Deck 8: Designing Pay Levels, mix, and Pay Structures

Question 1

Survey data from one or a few employers that are significantly out of line with other employers _____.

A) are deviant data
B) are anomalies
C) reflect a diverse sample
D) are standard deviations

Answer 1

B

Question 2

_____ measures competitors' use of performance-based pay.

A) Base pay
B) Short-term incentive pay
C) Total cash
D) Total compensation

Answer 2

C

Question 3

This measure of compensation may overstate competitors' pay.

A) Base pay plus benefits
B) Total cash compensation
C) Base pay
D) Total compensation

Answer 3

B

Question 4

The process of multiplying survey data by some factor judged to reflect the difference between a survey benchmark job and a company job is called _____.

A) updating
B) point factor adjustment
C) lead/lag policy adjustment
D) survey leveling

Question 5

The _____ publishes extensive information on various occupations in different geographic areas.It is a major source of publicly available compensation data.

A) Chamber of Commerce
B) Bureau of Labor Statistics
C) compensation association
D) Department of Economics

Question 6

The first step in interpreting survey data is _____.

A) check for the accuracy of job matches
B) seek out non-responders
C) check for fraudulent data
D) remove the top and bottom paying companies

Question 7

A relevant labor market includes all employers who compete in one or more of the following areas except _____.

A) employees in the same geographic area
B) the same occupations or skills
C) the same products and services
D) pay similar wages

Question 8

The final major decision in pay-level determination is _____.

A) interpret and apply results of survey
B) obtain top-management acceptance of final decisions
C) design grades and ranges
D) draw policy lines

Question 9

_____ shows how competitors value work in similar jobs.

A) Base wage
B) Total cash
C) Total compensation
D) Base pay plus benefits

Question 10

Which of the following jobs would most likely fall into a fuzzy market?

A) Screen writer (MGM)
B) Sound engineer (Sony studios)
C) Director of future vision services (West Publishing)
D) Vice-president of people (Southwest Airlines)

Question 11

The purpose of collecting data on number of employees in a pay survey is to _____.

A) indicate how the business is organized
B) estimate the ability to pay
C) estimate the organization's impact on the labor market
D) indicate staffing patterns

Question 12

The answer to the question of how many firms to include in a pay survey is _____.

A) there are no firm rules
B) include at least one-hundred
C) focus primarily on labor-market competitors
D) the top 50 percentile of similar sized firms

Question 13

Which of the following types of labor would most likely be recruited only locally?

A) Office and clerical workers
B) Scientists
C) Managers
D) Executives

Question 14

The first step in setting competitive pay and designing a pay structure is _____.

A) specify pay-level policy
B) conduct job evaluation
C) draw policy lines
D) specify relevant market

Question 15

Which of the following is true regarding the Employment Cost Index (ECI)?

A) It is published by the Department of Commerce.
B) It is an excellent source of competitor labor costs.
C) It measures annual changes in employer compensation costs.
D) It allows comparison of labor costs to all-industry averages.

Question 16

The second major decision in pay-level determination is _____.

A) specify relevant market
B) define purpose of survey
C) design and conduct survey
D) select product and labor market competitors

Question 17

The primary responsibility for conducting a pay survey is _____.

A) top management
B) the facility or plant manager
C) outside consultants
D) the compensation manager

Question 18

Financial data in pay surveys are used to _____.

A) group firms by size
B) analyze competitors' performance
C) compare competitors' labor costs
D) compare competitors' debt ratios

Question 19

Applying the job evaluation process to pay survey jobs to assess the degree of match between survey jobs and benchmark jobs is called the _____ approach.

A) low-high
B) benchmark job
C) benchmark conversion
D) point survey conversion

Question 20

A company using a skill-based pay system prices the job of lead assembler at between $10 and $22 per hour.Survey data showed the job assembler averaged $10 per hour and the job of assembly supervisor at $22 per hour.The company was using the _____ method of job matching.

