Deck 11: Pay for Performance and Employee Benefits

Question 1

Ryobi is a large, international power tool manufacturer that develops affordable, high-quality products, such as drills, circular saws, and routers for both homeowners and craftspeople. As the company continues to grow, its top executives want to ensure that employees are appropriately paid for their performance and that financial incentives are both fair and effective. Currently, the firm provides merit raises based on performance appraisals; however, executives are considering changing the current incentive plan. Which of the following, if true, undermines the argument that Ryobi should discontinue all merit raises?

A) Ryobi managers have noticed significant productivity improvements among employees who receive merit raises.
B) Ryobi managers have not received significant training about conducting performance appraisals.
C) Ryobi's top competitor is considered a high-performance work system within the industry.
D) Ryobi employees have expressed that they would prefer stock options to merit raises.

Answer 1

A
Explanation: A) If Ryobi managers have noticed productivity improvements among employees who receive merit raises, then the system is most likely effective and should not be discontinued. If employees want stock options instead of raises, or managers lack the necessary training to conduct performance appraisals, then merit raises should be discontinued.

Question 2

Elizabeth works at an auto firm, which recently shut down for five weeks to change machinery. However, during the shutdown, Elizabeth was able to maintain her standard of living because of the firm's ________.

A) supplemental unemployment benefits
B) workers' compensation insurance
C) supplemental health benefits
D) disability insurance

Answer 2

A
Explanation: A) Supplemental unemployment benefits are cash payments that supplement the employee's unemployment compensation, to help the person maintain his or her standard of living while out of work. They generally cover three contingencies: layoffs, reduced workweeks, and facility relocations.

Question 3

Plans in which a corporation contributes shares of its own stock to a trust established to purchase shares of the firm's stocks for employees are known as ________.

A) cash plans
B) Jefferson incentive systems
C) deferred profit-sharing plans
D) employee stock ownership plans

Answer 3

D
Explanation: D) Employee stock ownership plans (ESOPs) are company-wide plans in which the employer contributes shares of its own stock to a trust established to purchase shares of the firm's stock for employees. The firm generally makes these contributions annually in proportion to total employee compensation, with a limit of 15% of compensation.

Question 4

Most gainsharing plans include all of the following features EXCEPT ________.

A) a philosophy of cooperation
B) a focus on individual achievement
C) sharing of benefits formula
D) an involvement system

Question 5

A(n) ________ plan is an incentive plan that engages many or all employees in a common effort to achieve a company's productivity objectives with any resulting cost-savings shared among employees and the company.

A) stock gain plan
B) merit pay plan
C) gainsharing
D) ESOP

Question 6

Which of the following benefits is required by federal or state law?

A) disability insurance
B) workers' compensation
C) paid time off
D) pensions

Question 7

Tanner's employer puts a predetermined portion of profits into a trust account for Tanner's retirement. Which of the following is most likely the type of profit-sharing plan used by Tanner's employer?

A) Jefferson incentive system
B) deferred profit-sharing plan
C) gainsharing plan
D) cash plan

Question 8

Which of the following terms refers to benefits for time not worked such as unemployment insurance, vacation and holiday pay, and sick pay?

A) supplemental pay benefits
B) employee assistance
C) financial incentives
D) merit pay

Question 9

How does merit pay differ from a bonus?

A) Merit pay becomes part of an employee's base pay, but a bonus does not.
B) A bonus becomes part of an employee's base pay, but merit pay does not.
C) Merit pay is linked to individual performance, while a bonus is linked to profits.
D) A bonus is linked to individual performance, while merit pay is linked to profits.

Question 10

Which of the following is the primary benefit of employee stock ownership plans?

A) Employees have voting rights in firm decisions.
B) Firms pay distribution taxes for employees prior to retirement.
C) Firms may borrow against employee stock held in trust.
D) Employees are able to diversify their investments.

Question 11

The indirect financial and nonfinancial payments employees receive for continuing employment with the company are called ________.

