Deck 9: Managing Compensation

Question 1

Both Sam and Samantha work as cashiers at Modelo Hot Dogs. They do work of equal value to the firm, yet Sam receives less pay than Samantha. Sam is not happy because he perceives the system as being unfair to him. Which theory can you use to explain Sam's perceptions?

A) reverse discrimination theory
B) pay equity theory
C) expectancy theory
D) equity theory

Answer 1

D

Question 2

Which of the following is an example of nonfinancial compensation?

A) bonuses
B) employee recognition programs
C) health insurance
D) incentives

Answer 2

B

Question 3

For real wages to increase, what is necessary?

A) An employee's wage increase must be greater than the increase in the CPI.
B) An employee must receive a lump-sum wage increase equal to the increase in the CPI.
C) An employee's wage must simply increase.
D) The CPI must increase at least as much as the employee's wage.

Answer 3

A

Question 4

What is a key implication of expectancy theory when applied to pay systems?

A) Employees must get pay raises to cover increased living costs.
B) Employees expect their managers to be competent.
C) Employers expect their employees to be competent.
D) Rewards must be valuable for motivation to occur.

Question 5

In collective agreements, what are escalator clauses associated with?

A) predetermined fixed increases in pay year-over-year
B) a cost of living adjustment
C) job evaluations
D) succession planning

Question 6

Which of the following is an external factor that can influence the rates at which employees are paid?

A) collective bargaining
B) the employer's ability to pay
C) the employees' relative worth
D) the worth of the job

Question 7

Mohammed's compensation and benefits are calculated and paid on the basis of monthly periods. How would you classify this employee?

A) salaried employee
B) hourly employee
C) piece-rated employee
D) directly compensated employee

Question 8

What is the scope of the impacts of collective bargaining agreements?

A) They extend beyond the segment of the labour force that is unionized.
B) They are restricted to hourly employees only.
C) They are restricted to members of the union.
D) They are restricted to both exempt and nonexempt employees.

Question 9

According to expectancy theory, which of the following is a condition that must be met for employees to be motivated through rewards?

A) high motivation need
B) high instrumentality
C) high reinforcement
D) high procedural justice

Question 10

Which of the following issues does job evaluation helps to address?

A) issues dealing with employees' need for pay that is equal to their financial needs
B) issues dealing with employers' perceptions of the labour market
C) issues dealing with employers' need to match the market pay
D) issues dealing with employees' perceptions of equity

Question 11

Which job category is considered nonexempt?

A) clerk
B) manager
C) vice-president
D) president

Question 12

How would you describe "an increase in real wages"?

A) an increase in wages over the Consumer Price Index
B) an increase in wages and benefits
C) an increase in the monetary proportion of the compensation package
D) an increase in collectively bargained wages

Question 13

Some organizations can choose a strategy to pay higher than market wages and salaries. Which of the following will this likely help them do?

A) be more selective in their employee hiring
B) reduce their direct labour costs
C) reduce their indirect labour costs
D) achieve pay equity between men and women

Question 14

Which of the following is the simplest job evaluation system?

A) job ranking
B) point method
C) job classification
D) skilled based

Question 15

One theory of motivation is based on the proposition that employees would exert greater work effort if they have reason to anticipate it (their effort) will result in a valued reward. What is this theory?

A) instrumentality theory
B) equity theory
C) expectancy theory
D) internal equity theory

Question 16

Assume Microsoft wants to link its overall organizational strategy to its wage and benefit policies in the strategic plan. How can the company best do this?

A) through the development of better performance standards
B) through following federal strategic planning legislation
C) through adhering to Harvard University's Professor Porter model
D) through formalized compensation goals

Question 17

Which of the following is a component of indirect compensation?

A) benefits
B) wages
C) incentives
D) commissions

Question 18

Which of the following is a firm's internal factor that can influence the rates at which employees are paid?

A) labour market conditions
B) collective bargaining
C) the cost of living
D) the employer's strategy

Question 19

Which term refers to the concept of equal pay for work of equal value?

A) equal pay
B) comparable pay
C) compensable factor
D) pay equity

Question 20

Which of the following clauses are found in some labour agreements that periodically adjust compensation rates to reflect increases in cost of living?

A) maintenance clauses
B) escalator clauses
C) roll-up clauses
D) guarantee clauses

Question 21

What do job evaluations help to ensure?