A) benchmark job
B) low-high
C) pay range
D) benchmark conversion

Question 21

Paying jobs of different functions different rates within a pay band is called ____.

A) reference rates
B) broad banding
C) pay leveling
D) knowledge-based pay

Question 22

Job structure is to ________ as pay structure is to pay-policy line.

A) market line
B) pay surveys
C) job evaluation
D) reference rates

Question 23

Size of pay differentials between grades should _____.

A) be based upon differentials in market surveys
B) be approximately 15 percent
C) support career movement through the pay structure
D) be between 10 and 25 percent

Question 24

A survey conducted in January,2007 found the median pay effective January 1,2007,for a clerk was $20,000 and the forecast rate of wage increases in the market for 2007 was 5% and another 5% for 2008.An employer choosing to follow a lead/lag policy for the 2008 plan year will need to _____.

A) add $2000 to base pay
B) multiply the salary by 105 %
C) multiply the salary by 105 % and then by another 5 %
D) multiply the salary by 110%

Question 25

Which of the following is often used to set pay ranges?

A) Median
B) Weighted mean
C) Quartiles and percentiles
D) Standard deviation

Question 26

A market pay line _____.

A) reflects an organization's internal alignment policy
B) links a company's benchmark jobs with market rates paid by competitors
C) provides an accurate prediction of an organization's entry level pay rates
D) compares an organization's minimum and maximum pay rates for each skill level

Question 27

In the regression equation,y = a + bx,job evaluation points are _____.

A) a
B) b
C) x
D) y

Question 28

Aging market data to a point halfway through the plan year is called _____.

A) leveling
B) updating
C) lead/lag
D) lag

Question 29

The _____ pay strategy emphasizes external competitiveness and deemphasizes internal alignment.

A) job structure
B) broad banding
C) reference rate
D) market pricing

Question 30

Because employers are raising employee pay at various times during the year,survey data must be updated using a process called _____ or _____.

A) ageing,trending
B) ageing,smoothing
C) trending,leveling
D) gaining,smoothing

Question 31

An organization that has a match (pay)policy will pay its employees:

A) the market rate each month for the duration.
B) more than the market rate for some months and less than the market rate for the other months.
C) at the 100^th percentile of the market rate obtained through the wage/salary survey.
D) at the 50^th percentile of the market rate obtained through the wage/salary survey.

Question 32

Which of the following statistical measures shows how similar or dissimilar the market rates are from each other?

A) Weighted mean
B) Mean
C) Standard deviation
D) Median

Question 33

All of the following are examples of potential anomalies except _____.

A) outliers
B) a large variation in base pay for a job at one company
C) one company dominates the results
D) a large variation in average base pay for a job across companies

Question 34

Pay ranges for clerical and production jobs commonly range between _____ and _____.

A) 5,15
B) 15,30
C) 30,40
D) 40,60

Question 35

Pay ranges:

A) are flexible enough to deal with differences in quality,but not with the productivity or value of these quality variations.
B) usually lead to an increase in employee turnover.
C) reflect the differences in performance or experience that an employer wishes to recognize with pay.
D) cause employees to believe that their compensation can increase by only a limited amount.

Question 36

A survey conducted in January,2007 found the median pay effective January 1,2007,for a clerk was $20,000 and the forecast rate of wage increases in the market for 2007 of was 5% and another 5% for 2008.An employer choosing to follow a lead strategy of 4% above the market for the plan year,will need to _____.

A) multiply salary by 105% and then by 109%
B) increase the clerk salary by $2,000
C) multiply the salary by 109%
D) multiply the salary by 114%

Question 37

You work in a midsize organization and have just conducted a wage survey.Five midsize companies have provided wage data for a particular job.Here are the numbers.
Which of the following statistics will be the most accurate reflection of the market rate?

A) Mean
B) Weighted mean
C) Median
D) Mode

Question 38

A survey conducted in January,2007 found the median pay effective January 1,2007,for a clerk was $20,000 and the forecast rate of wage increases in the market for 2007 of was 5% and another 5% for 2008.If an employer chooses to follow a strategy of lagging the market by 3% for the plan year 2008,they will need to _____.