A) reimbursement
B) employee compensation
C) salary
D) benefits

Question 12

Keith works as a construction foreman, and he is viewed as a reliable, competent employee. Keith was recently injured in a car accident while on vacation, and his injuries are so severe that he will not be able to return to work. Which of the following would most likely provide Keith with benefits?

A) supplemental unemployment benefits
B) workers' compensation insurance
C) unemployment insurance
D) group life insurance

Question 13

Ryobi is a large, international power tool manufacturer that develops affordable, high-quality products, such as drills, circular saws, and routers for both homeowners and craftspeople. As the company continues to grow, its top executives want to ensure that employees are appropriately paid for their performance and that financial incentives are both fair and effective. Currently, the firm provides merit raises based on performance appraisals; however, executives are considering changing the current incentive plan. Which of the following questions is most relevant to the decision by Ryobi executives to discontinue all merit raises?

A) What are the guidelines for implementing a gainsharing plan?
B) What type of merit raises are effective for high-performing managers?
C) What organization-wide incentive plans are used by other manufacturing firms?
D) What is the connection between merit pay increases and employee productivity?

Question 14

What type of profit-sharing plan involves the firm simply distributing a percentage of profits as profit shares to employees at regular intervals?

A) current profit-sharing
B) Lincoln incentive system
C) Jefferson incentive system
D) employee stock ownership plan

Question 15

Eric has worked full-time for a large manufacturing company for over 3 years. Eric and his wife have recently adopted a baby, and Eric wants to take time off from work to care for the child. Which of the following laws most likely applies to Eric's situation?

A) Pregnancy Discrimination Act
B) Family and Medical Leave Act
C) Title VII of the Civil Rights Act
D) Newborn Mother's Protection Act

Question 16

Which of the following is the most commonly used tool for motivating employees?

A) merchandise incentives
B) recognition programs
C) special events
D) variable pay

Question 17

Which incentive plan is based on a philosophy that managers and employees must cooperate together?

A) cash plan
B) gainsharing plan
C) deferred profit-sharing plan
D) employee stock ownership plan

Question 18

Ryobi is a large, international power tool manufacturer that develops affordable, high-quality products, such as drills, circular saws, and routers for both homeowners and craftspeople. As the company continues to grow, its top executives want to ensure that employees are appropriately paid for their performance and that financial incentives are both fair and effective. Currently, the firm provides merit raises based on performance appraisals; however, executives are considering changing the current incentive plan. Which of the following, if true, best supports the argument that Ryobi should eliminate all merit raises?

A) Ryobi uses an enterprise incentive management system to automate compensation.
B) Motivation among Ryobi engineers has been improved through social recognition programs.
C) Performance appraisals at Ryobi occur annually, and standards vary from manager to manager.
D) The commission percentage for Ryobi sales people is based on the ability to meet monthly quotas.

Question 19

Malcolm is interviewing for a new job and he is evaluating the quality of the pension plans offered for each company he is considering. One company offers a pension plan in which the company will make all contributions to the plan and will base his pension benefit on a formula linked to his pay at the time of retirement and the number of years he works for the firm. This pension plan could be classified as a ________.

A) non-contributory, defined contribution
B) contributory, defined benefit
C) non-contributory, defined benefit
D) contributory, qualified plan

Question 20

Which of the following terms refers to any salary increase the firm awards to an individual employee based on his or her individual performance?

A) merit pay
B) variable pay
C) competency-based pay
D) incentive pay

Question 21

Craig was born in 1961. According to the Social Security Act, what is Craig's full retirement age?

A) 62
B) 65
C) 67
D) 70

Question 22

A straight salary for salespeople is most appropriate when the main tasks involve ________.

A) selling technical products
B) exceeding sales quotas
C) finding new clients
D) selling real estate

Question 23

According to research, most firms use ________ to motivate the short-term performance of managers.

A) work-life benefits
B) annual bonuses
C) variable pay
D) training

Question 24

According to the Comprehensive Omnibus Budget Reconciliation Act, how long are most employers required to make health benefits available to terminated or retired employees?

