Deck 9: Compensation and Benefits

Question 1

Bonuses are typically a function of the performance of the organization and are less dependent on the perceived performance of the executive.

Answer 1

True

Question 2

Which of the following statements is true of a maturity curve?

A) It is used to identify benchmarks or key jobs in an organization.
B) It is used to express the relationship between pay and job responsibilities.
C) It is used when information on compensation paid to employees by other employers in a particular geographic area or occupational group is collected.
D) It is used when the annual increase in pay varies based on the actual number of years of service a person has accumulated.

Answer 2

D

Question 3

External equity in compensation refers to comparisons made by employees to other employees performing similar jobs within the same organization.

Answer 3

False

Question 4

In the context of compensation, which of the following statements is true of external inequity?

A) It occurs when lower-level employees in a firm receive fewer incentives than the top executives.
B) Overpaying individuals for the value of their contributions can effectively solve external equity issues.
C) Problems with external equity may result in dissatisfied and unhappy workers.
D) The most commonly used source of information concerning external equity is job evaluation.

Question 5

The Social Security system is aimed at providing a minimum subsistence amount to individuals who are between jobs.

Question 6

From 2027, in the United States, individuals will not be able to retire with full benefits of the Social Security program until they reach age 70.

Question 7

Workers' compensation is a nonmandated employee benefit.

Question 8

In the context of nonmandated employee benefits, contributions to private pension plans come solely from the employer.

Question 9

Brenda, the chief technical officer of a telecommunications company, is a member of the Golden Scion Country Club, one of the most exclusive country clubs in the United States. Having a membership in such country clubs is usually expensive. It is, however, free of cost for Brenda as it is paid for by her company. In the given scenario, which of the following options best describes the membership given to Brenda by her company?

A) A remittance
B) A perquisite
C) A life-cycle benefit
D) A hardship premium

Question 10

Employee assistance plans are designed to help employees who require urgent medical support for family members in case of accidents.

Question 11

Which of the following is the second step in the factor-comparison method for job evaluation in an organization?

A) The comparison factors to be used are selected and defined.
B) Benchmark or key jobs in the organization are identified.
C) A job-comparison chart is developed to display benchmark jobs.
D) The benchmark jobs in the organization are grouped into grades.

Question 12

In the context of nonmandated benefits, which of the following is an extra benefit that may or may not have any direct financial value but is considered an important reward by employees?

A) Social Security benefit
B) A perquisite
C) A bursary
D) Workers' compensation

Question 13

The most commonly used method of job evaluation is the point system.

Question 14

Which of the following statements is true of life-cycle benefits?

A) They can be availed only at the end of an employee's service with an organization.
B) They refer to fitness workshops that help employees stay healthy.
C) They include child-care and elder-care benefits.
D) They are benefits that an employee's family receives after the employee's death.

Question 15

Pay compression is least likely to develop when the market rate for starting salaries increases at a rate faster than an organization can raise pay for individuals who are already on the payroll.

Question 16

The basic aim of the Affordable Care Act was to lower the number of uninsured employees.

Question 17

Which of the following is the first step in the factor-comparison method for job evaluation in an organization?

A) The job factors to be used are selected and defined.
B) Benchmark or key jobs in the organization are identified.
C) A job-comparison chart is developed to display benchmark jobs.
D) All jobs in the organization are grouped into grades.

Question 18

In an organization, which of the following functions of compensation serves to indicate to employees what is important to focus on by paying for certain kinds of activities or behaviors?

A) Workload reduction
B) Equity
C) Market benchmarking
D) Signaling

Question 19

In the context of mandated employee benefits, the government pays the cost of workers' compensation insurance.

Question 20

The third step in the factor-comparison method for job evaluation is:

A) selecting and defining the comparison factors to be used.
B) identifying benchmark or key jobs in an organization.
C) developing a job-comparison chart to display the benchmark jobs in an organization.
D) ranking the benchmark jobs in an organization on each compensable job factor.

Question 21

In the context of compensation, which of the following statements is true of internal equity?

A) It occurs when lower-level employees in a firm receive the same incentives as the top executives.
B) Overpaying individuals for the value of their contributions can effectively solve internal equity issues.
C) Problems with internal equity can result in conflict, feelings of mistrust, and low morale.
D) Much of the information concerning internal equity comes from a pay survey.

