Understanding and Administering
Compensation and Total Rewards
Module Overview
Purpose
This module will help develop an understanding and awareness of the classification system and
compensation programs, recognition and rewards programs and available UMHS resources.
Learning Objectives
Through lecture, discussion and activities, participants will be able to:
•
Describe the key elements of the Total Rewards Model
•
Identify key methods for job classification and salary setting at UM
•
Describe major components of the salary increase guidelines and timeline
•
Identify key aspects of the supervisor’s role in FLSA compliance
I.
Confirm Training Objectives
II.
Review the Total Rewards Model
III.
Discuss UM Job Classification and Salary Setting
IV.
Case Study 1
V.
Identify your role in the Annual Salary Program
VI.
Case Study 2
VII.
Review FLSA Regulations
VIII.
Compensation Resources
Agenda
Updated January, 2013
Property of University of Michigan Health System Human Resources
1
Understanding and Administering
Compensation and Total Rewards
The Total Rewards Model
Total Rewards:
All tools available to the employer that may be used to attract, retain and motivate employees.
UM utilizes a “total rewards” philosophy to recruit and retain employees:
Total Rewards
Performance
&
Recognition
Development
& Career
Opportunities
Performance
Learning
Opportunities
Compensation
Benefits
Work-Life
Base Pay
Health and
Welfare
Workplace
Flexibility
Retirement
Time off w/ out
Pay
Coaching /
Mentoring
Health &
Wellness
Advancement
Opportunities
Variable Pay
Incentive Pay
Time off w/
Pay
Legally
Required
Recognition
Community
Involvement
Financial
Support
Voluntary
Benefits
2
Property of University of Michigan Health System Human Resources
Updated January, 2013
Understanding and Administering
Compensation and Total Rewards
Why do we use Total Rewards?
- Profitability
- Effect on Labor Cost
- Recruitment/Attraction/Retention
- Flexibility
Updated January, 2013
Property of University of Michigan Health System Human Resources
3
Understanding and Administering
Compensation and Total Rewards
Total Rewards Exercise
Purpose:
To understand what is considered a reward.
Agenda:
- Consider the question “What do you perceive as a reward within the context of your
job?”
- Record 5 rewards on the index card provided
- Rank each reward; 1=high value through 5=lesser value
Limit:
4
5 minutes
Property of University of Michigan Health System Human Resources
Updated January, 2013
Understanding and Administering
Compensation and Total Rewards
Why People Start Looking
Why employees start looking:
Why employees start looking:
(Response from Managers)
1. Pay
(Response from Employees)
1. Pay
2. Family
2. Benefits
3. Opportunity
3. Ability to balance work and home life
4. Relocation
4. Opportunities for growth and advancement
5. Work Schedule
5. Schedule flexibility
6. Burn-out
6. Quality and skill of supervisor or manager
7. Workload
7. Level of trust in the workplace
Updated January, 2013
Property of University of Michigan Health System Human Resources
5
Understanding and Administering
Compensation and Total Rewards
Influences on the Compensation Design Process
6
Internal Factors
External Factors
- Corporate Mission
- Labor Market
- Business Strategy
- Legal/Regulatory Environment
- Corporate Culture
- Technology
- Costs/Resource Availability
- Economics
- Workforce Demographics
- Competition
Property of University of Michigan Health System Human Resources
Updated January, 2013
Understanding and Administering
Compensation and Total Rewards
Principles of the Classification System
1. A consistent and simple to understand system
2. Enhance our ability to attract and recruit
3. Encourages development of competencies
4. Provides a basis for defining career paths
5. Market referenced measuring competitiveness
6. Maintain legal compliance and reporting
Updated January, 2013
Property of University of Michigan Health System Human Resources
7
Understanding and Administering
Compensation and Total Rewards
Career Families
A meaningful grouping of jobs commonly clustered within a career emphasis
Academic & Student Services
Administration
Communications & Marketing
Engineering & Architecture
Environmental Safety & Security
Facilities Operations
Finance
Healthcare Administration & Support
The Arts
Hospitability
Human Resources
Information Technology
Institutional Advancement
Instructional Services
Legal & Government Relations
Library & Museum Operations
Patient Care Services
Purchasing
Research
8
Property of University of Michigan Health System Human Resources
Updated January, 2013
Understanding and Administering
Compensation and Total Rewards
Career Bands
Finance
Information Technology
Audit
Billing & Collection
Financial Analysis
Financial Operations & Accounting
Investments
Payroll
Financial Administration
Applications Development
System Administration
Business Systems Analysis & Support
Systems Security
Network Administration & Engineering
Systems Support
Project Management
Information Technology Administration
Purchasing
Communications & Marketing
Logistics & Inventory Control
Procurement
Purchasing Administration
Arts & Publications
Communications
Broadcasting
Marketing & Sales
Human Resources
Affirmative Action & EEO
Compensation
Benefits
Organizational Development
Recruitment & Employment
Employee & Labor Relations
Human Resources Administration
Temporary Workforce
Temporary
Legal & Government Relations
Legal Services
Government Relations
Updated January, 2013
Property of University of Michigan Health System Human Resources
9
Understanding and Administering
Compensation and Total Rewards
Job Roles
Categorizes classifications using various criteria relating to the primary purpose of a job and the
relationship jobs have to one another.