A) add 3% to $20,000
B) multiply the salary by 103%
C) multiply the salary by 108%
D) multiply the salary by 105% and then by 103%

Question 39

Which of the following statements is true regarding broad bands?

A) They require a relatively stable organization design.
B) They support recognition via titles or career progression.
C) They foster cross-functional growth.
D) They give managers "freedom with guidelines".

Question 40

The _____ minimizes distortion of the central tendency caused by outliers.

A) weighted mean
B) mean
C) mode
D) median

Question 41

Pay surveys include information about both all forms of cash compensation and benefits.

Question 42

A common practice is to use the 10^th and 90^th percentiles from pay survey data to set minimums and maximums of pay grades.

Question 43

Salary data available to employees via the Internet are as reliable and accurate as other more traditional surveys.

Question 44

The most common measure of variation in pay surveys is the standard deviation.

Question 45

It is easier for employers to determine the worth of jobs that fall into fuzzy markets than traditional relevant markets.

Question 46

Aging the market data to a point halfway through the plan year is called lead/lag.

Question 47

If the purpose of a survey is to price the entire structure,then benchmark jobs can be selected to include the entire job structure.

Question 48

Market lines may be constructed by either freehand drawing or linear regression.

Question 49

Adjustments to forms of pay occur more often than adjustments to overall pay level.

Question 50

When there is an unusual level of turnover in a job,an employer is likely to conduct a market survey.

Question 51

Total cash includes base pay plus stock options and benefits.

Question 52

The relevant labor market for accounting,sales or clerical skills should be limited to each industry in which these types of work are found.

Question 53

A frequency distribution must by constructed to calculate a median.

Question 54

The process of multiplying survey data by a factor reflecting the difference between a survey and a company job is called survey leveling.

Question 55

Setting your company's base pay to competitors' total compensation risks high fixed costs.

Question 56

Which of the following statements is true about market pricers?

A) They align pay structures with the business strategy.
B) Their pay structures are unique and difficult to imitate.
C) They assume that little value is added through internal alignment.
D) They emphasize pay structures based on unique technology or the way work is organized.

Question 57

The final step in determining externally competitive pay levels and structures is merging internal and external pressure.

Question 58

In a survey,employees' views reveal what they think about their pay.

Question 59

Identifying pay survey participants by company name is considered price fixing under the Sherman Act.

Question 60

Regression smoothes large amounts of data while minimizing variations.

Question 61

Grades group job evaluation data on the horizontal axis.

Question 62

When flat pay rates are used,they are typically the midpoint of a corresponding survey job.

Question 63

Pay ranges for managerial jobs are larger than ranges for other jobs because these jobs have greater opportunity for both discretion and performance than lower level jobs.

Question 64

The pay structure is reflected in job evaluation or skill certification.

Question 65

Who should be involved in designing a compensation survey?

Question 66

What is a market line?

Question 67

What are the advantages and disadvantages of the different measures of compensation?

Question 68

What is a survey? What purpose does it serve in terms of compensation?

Question 69

Explain the difference between standard deviation and quartiles and percentiles.

Question 70

Explain the concept of pay ranges.

Question 71

Market pricers match a small percentage of their jobs with market data.

Question 72

A pay range exists when at least two employees in the same job are paid different rates.

Question 73

Explain the low-high approach in selecting jobs for inclusion in a compensation survey.

Question 74

Ranges support flexibility within guidelines while bands support some flexibility within controls.

Question 75

Pay ranges for top-level management positions are commonly larger than those other professional and midlevel managerial positions.

Question 76

Smaller pay ranges may reduce the opportunities for promotion.

Question 77

A pure market pricing strategy tends to ignore internal alignment.

Question 78

What is broad banding? What are some of its advantages?

Question 79

Career moves between bands are more common than within bands.

Question 80

How is a relevant labor market defined?