A) internal equity
B) external equity
C) individual equity
D) comparative equity

Question 22

According to the textbook, what is the predominant approach to employee compensation in Canada?

A) competency-based pay
B) pay-for-performance
C) individual contract
D) job-based pay

Question 23

Crystal Ball Inc. is a large information technology firm with many levels of management. The company would like to compensate its managers on factors such as knowledge and accountability. Which system would you recommend?

A) market pricing
B) the Hay profile method
C) job classification as implemented in Microsoft
D) work valuation

Question 24

What's a key objective of wage and salary surveys?

A) to help with job evaluations
B) to help achieve gender pay equity
C) to validate performance appraisals
D) to help achieve external equity

Question 25

According to the textbook, which job evaluation method is considered the most valid?

A) job ranking
B) the classification method
C) the point method
D) the factor comparison method

Question 26

To help achieve internal equity, factors such as skills, effort, responsibilities, and working conditions may be used to assess jobs. What do we call these factors?

A) job specifications
B) job classification factors
C) compensable factors
D) factor comparisons

Question 27

Using the point manual, how is the relative worth of a job determined?

A) by benchmarking jobs contained in the point manual
B) through the wage mix
C) by the number of steps within the pay grade
D) by the total points that have been assigned to that job

Question 28

In developing a wage curve, what are market wage rates plotted against?

A) job evaluation points
B) employee benefits
C) the size of a firm
D) employee wages and salaries

Question 29

Accounting clerks, pay clerks, and junior secretaries are all classed in Grade 2 at Metroland Inc. Which of the following should apply to all these jobs?

A) They should all receive the same wage rate in order to achieve equality.
B) They should be paid within the same pay range.
C) They should be paid similar to Grade 2 jobs at McDonald's.
D) They should be paid at different wage rates because the worth of these jobs to the organization may differ.

Question 30

Tiffany works as an IT specialist at Nortel. She is compensated based on such skills as programming and service to clients. It is likely that she is paid under which of the following pay plans?

A) a competency-based pay plan
B) a performance-based pay plan
C) a merit-based pay plan
D) a seniority-based pay plan

Question 31

Which of the following describes a job evaluation method?

A) a skilled-based system
B) a job ranking system
C) a market evaluation system
D) a comparable worth system

Question 32

ABC Corporation uses a job evaluation system that links the value of jobs directly with the goals of the organization. Which job evaluation system is most likely being used by ABC Corporation?

A) work evaluation
B) goal setting
C) point method
D) goal system

Question 33

XYZ Company wants to pay its employees based on their skills that are valued by the company. Which of the following would it most likely use?

A) commission pay
B) stock-based pay
C) profit sharing
D) competency-based pay

Question 34

Which of the following is a relatively new job evaluation system?

A) job classification system
B) job ranking
C) the point system
D) work evaluation

Question 35

In geography, the water catchment area or watershed refers to the area that channels or supplies a specific area with its water. Catchment areas divide drainage basins. In wage surveys, what is this catchment area similar to?

A) the labour market
B) the region
C) the recruiting area
D) the supply region

Question 36

What types of jobs are usually evaluated using the Hay profile method?

A) executive and managerial
B) administrative and technical
C) information technology and manufacturing
D) sales and accounting

Question 37

Which of the following is a potential problem of wage and salary surveys?

A) The jobs in the surveys may not match those in the organization.
B) They are discriminatory.
C) They exclude key administrative jobs.
D) They do not capture key sectoral data.

Question 38

Which of the following is job classification often used to help determine pay for?

A) merit bonuses
B) the company's CEO
C) classified university professors' jobs
D) government jobs

Question 39

What do we call jobs that are selected to be included in salary surveys?

A) higher-pay jobs
B) equity jobs
C) comparison jobs
D) benchmark jobs

Question 40

What type of jobs do companies normally use to collect wage survey data?

A) key jobs
B) low-rated jobs
C) high-rated jobs
D) strategic jobs

Question 41

What is the key purpose of pay equity legislation?