Professional
Positions in this job role span a wide array of services. Jobs include those that provide
administrative, operational and technical services that support other related positions within an
organization. This Job Role also includes positions that provide professional services with some
degree of independence, requiring use and application of principles, theories, concepts and a
working knowledge of other related disciplines. Jobs may focus on the application of either
deep knowledge in a field of study and/or broad knowledge in several fields of study (exempt &
non-exempt).
Managerial
Positions provide leadership and professional expertise or services by leveraging the knowledge
and skills of others. Responsibilities typically include activities related to budget and human
resource management thus ensuring consistent application of related organizational policies,
practices and processes.
Executive
Positions provide leadership in the development of an organization’s long term needs, strategy
and direction, and is not typically responsible for the day-to-day operations of a functional area.
Decision-making often brings significant impact on existing policies, procedures and objectives.
Position responsibilities include leveraging the knowledge and skills of leadership.
Market Job Title & Working Title
Working Title
Working title is a customized title that provides greater understanding of the responsibilities
and scope of the Market Job Title.
Market Job Title
Market Job Title is categorized within the Classification Framework Elements of Career Family,
Career Band and Job Role
10
Property of University of Michigan Health System Human Resources
Updated January, 2013
Understanding and Administering
Compensation and Total Rewards
An Overview:
Market Referencing
Market referencing or “pricing” is the process of determining the “going rates” in relevant labor
markets for a representative sample of jobs having similar functions and comparable scope of
responsibility.

Assess organization’s pay competitive relative to other (peer) organizations competing
for the same human resource talent

Market referencing can aid in job design or redesign based on developments in the
market place

Market referencing has become the most common method of valuing jobs
Results of Market Referencing provide vital data for:

Developing appropriate compensation policies (ranges, bonus targets, shift differential,
on-call pay, etc.)

Determining how much individuals should be paid relative to competitive rates or
established policies
Updated January, 2013
Property of University of Michigan Health System Human Resources
11
Understanding and Administering
Compensation and Total Rewards
Compensation Program Design Process
Job Analysis
Job Descriptions
Job Evaluation
Market Referenced
Approach
Design of Pay
Structure (Ranges)
Pay Administration
Guidelines
12
Property of University of Michigan Health System Human Resources
Updated January, 2013
Understanding and Administering
Compensation and Total Rewards
Salary Setting for New Staff
Bargained-for staff
- Ranges with step increases
- Refer to specific contracts
Non-Bargained for staff
- UMHS Ranges based on external market data
- Departmental salary setting models
Considerations in determining base pay for a new hire
- Range of pay assigned to the job
- External market data
- Knowledge, skills, and experience of candidate relative to current employees
- Pay of others in same jobs
- Pay of others in related jobs
- Departmental budget
- Current pay of individual
Updated January, 2013
Property of University of Michigan Health System Human Resources
13
Understanding and Administering
Compensation and Total Rewards
UNIVERSITY OF MICHIGAN HEALTH SYSTEM
UMHS HUMAN RESOURCES
MEMORANDUM
TO:
Supervisor
SUBJECT:
Case Study 1: Determining Base Pay for a New Hire
For Case Study 1: “ Determining Base Pay for a New Hire”, please assume you are the supervisor
of the Accounting Department. You currently manage four (4) employees and now you want to
hire John Smith for an open Sr. Accountant position. Upon approval and posting of the position,
you have interviewed several qualified candidates and have decided to offer the job to John
Smith. You are not sure what base salary you should offer him because you don’t know what
other organizations are paying these days. Currently, it is April.