Question 22

Which of the following statements is true of the classification system as a job-evaluation method?

A) It can easily accommodate changes in the value of various individual jobs in an organization.
B) It is difficult to construct.
C) It assumes that a flexible relationship exists between job factors and their value to an organization.
D) It is difficult to communicate to employees.

Question 23

Jennifer, an account manager in an automobile company, has work experience of 6 years and has become one of the best employees of the company in the 2 years since joining. However, she resigns from her job when she finds out that most of the new employees with only 2 or 3 years of experience in the company are paid the same salary as hers. In the given scenario, Jennifer most likely resigns because of _____.

A) pay compression
B) wage elasticity
C) pay inversion
D) external inequity

Question 24

Identify a true statement regarding the skill-based pay approach.

A) It involves compensating employees for learning specific material.
B) It inhibits an organization's flexibility in scheduling tasks to employees.
C) It allows an organization to rotate employees through different jobs.
D) It tends to incur significant costs to an organization.

Question 25

Which of the following statements is true of cafeteria-style benefits plans offered by organizations?

A) Cafeteria-style benefits are funded jointly by the employer and the government.
B) They typically take the form of referrals for employees with a disabled parent or one who needs constant care.
C) Some evidence suggests that these programs can lead to increased satisfaction and reduced turnover.
D) They are benefits targeted at different stages in an employee's life.

Question 26

Which of the following is a problem of the Social Security system?

A) Social Security benefits do not directly depend on the withholdings assessed against the employee who is retiring.
B) Individuals can avail full Social Security benefits as early as at the age of 55, which puts undue pressure on a firm's resources.
C) The state often lacks a sufficient amount of funds needed to cover all retirees.
D) It provides limited income to those retirees who do not have other sources of income, that is, no part-time work or pension plans.

Question 27

Which of the following statements is true of the Employee Retirement Income Security Act (ERISA) of 1974?

A) It prevents organizations from establishing private pension plans.
B) It specifies which employees are covered by overtime provisions and which are exempt.
C) It allows an employee to carry a portion of his or her benefits to another job.
D) It makes vesting rights operational after 4 years of service at the most.

Question 28

Which of the following is a form of a mandated benefit?

A) Paid time off
B) Workers' compensation
C) A wellness program
D) A perquisite

Question 29

In the context of nonmandated benefits, which of the following are targeted at different stages of an employee's existence?

A) Wellness programs
B) Defined contribution plans
C) Life-cycle benefits
D) Employee assistance plans

Question 30

Identify a true statement regarding the efficiency wage theory.

A) Organizations that spend more money on employee benefits experience high employee turnover.
B) Organizations unwilling to spend on benefits successfully convince employees to work harder than before.
C) Organizations willing to spend more money on total compensation attract better-qualified people.
D) Organizations do not see any impact of social, cultural, and political forces on their benefits programs.

Question 31

The Employee Retirement Income Security Act (ERISA) of 1974:

A) prevents organizations from establishing private pension plans.
B) provides protection for the funding underlying pension plans.
C) includes provisions for minimum wages and child labor.
D) makes vesting rights operational after 3 years of service at the most.

Question 32

Which of the following is true of an organization's pay-for-knowledge approach?

A) It most likely involves the hourly workers of an organization.
B) It refers to an inexpensive method of improving employees' skills.
C) It aligns perfectly with an organization's traditional incentive systems.
D) It rewards employees for mastering information that relates to global issues.

Question 33

Barry & Finch, a law firm in Connecticut, performs job evaluation by organizing different sets of jobs in the firm into clusters called grades. The job evaluator then writes definitions and descriptions of each grade, which serves as a tool for deciding the compensation for each job. Which of the following job-evaluation methods is Barry & Finch using in the given scenario?

A) The classification system
B) The market-basket analysis method
C) The factor-comparison method
D) The point system

Question 34

In the context of compensations, perquisites are:

A) mandated family health-care benefits.
B) usually made available only to members of top management.
C) benefits targeted at different stages in an employee's life.
D) paid for solely by the government.

Question 35

Donald, the CEO of a multinational organization, is given a reward by the organization in the form of a contract that allows him to purchase 5 percent shares of the company anytime in the future at a predetermined price. Three years later, Donald purchases those shares at half their market price. Additionally, he becomes more motivated to work toward increasing the performance of the organization. In this scenario, Donald is given a _____.