A) to achieve equal pay for work of comparable value
B) to achieve equal pay for equal work
C) to eliminate the gender pay gap
D) to ensure more women in top management

Question 42

Scenario 9.2
Calendars "R" Us Ltd. is a small firm that manufactures yearly calendars with a specific focus on middle and high schools in Alberta. They started operations back in 2006 with just 12 employees, two machines, and a small warehouse that served as an office and production and storage facilities. Today, Calendars "R" Us has roughly 60 employees and supplies its calendars to most middle and high schools in Alberta. When employees join they are paid based on their relationship with the owners. Given the rapid growth in its staff complement, and the arbitrary way in which it normally compensates employees, payroll has proven to be quite a challenge for the company as management looks to expand into other provinces.
Refer to Scenario 9.2. Which of the following is a useful and cost-effective way for Calendars 'R" Us to find information on wage and salary trends in similar industries?

A) develop in-house surveys
B) use surveys done by provincial governments and boards of trade
C) purchase surveys done with global organizations
D) set wages based on ability to pay only

Question 43

What do we call payment rates above the maximum of a pay range?

A) red circle rates
B) unfair pay rates
C) pay for talent
D) broadband rates

Question 44

Scenario 9.2
Calendars "R" Us Ltd. is a small firm that manufactures yearly calendars with a specific focus on middle and high schools in Alberta. They started operations back in 2006 with just 12 employees, two machines, and a small warehouse that served as an office and production and storage facilities. Today, Calendars "R" Us has roughly 60 employees and supplies its calendars to most middle and high schools in Alberta. When employees join they are paid based on their relationship with the owners. Given the rapid growth in its staff complement, and the arbitrary way in which it normally compensates employees, payroll has proven to be quite a challenge for the company as management looks to expand into other provinces.
Refer to Scenario 9.2. Setting pay levels at Calendars "R" Us can be limited by all of the following factors EXCEPT which one?

A) employee expectations and motivation
B) profitability of the firm
C) productivity of employees
D) economic condition and competition

Question 45

Scenario 9.2
Calendars "R" Us Ltd. is a small firm that manufactures yearly calendars with a specific focus on middle and high schools in Alberta. They started operations back in 2006 with just 12 employees, two machines, and a small warehouse that served as an office and production and storage facilities. Today, Calendars "R" Us has roughly 60 employees and supplies its calendars to most middle and high schools in Alberta. When employees join they are paid based on their relationship with the owners. Given the rapid growth in its staff complement, and the arbitrary way in which it normally compensates employees, payroll has proven to be quite a challenge for the company as management looks to expand into other provinces.
Refer to Scenario 9.2. Calendars "R" Us jobs range from management to administrative, to clerical to production to packing to delivering. Which of the following would be key to evaluating the worth of each job category?

A) avoiding the use of job evaluation to establish wage structure
B) evaluating the job based on market price
C) evaluating the job based on total value delivered to the organization
D) comparing each job with a competitor in the market

Question 46

Scenario 9.2
Calendars "R" Us Ltd. is a small firm that manufactures yearly calendars with a specific focus on middle and high schools in Alberta. They started operations back in 2006 with just 12 employees, two machines, and a small warehouse that served as an office and production and storage facilities. Today, Calendars "R" Us has roughly 60 employees and supplies its calendars to most middle and high schools in Alberta. When employees join they are paid based on their relationship with the owners. Given the rapid growth in its staff complement, and the arbitrary way in which it normally compensates employees, payroll has proven to be quite a challenge for the company as management looks to expand into other provinces.
Refer to Scenario 9.2. Calendars "R" Us wants to develop a set of compensation policies that are internally fair. Which of the following is helpful in making this decision?

A) job evaluation
B) external competition
C) global comparisons of pay
D) market surveys

Question 47

ABC Corporation is a furniture firm based in Ontario that supplies its products to the federal government. What laws would apply to ABC Corporation?

A) federal and provincial laws
B) federal laws only
C) provincial laws only
D) international laws only

Question 48

Jambrone Foods and CUPE Local 5000 have a collective agreement in place that allows for wages to be paid at more than the minimum wage set by the Employment Standards Act. Which of the following best describes this agreement?

A) It is illegal.
B) It is legal.
C) It is legal but ill-advised.
D) It is acceptable under the Employment Standards Act but illegal under the Canada Labour Code.

Question 49

Refer to Scenario 9.1. Which of the following is NOT a benefit of competency-based pay system?

A) greater productivity
B) decreased compensation costs
C) improved staffing flexibility to meet production or service demands
D) reduced effects of absenteeism and turnover

Question 50

Strategic compensation may involve market pricing.