Information Provided:
1.
2.
Sheet A: Information regarding the employees in your department and John
Smith.
Sheet B: Compensation has provided you with survey pay data for several
levels of the job of Accountant from three well-known surveys.
Please answer the following questions:
A.
In reviewing the survey pay data sheet provided to you by Compensation, do you think
the data provided are appropriate? What questions do you have about the surveys
used?
14
B.
In reviewing the duties and requirements of the existing jobs in your department, do
you think the range of pay set by UM is appropriate when compared to the external
labor market?
C.
In reviewing the salaries of your current employees, do you think they are all paid
appropriately?
D.
In reviewing the survey pay data, each pay grade range, and each individual salary of
your current employees, what do you think you should offer John Smith? Please note
that his current salary (at his current job) is $45,000.
Property of University of Michigan Health System Human Resources
Updated January, 2013
Understanding and Administering
Compensation and Total Rewards
Updated January, 2013
Property of University of Michigan Health System Human Resources
15
Understanding and Administering
Compensation and Total Rewards
Department: Accounting
Sheet A
Employee
Name
Job Title
Job Description
Pay Grade
Range
John Smith
Sr.
Accountant
$39,000-$65,500
BA
4
New hire
Jane Banks
Accountant
$32,000-$50,000
BA
3
Solid
Performance
$45,000
Gary Stark
Accountant
$32,000-$50,000
BA
2
Exemplary
$38,000
Helen Parker
Accounting
Clerk
$21,250 $33,750
Associates
Degree
10
Solid
Performance
$33,750
Diane
Westwood
Accounting
Clerk
Prepares balance sheets, profit and loss
statements, and other financial reports. Analyzes
trends, costs, revenues, financial commitments,
and obligations to predict future revenues and
expenses. May lead the work of others
Reconcile general ledgers and financial reports,
discrepancies, irregularities, and unknown charges.
Process and deposit checks received by the
division. Control and distribute travel advances.
Research accounting questions for faculty and
staff. Initiate and process journal entries to
various accounts. Under general supervision
Reconcile general ledgers and financial reports,
discrepancies, irregularities, and unknown charges.
Prepare reports. Research accounting questions
for faculty and staff. Initiate and process journal
entries to various accounts. Under general
supervision
Responsible for various accounting activities such
as maintenance of the general ledger and
preparation of various accounting statements and
financial reports. Requires a high school diploma
or equivalent with 0-3 years of experience in the
field or a related area.
Responsible for various accounting activities such
as maintenance of the general ledger and
preparation of various accounting statements and
financial reports. Requires a high school diploma
or equivalent with 0-3 years of experience in the
field or a related area.
$21,250 $33,750
High School
3
Solid
Performance
$30,250
Property of University of Michigan Health System Human Resources
Education
Updated January, 2013
Experience
(Yrs)
Last Year
Performanc
e Rating
Current
Salary
TBD
Understanding and Administering
Compensation and Total Rewards
Survey Pay Data: Accounting
Sheet B
Survey Job Description:
Accountant – Senior Responsible for preparing financial statements including balance sheets, profit and loss statements. Reviews and analyzes general ledger
account balances. Verifies accuracy, makes recommendations for corrections. May provide guidance to lower level accountants. Through knowledge of
accounting principles and PC spreadsheet software needed. Requires a Bachelor’s Degree, plus a minimum of 2-4 years experience in general accounting.
