizations
Benchmark jobs: A benchmark job is one that has a scope of
work and responsibilities common to other organizations or
industries.
26
A pay survey is a collection of data on compensation rates for
workers performing similar jobs in other organizations.
26
Discussion
Recommend a job evaluation system for a small family-owned
business with six job titles and thirty incumbents. Recommend a
system for an oil refinery with 800 employees in managerial,
technical, and blue-collar jobs.
27
27
Pay Structures
Market line: Graph line that shows the relationship between:
Job value as determined by pay survey rates
Job value as determined by job evaluation points
28

A startup or small organization may have only three or four pay
grades. The federal government, by contrast, uses 15 pay grades
based on the level of difficulty, responsibility and qualifications
required.
28
Pay Grades
Pay grades (job grades): A grouping of individual jobs having
approximately the same job worth.
29
https://hr.harvard.edu/grade-level-listings
Using the market line as a starting point, the employer can
determine minimum and maximum pay levels for each pay grade
by making the market line the midpoint line of the new pay
structure.
29
Pay Range
For each pay grade, an organization will need to establish
minimum, midpoint and maximum pay ranges.
Salary ranges allow for differences among positions within the
same grade as well increasing levels of responsibility and
performance within the same job.
30
https://hr.harvard.edu/salary-ranges
Broadbanding
Broadbanding: Practice of using fewer pay grades with much
broader ranges than in traditional compensation systems

31
Benefits
Encourages horizontal movement of employees
Is consistent with trend towards flatter organizations
Creates a more flexible organization
Encourages competency development
Emphasizes career development
31
Rates Out of Range
Red-Circled Rates
Rates above the maximum rate
Green-Circled Rates
Rates below the minimum rate
32
Pay Compression and Salary Inversion
Pay compression
Wages for new hires are increasing faster than the wages of
people already on the payroll
Salary inversion
Occurs when the pay given to new hires is higher than the
compensation provided to more senior employees.
Pay Transparency Nondiscrimination Provision
the regulations prohibit federal contractors and subcontractors
from discharging or otherwise discriminating against their
employees and job applicants for discussing, disclosing, or
inquiring about compensation

33
33
Negotiating Salary
This video provides tips on negotiating salary from the
perspective of an employee.
34
34
Employee Selection
1
Learning Outcomes
Discuss the steps of a typical selection process
Compare the value of different types of employment tests
Explain why the information gathered during the process must
be reliable and valid
Contrast several types of selection interviews and some key
considerations in conducting these interviews
2

2
Selection
Process of choosing individuals who have relevant
qualifications to fill existing or projected job openings
“Hire hard, manage easy.”
“Good training will not make up for bad selection.”
3
Selection Process Flowchart
4
4
Pre-employment Screening
Discussion:
Should organizations do social network screening?
What are the potential problems with social network screening?
5
Electronic assessment screening: Software used to review
résumés and application forms received
Disqualification questions to understand individual KSAs
Assessment tests and background, drug, and financial screening
Social network screening—controversial

A controversial trend is screening candidates based on
information obtained from their social networking profiles.
Doing so can have negative consequences for applicants and
companies. The legality and appropriateness of such screening
is highly questionable because most managers simply access
available information without consistency or regard to job
demands. The information found on Facebook or other online
platforms can lead to discrimination against applicants due to
their religion or sexual orientation. Although it may be tempting
to just click on an applicant’s profile, top candidates may
develop a negative opinion of the organization or, even worse,
take legal action if they are not hired because of the information
found on social networking sites. Companies must walk a fine
line and realize that random, haphazard screening in this
manner is likely to attract attention from lawmakers who will no
doubt restrict the practice if it becomes too prevalent.
5
Application Forms
Application forms:
Basis for prescreening information
Are these questions found on application forms legal?
Marital status
Height/weight
Number and ages of dependents
Information on spouse
Date of high school graduation
Emergency contact information
Social Security number
6
Record of the applicant’s desire to obtain a position
Applicant profile for the interviewer

Basic employee record for applicants hired
Research on the effectiveness of the selection process
Formal document on which applicant attests to truthful
information
At-will employment: Indicates the right of the employer or the
employee to terminate employment at any time with or without
notice or cause (where applicable by state law)
Reference contacts: Requests permission to contact previous
employers listed by the applicant on the application form or
résumé
Employment testing: Notifies applicants of required drug tests,
pencil-and-paper tests, physical exams, or electronic or other
tests that will be used in the employment decision
Application time limit: Indicates how long application forms are
active (typically six months) and that individuals must reapply
or reactivate their applications after that period
Information falsification: Conveys to an applicant that
falsification of application information can be grounds for
serious reprimand or termination
Résumés as Applications
EEOC standards require that a résumé is treated as an
application form
Application forms are better because the same information is
furnished by all applicants
Résumés may embellish or omit negative information
If an applicant voluntarily furnishes some information on a
résumé that cannot be legally obtained, the employer should not
use that information during the selection process. Some
employers require those who submit résumés to complete an
application form as well so that there is consistent information
on every applicant and appropriate comparisons can be made.