Question 51

Which of the following is a potential outcome of wage-rate compression?

A) increased motivation
B) low employee morale
C) decreased employee theft
D) lower absenteeism

Question 52

Indirect compensation includes bonuses and commissions.

Question 53

Scenario 9.1
Denton and Denton Inc. (D&D Inc.) is a small graphic design firm that designs tray liners for various small food chains across Canada and a major chain in the United States. D&D currently has 20 employees who are paid hourly rates for time worked, not projects completed. These workers consider themselves valuable, knowledge-based workers, and now that the company is expanding its client base they are not happy with the current pay structure. Management claims that this pay structure, ranging from $20 to $65 per hour, is based on collapsing the pay ranges for four job bands.
Refer to Scenario 9.1. Given that these employees are skilled-based/knowledge workers, which of the following is a more effective way to compensate them?

A) piece rate pay system
B) hourly rate based on task completed
C) salaried employee system
D) competency-based pay system

Question 54

Desirée is a female receptionist employed by Trent University in Ontario. John is a male janitor with the same employer. Both jobs are evaluated as having 500 points, yet Desiree is paid less than John. She has decided to legally challenge the employer. Which of the following is relevant in this case?

A) the Peter principle
B) market matching
C) equal pay for work of equal value
D) equal pay for equal work

Question 55

Strategic compensation links an organization's compensation systems to its mission and business objectives.

Question 56

Refer to Scenario 9.1. What type of pay system is D&D Inc. currently using to compensate its employees?

A) broadbanding
B) competency-based
C) red circle rates
D) piece rate

Question 57

Wage compression may create problems related to which of the following?

A) external equity
B) internal equity
C) gender discrimination
D) racial discrimination

Question 58

Which of the following terms is also used to describe competency-based pay?

A) incentive pay
B) commission pay
C) skilled-based pay
D) broadband pay

Question 59

As the year 2000 approached, many organizations hired "young" and "inexperienced" information technology (IT) specialists to help address the Y2K problem. Many of these new hires were paid high compensation that brought them very close to the compensation earned by experienced IT specialists working with these companies. Which of the following can such a practice lead to?

A) wage inversion
B) pay equity
C) wage-rate compression
D) high turnover across the board

Question 60

Which type of legislation is concerned with minimum wage rates and overtime payments?

A) employment standards
B) employment equity
C) equal pay
D) pay equity

Question 61

The point system of job evaluation permits jobs to be evaluated quantitatively based on compensable factors.

Question 62

The consumer price index tracks the change in price over time of a "market basket" of goods and services.

Question 63

Pay equity is achieved when the compensation of female job classes is equal to male jobs of comparable worth.

Question 64

Among the goals of strategic compensation policy are rewarding past performance, attracting new employees, and reducing turnover.

Question 65

The expectancy theory of motivation predicts that one's level of motivation depends on the attractiveness of the rewards sought by employees and the probability of obtaining those rewards.

Question 66

HR professionals establish predetermined wage grades as a basis for evaluating jobs in the job classification system of job evaluation.

Question 67

Pay levels are limited in part by profitability of the firm and market pay.

Question 68

The job classification system is commonly used by smaller employers.

Question 69

Expectancy theory predicts that people expect to be paid as much or more than individuals in a similar job class.

Question 70

Employees who earn pay for hourly work are referred to as salaried employees.

Question 71

Real wages represent the difference between wage increases and cost-of-living increases.

Question 72

The use of job evaluation is widespread in the private sector but is rarely used in the public sector.

Question 73

Wage survey data can be obtained from government sources, trade associations, or professional groups, or organizations can conduct their own surveys.

Question 74

Job evaluation is a non-systematic, qualitative process of determining the relative worth of jobs in order to establish a comparison with the prevailing market and regional value of a job within a job family.

Question 75

Wage compression can be avoided by granting wage increases solely on the basis of the CPI.

Question 76

Granting wage increases solely on the basis of the CPI helps compress pay rates within a pay structure, thereby ensuring equity among those who receive the wage increase.

Question 77

Internal factors that influence wage rates include the worth of a job, and the employer's ability to pay.

Question 78

Job ranking is a simple method that provides a precise measure of each job's worth.

Question 79

Labour market conditions have little impact on wage rates paid to employees.

Question 80

When time off is given in exchange for overtime work, it must be given hour-for-hour to the number of hours worked overtime.