REWARD SYSTEMS SHOULD ENCOURAGE WORKERS TO:

1. REWARD SYSTEMS SHOULD ENCOURAGE WORKERS TO: JOIN AND REMAIN WITH THE ORGANIZATION Attraction & Membership Loyalty & Longevity PERFORM THEIR JOBS EFFECTIVELY Attendance and Required Behavior Accomplish Specific Results Do What is Expected ENGAGE IN SPONTANEOUS, INNOVATIVE BEHAVIOR ON BEHALF OF THE FIRM Put Themselves Out by “Going the 2nd Mile” Demonstrate Committed “We Care” Behavior Doing the Unexpected, But Highly Appreciated ORGANIZATIONAL CITIZENSHIP BEHAVIOR

2. COMPENSATION ISSUES HOW TO DIVIDE THE COMPENSATION DOLLAR Base Wages Incentives Benefits DISTRIBUTIVE JUSTICE PRINCIPLE Pay system remunerates/rewards on what basis… Equality? Need? Seniority? Job Demands? Performance (Merit)? Social Worth? ABILITY TO PAY COMPETITIVE WAGES SET PAY AT, ABOVE, ORBELOW THE GOING RATES IN THE INDUSTRY What can we afford? What other compensation do we provide? CONFIDENTIALITY OF THE PAY SYSTEM Is it secret, or are the scales and criteria public information?

3. COMPENSATION ISSUES, CONTD PAY EQUITY (Fairness) INTERNAL Compared to other jobs within the organization EXTERNAL Compared to similar jobs outside the organization PHILOSOPHY OF EXECUTIVE COMPENSATION Wage differences between the top and bottom jobs in the firm (“multiples”) What is minimum pay in this company? What is the maximum pay allowed? PHILOSOPHY OF WAGE PROGRESSION Number of pay grades and amount of overlap between them Number of steps within each grade? On what basis is each move (step) granted? Merit? Seniority? Experience?

4. THREE POSSIBLE BASE PAY SYSTEMS A SINGLE RATE FOR EACH JOB There is no range, this job pays $12.00/hr There are no pay increments awarded for either seniority or merit A PAY RANGE FOR EACH JOB The pay for this job ranges from $11.00 to $17.00/hr On what basis do employees progress through the range? SENIORITY? TIME-IN-GRADE? MERIT? How large should each step or increment be? $.50? $1.00? $2.00? A PAY GRADE SYSTEM Several jobs are grouped together into a single pay grade All these jobs will share a common pay range Painters, mechanics, and truck drivers are paid from $10.50 to 16.85/hr

5. INTERNAL JOB EVALUATION METHODS RANKING Manager rank-orders all jobs in descending order of importance Used in small organizations with a limited number of different jobs CLASSIFICATION SYSTEM Jobs are grouped together into clusters with similar difficulty A generic “description” is written for each cluster or grade (classification) US Postal Service…all jobs are slotted into one of 16 job grades FACTOR COMPARISONS Key jobs selected and ranked on four or five job factors (skills, effort, resp, work cond) Allocate the base wage for each key job across factors (eg, $4 for skill, $3 for effort, etc) Assemble benchmarks into a manual which can be used to set pay for other non-key jobs POINT SYSTEM Establish criteria (compensable factors) on which to evaluate all jobs Write degree descriptions which illustrate the variability of demand for each factor Assign weights to each factor; then assign points to each degree descriptor Assemble into a point manual, which can act as a standard to evaluate all jobs The more points allocated to the job, the higher the base wage should be

