Deck 13: Compensation Budgets and Administration

Question 1

Which of the following is true about core employees?

A)They are employees whose employment agreements cover only short, specific time periods.
B)They can be contracted and expanded more easily than the contingent workers.
C)They help achieve flexibility and control labour costs.
D)They bring about an increase in the fixed portion of labour costs.
E)They have many varied compensation packages.

Answer 1

D

Question 2

A management strategy that gives separate organization units the responsibility to design and administer their own systems is known as:

A)outsourcing
B)centralization
C)decentralization
D)authoritarianism
E)tactical planning

Answer 2

C

Question 3

Which of the following depends on performance and is NOT added to employees' base pay?

A)variable pay
B)overtime pay
C)merit pay
D)across-the-board increase
E)provident fund

Answer 3

A

Question 4

Beta Systems decided to outsource some of its operations. Which of the following will be a short-term advantage for the company?

A)increased ability to focus on activities that do not directly contribute to the strategic objectives of the company
B)more control over decisions
C)less risk of information being leaked to rivals
D)cost savings
E)more responsiveness to employee-manager problems

Question 5

Range minimums and maximums reflect:

A)the value placed on work
B)government regulations of wages
C)the market value of the output produced
D)market fluctuations in wage rates
E)the market value of an employee's skills and abilities

Question 6

To help ensure that different managers grant consistent increases to employees with similar performance ratings and in the same position in their ranges one should utilize:

A)job security measures
B)outsourcing techniques
C)ad hoc reshuffling
D)merit grids
E)management by objectives

Question 7

The compa-ratio reflects the relationship of:

A)red circle rates to green circle rates
B)average rates actually paid to the midpoint of the range
C)company profits of the present year to those of the previous year
D)rates paid for satisfactory performance to rates paid for exceptional performance
E)range maximums to range minimums

Question 8

Which of the following is an advantage of outsourcing?

A)It ensures short-term cost savings to the business.
B)It enables more control over decisions that are often critical to all employees.
C)It brings about greater responsiveness to unique and specific employee problems.
D)It reshapes the compensation function to make it less client focused and more promotion focused.
E)It results in the preservation of information from rivals and competitors.

Question 9

A compa-ratio greater than 1.00 typically occurs because:

A)majority of employees are new hires
B)turnover is high
C)promotion rates are low
D)most workers are high in seniority
E)majority of workers are poor performers

Question 10

An organization adopts a marketing approach to let its employees know the benefits of its overall pay policies but not specific details about increases or limits of the policies. Which of the six steps in the communication compensation process does the organization's action reflect?

A)collecting information from executives, managers, employees concerning their understanding of the existing compensation programs
B)evaluating the compensation program
C)developing a communication strategy that will accomplish the original objectives
D)defining the objectives of the compensation program
E)determining the most effective media in light of the message and the audience

Question 11

The most common approach to managing labour costs during a recession involves:

A)using a top-down budgeting
B)reducing employees' variable pay
C)reducing the workforce
D)hiring only core employees
E)using competitive market rates

Question 12

A possible side effect of a decentralized pay structure is that:

A)it may be difficult to transfer employees from one business unit to another
B)there is decreased potential for pay discrimination
C)there is decreased opportunity for the inconsistent treatment of employees
D)pushing responsibilities and expenses close to the units, managers, and employees affected by them may cause doubt that decisions are business related
E)organizations require larger compensation staffs

Question 13

A group of employees with whom a strong and long-term relationship is desired is:

A)temporary workers
B)part-time employees
C)contract employees
D)core employees
E)contingent workers

Question 14

Employers achieve flexibility and control labour costs by:

A)hiring only full-time employees
B)expanding the permanent workforce
C)forming strong and long-term relationships with all employees
D)expanding or contracting the contingent workforce
E)basing employee payment decisions on manager preferences

Question 15

Which of the following processes is a change agent in restructuring compensation policies?

A)reemployment
B)reverse engineering
C)broadbanding
D)reengineering
E)benchmarking

Question 16

Which of the following factors helps in the reduction of labour costs?