Market Pay Data
Survey Name
SCOPE
Average $
Low
Mid
High
Mercer
Detroit
$51,500
$45,450
$52,000
$56,100
Watson Wyatt
Detroit, Ann Arbor, Flint
$52,400
$46,700
$51,100
$55,400
Compdata
Detroit>1000 Employees
$51,770
$42,245
$49,800
$53,600
Average
$51,890
$44,798
$50,967
$55,033
Survey Job Description:
Accountant – Responsible for completing and maintaining the general ledgers and financial reports. May also have some responsibility for payroll, performing
internal control audits, and budgeting. May supervise departmental support staff. Requires a Bachelor’s Degree and 0-2 years of experience.
Market Pay Data
Survey Name
SCOPE
Average $
Low
Mid
High
Mercer
Detroit
$42,400
$35,525
$42,080
$47,070
Watson Wyatt
Detroit, Ann Arbor, Flint
$43,400
$37,600
$41,100
$46,400
Compdata
Detroit>1000 Employees
$42,360
$34,240
$40,000
$43,046
Average
$42,720
$35,788
$41,060
$45,505
Survey Job Description:
Accounting Clerk – Responsible for various Accounts Payable functions, which may include verifying and coding invoices, processing disbursements, reconciling
bills, checking balances, preparing statements, and maintaining vendor files. May prepare checks for signature and communicate to vendors.
Market Pay Data
Survey Name
Mercer
Watson Wyatt
Compdata
SCOPE
Detroit
Detroit, Ann Arbor, Flint
Detroit>1000 Employees
Average
Updated January, 2013
Average $
$28,975
$29,300
$29,200
$29,158
Low
$26,480
$27,900
$24,690
$26,357
Property of University of Michigan Health System Human Resources
Mid
$28,040
$29,000
$27,000
$28,013
High
$30,285
$30,900
$30,250
$30,478
Understanding and Administering
Compensation and Total Rewards
Annual Salary Program
May - June
HR Meetings with Unit
Management Regarding
Market Data
July
Salary Program
Guidelines
Issued
July - August
Salary Worksheets
Completed
August - September
Salary Increases Processed
The Annual Salary Program:
May - June:
Market base pay data is reviewed with Unit Management and concerns regarding
competitiveness are addressed.
July:
New “Salary Increase Guidelines” for the year are issued by the Hospital and Health Centers
Office of the Director and CEO.
July - August:
Managers and supervisors receive and complete the salary worksheets from the Human
Resources Department.
August - September:
Salary increases are processed.
18
Property of University of Michigan Health System Human Resources
Updated January, 2013
Understanding and Administering
Compensation and Total Rewards
Salary Increase Guidelines
•
Salary increases on an annual basis (Sept.)
•
“Salary Increase Guidelines” issued consist of:
•
•
Overall budget allocation
•
Distribution guidelines
•
Processing instructions
•
Performance evaluation guidelines
Salary increase budgets are affected by:
•
External market
•
Financial health of the organization
•
Third party reimbursements
Updated January, 2013
Property of University of Michigan Health System Human Resources
19
Understanding and Administering
Compensation and Total Rewards
Delivering Salary Increases
Options:
20
•
Increase base pay
•
No increase to base pay; salary supplement
•
Combination:
•
Increase base pay
•
Salary supplement
•
Additional mid-year increases when outstanding performance can be
documented
•
Split funding requires coordination between departments
Property of University of Michigan Health System Human Resources
Updated January, 2013
Understanding and Administering
Compensation and Total Rewards
UNIVERSITY OF MICHIGAN HEALTH SYSTEM
UMHS HUMAN RESOURCES
MEMORANDUM
TO:
Supervisor
SUBJECT:
Case Study 2: The Annual Salary Program
For Case Study 2: “ The Annual Salary Program”, please assume it is July and the University has
just issued the new Salary Increase Guidelines.
Information Provided:
1.
2.
The salary increase budget has been established at 3%.
Sheet A: Information regarding your department employees. Please assume
that the performance rating for each employee has been established by
you and is listed for the previous year and the current year.
Please answer the following questions:
Refer to “Salary Increase Guidelines” provided to you.
A.
In reviewing each pay grade range and each individual salary of your current employees,
how will you distribute the budget?
B.
Will you consider salary supplements?
C.
How will you process the increases?