A) 6 months
B) 12 months
C) 18 months
D) 24 months

Question 25

Which term refers to an incentive plan in which a person is paid a sum for each item sold, with a strict proportionality between results and rewards regardless of output?

A) standard merit pay
B) straight hourly pay
C) straight piecework
D) variable pay

Question 26

Workers at a t-shirt shop are paid a sum for each t-shirt they produce. Which incentive plan is most likely used by the employer?

A) merit pay
B) piecework
C) standard hour
D) variable pay

Question 27

________ are groups of health care providers that contract with employers, insurance companies, or third-party payers to provide medical care services at a reduced fee.

A) PPOs
B) HMOs
C) DMOs
D) Hospitals

Question 28

What should be the central focus of a firm's executive reward packages?

A) employing top-quality management experts
B) accomplishing the firm's strategic goals
C) ensuring ethical and legal accountability
D) encouraging long-term accountability

Question 29

What is a disadvantage of straight commission plans?

A) Payments are complicated to calculate.
B) Salespeople spend too much time on servicing.
C) Salespeople neglect selling hard-to-sell products.
D) The company's fixed sales costs are proportionately high.

Question 30

Every month, Angela, a manager at a manufacturing facility, meets briefly with each of her subordinates and shows them a graph of their productivity on the assembly line. Which term best describes Angela's activity?

A) exit interview
B) social recognition
C) performance feedback
D) performance appraisal

Question 31

What is the main benefit of paying salespeople a combination of salary and commission?

A) limiting the firm's risk of overly high commissions
B) aligning employee goals and company strategy
C) providing simple salary administration
D) clearly linking pay with performance

Question 32

All of the following are Social Security benefits EXCEPT ________.

A) death benefits
B) disability payments
C) retirement benefits
D) defined contribution benefits

Question 33

According to research, which of the following has a significant impact on employee engagement?

A) performance reviews
B) variable pay plans
C) job design
D) awards

Question 34

Jenny's pension plan encourages her to contribute at least 5% of her annual salary in addition to the set amount that her company contributes. She is given choices regarding how the money is invested. When she retires, the amount she has available will depend on how much she invested herself, and the rate of return on the investments she chose. This pension plan would be classified as ________.

A) qualified, defined benefit
B) non-contributory, defined benefit
C) contributory, defined contribution
D) contributory, defined benefit

Question 35

Which term refers to any plan that ties pay to productivity or profitability?

A) piecework
B) variable pay
C) merit pay
D) overtime pay

Question 36

What is the primary disadvantage of using the straight salary approach to pay salespeople?

A) relying on annual profits
B) discouraging staff loyalty
C) preventing territory changes
D) failing to link effort with reward

Question 37

An employer would most likely use an enterprise incentive management system to ________.

A) calculate overtime pay
B) automate award programs
C) monitor employee engagement
D) track performance appraisals

Question 38

Tyrone, a data entry clerk, is paid a basic hourly rate. He receives an extra percentage of his rate when his productivity is above normal. Which incentive plan is most likely used by Tyrone's employer?

A) standard merit pay
B) standard hour plan
C) straight piecework
D) variable pay

Question 39

The Sarbanes-Oxley Act was most likely enacted to ________.

A) provide financial insight
B) decrease the corporate tax rate
C) monitor the distribution of stock shares
D) increase the accountability of top executives

Question 40

Angelo, a process engineer with Global Semiconductor, is following a technical path rather than a management path at the firm. Which of the following has most likely been implemented by Global Semiconductor?

A) dual-career ladder
B) competency-based pay
C) flexible family benefits
D) social recognition program

Question 41

Which term refers to payments a firm makes related to changes in company ownership?

A) pension plan
B) annual bonus
C) golden parachute
D) retirement perks

Question 42

An executive who receives a(n) ________ stock receives units instead of shares of company stock. The units will be equated to cash in the future if appreciation occurs.

A) phantom
B) restricted
C) premium
D) nonqualified

Question 43

What is the most likely reason that firms are implementing group incentive plans?