6. FACTOR COMPARISONS PROCEDURES SELECT KEY JOBS (well-known jobs which we believe are fairly-paid) CREATE RANK ORDERINGS OF THE KEY JOBS WITHIN EACH OF THE UNIVERSAL COMPENSABLE FACTORS Skills Effort (Physical and Mental) Responsibility Working Conditions ALLOCATE THE KEY JOB PAY ACROSS THE COMPENSABLE FACTORS How much of the total wage do you pay for “skills?” …How much for “effort?” CREATE A FACTOR COMPARISON MANUAL USING YOUR MONETARY ALLOCATIONS TO BENCHMARK THE VALUE OF EACH KEY JOB. USE THIS FACTOR COMPARISON “MANUAL” TO ASSIGN BASE PAY VALUES TO THE NON-KEY JOBS WITHIN THE ORGANIZATION. THE FACTOR COMPARISON SYSTEM COMPARES JOBS TO JOBS…THERE REALLY ISN’T ANYTHING SPECIFIC IN THE MANUAL TO PRECISELY DEFINE WHAT “SKILLS” IS.

7. FACTOR COMPARISONS KEY JOBS“Fair” Base Pay Rate Systems Programmer $ 20/hr Plumber $ 18/hr Carpenter $ 17/hr Painter $ 14/hr Office Secretary $ 13/hr BENCHMARKS SKILLEFFORTRESPONSIBWORK COND Programmer $ 10 Plumber $ 6 Programmer $ 6 Plumber $ 4.50 Secretary $ 6 Carpenter $ 5.50 Secretary $ 4.50 Painter $ 4 Carpenter $ 5 Painter $ 5 Carpenter $ 3.50 Carpenter $ 3 Plumber $ 4.50 Programmer $ 3 Plumber $ 3 Secretary $ 1.50 Painter $ 3 Secretary $ 1 Painter $ 2 Programmer $ 1

8. POINT METHOD PROCEDURES Establish criteria (more specific examples of compensable factors) on which to evaluate all jobs Write degree descriptions to illustrate the variability of demand for each factor Assign weights to each factor Assign points to each degree descriptor in harmony with the weightings Assemble these descriptions and points into a manual, which can act as a standard to evaluate all jobs Validate the manual by evaluating “KEY JOBS” on each criterion. Allocate the corresponding points, run a regression analysis on the assigned points and the “fair” base pay for each key job. If the regression is a good statistical fit, and at least 90% of the key jobs stay within 10% of the calculated regression line, the manual has been validated, and can be used to assign base pay rates to all non-key jobs in the organization. The more points allocated to the job, the higher the base wage should be.

9. Developing Factors for a Job Evaluation Manual EDUCATION (20%) Education represents the knowledge required to perform the duties involved in the job; usually acquired through formal education. Consider only what the job requires, not the education of the current employee on the job. Exclude consideration of on-the-job experiences for this factor. The degrees are expressed in terms of formal education for convenience. Degree Points Definitions 1 20 Able to read and follow simple oral and written instructions. Can add and subtract. Can fill out simple reports and forms. Equivalent to an eighth grade elementary education. 2 35 Able to give clear oral and written instructions. Writes reports. Makes simple computations and comparisons. Can multiply and divide, equivalent to skills acquired by a tenth grade education. 3 50 Good knowledge of high school subjects such as algebra, geometry, physics, chemistry, English, computing or knowledge of commercial, mechanical, or vocational subjects equivalent to a typical high school graduate. 4 80 One year of college or vocational/technical training beyond the high school level in a specific technical or theoretical subject area. 5 115 Two years of specific subject knowledge beyond high school is required. Specialized subject knowledge may demand registration, certification, or licensure. Required education is equivalent to an AS degree. 6 155 A specialized baccalaureate degree is required. 7 200 A specialized master's degree is required.

