Deck 10: Developing Compensation Plans

Question 1

External equity refers to ________.

A) how a job's pay rate in one company compares to the job's pay rate in other companies
B) how fair the job's pay rate is when compared to other jobs within the same company
C) the fairness of an individual's pay as compared to what his or her co-workers are earning for the same or very similar jobs within the company, based on each individual's performance
D) the perceived fairness of the processes and procedures used to make decisions regarding the allocation of pay

Answer 1

A
Explanation: Equity is a key factor in determining pay rates. Externally, pay must compare favorably with rates in other companies, or an employer will find it hard to attract and retain qualified employees. Internally, each employee should view his or her pay as equitable given other employees' pay in the organization.

Question 2

Direct financial payments include all of the following EXCEPT ________.

A) commissions
B) insurance
C) salaries
D) incentives

Answer 2

B
Explanation: Employee compensation refers to all forms of pay going to employees and arising from their employment. It has two main components: direct financial payments (wages, salaries, incentives, commissions, and bonuses) and indirect financial payments (financial benefits like employer-paid insurance and vacations).

Question 3

Which law makes it illegal to discriminate against any individual with respect to compensation because of race,color,religion,sex,or national origin?

A) Employer Retirement Income Security Act
B) Title VII of the Civil Rights Act
C) Fair Labor Standards Act
D) Davis-Bacon Act

Answer 3

B
Explanation: Title VII makes it unlawful for employers to discriminate against any individual with respect to hiring, compensation, terms, conditions, or privileges of employment because of race, color, religion, sex, or national origin.

Question 4

Jorge worked 6 hours of overtime this week but has decided to take time off instead of overtime pay.How many hours will Jorge receive in time off from work?

A) 3 hours
B) 6 hours
C) 9 hours
D) 12 hours

Question 5

Which of the following is TRUE for employers who use independent contractors?

A) Payroll taxes are paid by the employer.
B) Federal income taxes are charged at a reduced rate.
C) Social Security taxes are higher than for regular employees.
D) Fair Labor Standards Act overtime requirements do not apply.

Question 6

Unions typically negotiate all of the following issues EXCEPT ________.

A) wage rates
B) income security
C) time off with pay
D) unpaid medical leave

Question 7

All of the following issues are addressed by the Fair Labor Standards Act EXCEPT ________.

A) termination
B) overtime pay
C) record-keeping
D) minimum wage

Question 8

Which compensation-related law contains provisions for minimum wage,maximum hours,overtime pay,equal pay,and child labor?

A) Davis-Bacon Act
B) Fair Wages Act
C) Civil Rights Act
D) Fair Labor Standards Act

Question 9

The ________ gave employees the right to organize,bargain collectively,and engage in concerted activities for the purpose of collective bargaining.

A) Fair Labor Standards Act
B) Civil Rights Act
C) Employer Retirement Income Security Act
D) National Labor Relations Act

Question 10

Homelife,a national chain of high-end furniture stores,employs nearly 800 workers.In the past few years,the company's market share has dropped significantly,and employee turnover has increased.Upper management is considering the implementation of a new compensation policy in its efforts to turn the company around.Historically,the company has paid all employees similarly with some variation for seniority but no distinction between high and low performers. All of the following questions are relevant to Homelife's decision to develop an aligned reward strategy EXCEPT ________.

A) What compensation programs should Homelife use to reinforce necessary employee behaviors?
B) How well does Homelife's current compensation program match the company's strategic aims?
C) What were the results of the most recent Homelife customer review ratings?
D) What compensation programs should Homelife use to reinforce desired employee behaviors?

Question 11

Internal equity refers to ________.

A) how a job's pay rate in one company compares to the job's pay rate in other companies
B) how fair the job's pay rate is when compared to other jobs within the same company
C) the fairness of an individual's pay as compared to what his or her co-workers are earning for the same or very similar jobs within the company, based on each individual's performance
D) the perceived fairness of the processes and procedures used to make decisions regarding the allocation of pay

Question 12

________ refers to all forms of pay or rewards going to employees and arising from their employment.

A) Employee reimbursement
B) Employee compensation
C) Salary
D) Benefits

Question 13

Jill works as a cashier at a grocery store.She earns $10 an hour (or $400 for a 40-hour week).Last week,she worked 46 hours.What is the minimum amount that Jill earned last week?