A) stricter regulations regarding team bonus plans
B) heavy reliance on teams to manage work
C) expected loss of older workers
D) rising cost of health benefits

Question 44

What is the primary cause of rising unemployment tax rates?

A) outsourced workers
B) unsafe workplaces
C) executive perquisites
D) economic recessions

Question 45

A manager can best control the cost of unemployment insurance by ________.

A) eliminating supplemental pay benefits for part-time employees
B) documenting the poor performance of dismissed employees
C) establishing a pooled paid leave plan for workers
D) investigating all workers' compensation claims

Question 46

All of the following are factors that influence an annual bonus EXCEPT ________.

A) eligibility
B) commission
C) size of the fund
D) individual performance

Question 47

Which gainsharing plan involves employees working on a guaranteed piecework basis?

A) current profit-sharing
B) deferred profit-sharing
C) Lincoln incentive system
D) earnings-at-risk pay plan

Question 48

Marie, a top manager at Levon Marketing, will receive 500 shares of the firm's stock if the firm's sales increase by 5% in the next quarter. Which of the following was Marie most likely given?

A) phantom stock
B) stock appreciation rights
C) restricted stock plan
D) performance-contingent restricted stock

Question 49

All of the following are examples of organization-wide incentive plans EXCEPT ________.

A) employee stock ownership plans
B) gainsharing plans
C) golden parachute
D) profit sharing

Question 50

Broad-based stock option plans are intended to ________.

A) motivate all employees at a firm
B) encourage management retention
C) monitor the decisions of executives
D) distribute earnings to boards of directors

Question 51

Which term refers to the right to purchase a stated number of shares of a company stock at today's price at some time in the future?

A) stock option
B) gainsharing plan
C) multiplier method
D) at-risk variable plan

Question 52

Enterprise incentive management software is used by managers to ________.

A) motivate employees to meet and exceed departmental goals
B) quantify correlations between pay and performance
C) select and develop mission-critical employees
D) monitor training and development needs

Question 53

Upon being hired as a marketing representative at Argo Pharmaceuticals, Shelly agreed to forego 5% of her normal pay if she failed to meet performance goals. In return, Shelly will receive a 10% bonus if she exceeds her goals. In what type of plan does Shelly most likely participate?

A) earnings-at-risk pay plan
B) variable risk sharing plan
C) at-risk gainsharing plan
D) risk-reward stock plan

Question 54

An employer's unemployment tax rate depends on the employer's ________.

A) total payroll costs
B) policy on retirements
C) supplemental pay benefits
D) rate of employee terminations

Question 55

An earnings-at-risk pay plan bases employee pay and bonuses on ________.

A) maximizing organizational performance
B) generating additional long-term sales
C) engaging in strategic objectives
D) achieving departmental goals

Question 56

Health insurance, life insurance, pensions, and child care assistance are best categorized as ________.

A) compensation
B) incentives
C) benefits
D) rewards

Question 57

Which of the following is the LEAST relevant characteristic of an effective incentive plan?

A) Incentives are based on industry standards.
B) Rewards are attractive to targeted employees.
C) Incentives are linked to effort and performance.
D) Goals are specific, achievable, and challenging.

Question 58

Which of the following involves setting a production standard for a specific work group and then paying incentives to the group members if they exceed the standard?

A) team incentive plan
B) group profit-sharing plan
C) employee stock ownership plan
D) organization-wide incentive plan

Question 59

Which of the following is a discretionary benefit?

A) unemployment insurance
B) disability insurance
C) FMLA leaves
D) Social Security

Question 60

Which of the following would most likely be used by a firm that wants to retain the services of a top manager for a specified period of time?

A) restricted stock plan
B) golden parachute plan
C) stock appreciation rights
D) performance-contingent restricted stock

Question 61

Why do some companies use employee leasing firms?

A) Large companies experience shifts in employee demand.
B) Small businesses are able to obtain affordable health insurance.
C) Businesses save on health care costs by hiring independent contractors.
D) Companies reduce unemployment insurance premiums by outsourcing.