10. A Job Evaluation Manual (outline/illustration) - 1 I. EDUCATION (20%) 1 (20) Able to read, do simple math (add/subtract), and follow instructions (eighth-grade level) 2 (35) Makes comparisons, computes (multiply/divide), writes instructions & reports (tenth grade level) • (50) Good knowledge of math, chemistry, English, or computing equivalent to a high school graduate • (80) One year of specific subject knowledge – technical or trade school equivalent • (115) Two years of specific subject knowledge – certification/licensure required – equivalent to an AS degree • (155) Bachelor’s degree – specialized degree required 7 (200) Master’s degree – specialized degree required II. EXPERIENCE (10%) • (10) No previous experience required – can learn on the job • (40) Three to six months previous experience is required • (80) At least one year of previous experience is required • (100) Must have at least two years previous experience • SUPERVISION (18%) • (18) None • (45) Informal supervision, provides advice and guidance to 1-4 coworkers • (90) Formal supervision, schedules and appraises 1-4 workers 4 (140) Formal supervision of 5-9 workers 5 (180) Formal supervision of ten or more workers IV. PHYSICAL DEMANDS (17%) • (17) Mostly sits; visual demands less than 20% of the day; no required standing or walking • (35) Sits about 75% of the day; visual demands less than 50% of the day; stands or walks about 25% of the day • (85) High visual demands more than 50% of the day; constant finger motion; moderate standing/walking (<50%) • (130) Rapid hand coordination much of the day; stands more than 50% of the day; occasionally carries loads up to 30 lbs 5 (170) Regularly lifts/carries loads > 60 lbs; stands, pushes, crawls; very strenuous activity much of the day

11. A Job Evaluation Manual (outline/illustration) - 2 V. PROPERTY/LIABILITY (10%) 1 (10) Potential loss is minimal < $100; cash, equipment, product quality 2 (30) Potential loss up to $1000 per incident; cash, equipment, product quality 3 (70) Potential loss up to $5000 per incident; cash, equipment, product quality, lawsuit • (100) Potential loss up to $10000 per incident; cash, equipment, products, lawsuit VI. CONFIDENTIAL INFORMATION ( 5%) • ( 5) No exposure to or potential loss of confidential information • (20) Exposure to or potential loss of semi-confidential information • (50) Exposure to or potential loss of highly confidential information VII. PUBLIC CONTACTS (10%) • (10) Deals only with departmental personnel; rarely has contact with people in other departments • (25) Has several important contacts within the organization (other departments); occasionally meets publics (outsiders) • (55) Many public contacts (>50%) and many internal contacts; most contacts are friendly (>95%) • (80) Constant public contacts (>75%) and many internal contacts; 90% of contacts are friendly, tact needed • (100) Constant public and internal contacts; > 15% of contacts are stressful; tact and negotiating skills essential VII. WORK ENVIRONMENT (10%) • (10) Pleasant, well-lit, climate-controlled environment; safe • (35) Workplace is a bit uncomfortable, cramped; dirty/dim/damp; noisy environment; hot/cold • (60) Minor injury possible if care is not exercised; exposure to sharp surfaces, minor cuts, slippery floors, sprains and strains • (100) Major injury possible if care is not exercised; exposure to fumes, falls, unguarded equipment; safety equipment required

12. To Validate the Job Evaluation (Point) Manual… 1---SELECT 10-15 “KEY JOBS” FROM WITHIN THE ORGANIZATION. --a “KEY” job is one that has a well-known job description, and is fairly paid… in other words, we believe the current pay for the job is correct/fair. 2---EVALUATE EACH KEY JOB, USING THE JOB DESCRIPTION AND THE POINT MANUAL 3---FOR EACH COMPENSABLE FACTOR, ASSIGN THE APPROPRIATE “DEGREE” AND THE APPROPRIATE POINT VALUE ASSOCIATED WITH IT. 4---ONCE COMPLETE, TOTAL UP THE POINTS ASSIGNED TO EACH KEY JOB. 5---REPORT THE CURRENT PAY FOR EACH POSITION (…which we assume is fair/correct). 6---PLOT EACH KEY JOB ON A GRAPH (Points assigned on the bottom, Pay rate on the left) 7---RUN A REGRESSION ANALYSIS OF THE DATA. 8---IF THE REGRESSION MODEL IS STATISTICALLY APPROPRIATE, THE MANUAL IS USABLE

