HR Oops
Overlooking Overtime
The Department of Labor oversees if employers are paying their employees properly. In one
instance, a Texas construction company failed to pay the workers one and a half times their
regular rate for scheduled and unscheduled hours including time spent traveling between works
sites. At a maintenance and construction services firm, the company said they would pay
managers a salary but then actually paid an hourly basis when it benefited the company. If the
manager worked less than 40 hours, the company paid hourly and if the manager worked more
than forty, the company paid a salary.
Discussion Questions with Possible Responses
1. How could the construction company in the first example have met the legal requirements
for overtime pay?
2. How could the services firm in the second example have met the requirements for
overtime pay?
HR How To
Gathering Wage Data at the BLS Website
This vignette highlights the data on the hourly wages in the Bureau of Labor Statistics (BLS).
This federal agency makes data available at its website on an interactive basis. The data come
from the BLS’s National Compensation Survey. The user specifies the category of data desired,
and the BLS provides tables of data almost instantly.
Discussion Question and Suggested Response
1. If you wanted to hire an accountant to work in New York City, would you search the
database for wages in the New York City metropolitan area or for the whole state?
Why?
2. Why might your employer decide to pay the accountant it hires a different amount than
the median pay reported for accountants in the BLS database?
HRM Social
Salary Talk is Trending
The younger generation is used to sharing personal information via social media so they
are also more comfortable sharing information about salary. Some people feel that
talking about salary is impolite and can cause envy and employee relations issues. A job
review site called Glassdoor encourages job-reviewing and sharing of job information.
Although some employers are uncomfortable with employees sharing job and salary
information, they may not forbid employees form sharing based on the NLRA. To better
deal with the issue some companies are starting to be more transparent when it comes
to salary data.
Discussion Questions with Possible Responses
1. How would a trend toward sharing salary information on social media affect a company
that has a below-market strategy for setting pay levels?
2. How would this trend affect a company that has a strategy of setting pay levels at the
market rate?
HRM Social
Salary Talk is Trending
The younger generation is used to sharing personal information via social media so they
are also more comfortable sharing information about salary. Some people feel that
talking about salary is impolite and can cause envy and employee relations issues. A job
review site called Glassdoor encourages job-reviewing and sharing of job information.
Although some employers are uncomfortable with employees sharing job and salary
information, they may not forbid employees form sharing based on the NLRA. To better
deal with the issue some companies are starting to be more transparent when it comes
to salary data.
Discussion Questions with Possible Responses
1. How would a trend toward sharing salary information on social media affect a company
that has a below-market strategy for setting pay levels?
2. How would this trend affect a company that has a strategy of setting pay levels at the
market rate?
ROADMAP: CASE STUDY
Thinking Ethically
Is Pay Disparity in the Fast-Food Business Ethical?
The fast food industry has the greatest pay disparity between the lowest and highest paid
positions. The average wage for front line workers is $9.09 per hour which qualifies most
workers for some type of government assistance. On the other extreme fast-food executives
has quadrupled for many from 2000 to 2013. On average the pay ratio of fast-food CEO’s to
average fast-food workers is more than a thousand to one.
Discussion Questions with Possible Responses
1. Under what conditions, if any, is it ethical for an employer to pay employees a wage low
enough that full-time workers are eligible for public assistance?
2. Under what conditions, if any, is it ethical for a CEO to make a thousand times more
than a front-line worker in the same organization?
ROADMAP: Review and Discussion Questions
1. In setting up a pay structure, what legal requirements must an organization meet?
Which of these do you think would be most challenging for a small start-up business?
Why?
The student responses as to which would be the most challenging will vary.
2. In gathering data for its pay policies, what product markets would a city’s hospital want
to use as a basis for comparison? What labor markets would be relevant? How might
the labor markets for surgeons be different from the labor market for nursing aides?
3. Why might an organization choose to pay employees more than the market rate? Why
might it choose to pay less? What are the consequences of paying more or less than
the market rate?
4. Suppose you work in the HR department of a manufacturing company that is planning to
enrich jobs by having production workers work in teams and rotate through various jobs.