A) cafeteria-style benefits plan
B) stock-option plan
C) employee assistance plan
D) life-cycle benefit

Question 36

Adopting an open pay system in an organization:

A) gives rise to jealousy and resentment among employees.
B) motivates low performers to work harder for better compensation.
C) causes pay compression in the long run.
D) causes high employee turnover.

Question 37

Which of the following is an issue related to executive compensation?

A) Little or no relationship seems to exist between the performance of an organization and the compensation paid to its senior executives.
B) Most senior executives are exempt from the perquisites provided by an organization to its employees.
C) Executive compensation in the United States is far lower than that paid to senior executives in other countries.
D) Executive compensation only involves incentive pay, which is based on the years of service in an organization and commission from the clients brought to it.

Question 38

In the context of employment law, which of the following are guaranteed rights to receive pension benefits?

A) Human rights
B) Union rights
C) Vesting rights
D) Access rights

Question 39

Which of the following statements is true of the Fair Labor Standards Act?

A) It makes vesting rights operational after 6 years of service at the most.
B) It provides protection for the funding underlying pension plans.
C) It allows an employee to carry a portion of his or her benefits to another job.
D) It includes provisions for the minimum wage and overtime.

Question 40

Which of the following is a disadvantage of using an above-market compensation strategy?

A) It encourages voluntary turnover among employees.
B) A firm using this strategy incurs high labor costs.
C) It hinders a culture of elitism and competitive superiority.
D) Employees in firms using this strategy experience external inequity.

Question 41

Which of the following are designed to assist employees who have chronic problems with alcohol or drugs or who have serious domestic problems?

A) Employee assistance plans
B) Cafeteria-style benefits plans
C) Outbound training programs
D) Early retirement programs

Question 42

An HR manager at a cosmetics company invites the new employees to a meeting to discuss company policies and to explain the benefits plan used by the company. As part of this benefits plan, he gives each employee a list of benefits and asks him or her to choose the benefits that he or she really wants. The company aims to increase employee satisfaction by using this benefits plan. Which of the following benefits plans is the cosmetics company using in the given scenario?

A) A defined contribution plan
B) An employee assistance plan
C) A cafeteria-style benefits plan
D) A defined benefits plan

Question 43

Which of the following statements is true of pay surveys?

A) Individual employees should not have access to the data collected from these surveys.
B) They are the most commonly used source of information for internal equity.
C) Large firms design their own pay surveys to get the exact data they need.
D) The jobs that are the focus of these surveys should be niche jobs.

Question 44

Which of the following occurs when individuals with substantially different levels of experience, performance abilities, or both in an organization are paid wages or salaries that are relatively equal?

A) Pay compression
B) Wage elasticity
C) Pay inversion
D) External inequity

Question 45

Which of the following is true of workers' compensation?

A) It is aimed at helping people who have chronic problems with alcohol or drugs.
B) The exact premium paid for workers' compensation insurance is a function of each employee's salary.
C) Employers pay the cost of workers' compensation insurance.
D) It is provided to people who are between jobs.

Question 46

Which of the following is a life-cycle benefit offered by employers?

A) Helping employees cope with chronic drug and alcohol problems
B) Providing company-paid day-care facilities to employees
C) Offering overseas assignment opportunities to employees
D) Helping employees deal with domestic abuse problems

Question 47

Grenstall Inc., a software development firm, has adopted a new job-evaluation system in which managers are asked to objectively quantify the value of eight to ten compensable factors of each job in the organization. These compensable factors are based on their importance to that particular job and may include skill, physical effort, mental effort, and responsibility so forth. In this system, jobs are compared against a standard of key ratings. Which of the following job-evaluation systems is Grenstall Inc. most likely using in the given scenario?

A) The market-basket analysis method
B) The classification system
C) The factor-comparison method
D) The point system

Question 48

Which of the following is a difference between salaries and wages?

A) Performance is the basis for wages, whereas time is the basis for salaries.
B) Wages are paid to permanent employees, whereas salaries are paid to temporary employees.
C) Wages are paid to managerial employees within a firm, whereas salaries are paid to operational and lower-level employees within a firm.
D) Waged employees are eligible for the overtime provisions of the Fair Labor Standards Act, whereas salaried employees are not.