13. Evaluate the Job and Assign Degrees (and Points) COMPENSABLE FACTORSFINISH SPRAYER (Job Specifications)ExplanationAssign degreePoints Education Able to read, write, and make simple math calculations120 Experience No previous experience needed, can learn on-the-job110 Supervision No supervisory duties118 Physical Demands Lifts 60 lbs or more, stands constantly, must turn pieces by hand 5170 Property/Liability Keep equip unclogged; paint mistakes cause rework + lost production230 Confidential Information No exposure to confidential information 1 5 Public Contacts Works alone… all work-related contacts are internal110 Work Environment Exposed to fumes and overspray, must wear respirator at all times4100 TOTAL POINTS ASSIGNED 363

14. VALIDATING THE POINT MANUAL1 - Graph the Key Jobs

15. VALIDATING THE POINT MANUAL2 - Plot the Regression Line

16. VALIDATING THE POINT MANUAL3 - Graph 10% Above and Below the Regression LineAre >90% of Key Jobs Within the Bounds?

17. VALIDATING THE POINT MANUAL4 - Graph 15% Above and Below the Regression LineAre ALL Key Jobs Within the Bounds?

18. CREATING PAY GRADES AND RANGESBuild Pay Grades 50 Points Wide Between the High and Low Regression Lines

19. DISPLAY FINAL PAY GRADES AND RANGES(Point Method Pay System is now Complete)

20. PLOT NON-KEY JOBS ON GRAPHWITH PAY GRADES AND RANGES

21. WHAT SHOULD BE DONE ABOUT UNDERPAID JOBS?(Green Circle Rates)

22. WHAT SHOULD BE DONE WITH OVERPAID JOBS?(Gold Circle Rates)

23. WHAT SHOULD BE DONE WITH OVERPAID JOBS?(Silver Circle Rates)

24. WHAT SHOULD BE DONE WITH OVERPAID JOBS?(Red Circle Rates)

25. STRATEGIES FOR HANDLING DEVIATIONS ABOVE AND BELOW THE RECOMMENDED BASE PAY RATE GREEN CIRCLE RATES RAISE PAY UP AS SOON AS POSSIBLE TO THE APPROPRIATE LEVEL GOLD CIRCLE RATES LEAVE RATE AS IS…DO NOT ADJUST…CONTINUE GIVING RAISES & COLAs SILVER CIRCLE RATES LEAVE RATE AS IS…DO NOT ADJUST, CONTINUE COLAs BUT NOT RAISES RED CIRCLE RATES MUST BRING RATES DOWN TO THE PROPER LEVEL

26. RED CIRCLE STRATEGIES BRING RATES IMMEDIATELY DOWN INTO LINE Give proper notification first PAY A “LUMP SUM” SETTLEMENT Bring rates into line, but pay a one-time severance settlement PROVIDE AN “ADDER” SUPPLEMENT Bring rates into line, but issue a supplemental check each pay period that is gradually reduced over time FREEZE PAY RATE IMMEDIATELY No raises given for seniority or COLA Eventually, the entire organizational pay structure will rise (due to COLAs and wage surveys) which will bring the pay rate back into range, at which time the worker will again get raises and COLAs. TRANSFER THE WORKER TO A HIGHER-RATED JOB

27. COMPENSATION SURVEYS • Needed to attract and retain workers with scarce skills • Develops a sense of external equity and fairness • Helps the firm maintain an adequate pay structure DETERMINING THE SCOPE OF THE SURVEY Where are we having trouble retaining workers? Where are market rates likely to be different from internal rates? Which jobs are the most difficult to fill? Where are we adding new positions to our organization?

