Question 1

Richard's job has a compa-ratio of 0.85.What does this ratio tell about Richard's pay rate?

Accepted Answer

A compa-ratio of 0.85 indicates that Richard's pay is below the market rate, as the ratio compares his actual pay rate to the market rate for his position. A ratio of 1 indicates that his pay is in line with the market rate, while a ratio above 1 would indicate that his pay is above the market rate.

Question 2

With which sales compensation plan does the level of pay not vary when sales volume does?

Accepted Answer

In a salary-only (base pay) plan, the level of pay is fixed, regardless of the sales volume. This provides a stable income for the salesperson, but may not incentivize them to increase their sales.

Question 3

What represents the relationship between a company's valuation of jobs based on job evaluation and the valuation of jobs within the external market,as assessed by compensation surveys?

Accepted Answer

D

Question 4

If the company adopts a market lead policy,how will that company's pay range midpoint compare to the market average?

Accepted Answer

A market lead policy typically means that a company is willing to pay above the market average in order to attract and retain the top talent in their industry. Therefore, the midpoint of the pay range is likely to be higher than the market average.

Question 5

Jasmine Black believes that the company should share part of the risk for her sales position.Which sales compensation plan should she pursue?

Accepted Answer

The answer of Jasmine Black believes that the company should...

Question 6

These represent the horizontal dimension of pay structures.

Accepted Answer

Pay grades represent the horizontal dimension of pay structures, grouping jobs based on their relative value to the organization. Pay ranges represent the vertical dimension, showing the minimum, maximum, and midpoint of pay for each pay grade. Job evaluation points and pay spreads are not representative of the horizontal dimension of pay structures.

Question 7

Which term is used to describe the situation where the pay spread between newly hired employees and more qualified job incumbents is small?

Accepted Answer

Pay compression refers to the situation where the pay difference between newly hired employees and more experienced or qualified job incumbents is narrow. Option A, pay structures, refers to the way pay is organized within a company, including the range of pay offered for different jobs. Option C, red circle pay rates, refers to paying employees above the normal range of the pay scale, while option D, green circle pay rates, refers to paying employees below the normal range of the pay scale. Neither of these options are directly related to the pay difference between newly hired and experienced employees.

Question 8

John is just hired by a software company as a programmer.He is also a part-time student at the local college and needs just a few credits to graduate from this college.A college degree is required in order to work as a programmer in this software company.Therefore,John receives below-minimum pay rate until he graduates from college.What type of pay rate does John receive?

Accepted Answer

The answer of John is just hired by a software...

Question 9

This type of sales incentive compensation plan offers the sales person a salary and further compensation if they meet a specific,exceptional sales goal.

Accepted Answer

This sales incentive compensation plan is a salary-plus-bonus plan, where the sales person is guaranteed a certain amount of money through their salary, but can earn additional bonuses if they exceed a specific sales goal.

Question 10

This theory suggests that an employee must regard his own ratio of merit increase pay to performance as similar to the ratio for other comparably performing people in the company.

Accepted Answer

This theory is known as equity theory, which posits that employees compare their own inputs (e.g. effort, experience, skills) and outcomes (e.g. pay, benefits, recognition) to those of others in similar positions within the organization. The theory suggests that employees strive to achieve a sense of fairness or equity in these comparisons, such that they feel they are being treated similarly to others with comparable performance levels.

Question 11

Midpoint,minimum,and maximum are values used to define which of the following?

Accepted Answer

Midpoint, minimum, and maximum are used to define pay ranges, which are a grouping of salaries or wages for a specific job or group of jobs within an organization. The midpoint is the middle value of the range, the minimum is the lowest salary or wage within the range, and the maximum is the highest salary or wage within the range. This helps organizations establish a fair and consistent pay structure for their employees.

Question 12

In establishing pay grades,which pay rate is established first?

Accepted Answer

The midpoint is usually established first when creating pay grades because it serves as a benchmark for determining the minimum and maximum pay rates. The midpoint is typically set at the industry average or at a level that the organization believes is competitive in the market. From there, the minimum and maximum pay rates can be determined based on factors such as job responsibilities, experience, and qualifications.

Question 13

A recently opened car dealer uses an incentive compensation plan for its sales people.The dealer provides money to its salespeople to cover basic living expenses and then shares a fixed percentage of the selling price of each car that a salesperson sells.However,the salesperson should repay the subsistence pay component within a year; otherwise he/she cannot continue in the employment of this dealer.What type of sales compensation plan does this dealer adopt?

Accepted Answer

This is because the salespeople receive a subsistence pay (draw) to cover their basic living expenses, which they need to repay within a year. In addition to this, they also receive a percentage of the selling price of each car they sell (commission). This combination of a draw and commission is characteristic of a commission-plus-draw compensation plan.

Question 14

Which scenario would be appropriate for using a salary-only plan?

Accepted Answer

A salary-only plan would be appropriate for salespeople who are selling high-priced products with long lead times as it may take longer for sales to close and commissions would not be paid until the sale is complete, causing financial strain on the salesperson. A salary-only plan provides a steady income, alleviating some financial pressure for the salesperson.

Question 15

This term refers to the groupings of jobs based on compensable factors,for the purpose of applying pay policies.

Accepted Answer

Pay grades are groupings of jobs based on compensable factors such as experience, education, and responsibilities. These groupings allow for pay policies to be applied consistently and fairly across similar jobs. Each pay grade typically has a minimum and maximum salary range.

Question 16

How are compa-ratios calculated?

Accepted Answer

Compa-ratios are calculated by dividing an employee's pay rate by the pay range midpoint. This provides a comparison of an individual's pay rate to the midpoint of the pay range, indicating how their pay level compares to that of others in the same position.

Question 17

When these are used to develop pay grade widths,the grades are based on a set number of job evaluation points for each grade that increases as an employee moves up the pay structure.

Accepted Answer

Absolute job evaluation points spreads are used to develop pay grade widths by assigning a set number of job evaluation points to each grade, which increases as an employee moves up the pay structure.

Question 18

If the company adopts a market lag policy,how will that company's pay range midpoint compare to the market average?

Accepted Answer

A market lag policy means that the company's pay range midpoint will be lower than the market average. The company may be intentionally setting lower pay levels to save costs or due to other reasons. Therefore, the midpoint will be lower than the market average.

Question 19

This federal Act requires contractors with federal contracts worth over $2,000 to pay wages at least equal to those prevailing in the area where the work is being done.

Accepted Answer

The Davis-Bacon Act requires contractors with federal contracts over $2,000 to pay wages at least equal to those prevailing in the area where the work is being done for laborers and mechanics. It was enacted in 1931 to prevent contractors from undercutting local workers by bringing in lower-paid, non-local laborers.

Question 20

This type of pay rate applies to an employee who is demoted but is paid more than the maximum rate for the pay grade he is now in.

Accepted Answer

The red circle pay rate applies to an employee who is demoted but still paid above the maximum for their new pay grade. This is done in order to avoid a decrease in salary that may negatively affect employee morale or retention. The green circle pay rate applies to a newly hired employee who is paid above the usual range for their position to attract high-quality candidates. Graduated and multi-tier pay rates are not specifically associated with demotions or pay above the maximum rate for a pay grade.

Quiz 8: Building Pay Structures that Recognize Individual Contributions