Question 49

Which of the following is a disadvantage of the classification system for job evaluation?

A) It assumes that a constant and inflexible relationship exists between job factors and their value to an organization.
B) It is difficult to construct.
C) It provides rigid standards for compensation and cannot accommodate changes in the value of various individual jobs in an organization.
D) It is difficult to communicate to employees.

Question 50

Brad, a manager at a new investment firm, is performing job evaluation. He selects 12 benchmark jobs in the firm and then ranks each of these jobs against compensable job factors such as physical effort, responsibility, skill, and nature of the working conditions. This ranking is based on job descriptions created during job analysis. Later, the management meets as a group and develops a consensus on the assigned values for each job. In the given scenario, which of the following systems or methods is Brad most likely using for job evaluation?

A) The point system
B) The classification system
C) The factor-comparison method
D) The market-basket analysis method

Question 51

Organizations that practice pay secrecy:

A) encourage greater camaraderie and teamwork among employees.
B) experience pay inversion in the long run.
C) believe an individual's pay is not for public knowledge.
D) motivate low performers to work harder for better compensation.

Question 52

Which of the following is a job-evaluation technique that requires managers to quantify, in objective terms, the value of the various elements of specific jobs?

A) The market-basket analysis method
B) The classification system
C) The factor-comparison method
D) The point system

Question 53

Which of the following is established to give senior managers of a company the option to buy the company shares in the future at a predetermined, fixed price?

A) The Social Security system
B) A stock-option plan
C) An employee assistance plan
D) A life-cycle benefit

Question 54

A leading placement consultancy firm gathered and presented information about the average compensation for attorneys to its clients. This information included data on the compensation paid by other law firms in a specific geographic region. The firm used this information to inform its clients about the companies that have the most external equity. Which of the following methods has the placement consultancy firm most likely used to gather information about compensation rates at different firms?

A) Job evaluation
B) A pay survey
C) A maturity curve
D) The point system

Question 55

Which of the following refers to the extent to which the compensation of any individual in an organization is formally made available to other individuals?

A) Wage and salary administration
B) Pay secrecy
C) Pay inversion
D) Pay compression

Question 56

Tessy, a senior accountant at a private bank in Massachusetts, retired at the age of 62. Upon retirement, she received a benefit amount from the bank. This benefit amount equaled the total sum of money she had added to her pension plan each year plus the amount that the bank added to it every year. In this scenario, the sum of money that Tessy received post retirement comes from the _____.

A) Workers' Compensation Insurance Program
B) defined contribution plan
C) cafeteria-style benefits plan
D) Social Security program

Question 57

The actual funding for Social Security benefits comes from the _____.

A) incomes of legal children of retired employees
B) withholdings of current employees
C) last employers of retired employees
D) contingency fund of the government

Question 58

In the context of cafeteria-style benefits plans, which of the following refers to the fact that the employee most likely to select a benefit is also most likely to use the benefit, which tends to drive up benefit costs?

A) The Peltzman effect
B) Blowback
C) The cobra effect
D) Adverse selection

Question 59

Identify a true statement regarding benefits programs.

A) Organizations that do not spend much on employee benefits save money in the long run.
B) Employees are more likely to be satisfied with firms that provide better benefits.
C) Organizations unwilling to spend on benefits successfully convince employees to work harder.
D) Employees are attracted to firms that ask employees to bear the costs of benefits.

Question 60

Unlike pay-for-knowledge plans, skill-based pay plans:

A) are more likely to be associated with hourly workers.
B) reward employees for learning new material.
C) reduce the flexibility of scheduling for management.
D) have the potential to clash with more traditional incentive systems.

Question 61

Which of the following statements is true of employee assistance plans?

A) They focus on keeping employees from becoming sick rather than simply paying expenses when they do become sick.
B) They are typically voluntary, and referrals are confidential.
C) They provide assistance to employees in learning new skills and material.
D) They are made available only to members of top management or to certain especially valuable professionals within the firm.

Question 62

Discuss the various determinants of a firm's compensation strategy.

Question 63

Briefly explain the steps involved in the classification system for job evaluation.

Question 64

What are private pension plans? Briefly explain the two types of private pension plans.

Question 65

Briefly explain pay secrecy, pay compression, and pay inversion in the context of wage and salary administration.