A) $430
B) $460
C) $490
D) $520

Question 14

Which of the following terms refers to a compensation plan that advances a firm's strategic goals?

A) workers' compensation package
B) aligned reward strategy
C) performance pay plan
D) strategic management

Question 15

Which of the following has historically been the primary issue in collective bargaining?

A) safety
B) wage rates
C) income security
D) health care benefits

Question 16

According to the Family and Medical Leave Act,eligible employees can take up to ________ weeks of unpaid,job-protected leave for the birth of a child or for the care of a child,spouse,or parent.

A) two
B) four
C) six
D) twelve

Question 17

According to the Fair Labor Standards Act,if a worker covered by the act works more than 40 hours,he or she will receive overtime pay at a rate of ________ of normal pay for any hours worked over 40 in a workweek.

A) 50%
B) 100%
C) 125%
D) 150%

Question 18

The ________ states that employees of one sex may not be paid wages at a rate lower than that paid to employees of the opposite sex for doing roughly equivalent work.

A) American Disabilities Act
B) Civil Rights Act
C) Employer Retirement Income Security Act
D) Equal Pay Act

Question 19

Which of the following terms refers to pay in the form of financial benefits,such as insurance?

A) merit raises
B) out-of-pocket expenses
C) indirect financial payments
D) direct financial payments

Question 20

Jason is an information systems technician in a town in North Carolina with a population of 100,000.He earns $35,000/year.He recently found out that a nearby town with a similar population pays people in the same position $40,000/year.Jason is concerned with the ________ form of equity.

A) distributive
B) procedural
C) internal
D) external

Question 21

Because the minimum wage is set by the Fair Labor Standards Act,there is no variation among states in regarding the minimum wage paid to hourly workers.

Question 22

Lisa is an HR manager who has been assigned the task of establishing pay rates to ensure external equity.What should Lisa most likely do first?

A) conduct a salary survey
B) compare performance appraisals
C) analyze a scatter plot of employee pay
D) use wage curves to price each pay grade

Question 23

What type of pay plan is being used when workers are paid a sum for each unit they produce?

A) base pay
B) competency-based pay
C) job-based pay
D) piecework

Question 24

Homelife,a national chain of high-end furniture stores,employs nearly 800 workers.In the past few years,the company's market share has dropped significantly,and employee turnover has increased.Upper management is considering the implementation of a new compensation policy in its efforts to turn the company around.Historically,the company has paid all employees similarly with some variation for seniority but no distinction between high and low performers. Which of the following,if TRUE,best supports the argument that Homelife executives should primarily address internal equity issues when developing a new compensation plan?

A) Most of Homelife's former employees are now employed at competitors' stores in similar positions.
B) Homelife employees receive annual performance appraisals at which time they set career goals.
C) Salary surveys indicate dissatisfaction among the Homelife managers in different departments.
D) Homelife pays its sales managers commissions in addition to base salaries and health benefits.

Question 25

External equity refers to how fair the job's pay rate is when compared to other jobs within the same company.

Question 26

Which of the following employees would most likely be categorized as nonexempt?

A) Anna, a registered nurse who earns $59,000/year
B) Bob, a teacher who earns $56,000/year
C) Carol, a bookkeeper who earns $23,000/year
D) Dave, a taxi driver who earns $20,000/year

Question 27

Financial benefits like employer-paid insurance and vacations are not a part of employee compensation.

Question 28

Indirect payments that contribute to an employee's compensation include variable pay like commissions and bonuses.

Question 29

The Equal Pay Act states that employees of one sex may not be paid wages at a rate lower than that paid to employees of the opposite sex for doing roughly equivalent work.

Question 30

Which of the following professions is most likely categorized as nonexempt?

A) general manager
B) pharmacist
C) paralegal
D) teacher

Question 31

All of the following duties most likely indicate that an employee is exempt EXCEPT ________.

A) making sales outside of the office
B) performing manual office work
C) designing computer systems
D) managing subordinates

Question 32

Taxi drivers and agricultural workers are always considered exempt employees.

Question 33

Which 1931 law allows the secretary of labor to set wage rates for laborers employed by contractors working for the federal government?

A) Title VII
B) Davis-Bacon Act
C) Fair Labor Standards Act
D) Walsh-Healey Public Contract Act

Question 34

As an HR manager,how would you establish pay rates while ensuring external,internal,individual and procedural equity?