Question 62

Athena, a sales representative, was terminated from her position at Ross Manufacturing. On Athena's last day of work, she was given a check for $5,000. What did Athena most likely receive from Ross Manufacturing?

A) disability pay
B) annual bonus
C) severance pay
D) unemployment insurance

Question 63

Legally required benefits, such as unemployment insurance, are more costly to employers than health insurance.

Question 64

According to surveys, what will most employers do in response to the Patient Protection and Affordable Care Act?

A) decrease the time allowed for family leave
B) decrease workers' compensation benefits
C) increase employee contributions for dependents
D) increase sponsorships of retiree medical coverage

Question 65

Employee benefits account for about over one-half of wages and salaries.

Question 66

The primary purpose of ________ is to enable employees to balance work and family obligations.

A) automated benefits systems
B) work-life benefits
C) cafeteria plans
D) pooled paid leave banks

Question 67

Which of the following is NOT a true statement about the Family and Medical Leave Act?

A) The law applies to all public and private employers regardless of size.
B) Eligible employees have worked for the employer for at least one year.
C) Leave may be taken for personal illness or the birth of a child.
D) Eligible employees must be granted up to 12 weeks of leave.

Question 68

Which condition must be met for an injured employee to receive workers' compensation benefits?

A) The injury occurred during an overtime or nighttime shift.
B) The employee was wearing adequate protection.
C) The injury was not the fault of the employee.
D) The employee was injured while on the job.

Question 69

What is the main problem associated with defined benefits plans?

A) lack of employer matching
B) lack of portability
C) highly regulated
D) highly taxed

Question 70

Which of the following provides services such as financial counseling, child care referrals, and adoption assistance?

A) long-term pension plan
B) work-life benefit service
C) benefit management system
D) employee assistance program

Question 71

A 401(k) plan is best described as a(n) ________.

A) defined contribution pension plan
B) defined benefit pension plan
C) health savings account
D) golden parachute

Question 72

Portability makes it easier for employees who leave a firm prior to retirement to ________.

A) switch to defined contribution pension plans
B) take their pension funds with them
C) designate a new pension beneficiary
D) invest their pensions in 401(k) plans

Question 73

Which group contributes to workers' compensation funds?

A) employers
B) state governments
C) federal government
D) insurance providers

Question 74

Gainsharing plans involve putting some portion of an employee's weekly pay at risk for the opportunity to earn incentives if the employee meets or exceeds his or her goals.

Question 75

Which term refers to the money that an employer and employee have placed in the employee's pension fund that cannot be forfeited for any reason?

A) thrift plans
B) vested funds
C) stock options
D) cash balance funds

Question 76

Furman, an automotive parts manufacturer, employs nearly 800 workers in its Dallas, Texas facility. Furman has always offered its employees health and dental insurance as well as legally required benefits such as unemployment insurance and workers' compensation. Furman's top executives are considering the idea of offering employees a a flexible benefits plan. Which of the following, if true, best supports the argument that Furman should offer employees a flexible benefits plan?

A) Some Furman employees express interest in vision insurance, while other workers never enroll for dental insurance.
B) Furman outsources its employee benefits program, and employees must file claims with the plan's administrator.
C) Some Furman employees prefer to build their work days around a core of midday hours rather than work from 9 to 5.
D) Furman established a pooled paid leave bank to reduce the number of employee absences.

Question 77

Merit raises typically become part of an employee's base salary.

Question 78

A key advantage of employee stock ownership plans is that the company gets a tax advantage equal to the fair market value of the shares that are transferred to the trustee.

Question 79

Kim works a 4-day workweek that consists of 10-hour days. Kim's employer most likely offers ________.

A) job sharing
B) flextime schedules
C) telecommuting options
D) compressed workweeks

Question 80

Which of the following is considered a hybrid of defined benefit and defined contribution plans?

A) ESOP
B) 401(k) plan
C) flexible savings
D) cash balance plan