Deck 9: Managing Compensation

Question 1

In a unionized environment, how is pay for employees in the bargaining unit normally determined?

A) through escalator clauses
B) through collective bargaining
C) through pay equity
D) through market evaluations with other all unions

Answer 1

B

Question 2

Which term refers to paying wages that are relatively equal to the value of the work being performed?

A) comparable worth
B) pay equity
C) compensable factors
D) equal pay

Answer 2

B

Question 3

Job evaluation helps to address issues dealing with which of the following?

A) employees' need for pay that reflects cost of living increases
B) employees' perceptions of equity
C) employers' need to match the market pay
D) employers' perceptions of unfair jobs

Answer 3

B

Question 4

One theory is based on the theoretical concept that employees should exert greater work effort if they have reason to expect it will result in a valued reward. What is this theory?

A) expectancy theory
B) equity theory
C) instrumentality theory
D) internal equity theory

Question 5

Which of the following is an internal factor that can influence the rates at which employees are paid?

A) labour market conditions
B) collective bargaining
C) the employer's ability to pay
D) the cost of living

Question 6

For real wages to increase, what is necessary?

A) An employee's wage increase must be greater than the increase in the CPI.
B) An employee must receive a lump-sum wage increase equal to the increase in the CPI.
C) An employee's wage must simply increase.
D) The CPI must increase at least as much as the employee's wage.

Question 7

What is the measure of the average change in prices over time in a fixed "market basket" of goods and services?

A) a cost of living allowance
B) a cost of living adjustment
C) the consumer price index
D) the inflation index

Question 8

Assume Microsoft wants to link its overall organizational strategy to its wage and benefit policies in the strategic plan. How can the company best do this?

A) through the development of better performance standards
B) through following federal strategic planning legislation
C) through adhering to Harvard University's Professor Porter model
D) through formalized compensation goals

Question 9

Which of the following clauses are found in some labour agreements that periodically adjust compensation rates to reflect increases in cost of living?

A) maintenance clauses
B) escalator clauses
C) roll-up clauses
D) guarantee clauses

Question 10

What is the classification for employees whose compensation is calculated on the basis of weekly, biweekly, or monthly periods?

A) salaried employees
B) hourly employees
C) management employees
D) white-collar employees

Question 11

How far do the impacts of collective bargaining extend?

A) to hourly employees only
B) to both hourly and management employees
C) beyond the segment of the labour force that is unionized
D) to both exempt and non-exempt employees

Question 12

Vidya works at Paymore Shoes and is paid for time she works in the store. How would you classify Vidya?

A) a salaried employee
B) an hourly employee
C) an exploited employee
D) a white-collar employee

Question 13

Which of the following is an example of nonfinancial compensation?

A) bonuses
B) commissions
C) health insurance
D) employee recognition programs

Question 14

Which of the following is NOT a common goal of compensation policy?

A) to punish employees for poor performance
B) to reward employees' past performance
C) to maintain the budget
D) to attract new employees

Question 15

Some organizations can choose a strategy to pay higher than market wages and salaries. Which of the following will this NOT help them do?

A) be more selective in their employee hiring
B) reduce training costs
C) retain valuable employees
D) develop more advanced performance appraisals

Question 16

Both Sam and Samantha work as cashiers at Modelo Hot Dogs. They do work of equal value to the firm, yet Sam receives less pay than Samantha. Sam is not happy because he perceives the system as being unfair to him. Which theory can you use to explain Sam's perceptions?

A) reverse discrimination theory
B) pay equity theory
C) expectancy theory
D) equity theory

Question 17

Which of the following is NOT a disadvantage of the job ranking system?

A) It does not provide a very refined measure of the job's worth, since the comparisons are made on the basis of the whole job.
B) The final rankings of jobs do not indicate the relative importance of the jobs.
C) Its simplicity makes it suitable for smaller employers.
D) It should only be used with non-exempt jobs.

Question 18

What is a key implication of expectancy theory when applied to pay systems?

A) Employees must get pay raises to cover increased living costs.
B) Employees expect their managers to be competent.
C) Employers expect their employees to be competent.
D) Rewards must be valuable for motivation to occur.

Question 19

Which of the following is an external factor that can influence the rates at which employees are paid?