28. SHOULD WE USE STANDARD WAGE SURVEYS? PROS: Minimal time investment needed for the individual firm Data is based on large samples – adequate representation Surveys conducted by experts…people who know how to do it Data is summarized, categorized, easy to interpret CONS: There may be a fee (cost) for access to the data You can’t select the specific companies surveyed Can’t control the type of data reported (which jobs? benefits?) Data summaries may mask differences you want to examine

29. COLLECTING YOUR OWN WAGE SURVEY DATA PHONE INTERVIEW -- (easiest) + Quick and relatively easy to do + Job content can be clarified to ensure the jobs are comparable + Can build rapport with respondent over time. Future contacts will be easier. - Puts a burden on the responder to reply immediately (to a possible stranger) - May yield incomplete answers because the respondent didn’t anticipate your call - Long phone calls are not welcome. You can’t get much data in five minutes. MAILED QUESTIONNAIRE -- (most common) + Can collect data on many different job titles, benefits, etc + Responses aren’t rushed – allows time for careful thought before answering - Response rates may be very low - Misunderstanding or confusion about comparable jobs cannot be clarified - Only gathers responses to specific questions posed - if you forgot to ask – too bad!

30. COLLECTING WAGE SURVEY DATA, CONTD INTERVIEW – (most reliable) + Can ask questions, clarify job titles, etc + Gathers data with minimum impact on respondent + Builds relationships which can make future data exchange easier - Very time consuming to make and set appointments, conduct interviews, etc - Costly method; the expense of travel, etc CONFERENCE -- (least used, but promising) + Takes advantage of professional meetings and conferences of HR personnel + Agenda of jobs to be reviewed, etc. established ahead of time—people come prepared + Face-to-face meetings allow clarification and detailed discussion of jobs, benefits, etc - Meetings can be time consuming and tiring, after a day of conference activities - Determining when and where to gather requires coordination with several other firms

31. THE WAGE SURVEY PACKAGE • Introductory letter or contact • Explain purpose and solicit cooperation • Assure confidentiality • Offer to share a summary of results INFORMATION PROVIDED Job titles and summary of duties section INFORMATION SOUGHT Comparable job titles in the surveyed organization Base pay ranges (bottom, midpoint, top) Benefits (is the medical, pension, etc. contributory?) Incentives (how large and based on what?) ADDITIONAL CONSIDERATIONS Use of stratified samples? Will reminders be sent?

37. HOW TO ENCOURAGE EXCELLENCE? ARE WE TAKING FULL ADVANTAGE OF THE REWARDS WE CONTROL? HAVE WE THOUGHT THROUGH THE FULL IMPACT THAT OUR REWARD SYSTEM HAS ON THE ORGANIZATION? DO EMPLOYEES HIGHLY VALUE THE REWARDS WE MAKE AVAILABLE TO THEM? DO EMPLOYEES KNOW WHAT THEY MUST DO TO OBTAIN THESE REWARDS? IN SHORT, DO WE REWARD EXCELLENCE OR MEDOCRITY?

38. USE INCENTIVE PAY TO REWARD: • PRODUCTIVITY • ACHIEVEMENTS & ACCOMPLISHMENTS • ACQUISITION OF NEW SKILLS • LONGEVITY WITH THE FIRM HOW TO ADMINISTER INCENTIVE PAY A. ADD IT TO THE REGULAR PAYCHECK ONCE ACQUIRED…FOREVER PAID…NEVER IS “EARNED” AGAIN INCENTIVE PAY MIXED WITH BASE PAY…WORKERS LOSE MOTIVATION B. PAY IT ALL OUT AS A LUMP-SUM AT ONE TIME LARGE CASH OUTFLOWS ARE DIFFICULT FOR THE FIRM TO MANAGE OPPOSED BY UNIONS BECAUSE ANNUAL WAGES DON’T GROW

39. “INCENTIVE” PLANS AND PERFORMANCE-BASED REWARDS -- 1 1. SENIORITY & LONGEVITY SYSTEMS • Rewards loyalty to the firm…not productivity or performance • Workforce more likely to possess obsolete skills • Increments must be granted each year (no limit or “cap”) 2. ACQUIRED SKILLS & KNOWLEDGE INCENTIVES • The size of pay increments for each added skill • Labor costs go up…but does productivity improve? • Once all skills are mastered…what motivates the worker? • There are no rewards for work performance

