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Part I – Setting the Stage for Strategic Compensation
severance pay to meet financial obligations while they Search for employment. In the past, compa-
nies commonly offered a year or more of severance pay. Severance benefits today tend to be less
generous. For example, as part of Delta Airlines’s 2005 closure of its Boston reservation center, the
company offered only 6 weeks of severance pay regardless of seniority with the company.
Employees initiate voluntary terminations, most often to work for other cofiipanies or to
retire. In the case of retirement, companies sponsor pension programs. Pension programs
provide income to individuals throughout their retirement. Companies sometimes use early
retirement programs to reduce workforce size and trim compensation expenditures. Early
retirement programs contain incentives designed to encourage highly paid employees with
substantial seniority to retire earlier than they had planned. These incentives expedite senior
employees’ retirement eligibility and increase their retirement income. In addition, some compa-
nies continue retirees’ rnedical benefits. .’i
COMPENSATION AND LEGISLATION Employment laws establish bounds of both acceptable
employment practices and employee rights.’Federal laws that apply to compensation practices are
grouped according to four themes:
Income continuity, safety, and work hours
Pay discrimination
Accommodating of disabilities and family needs
Prevailing wage laws
Table 1-3 lists for each theme some of the major laws that influence compensation practice.
The federal government enacted income continuity, safety, and work hours laws (e.g., the Fair
Labor Standards Act of 1938) to stabilize individuals’ incomes when the individuals became
TABLE 1-3 Laws that Influence Compensation
income Continuity, Safety, and Work Hours
Minimum wage laws-Fair Labor Standards Act of 1938
Minimum wage
Overtime provisions
Portal-to-Portal Act of 1947
Equal Pay Act of 1963
Child labor provisions
Work Hours and Safety Standards Act of 1962
McNamara-O’Hara Service Contract Act of 1965
Pay Discrimination
Equal Pay Act of 1963
Lilly Ledbetter Fair Pay Act (2009)
Civil Rights Act of 1964, Title VII
Bennett Amendment (1964)
Executive Order 11246 (1965)
Age Discrimination in Employment Act of 1967 (amended in 1978, 1986, and 1990)
Executive Order 11141 (1964)
Civil Rights Act of 1991
Accommodating Disabilities and Family Needs
Pregnancy Discrimination Act of 1978
Americans with Disabilities Act of 1990 (amended in 2008)
Family and Medical Leave Act of 1993
Prevailing Wage Laws
Davis-Bacon Act oi‘ 1931
Walsh-Healey Public Contracts Act of 1936

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