A) the worth of the job
B) the employees' relative worth
C) the employer's ability to pay
D) the cost of living

Question 20

One's level of motivation depends on the attractiveness of the rewards sought. Which of the following refers to the probability of obtaining those rewards?

A) expectancy theory
B) equity theory
C) instrumentality
D) internal equity

Question 21

What type of jobs do companies normally use to collect wage survey data?

A) key jobs
B) low-rated jobs
C) high-rated jobs
D) strategic jobs

Question 22

Crystal Ball Inc. is a large information technology firm with many levels of management. The company would like to compensate its managers on factors such as knowledge and accountability. Which system would you recommend?

A) market pricing
B) the Hay profile method
C) job classification as implemented in Microsoft
D) work valuation

Question 23

In geography, the water catchment area or watershed refers to the area that channels or supplies a specific area with its water. Catchment areas divide drainage basins. In wage surveys, what is this catchment area similar to?

A) the labour market
B) the region
C) the recruiting area
D) the supply region

Question 24

Tiffany works as an IT specialist at Nortel. She is compensated based on such skills as programming and service to clients. It is likely that she is paid under which of the following pay plans?

A) a competence-based pay plan
B) a performance-based pay plan
C) a merit-based pay plan
D) a seniority-based pay plan

Question 25

Which three factors does the Hay profile method use for evaluating jobs?

A) knowledge, skill, and responsibility
B) responsibility, mental activity, and skill
C) responsibility, knowledge, and mental activity
D) knowledge, accountability, and mental activity

Question 26

Which of the following is NOT a method of comparison used in job evaluation?

A) job worth system
B) job ranking system
C) job classification system
D) point system

Question 27

When can red circle rates lead to results above the maximum for the pay range?

A) promotional opportunities are plentiful
B) the relevant jobs may have been evaluated too high previously
C) employees are demoted
D) grades are added to the range

Question 28

According to the text, what is the predominant approach to employee compensation?

A) pay-for-performance
B) competence-based pay
C) job-based pay
D) individual contract

Question 29

What is job classification often used to help determine pay for?

A) merit bonuses
B) the company's CEO
C) classified university professors' jobs
D) government jobs

Question 30

Using the point manual, how is the relative worth of a job determined?

A) by benchmarking jobs contained in the point manual
B) through the wage mix
C) by the number of steps within the pay grade
D) by the total points that have been assigned to that job

Question 31

In the development of a factor comparison scale, key jobs are NOT normally ranked against which of the following factors?

A) skill
B) performance
C) mental effort
D) responsibility

Question 32

Which of the following is a quantitative job evaluation procedure that determines a job's relative value on the basis of quantitative assessments of specific job elements?

A) the point system
B) job ranking
C) the factor comparison method
D) the job grade system

Question 33

Ontario Hydro is seeking a top-level engineer to help with its operations. What is the relevant labour market to be surveyed?

A) regional
B) local
C) national
D) internal

Question 34

What type of equity do wage and salary surveys permit an organization to maintain?

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

Question 35

In developing a wage curve, what are market wage rates plotted against?

A) market survey data
B) employee benefits
C) the size of a firm
D) the point value of jobs

Question 36

What should employers do if they wish to encourage employees to accept a promotion to a job in a higher grade?

A) increase the size of successive rate ranges
B) increase the point spread of pay grades
C) decrease the size of successive rate ranges
D) decrease the point spread of pay grades

Question 37

According to the text, which job evaluation method is considered the most valid?

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

Question 38

Which of the following pay systems would an organization wishing to establish greater job-staffing flexibility most likely use?

A) straight pay
B) competence-based pay
C) incentive pay
D) two-tier pay

Question 39

To help achieve internal equity, factors such as skills, effort, responsibilities, and working conditions may be used to assess jobs. Which term refers to these factors?

A) job specifications
B) job classification factors
C) compensable factors
D) factor comparisons

Question 40

Accounting clerks, pay clerks, and junior secretaries are all classed in Grade 2 at Metroland Inc. Which of the following should apply to all these jobs?

A) They should all receive the same wage rate in order to achieve equality.
B) They should be paid within the same pay range.
C) They should be paid similar to Grade 2 jobs at McDonald's.
D) They should be paid at different wage rates because the worth of these jobs to the organization may differ.