Updated January, 2013
Property of University of Michigan Health System Human Resources
21
Understanding and Administering
Compensation and Total Rewards
Department: Accounting
Sheet A
Employee
Name
Job Title
Pay Grade Range
$39,000-$65,500
BA
Jane Banks
Sr.
Accountant
Accountant
$32,000-$50,000
Gary Stark
Accountant
Helen Parker
Accounting
Clerk
Accounting
Clerk
John Smith
Diane
Westwood
Education
Experience
(Yrs)
Last Year
Performance
Rating
This Year
Performance
Rating
4
N/A
Exemplary
$52,000
BA
3
4%
BA
2
$38,000
2%
$21,250 - $33,750
Associates
Degree
10
Solid
Performance
Solid
Performance
Solid
Performance
Solid
Performance
$45,000
$32,000-$50,000
Solid
Performance
Exemplary
$33,750
3%
$21,250 - $33,750
High School
3
Solid
Performance
Solid
Performance
$30,250
3%
Total Department Salaries
Property of University of Michigan Health System Human Resources
Updated January, 2013
Current
Salary
$199,000
Last Year
Increase
to Base
Pay
N/A (New
Hire)
This Year
Increase
to Base
Pay
Understanding and Administering
Compensation and Total Rewards
Rewards Throughout the Year
•
Spot Awards
•
Mid-year Merit
•
PTO Awards
•
Recognition through UMHS recognition programs
Updated January, 2013
Property of University of Michigan Health System Human Resources
23
Understanding and Administering
Compensation and Total Rewards
Differentials
Shift Differentials:
Shift differentials for afternoon and evening shifts differ per classification. For specific
afternoon and evening shift differentials, please visit:
http://www.umich.edu/~hraa/compclass/shift.htm
Additional Duties Differential:
Additional duties differential financially acknowledges the non-bargained-for employee who
assumes additional responsibilities on an ongoing basis but does not assume the full range of
duties of a higher classification.
Administrative Differential:
An administrative differential financially acknowledges Professional/Administrative or
Instructional employees who assume the duties described in an official University classification.
It also recognizes staff that continues their regular appointment in one department and assume
an interim appointment for another position.
24
Property of University of Michigan Health System Human Resources
Updated January, 2013
Understanding and Administering
Compensation and Total Rewards
Fair Labor Standards Act (FLSA)
FLSA regulates:
•
Minimum wage
•
Hours of work
•
Employment categories (exempt/non-exempt)
•
Overtime
•
Child labor
•
Record keeping requirements
FLSA: General Categories
Exempt:
•
Executives
–
Officers
–
Managers
•
Administrative
•
Professionals
•
Outside sales
Non-exempt:
•
Paraprofessionals
–
Technicians
–
Office clerical
–
Skilled trades
–
Semiskilled
–
Unskilled
FLSA: Hours of Work
•
Only time worked is considered toward the calculation of overtime pay
•
All hours worked must be paid
•
You have to pay all hours worked even if you did not approve the overtime
Updated January, 2013
Property of University of Michigan Health System Human Resources
25
Understanding and Administering
Compensation and Total Rewards
FLSA: Rest and Meal Periods

None required under FLSA

Rest periods of 5 to 20 minutes count as hours worked.
The University of Michigan’s policy concerning rest periods (SPG 201.52)
states “There will normally be a rest period which may be taken at a time and
place and in a manner which does not interfere with the efficiency of the
department. The rest period will be with pay and will not exceed 15 minutes for
each four (4) hours of work where practical. The rest period is intended to be a
recess to be preceded and followed by an extended work period. Consequently, it
may not be used to cover a staff member’s late arrival to work or early
departure, to extend the lunch period, nor may it be regarded as cumulative if
not taken.”

Bona-fide meal periods of 30 minutes or more are not hours worked.
The University of Michigan’s policy concerning lunch periods (SPG 201.21)
states “Departmental lunch periods when unpaid are either thirty (30) minutes or
sixty (60) minutes in duration and are scheduled by the department. When the
lunch period is a paid part of the regularly scheduled work day, it shall not exceed
twenty (20) minutes. In these cases, staff members are expected to eat their
lunch as time and the work schedule permit.”