40. “INCENTIVE” PLANS AND PERFORMANCE-BASED REWARDS -- 2 3. PIECE RATES & COMMISSIONS • Setting “fair” standards • Changing standards and rates • Who controls work outcomes? • Are there rewards for all the essential duties of the job? WHEN IS IT FEASIBLE TO USE PIECE RATES? 1. UNITS OF WORK ARE EASY TO DISTINGUISH AND MEASURE 2. QUALITY IS OF LESSER IMPORTANCE THAN QUANTITY 3. WORKER INVOLVEMENT IS A MAJOR DETERMINANT OF PRODUCTIVITY 4. THE WORKER CONTROLS WORK SPEED…NOT MACHINE-PACED 5. CLOSE SUPERVISION IS IMPRACTICAL 6. CHANGES IN WORK PROCESSES ARE INFREQUENT 7. YOU HAVE EXPERTS TO SET AND EVALUATE YOUR WORK STANDARDS 8. COMPETITION REQUIRES THAT UNIT LABOR COSTS BE PREDICTABLE

41. “INCENTIVE” PLANS AND PERFORMANCE-BASED REWARDS -- 3 • MERIT REVIEW PLANS WHY DO MERIT PLANS FAIL? (HAMNER, 75) • Appraisal ratings seem invalid or biased • APPROPRIATE MEASURES? • OBJECTIVITY OR RATERS? • Pay adjustments not seen as being related to performance • Supervisors more concerned about satisfaction than performance • Incentives offered (type and size) aren’t motivating • ARE THESE REWARDS HIGHLY DESIRED? • SMALL INCREMENTS DO NOT MOTIVATE • Usually added to base pay as a percentage • EARNED ONCE…KEPT FOREVER • Trust and openness about pay and merit increases is very low

42. “INCENTIVE” PLANS AND PERFORMANCE-BASED REWARDS -- 4 5. SUGGESTION SYSTEMS • Origin of the idea…who should get the credit? • Some workers can’t write their ideas down • Does management follow up on the ideas submitted? • Supervisors criticized…suggests they’re incompetent 6. COST-REDUCTION (GAINSHARING) PLANS • SCANLON, KAISER, RUCKER, IMPROSHARE • Sensitive cost data must be revealed to workers • Middle management is left out • Unions use the system to criticize management • Usually a complex formula for distributing rewards • Weakened link between rewards & individual performance

43. “INCENTIVE” PLANS AND PERFORMANCE-BASED REWARDS -- 5 7. PROFIT-SHARING PLANS • Is there a real link to worker performance? • Impact of economic decline…what happens to motivation? • Determining the formula for distribution 8. STOCK OWNERSHIP PLANS • Dilution of control over the company • Impact of changes in the tax laws and economic cycles • Any real link to worker performance? • SPECIAL CONTESTS AND AWARDS ABSENTEEISM, SALES PROMOTIONS, OUTSTANDING SERVICE AWARDS • Are the consequences of the spirit of competition anticipated? JEALOUSY, UNCOOPERATIVENESS, COMPETITION WITHIN TEAMS AND GROUPS • Only the “Best” receives a reward…what about # 2? • Awards are often seen as “rights” (I earned it!), not as gifts

44. FOR INCENTIVE SYSTEMS TO BE SUCCESSFUL • PERFORMANCE INDICATORS MUST BE CLEARLY DEFINED • STANDARDS MUST BE COMMUNICATED TO WORKERS • WORKERS MUST BE ABLE TO INFLUENCE PERFORMANCE ACHIEVEMENT • PERFORMANCE MUST BE ACCURATELY EVALUATED • REWARDS MUST BE BASED ON WORKER PERFORMANCE • REWARDS OFFERED MUST BE HIGHLY VALUED BY WORKERS • WORKERS AND MANAGEMENT MUST TRUST EACH OTHER