The pay structure will have to be adjusted to fit this new work design. How would you
expect the employees to evaluate the fairness of their pay in their redesigned jobs? In
terms of equity theory, what comparisons would they be likely to make?
5. Summarize the way organizations use information about jobs as a basis for a pay
structure.
6. Imagine that you manage human resources for a small business. You have recently
prepared a report on the market rate of pay for salespeople and the company’s owner
says the market rate is too high. The company cannot afford this level of pay and
furthermore, paying that much would cause salespeople to earn more than most of the
company’s managers. Suggest three possible measures the company might take to
help resolve this conflict.
7. What are the advantages of establishing pay ranges, rather than specific pay levels, for
each job? What are the drawbacks of this approach?
8. Suppose the company in Question 1 wants to establish a skills-based pay structure.
What would be some advantages of this approach? List the issues the company should
be prepared to address in setting up this system. Consider the kinds of information you
will need and the ways employees may react to the new pay structure.
9. Why do some employers subsidize the pay of military reserve members called up to
active duty? If the military instead paid these people the wage they command in the
civilian market) that is, the salary they earn at their regular jobs), who would bear the
cost? When neither the reserve members’ employers nor the military pays reserve
members their civilian wage, reserve members and their families bear the cost. In your
opinion, who should bear this cost – employers, taxpayers, or service members (or
someone else)?
10. Do you think U.S. companies pay their chief executives too much? Why or why not?
Taking Responsibility
IKEA Aims to Pay a Living Wage
IKEA recently announced they would raise their hourly pay rates to an average of $10.76 per
hour, up from $9.17 per hour. They are doing this because of their belief that paying a living
wage is one way to treat their employees with dignity. They will use the MIT Living Wage
Calculator, which factors in the cost of food, housing, taxes, and transportation in the various
areas in which they have stores. IKEA states they don’t plan to raise prices to cover this
investment in their employees.
Discussion Questions with Possible Responses
1. What are some risks and challenges that IKEA is likely to face as a result of basing its
minimum pay on the living-wage formula, rather than just legal requirements and the
market rate?
2. Given that IKEA’s management considers the living wage to be consistent with the
company’s mission, what advice would you give the company for implementing it
successfully?
Managing Talent
Twitter Tries to Be an Employer You’d Tweet About
Twitter exists in a highly competitive compensation market for key exectuvies and software
enginteers. HR has a challenge of attracting and retaining hard-to-replace talent in this market.
Twitter has been very generous to its executives an software engineers.
Discussion Questions with Possible Responses
1. Do you think the levels of pay described in this case contribute to Twitter’s business
success?
2. Suppose you work in Twitter’s HR department, and the company’s executives ask you to
try reining in the spending on salaries. What would you recommend?
HR in Small Business
Changing the Pay Level at Eight Crossings
This case describes the decision of Patrick Maher, CEO of Eight Crossings, to cut pay levels for
medical and legal transcribers in order to remain competitive.
Discussion Questions with Possible Responses
1. How did the change in pay level at Eight Crossings affect its ability to attract and retain a
high-quality workforce?
2. Do you think the company’s pay structure was better suited to its objectives before or
after the reduction in pay level? Why?
3. How would you evaluate the company’s method of communicating the change in pay
level? What improvements to that process can you suggest?
HRM DVD Vol 3 Suggested Video with Discussion Questions and Possible Responses
GM Cuts Benefits and Pay (1:57)
Video Summary
The video case begins with a news report story stating that GM cannot solve its financial
problems by job cuts alone, so it is cutting pay for senior leaders. Rick Wagner gave himself a
50 percent pay cut and announced he would forfeit his bonuses. Other senior executives saw
30-40 percent pay cuts and no bonuses. The move was a symbolic gesture to gain favor with
the United Auto Workers Union.
GM also cut healthcare benefits for salaried retirees and replaced the pension plan for white
collar workers. GM’s biggest challenge is they don’t have the products that customers want to
buy, so these cuts may not be enough to save the automaker.
Discussion Questions
1. What are some of the actions senior leaders can take to show they are committed to long
term company success?
2. What strategies can a company utilize towards winning back their customer base when
recovering from bad times?