6
Types of Tests
Sample Work Sample Tests
Clerical
■ Typing test.
■ Proofreading.
7
7
Job knowledge tests
Designed to measure people’s level of understanding about a
particular job
Work sample tests
Require the applicant to perform tasks that are actually a part of
the work required on the job

Types of Tests
8
The Employee Polygraph Protection Act of 1988 prohibits
employers from requiring or requesting pre-employment
polygraphs under most circumstances.
Federal, state, and local government agencies are exempt from
the act.
Reduces the frequency of lying and theft
on the job
Communicates to applicants that dishonesty will not be
tolerated
The polygraph, more generally and incorrectly referred to as the
“lie detector,” is a mechanical device that measures a person’s
galvanic skin
response, heart rate, and breathing rate.
Congress passed the Employee Polygraph Protection Act, which
prohibits the use of
polygraphs for preemployment screening purposes by most
employers.
Federal, state, and local government agencies
are exempt from the act. Also exempted are certain private
sector
employers such as security companies and pharmaceutical
companies.
The act does allow employers to use
polygraphs as part of internal investigations of thefts or

losses. But in those situations, the polygraph test should be
taken voluntarily, and the employee should be allowed to
end the test at any time.
8
Cognitive ability tests
Measure mental capabilities such as general intelligence, verbal
fluency, numerical ability, and reasoning ability
Provides a diagnostic opinion about a candidate's honesty, but
their validity has been called into question
Polygraph tests (Lie detector)
9

Types of Tests
Legal experts recommend that employers order such tests only
after making a contingent offer of employment.
10
10
Physical ability tests
Tests that measure an individual’s abilities such as strength,
endurance, and muscular movement.
Medical examinations
Ensure the health of an applicant is adequate to meet the job
requirements
Drug tests
Right of an employer in accordance with Drug-Free Workplace
Act of 1988

Legal Considerations in Selection Process
Job-relatedness: Qualification or requirement in selection is
significantly related to successful performance of job duties
Business necessity: Practice that is necessary for safe and
efficient operations
11
Selection Tests
The Uniform Guidelines on Employee Selection Procedures of
1978: 4/5ths rule
12
Selection tests must be evaluated extensively before being
utilized for hiring decisions. The development of test items
should be linked to a thorough job analysis, which is covered

in Chapter 4. Also, initial review of the items should include an
evaluation by knowledge experts, and statistical and validity
assessments of the items should be conducted.
Pre-employment testing is a selection tool that can provide
valuable information to aid the selection process.
Pre-employment tests can add objectivity to the selection
process if applicants for the same position take the same test
under the same conditions and if the test accurately measures
skills essential to job performance.
If the use of a particular selection procedure results in adverse
impact, the employer can eliminate the use of the procedure,
thus eliminating the adverse impact. Or, if the employer wishes
to continue to use the procedure, it must then demonstrate the
“business necessity” of the selection procedure– that is,
demonstrate a clear relationship between the selection
procedure and performance of the job. This process is known as
validation.
Validation as used in personnel psychology is the establishment
of a clear relationship between a selection procedure and the
requirements of successful job performance. The Uniform
Guidelines recognize three aspects of validity: content validity,
criterion validity, and construct validity. The Uniform
Guidelines outline technical standards and documentation
requirements to justify each of these three aspects of validity.
12
Case: Gordon Food Service
Michigan-based Gordon Food Service administered a strength
test using isokinetic testing technology and equipment to
measure upper and lower body resistance. The test was intended
to gauge an applicant’s ability to handle the physical demands
of the job and determine the applicant’s risk of injury,