Question 35

Which law requires time-and-a-half pay for any hours worked over 40 hours per week involving government contracts amounting to $10,000 or more?

A) Title VII
B) Davis-Bacon Act
C) Fair Labor Standards Act
D) Walsh-Healey Public Contract Act

Question 36

When nonexempt employees work more than 40 hours per week,employers must pay overtime at a rate of at least one-and-a-half times the normal pay for any hours worked over 40 in a workweek.

Question 37

The provision of the Family and Medical Leave Act that entitles employees to take up to 12 weeks of unpaid,job-protected leave for the birth of a child only applies to women.

Question 38

An exempt employee is eligible for overtime pay.

Question 39

What federal laws stipulate how employers compensate employees? How does an employer determine the monetary value of a job?

Question 40

Which term refers to a compensation plan that includes traditional pay,job design,career development,and recognition?

A) point method
B) total rewards
C) competency-based pay
D) talent-management salaries

Question 41

What is the first step in the ranking method of job evaluation?

A) developing class or grade descriptions
B) selecting and ranking jobs by department
C) identifying appropriate compensable factors
D) gathering job information from a job analysis

Question 42

What is a drawback associated with the ranking method of job evaluation?

A) high costs
B) subjective aspects
C) time-consuming
D) highly complex

Question 43

Which of the following is used to anchor the employer's pay scale?

A) grades
B) job aid
C) benchmark jobs
D) human resource metric

Question 44

Homelife,a national chain of high-end furniture stores,employs nearly 800 workers.In the past few years,the company's market share has dropped significantly,and employee turnover has increased.Upper management is considering the implementation of a new compensation policy in its efforts to turn the company around.Historically,the company has paid all employees similarly with some variation for seniority but no distinction between high and low performers. Which of the following,if TRUE,supports the argument that Homelife should distribute salary surveys before establishing new pay rates?

A) Homelife executives want to identify benchmark jobs before determining the worth of other jobs.
B) Computerized job evaluation systems will be used by Homelife to generate questionnaires.
C) Homelife executives plan to use the compensable factors emphasized by the Equal Pay Act.
D) A wage curve needs to be established by Homelife for the purpose of federal compliance.

Question 45

Which of the following best describes the point method of job evaluation?

A) comparing the importance of each compensable factor
B) ranking each job relative to all other jobs based on pay grade
C) identifying and quantifying the compensable factors present in a job
D) deciding which jobs have a higher number of compensable factors

Question 46

Which of the following statements is most likely TRUE about the ranking method of job evaluation?

A) Jobs are typically ranked based on the whole job.
B) Several compensable factors are commonly used to rank jobs.
C) The ranking method is typically more time consuming than other methods.
D) Ranking is usually appropriate for large employers because of the method's cost.

Question 47

Which of the following most likely indicates the need for job evaluation?

A) work stoppages
B) low turnover rates
C) vertical promotions
D) part-time employees

Question 48

A ________ pay system involves setting pay rates based on a comparison between internal pay and external pay.

A) ranking
B) salary survey
C) market-competitive
D) compensable factor

Question 49

Which job evaluation method is considered the simplest and least expensive?

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

Question 50

Basic factors that establish how several jobs compare to one another and that determine the pay for each job are called ________.

A) compensable factors
B) job evaluation factors
C) ranking factors
D) analysis factors

Question 51

When using the job classification method of job evaluation,raters categorize jobs into groups of similar jobs called ________.

A) classes
B) grades
C) sections
D) cohorts

Question 52

Which job evaluation method is a quantitative technique involving the identification of several compensable factors and the degree to which each of these factors is present in the job?

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

Question 53

What is the purpose of the wage curve?

A) to show the relationship between the value of the job and the current average pay rates
B) to equate jobs of similar difficulty or importance as established by job evaluation
C) to cluster jobs into logical groupings for pay purposes
D) to choose benchmark jobs within each pay grade

Question 54

HR managers and supervisors at Coffman Enterprises have identified a need for job evaluation and have gained the cooperation of employees.What is the next step in preparing for the job evaluation process?

A) separating exempt and nonexempt jobs
B) selecting a job evaluation committee
C) identifying benchmark jobs
D) ranking jobs by grade

Question 55

The purpose of conducting a salary survey is to ________.