45. BENEFITS LEGISLATION REVIEW 1911 – WORKER’S COMPENSATION BENEFITS FOR ON-THE-JOB INJURIES 1935 – UNEMPLOYMENT COMPENSATION NO-FAULT LOSS OF JOB BENEFITS; 6.2% of first $7000, w/ 5.4% to State 1935 – SOCIAL SECURITY ACT 7.65% paid by employee, 7.65% matched by employer; 13.2% for self-employed 1974 – EMPLOYEE RETIREMENT INCOME & SECURITY ACT (ERISA) EMPLOYERS MUST SET ASIDE PENSION OBLIGATIONS ANNUALLY 1985 – CONSOLIDATED OMNIBUS BUDGET RECONCILIATION ACT (COBRA) >20+ Employees; Separated workers can stay on medical insurance for 18 months 1993 – FAMILY AND MEDICAL LEAVE ACT >50+ Employees; Unpaid leave for up to 12 weeks for family/medical emergencies 2010 – PATIENT PROTECTION & AFFORDABLE CARE ACT (PPACA) HEALTH INSURANCE REFORM, 26 yr old dependents covered, Pre-existing conditions eliminated

46. LEGALLY REQUIRED BENEFITS SOCIAL SECURITY -- 40 Quarters –Earn $500+ per qtr RETIREMENT DISABILITY SURVIVOR HEALTH INSURANCE UNEMPLOYMENT COMPENSATION – 26 wks + 13 NO-FAULT JOB LOSS WORKER’S COMPENSATION JOB-RELATED INJURIES

47. EXPECTED BENEFITS PAYMENT FOR TIME NOT WORKED HOLIDAYS VACATIONS SICK PAY FUNERAL LEAVE, ETC. INSURANCE PLANS HEALTH DENTAL VISION LIFE RETIREMENT PLANS PENSION

48. RETIREMENT PLANS SOCIAL SECURITY – mandated by the federal government PRIVATE PENSION PLANS DEFINED BENEFIT vs DEFINED CONTRIBUTION PLANS CONTRIBUTORY vs NONCONTRIBUTORY PLANS INIDIVIDUAL RETIREMENT ACCOUNTS (IRAs) PROFIT SHARING PLANS EMPLOYEE STOCK PLANS Stock Grants Stock Options ESOPs EMPLOYEE RETIREMENT INCOME SECURITY ACT of 1974 (ERISA) ADEQUATE FUNDING OF PRIVATE PENSION PLANS VESTING REQUIREMENTS REPORTING & DISCLOSURE

49. FAMILY & MEDICAL LEAVE ACT - 1993 ORGANIZATIONS WITH 50 OR MORE EMPLOYEES EMPLOYED FOR ONE YEAR PRIOR TO LEAVE REQUEST UP TO 12 WEEKS OF UNPAID LEAVE FOR: CHILDBIRTH ADOPTION SERIOUSLY ILL FAMILY MEMBER (Child, Spouse, Parent) EMPLOYEE’S OWN ILLNESS EMPLOYERS MUST CONTINUE HEALTH COVERAGE MUST ALLOW RETURN TO SAME/COMPARABLE POSITION “KEY” EMPLOYEES EXEMPTED (Highest paid 10%)

50. Patient Protection and Affordable Care Act - 2010 National Federation of Independent Business v. Sebelius 2012 U.S. Supreme Court ruled most of the law is legal. Health insurance must cover all pre-existing conditions (excl. Tobacco) Premiums cannot be adjusted for gender, age, or geographic location Up to 26 yrs old can stay on parents insurance coverage ORGANIZATIONS WITH > 50 EMPLOYEES MUST “PLAY or PAY” Do you have employees at < 400% of poverty-level wages? If an employee can claim a government subsidy for health insurance, the employer will be assessed $2000 per claimant, plus penalty (50-30)*$2000. Some employers will drop health insurance and pay penalty… it’s cheaper! Others will increase part-time work (< 30 hrs/wk) and avoid the penalties. ** Medicare taxes up .9% >$200,000 ; Unearned income tax increases 3.8% “Cadillac” plans w/b taxed 40% (if plan costs >$10,200 indiv/$27,100 family)