according to the settlement.
Office of Federal Contract Compliance Programs investigators
found that the test had a statistically significant adverse impact
on female applicants, resulting in the hiring of only six females
over a period when nearly 300 males were hired.
Moreover the test was “more stringent than the actual job
requirements at Gordon Food,” and was not validated.
Gordon Food Service agreed to pay $1.85 million in back wages
and benefits to 926 women, hire 37 of the female applicants,
and stop using the strength test.
13
job-related and consistent with business necessity
“Too often we find tests like the one used in this case that
exclude workers from jobs that they can in fact perform,” said
Patricia Shiu, director of the OFCCP, in a press release. The
agency stated that the test was “more stringent than the actual
job requirements at Gordon Food,” and was not validated.
Gordon Food Service agreed to pay $1.85 million in back wages
and benefits to 926 women, hire 37 of the female applicants,
and stop using the strength test. The company, which provides
products to the U.S. Departments of Defense and Agriculture
and to the Federal Prison System, did not admit liability.
PRE-EMPLOYMENT TEST BY DIAL CORP.
DISCRIMINATES AGAINST WOMEN, COURT RULES IN
EEOC CASE https://www.eeoc.gov/eeoc/newsroom/release/2-
8-05.cfm
13
EEOC v. Dial Corp.
Women were disproportionately rejected for entry-level

production jobs because of a strength test. The test had a
significant adverse impact on women – prior to the use of the
test, 46% of hires were women; after use of the test, only 15%
of hires were women.
Dial defended the test by noting that it looked like the job and
use of the test had resulted in fewer injuries to hired workers.
The EEOC established through expert testimony, however, that
the test was considerably more difficult than the job and that
the reduction in injuries occurred two years before the test was
implemented, most likely due to improved training and better
job rotation procedures.
On appeal, the Eighth Circuit upheld the trial court’s finding
that Dial’s use of the test violated Title VII under the disparate
impact theory of discrimination.
14
14
Selection Tests
utilized for hiring decisions.
The development of test items should be linked to a thorough
job analysis.
Case: Selecting a Programmer
15
utilized for hiring decisions. The development of test items
should be linked to a thorough job analysis, which is covered
in Chapter 4. Also, initial review of the items should include an
evaluation by knowledge experts, and statistical and validity
assessments of the items should be conducted.

15
*Reliability and Validity
Reliability: Extent to which a test or measure repeatedly
produces the same results over time
Validity: Extent to which a test measures what it claims to
measure
Selection tests should be validated to ensure that they measure
the knowledge or skills that an applicant would need to perform
the job.
16
Correlation Scatterplots
17
17
Ban-the-box Laws
The "box" refers to the question on job applications that asks
applicants whether or not they have ever been convicted of a
crime.
Ban-the-box does not mean there can never be a criminal
background check
18
However, most ban-the-box legislation places other restrictions
and other requirements on employers. For instance, some states

prohibit employers from inquiring about arrests, dismissed
history, sealed records, or history in a diversion program. Some
ban-the-box laws restrict employers from inquiring about
criminal history until after the first interview or until a
conditional offer of employment is made. Some jurisdictions
require employers to consider other factors, such as, time-
related restrictions or whether the criminal history is job-
related.
https://www.backgroundchecks.com/banthebox
18
Ban the Box Laws in California
19
For a full list, please see Ban the Box Laws by State and
Municipality from SHRM
Interview
Purposes
To obtain information about candidates
To provide information and reinforce the employer brand
In-depth selection
interview
Initial screening
interview
Assessing the qualifications of applicants
20

Types of Interviews
Unstructured interview: Interview that uses questions developed
from the answers to previous questions
Structured interviews: Uses a set of standardized questions that
have an established set of answers
21
Employers prefer to use interviews over other selection
activities because
they have high “face validity” (i.e., interviews make sense to
employers). It is
often assumed that if someone interviews well and the
information obtained in
the interview is useful, then the individual will be a good
hire.30 However, an
unstructured interview does not always provide much actual
validity, causing
a growth in the popularity of structured interviews.
21
Comparison of Structured and Unstructured Selection
Interviews
22
Structured Interviews
Situational interview: Questions about how applicants might
handle specific job situations
Behavioral interview: Applicants give specific examples of how
they have performed a certain task

Example: “Tell me about a time when you initiated a project.
What was the situation? What did you do? What were the
results?”
Interview and Resume Tips from Starbucks
23
A recent study showed that “past behavior”
interviews are better at identifying achievement at work than
are situational
interviews, because they focus on what applicants have actually
done in real
situations rather than on what they think they might do in
hypothetical situations.
33 An example of a behavioral interview line of questioning
might be:
“Tell me about a time when you initiated a project. What was
the situation?
What did you do? What were the results?”
23
Discussion: Are these questions situational or behavioral
questions
1. Describe a time when you were faced with problems or
stresses at work that tested your coping skills. What did you do?
2. What would you do if the work of a subordinate or team
member was not up to expectations?
3. Give an example of a time when you had to be relatively
quick in coming to a decision. How did you go about making
the decision?
4. How would you handle it if you believed strongly in a
recommendation you made in a meeting, but most of your co-
workers shot it down?