Question 41

Scenario 9.1
Denton and Denton Inc. (D&D Inc.)is a small graphic design firm that designs tray liners for various small food chains across Canada and a major chain in the USA. D&D currently has 20 employees who are paid hourly rates for time worked, not projects completed. These workers consider themselves valuable, knowledge-based workers, and now that the company is expanding its client base they are not happy with the current pay structure. Management claims that this pay structure, ranging from $20 to $65 per hour, is based on collapsing the pay ranges for four job bands.
Refer to Scenario 9.1. Which of the following is NOT a benefit of competence-based pay system?

A) greater productivity
B) decreased compensation costs
C) improved staffing flexibility to meet production or service demands
D) reduced effects of absenteeism and turnover

Question 42

Scenario 9.1
Denton and Denton Inc. (D&D Inc.)is a small graphic design firm that designs tray liners for various small food chains across Canada and a major chain in the USA. D&D currently has 20 employees who are paid hourly rates for time worked, not projects completed. These workers consider themselves valuable, knowledge-based workers, and now that the company is expanding its client base they are not happy with the current pay structure. Management claims that this pay structure, ranging from $20 to $65 per hour, is based on collapsing the pay ranges for four job bands.
Refer to Scenario 9.1. Given that these employees are skilled-based/knowledge workers, which of the following is a more effective way to compensate them?

A) piece rate pay system
B) hourly rate based on task completed
C) salaried employee system
D) competence-based pay system

Question 43

Desirée is a female receptionist employed by York University in Toronto. John is a male janitor with the same employer. Both jobs are evaluated as having 500 points, yet Desiree is paid less than John. She has decided to legally challenge the employer. Which of the following is relevant in this case?

A) the Peter principle
B) market matching
C) equal pay for work of equal value
D) equal pay for equal work

Question 44

Scenario 9.2
Calendar "R" Us Ltd. is a small firm that manufactures yearly calendars with a specific focus on middle and high schools in Alberta. They started operations back in 2006 with just 12 employees, two machines, and a small warehouse that served as an office and production and storage facilities. Today, Calendar "R" Us has roughly 60 employees and supplies its calendars to most middle and high schools in Alberta. When employees join they are paid based on their relationship with the owners. Given the rapid growth in its staff complement, and the arbitrary way in which it normally compensates employees, payroll has proven to be quite a challenge for the company as management looks to expand into other provinces.
Refer to Scenario 9.2. Calendar "R" Us jobs range from management to administrative, to clerical to production to packing to delivering. Which of the following would be key to evaluating the worth of each job category?

A) avoiding the use of job evaluation to establish wage structure
B) evaluating the job based on market price
C) evaluating the job based on total value delivered to the organization
D) comparing each job with a competitor in the market

Question 45

Rewarding an employee's past performance is a goal of strategic compensation policy.

Question 46

Scenario 9.2
Calendar "R" Us Ltd. is a small firm that manufactures yearly calendars with a specific focus on middle and high schools in Alberta. They started operations back in 2006 with just 12 employees, two machines, and a small warehouse that served as an office and production and storage facilities. Today, Calendar "R" Us has roughly 60 employees and supplies its calendars to most middle and high schools in Alberta. When employees join they are paid based on their relationship with the owners. Given the rapid growth in its staff complement, and the arbitrary way in which it normally compensates employees, payroll has proven to be quite a challenge for the company as management looks to expand into other provinces.
Refer to Scenario 9.2. Which of the following is a useful and cost-effective way for Calendar 'R" Us to find information on wage and salary trends in similar industries?

A) develop in-house surveys
B) use surveys done by provincial governments and boards of trade
C) purchase surveys done with global organizations
D) set wages based on ability to pay only

Question 47

Scenario 9.1
Denton and Denton Inc. (D&D Inc.)is a small graphic design firm that designs tray liners for various small food chains across Canada and a major chain in the USA. D&D currently has 20 employees who are paid hourly rates for time worked, not projects completed. These workers consider themselves valuable, knowledge-based workers, and now that the company is expanding its client base they are not happy with the current pay structure. Management claims that this pay structure, ranging from $20 to $65 per hour, is based on collapsing the pay ranges for four job bands.
Refer to Scenario 9.1. What type of pay system is D&D Inc. currently using to compensate its employees?

