Chapter Three
Contextual Influences on
Compensation Practice
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Figure 3-1
Employers’, Employees’, and Government’s Goals
Employers
Government
Employees
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Table 3-1
Differences Between Annual Minimum Wage Earnings
and Annual Poverty Thresholds for Selected Years
YEAR
1980
1986
1989
1990
1992
1994
1996
1998
ANNUAL MINIMUM
WAGE EARNINGS
(hourly min. wage ANNUAL POVERTY
x 40 hr/week x
THRESHOLD
52 weeks)
(family of three) DIFFERENCE
FED. MINIMUM
A
B
HOURLY WAGE
A-B
$3.10
$3.35
$3.35
$3.80
$4.25
$4.25
$4.75
$5.15
$6,448
$6,968
$6,968
$7,904
$8,840
$8,840
$9,880
$10,712
$6,565
$8,737
$9,885
$10,419
$11,186
$11,542
$12,156
$12,750
-$ 117
-$1,769
-$2,917
-$2,515
-$2,346
-$2,702
-$2,276
-$2,038
Source: US Dept. of Commerce, Statistical abstracts of the US, 119th ed. (Washington, DC: US Government
Printing Office, 1999).
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Table 3-2
Six Defining Factors of Trainee for the FLSA






The training, even though it includes actual operation of the
employers’ facilities, is similar to that which would be provided in
a vocational school.
The training is for the benefit of the trainee.
The trainee does not displace regular employees but works
under closer supervision.
The employer providing the training gains no immediate
advantage from the trainees’ activities; on occasion, the
employer’s operation may in fact be hindered.
The trainee is not guaranteed a job at the completion of the
training.
The employer and the trainee understand that the employer is
not obligated to pay wages during the training period.
Source: J.E. Kalet, Primer on wage and hour laws (Washington, DC: Bureau of National Affairs, 1987).
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Table 3-3
FLSA Exemption Criteria for Executive, Administrative,
and Professional Employees (1 of 3)

Executive Employees
» Primary duties include managing the organization
» Regularly supervise the work of two or more fulltime employees
» Authority to hire, promote, and discharge
employees
» Regularly use discretion as part of typical work
duties
» Devote at least 80 percent of work time to fulfilling
the previous activities
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Table 3-3
FLSA Exemption Criteria for Executive, Administrative,
and Professional Employees (2 of 3)

Administrative Employees
» Perform non-manual work directly related to
management operations
» Regularly use discretion beyond clerical duties
» Perform specialized or technical work, or perform
special assignments with only general supervision
» Devote at least 80 percent of work time to fulfilling
the previous activities
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Table 3-3
FLSA Exemption Criteria for Executive, Administrative,
and Professional Employees (3 of 3)

Professional Employees
» Primary work requires advanced knowledge in a
field of science or learning, including work that
requires regular use of discretion and independent
judgment, or
» Primary work requires inventiveness, imagination,
or talent in a recognized field or artistic endeavor
Source: 29 Code of Federal Regulations, Sec. 541.3 29; Sec. 541.1.
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Table 3-4
Compensable Activities That Precede and Follow
Primary Work Activities






The time spent on the activity was for the employee’s benefit.
The employer controlled the amount of time spent.
The time involved is categorized as “suffered and permitted,”
meaning that the employer knew the employee was working on
incidental tasks either before or after the scheduled tour of
duty.
The time spent was requested by the employer.
The time spent is an integral part of the employee’s principal
duties.
The employer has a union contract with employees providing
such compensation, or, as a matter of custom or practice, the
employer has compensated the activities in the past.
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Table 3-5
U.S. Department of Labor Definitions of
Compensable Factors
Factor
Skill
Effort
Responsibility
Working
conditions
Definition
Experience, training, education, and ability as
measured by the performance requirements of a
job
The amount of mental or physical effort expended
in the performance of a job
The degree of accountability required in the
performance of a job
The physical surroundings and hazards of a job,
including dimensions such as inside versus
outside work, heat, cold, and poor ventilation
Source: U.S. Department of Labor, Equal pay for equal work under the Fair Labor Standards Act
(Washington, D.C.: U.S. Government Printing Office, December 31, 1971).
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Table 3-6
Glass Ceiling Barriers: The Glass Ceiling
Commission’s Major Findings (1 of 2)


Societal barriers that may be outside the direct control of
business
» The supply barrier related to educational opportunity and
attainment
» The difference barrier as manifested in conscious and
unconscious stereotyping, prejudice, and bias related to
gender, race, and ethnicity
Internal structural barriers within the direct control of business
» Outreach and recruitment practices that do not seek out or
reach or recruit minorities and women
» Corporate climates that alienate and isolate minorities and
women
Source: Fed. Glass Ceiling Commission, Good for business: Making full use of the nation’s human capital (Washington, D.C.:
U.S. Government Printing Office, March, 1995).
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Table 3-6
Glass Ceiling Barriers: The Glass Ceiling
Commission’s Major Findings (2 of 2)


Internal structural barriers within the direct control of business
(cont.)
» Pipeline barriers that directly affect opportunity for
advancement (initial job placements, lack of mentoring, lack
of management training, lack of career development, counterproductive behavior and harassment by colleagues)
Governmental barriers
» Lack of vigorous, consistent monitoring and law enforcement
» Weaknesses in the formulation and collection of employmentrelated data that make it difficult to ascertain the status of
groups at the managerial level and to disaggregate the data
» Inadequate reporting and dissemination of information
relevant to glass ceiling issues
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Table 3-8
Average Weekly Earnings by Industry Group,
1980 to 1998
INDUSTRY
1980
1985
1990
1995
1998
Mining
$397
$520
$603
$684
$744
Construction
$368
$464
$526
$587
$643
Manufacturing
$289
$386
$442
$515
$563
Transportation, public utilities
$351
$450
$496
$557
$606
Wholesale trade
$267
$351
$411
$476
$538
Finance, insurance, real estate
$210
$289
$357
$442
$512
Services
$191
$257
$319
$369
$420
Retail Trade
$147
$175
$194
$221
$255
Source: U.S. Dept. of Commerce, Statistical abstracts of the United States, 119th ed. (Washington, D.C.: U.S. Government
Printing Office, 1999).
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