24
Effective Interviewing: Questions to Avoid
Illegal questions
Questions that are not job related
Yes/no questions
Obvious questions
Questions that rarely produce a true answer
Leading questions
25
Yes/no questions: Unless verifying specific information, the
interviewer should avoid questions that can be answered “yes”
or “no.” For example, “Did you have good attendance on your
last job?” will probably be answered simply “yes.”
• Obvious questions: An obvious question is one for which the
interviewer already has the answer and the applicant knows it.
• Questions that rarely produce a true answer: Avoid questions
that prompt a less-than-honest response. An example is “How
did you get along with your coworkers?” The likely answer is
“Just fine.”
• Leading questions: A leading question is one to which the
answer is obvious from the way the question is asked. For
example, “How do you like working with other people?”
suggests the answer “I like it.”
• Illegal questions: Questions that involve information such as
race, age, gender, national origin, marital status, and number of
children are illegal. They are just as inappropriate in the
interview as on the application form.
• Questions that are not job related: All questions should be
directly job related.

25
Background Investigations
Negligent hiring: Occurs when an employer fails to check an
employee’s background and the employee injures someone on
the job.
Question: How would you conduct a complete background
investigation on applicants for the job of school bus driver to
minimize concerns about negligent hiring?
Negligent retention
26
Employment Background Checking Basics
Information can be obtained from:
Past job records
Testing records
Educational and certification records
Drug tests
Criminal history
Sex offender lists
Motor vehicle records
Credit history
27
Legal Constraints on Background Investigations
EEOC requires you treat everyone equally
When you run background checks through a company in the
business of compiling background information , you must
comply with the Fair Credit Reporting Act (FCRA)

Notify the applicant and get their permission to get a
background report
28
Companies should obtain a signed release from the applicant
The FCRA applies anytime an employer obtains a background
check for employment purposes from a third party. These
reports could include criminal history, employment and
education verifications, motor vehicle reports, health care
sanctions and professional licenses. It is important to note that
while the word “credit” appears in the name of the law, it
applies to background reports regardless of whether or not the
report includes credit information.
Employers must make sure they disclose that they are going to
conduct a background check and get written authorization.
28
Medical Examinations
and Inquiries
Used to determine the physical and mental abilities to perform
jobs
ADA prohibits:
Using pre-employment medical exams, except for drug tests,
until a job has been conditionally offered
Rejecting an individual because of a disability
Asking job applicants any question related to current or past
medical history until a conditional job offer has been made
29

Medical Examinations
and Inquiries
Drug testing - Accuracy of tests varies according to the type of
test used and the quality of the laboratory where the test
samples are sent
Safety-sensitive jobs may require more stringent screening
Positive tests should be tested again
30
Summarizing Information about Applicants
31
Approaches for
Combining Predictors
Compensatory Approach
Allows a higher score on one predictor to offset, or compensate
for, a lower score on another
32
Approaches for
Combining Predictors (Cont.)
Multiple cutoff model:
Requires an applicant to achieve some minimum level of
proficiency on all selection dimensions
Multiple hurdles model:
Sequential strategy in which only the applicants with the top

scores at an initial test stage go on to subsequent stages
33
Making the Job Offer
General process
Offer given over the telephone
Formalized letter is then sent to the applicant
Offer document should be reviewed by legal counsel
Terms and conditions of employment should be clearly
identified
34
Recruiting High-Quality Talent
1
1
Learning Outcomes
Describe what is recruiting, outline the elements that are part of
a strategic recruiting strategy
Describe the methods firms use to recruit externally and
internally
List some of the ways firms can use to improve their recruiting
and the metrics they use to do so
Explain why diverse recruitment are important to companies
2