A) compare internal and external equity
B) determine prevailing wage rates
C) identify compensable factors
D) rank benchmark jobs

Question 56

A ________ is comprised of jobs of approximately equal difficulty or importance as established by job evaluation.

A) pay group
B) benchmark
C) pay grade
D) class

Question 57

________ is a formal and systematic comparison of jobs to determine the worth of one job relative to another.

A) Job analysis
B) Job evaluation
C) Job description
D) Job classification

Question 58

What is the first step in creating a market-competitive pay plan?

A) choosing benchmark jobs
B) selecting compensable factors
C) reviewing relevant job descriptions
D) evaluating external and internal wage curves

Question 59

Which of the following is NOT one of the compensable factors emphasized in the Equal Pay Act?

A) skills
B) effort
C) accountability
D) responsibility

Question 60

Which of the following shows the relationship between the value and average pay of a job?

A) pay group
B) pay grade
C) benchmark
D) wage curve

Question 61

The U.S.government uses all of the following compensable factors to writ a grade definition EXCEPT ________.

A) difficulty and variety of work
B) supervision received and exercised
C) accountability
D) knowledge required

Question 62

The Equal Pay Act focuses on three compensable factors-know-how,problem solving,and accountability.

Question 63

Employers use salary surveys in all the following ways EXCEPT to ________.

A) collect employee benefits data
B) price jobs in the marketplace
C) price benchmark jobs
D) create wage curves

Question 64

Supplemental executive retirement plans and supplemental life insurance are classified as ________ in executive compensation packages.

A) base salary
B) short-term incentives
C) deferred long-term incentives
D) executive benefits and perks

Question 65

________ involve(s)determining the "worth" to the employer of each of its jobs and then pricing these jobs.

A) Job equity
B) Job evaluation methods
C) Job comparisons
D) Job analysis

Question 66

Kayla,an HR manager,is in the process of creating a market-competitive pay plan.For an accounting job at the firm,she has assigned the following weights: 70% for job complexity,25% for effort,and 5% for working conditions.What is the next step Kayla must take in the process?

A) drawing the internal and external wage curves
B) converting percentage weights into point values
C) defining the degree for each compensable factor
D) reviewing job descriptions and specifications

Question 67

Why would a firm most likely offer executive stock options in a compensation package?

A) to offer the executive long-term retirement security
B) to provide the executive with guaranteed bonuses
C) to encourage the executive to increase the firm's value
D) to prevent the executive from negotiating with other firms

Question 68

Which term refers to a series of steps or levels within a pay grade and is usually based on years of service?

A) wage grade
B) pay range
C) compa ratio
D) wage curve

Question 69

When splitting each factor into degrees in the process of creating a market-competitive pay plan,the number of degrees should not exceed two or three in most cases.

Question 70

After establishing a market-competitive pay plan,an employer realizes that some employees are being underpaid and some are being overpaid.How should these two situations be addressed?

Question 71

A(n)________ wage curve would most likely indicate whether a firm's pay rates are too low compared to what other firms pay.

A) current
B) internal
C) factored
D) market

Question 72

What is the benefit of using pay ranges for each pay grade?

A) facilitates the administration of a total rewards system
B) gives employers more flexibility in the labor market
C) identifies and corrects out-of-line pay rates
D) gives employers less flexibility in the labor market

Question 73

Unlike other job evaluation methods,the ranking method relies heavily on job specifications.

Question 74

Which of the following equals an employee's pay rate divided by the pay range midpoint for his or her pay grade?

A) pay grade
B) rate range
C) wage curve
D) compa ratio

Question 75

What is a disadvantage of the job classification method?

A) vague benchmarking
B) reliance on competencies
C) complexity of grouping jobs
D) difficulty writing grade descriptions

Question 76

What is comparable worth? Discuss the connection between comparable worth and the point method.

Question 77

Which of the following is most likely a short-term incentive given to top executives?

A) pension plans
B) stock bonuses
C) life insurance
D) stock options

Question 78

What are the similarities and differences between developing compensation plans for professionals and lower-level employees? What role does job evaluation play in each?

Question 79

Mario,an HR specialist,is conducting a job evaluation.Mario ranks different components of the job,including complexity,experience,and education required,and then adds up the points for each component.Mario is most likely using the ________ method of job evaluation.

A) ranking
B) job classification
C) factor comparison
D) alternative point

Question 80

Why do employers use pay ranges for each pay grade?