A)Paying more benefits and less cash
B)Paying the same wages to fewer employees
C)Making early retirement less attractive
D)Increasing the number of employees
E)Expanding the core workforce

Question 17

The budgeting approach that requires senior management of each unit to estimate the pay increase for the entire organization unit is known as the:

A)bottom-up budgeting approach
B)peer budgeting approach
C)top-down budgeting approach
D)employee-participation budgeting approach
E)decentralized budgeting approach

Question 18

Which of the following statements is true about analyzing the return of investments of pay decisions?

A)It focuses on increasing the turnover of top employees.
B)It restricts thinking to treating compensation as only an expense.
C)It is a practice followed by all organizations regularly.
D)It encourages looking at compensation as an investment as well as an expense.
E)It increases the focus of employees as individuals and not as human capital.

Question 19

Which of the following factors influences decisions made using the top-down approach?

A)providing consultation to managers
B)reviewing and revising forecasts and budgets with management
C)monitoring budget versus actual increases
D)analyzing the impact of the cost of living increases on wages
E)analyzing forecasts

Question 20

Which of the following is the first step in the six-stage process of compensation communication?

A)evaluating the compensation program
B)defining the objectives of the communication program
C)developing a communicating strategy for the compensation program
D)collecting information from executives, managers, and employees concerning their understanding of existing compensation programs
E)determining the most effective media with which to communicate compensation program

Question 21

Using contingent employees makes it more difficult to control labour costs.

Question 22

Decentralized pay structures are generally easier to administer.

Question 23

Which budgeting method places most responsibility on individual managers?

A)the top-down budgeting method
B)the planned level rise budgeting method
C)the unit-level budgeting method
D)the bottom-up budgeting method
E)the control to compa-ratio budgeting method

Question 24

Which of the following is a step in the bottom-up approach to controlling salary level?

A)examining the current year's rise in average wages
B)managers to forecast pay increase recommendations
C)instructing managers in compensation policies and techniques
D)determining the company's ability to pay
E)analyzing the impact of cost-of-living increases on wages

Question 25

If the pay system is not based on work-related or business-related logic, then the wisest course is probably to avoid formal communication until the system is put in order.

Question 26

A compa-ratio of below 1.00 indicates lower turnover.

Question 27

Announcements of layoffs and plant closings never have favourable effects on stock prices as investors anticipate poor cash flow and increased costs.

Question 28

Changes in the CPI only indicate whether prices have increased more or less rapidly in an area since the base period.

Question 29

Outsourcing means that organizations secure a range of services and supplies from independent, external vendors.

Question 30

Range minimums and maximums reflect the market value of output produced.

Question 31

An index that measures changes in prices over time is known as the:

A)Producer Price Index
B)Manufacturer Price Index
C)Consumer Price Index
D)Cost of Living Index
E)Cost Price Index

Question 32

Increased cost is the most significant short-term disadvantage of outsourcing.

Question 33

The CPI is of public interest because changes in it trigger changes in labour contracts.

Question 34

Organizations secure a range of services and supplies from independent, external vendors by:

A)doing a job analysis
B)outsourcing
C)engaging in employment-at-will
D)having joint ventures
E)partnering

Question 35

A planned level rise is the percentage increase in average pay that is planned for a budget period.

Question 36

Discuss how centralization and decentralization affect the structuring of the compensation function.

Question 37

A Consumer Price Index (CPI)of 120 in Ontario and 160 in Toronto means that it costs more to live in Toronto.

Question 38

Red circle rates are pay rates below the range minimum.

Question 39

Costing out wage proposals is commonly done prior to recommending pay increases.

Question 40

Green circle rates pay rates above the range maximum.

Question 41

What is the formula for calculating compa-ratio?

Question 42

Describe the steps within the compensation forecasting cycle of bottom-up budgeting.

Question 43

How do organizations deal with the issues that arise from decentralization?

Question 44

Labour costs are a function of which three factors?

Question 45

How do inherent controls help control labour costs?

Question 46

What is bottom-up budgeting?

Question 47

Which are the two groups of employees that employers establish different relationships with?

Question 48

What are the six stages in the compensation communication cycle?

Question 49

What balance is required in order to manage compensation?