2
What is recruiting?
Recruiting is the process by which organizations locate and
attract individuals to fill job vacancies.
Recruiting connects companies to sources of employees;
selection involves picking the best supplier of talent
3
3
4
Significance of recruitment in modern world
How to calculate recruitment costs for budget planning
https://resources.workable.com/tutorial/recruitment-costs-
budget
4
Employee Recruitment Process
5
5

Establish Recruitment Objectives
Considerations:
Number of open positions to be filled.
Date by which positions should be filled.
Number of applications desired.
Type of applicants sought:
Level of education.
Knowledge, skills and abilities.
Interests and values.
Diversity.
Job performance goals for new hires.
Expected new-hire retention rate.
6
6
Elements of a Recruiting Strategy
7
• What type of individuals should be targeted? • Where can
these people be found? • When should the recruitment campaign
begin? • How can the targeted individuals best be reached? •
What recruitment message should be communicated? • What
type of recruiters should be used? • What should be the nature
of a site visit? • What should a job offer entail?
7

Assigning Responsibility
for Recruiting
Recruiting by employer or outsourced
Recruitment process outsourcing (RPO)
Professional employer organizations (PEOs) and employee
leasing
Employee leasing: Employer signs an agreement with the PEO
Staff is hired by PEO and leased to employer
Leasing firm pays wages, pays taxes, and handles HRM
8
Employment Branding
Employment brand: Distinct image of the organization that
captures the essence of the company to engage employees and
outsiders
Attracting Top Talent with a Strong Employer Brand
Employer of choice
9
Employer of choice
: Desirable places to work because of employee engagement,
satisfaction, pay, benefits, schedules, social responsibility, etc.
9
Combination of Core and Flexible Workers
Core workers: Employees that are foundational to the business
Flexible Workers: Employees that are hired on an “as needed”
basis
Advantages
Challenges

10
10
Independent contractors
Independent contractors: Workers who perform specific services
on a contract basis
Independent contractors vs regular employees:
Behavioral: Does the company control or have the right to
control how the worker does his or her job?
Financial: Are the business aspects of the worker’s job
controlled by the payer?
Type of Relationship: Are there written contracts or employee
type benefits?
11
Behavioral: Does the company control or have the right to
control what the worker does and how the worker does his or
her job?
Financial: Are the business aspects of the worker’s job
controlled by the payer? (these include things like how worker
is paid, whether expenses are reimbursed, who provides
tools/supplies, etc.)
Type of Relationship: Are there written contracts or employee
type benefits (i.e. pension plan, insurance, vacation pay, etc.)?
Will the relationship continue and is the work performed a key
aspect of the business?
11
Advantages and Disadvantages of Using Flexible Staffing

Alternatives
12
Understanding Labor Markets
13
Labor markets: Supply pool from which employers attract
employees
Elements of the labor market:
Labor force population: All individuals who are available for
selection if all possible recruitment strategies are used
Applicant population: Subset of the labor force population that
is available for selection using a particular recruiting approach
Applicant pool: All persons who are actually evaluated for
selection
Labor force population: All individuals who are available for
selection if all possible recruitment strategies are used
Applicant population: Subset of the labor force population that
is available for selection using a particular recruiting approach
Applicant pool: All persons who are actually evaluated for
selection
13
14
How to recruit?

14
Recruiting Source Choices: Internal versus External
Internal recruitment: Promoting from within the organization
External recruitment: Hiring from outside the organization
15
Possible strategy for organizations that face rapidly changing
competitive environments and conditions:
Promote from within if a qualified applicant exists
Go to external sources if not
15
Internal Recruiting Sources
Organizational Databases
Internal job posting
Company intranet
Employee referrals
Rerecruiting former employees and applicants
16
Organizational Databases
Information on existing employees like knowledge, skills, and
abilities (KSA) are entered into a database
Employee data sorted by occupational fields, education, areas of
career interests, previous work histories, and other variables
These databases can be linked to HR activities
Job posting is the process of announcing job openings to all
employees. Some organizations have developed computerized
versions of job announcements that are sent out as e-mails to all