FLSA: Lectures, Meetings and Training Programs
The most misunderstood part of the test for whether lectures, meetings and training time are
hours worked is the decision about when attendance is voluntary or involuntary.
Attendance is work time if:
•
It is required by the employer
•
The employee is given to understand or led to believe that present working
conditions or the continuance of employment would be adversely affected by
non-attendance
Attendance is not work time if all of the following four criteria are met:
•
Attendance is outside of the employee’s regular working hours
26
•
Attendance is in fact voluntary
•
The course, lecture, or meeting is not directly related to the employee’s job
•
The employee does not perform any productive work during such attendance
Property of University of Michigan Health System Human Resources
Updated January, 2013
Understanding and Administering
Compensation and Total Rewards
FLSA: “On Call”/”Call Back Pay” Time
1. Engaged to wait
2. Waiting to be engaged
1. Engaged to wait – All hours the employee is “engaged to wait” are considered hours
worked
•
Employee required to stay on company premises, or close enough that employee
is not free to pursue his/her own interests
•
A person hired to do nothing, or who is hired to wait for something to do (or
happen), is still working
The University of Michigan’s policy (SPG 201.6) states employees engaged to wait are
working and are paid straight pay. Overtime and shift differential are paid where
appropriate (SPG 201.36).
2. Waiting to be engaged
•
Employee who is “on call” must be able to use the time for their own purposes
•
Can require employee to be accessible by phone or pager
•
Any time spent responding to calls is hours worked
“On Call” time at the University of Michigan is paid at the rate of twenty percent of the
salary range minimum for employees engaged to wait. Overtime and shift differential
are paid where appropriate (SPG 201.36). Once the employee engages in work, they
resume back to regular pay. Overtime and shift differential are paid where appropriate
(SPG 201.36).
The University of Michigan practice (SPG 201.6) dictates that non-exempt employees
who are required to return to work will receive overtime for time worked and shift
differential if applicable or a minimum of four hours of pay at their regular rate of pay
plus shift differential, whichever is greater. Employees in an “on call” status are not
eligible for call back pay (SPG 201.36).
Updated January, 2013
Property of University of Michigan Health System Human Resources
27
Understanding and Administering
Compensation and Total Rewards
FLSA: Overtime
•
1.5 times regular rate over 40 hours required
•
Or “8 and 80” rule for hospitals
•
Regular rate includes supplementary earnings such as commissions, nondiscretionary bonuses or shift premiums
•
Overtime is calculated on actual time worked not time paid
•
Exempt employees are not eligible for overtime pay
FLSA: Exempt Employees
•
Paid on a salary basis
•
Salary paid must meet minimum specified amount stated in regulations
•
Salary is not subject to reduction due to quality or quantity of work performed
(exceptions listed)
•
Duties must primarily involve duties as defined by regulations
FLSA: What’s Not Required
28
•
Pay for time not worked
•
Time clocks to record hours worked
•
Premium pay for:
•
Saturday, Sunday, holiday, or sixth- or seventh-day work
•
Hours worked in excess of eight per day unless the employer chooses the
8/80 option
•
The University of Michigan, however, does provide shift premiums to
employees (SPG 201.55 ) and payment, in most circumstances, to
nonexempt employees for hours worked in excess of eight per day
•
Differentiation between exempt and nonexempt employees in any other way
than minimum wage payments, overtime premiums, and records
•
Pay raises or fringe benefits
•
A discharge notice, reason for discharge or immediate payment of final wages to
terminate employees
•
Pay stubs or W-2’s
•
A limit on number of hours in a day, or days in a week, an employee may be
required or scheduled to work (if the employee is at least 16 years old)
Property of University of Michigan Health System Human Resources
Updated January, 2013
Understanding and Administering
Compensation and Total Rewards
Additional Resources
Appendix:
 Related University Policies (http://spg.umich.edu)
 Fair Labor Standards Act materials
Unit HR Consultant
Provides guidance on HR and Compensation related matters
Training
www.umich.edu/~/hraa/career/supervisors
Website
 www.umich.edu
 www.umich.edu/~/hraa
Updated January, 2013
Property of University of Michigan Health System Human Resources
29