employees and some publish employment newsletters or flyers.
The announcement should contain information about the
position, the required qualifications and instructions for
applying.
The important issue in job posting is that the job announcement
is made available to all employees. Adequate job posting can
ensure that minority workers and other disadvantaged groups
are aware of opportunities within the organization. HR must
ensure that all employees have an equitable opportunity to apply
for the jobs that are available. Employee cynicism can occur
when jobs are posted but the organization has already selected a
strong internal candidate for the position. Such practices create
resentment and mistrust among employees when they believe
the job posting is just a formality with little real opportunity for
advancement.
Employee Referrals: Current employees can play an important
role in recruiting new employees and some organizations pay a
bonus to employees for successful referrals. There is a
downside to extensive use of employee referrals. The EEOC
compliance manual issued in 2006 updated guidance on the
prohibition of discrimination under Title VII of the Civil Rights
Act of 1964. The manual clearly warns that relying on word-of-
mouth recruiting may generate applicant pools that do not
reflect the diversity of the labor market. Therefore, it would
seem prudent to use employee referral sparingly.
16
Discussion: Employee Referrals
What do you think about employee referrals?
Does your organization have a policy on nepotism?
What are the drawbacks and advantages you perceive with this
practice?

17
Nepotism: Hiring relatives.
Does your organization have a policy on nepotism?
May be discriminatory.
Must ensure individuals are not in supervisory positions
managing their own relatives.
May create issues of favoritism.
Be careful of civil rights violations. In many states, it is illegal
to discriminate in hiring practices based on a person’s marital
status. Many organizations have nepotism policies, so find out
where your employer stands on the issue. When hiring relatives,
most employers require family members to work in different
areas to prevent issues of favoritism and possible morale
problems among other employees. It is never appropriate for
family members to be in supervisory positions where they are
required to manage their own relatives.
17
Pros and Cons of Internal Recruiting
18
External Recruiting Methods
Media Sources
Employment Agencies
Labor Unions
Job Fairs
Educational Institutions
Competitive Recruiting Sources
Professional and trade associations, trade publications, and

competitors
19
19
Advantages and Disadvantages of External Recruiting
20
Do You Know?
Recruitment: True or False
1.____ It is estimated that replacing a full-time private-sector
employee costs at least 25 percent of that employee’s total
annual compensation.
2.____ When the economy in your area is down and there is
significant unemployment, you may have to offer increased
compensation or benefits incentives to attract quality applicants
as you will be in stiff competition with other employers to
attract qualified applicants.
3.____ The ADA requires accommodation by employers so that
a disabled applicant has equal opportunity to apply for job
openings, regardless of the nature of the accommodation.
21

The strength of the economy and labor market conditions will
significantly affect your organization’s ability to attract and
retain top-level employees. When the economy is strong with
little unemployment, you may have to compete with other
employers for a limited number of skilled employees. This may
require increased compensation or benefit incentives to attract
quality applicants. The reverse may be true in a soft economy
with high levels of unemployment. The problem then is not a
shortage of qualified applicants; instead, the problem is
managing a huge number of applications that must be pared
down to find a few potential good hires.
21
Do You Know? (Cont.)
4.____ Even though Internet recruiting may speed up the
application process, it still requires trained HR staff to screen
all applications and administer selection tests.
5.____ Many organizations use promotion from within as a
motivation tool and a reward for good work or longevity with
the organization.
6.____ Generally, the more technically specific the job, the
broader the geographic area of recruitment.
22
22
Evaluating Recruiting Efforts
Evaluating recruiting quality and quantity
Evaluating recruiting satisfaction
Evaluating the time required to fill openings
Evaluating the cost of recruiting

23
Recruiting metrics
Helps understand which recruiting sources work best for
different employees
Can be used to see whether sufficient numbers of targeted
population groups are being attracted
For example, one area of concern in recruiting might be
protected category
persons. In Chicago, a network-based recruiting firm received
only 16 black
and 4 Hispanic applicants out of 276 persons for a customer
service job.
Yet Chicago has 37% blacks and 26% Hispanics in its
population. Clearly,
the efforts to increase recruiting in these racial/ethnic groups
needed major
attention.63
23
Recruitment Metrics
Time-to-fill
Metric that refers to the number of days from when a job
opening is approved to the date a person is chosen for the job
Quality-of-fill
Metric that measures how well new hires are performing, and
their retention levels
24
Time-to-fill

Lower time-to-fill statistics are better
Trade-off has to be made between the time to fill a position and
the quality of the candidates needed for the position
24
**Recruitment Metrics (Cont.)
Yield ratio
Compare the number of applicants at one stage of the recruiting
process with the number at the next stage
Yield ratio =
For instance:
25
Used to determine how many total applicants a firm needs to
attract and advance to different stages in the hiring process to
fill different jobs
25
Sample Recruiting Evaluation Pyramid
26
26
Recruitment Metrics (Cont.)
Acceptance rate

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