A) broadbanding
B) competence-based
C) red circle rates
D) piece rate

Question 48

Which of the following is the most likely outcome of collapsing many salary grades into a few wide salary bands through broadbanding?

A) reduction of pay levels
B) encouragement of lateral skill building
C) reduction of the number of employees needed
D) the collapse of broadbands

Question 49

What is NOT an outcome of wage-rate compression?

A) increased employee performance
B) low employee morale
C) delinquent employee behaviour
D) increased absenteeism

Question 50

Jambrone Foods and CUPE Local 5000 have a collective agreement in place that allows for wages to be paid at more than the minimum wage set by the Employment Standards Act. Which of the following describes this agreement?

A) illegal
B) legal
C) legal but ill-advised
D) acceptable under the Employment Standards Act but illegal under the Canada Labour Code

Question 51

Scenario 9.2
Calendar "R" Us Ltd. is a small firm that manufactures yearly calendars with a specific focus on middle and high schools in Alberta. They started operations back in 2006 with just 12 employees, two machines, and a small warehouse that served as an office and production and storage facilities. Today, Calendar "R" Us has roughly 60 employees and supplies its calendars to most middle and high schools in Alberta. When employees join they are paid based on their relationship with the owners. Given the rapid growth in its staff complement, and the arbitrary way in which it normally compensates employees, payroll has proven to be quite a challenge for the company as management looks to expand into other provinces.
Refer to Scenario 9.2. Setting pay levels at Calendar "R" Us can be limited by all EXCEPT which one of the following factors?

A) employee expectations and motivation
B) profitability of the firm
C) productivity of employees
D) economic condition and competition

Question 52

Woolite Fabrics is located in Vancouver, British Columbia. Which laws regulate its compensation?

A) federal and international laws
B) municipal and federal laws
C) provincial and federal laws
D) international laws

Question 53

Which of the following is NOT a potential challenge to competence-based pay?

A) limits by organizations to how much employees can earn despite their competencies
B) reluctance by employees to participate in relevant training
C) the development of appropriate measures of skills and competencies
D) staff flexibility

Question 54

Which of the following is NOT an idea that organizations may incorporate in an attempt to minimize the problem of wage-rate compression?

A) giving larger increases to more-senior employees
B) emphasizing pay-for-performance
C) providing equity adjustments for employees hardest hit by pay compression
D) linking all employees' pay more tightly to the CPI

Question 55

Scenario 9.2
Calendar "R" Us Ltd. is a small firm that manufactures yearly calendars with a specific focus on middle and high schools in Alberta. They started operations back in 2006 with just 12 employees, two machines, and a small warehouse that served as an office and production and storage facilities. Today, Calendar "R" Us has roughly 60 employees and supplies its calendars to most middle and high schools in Alberta. When employees join they are paid based on their relationship with the owners. Given the rapid growth in its staff complement, and the arbitrary way in which it normally compensates employees, payroll has proven to be quite a challenge for the company as management looks to expand into other provinces.
Refer to Scenario 9.2. Calendar "R" Us wants to develop a set of compensation policies that are internally fair. Which of the following is helpful in making this decision?

A) job evaluation
B) external competition
C) global comparisons of pay
D) market surveys

Question 56

Which legislation is concerned with minimum wage rates and overtime payments?

A) Equal Pay Act
B) Employment Equity Act
C) Employment Standards Act
D) Pay Equity Act

Question 57

Indirect compensation includes bonuses and commissions.

Question 58

How can organizations dodge comparable worth issues?

A) by paying female and male secretaries the same wage
B) by having an employment equity program in place
C) by using one job evaluation system for clerical jobs and another system for other jobs
D) by having a valid performance appraisal system

Question 59

Strategic compensation is the compensation of employees in ways that enhance motivation and growth while concurrently aligning their efforts with the goals of the organization.

Question 60

As the year 2000 approached, many organizations hired "young" and "inexperienced" information technology (IT)specialists to help address the Y2K problem. Many of these new hires were paid high compensation that brought them very close to the compensation earned by experienced IT specialists working with these companies. Which of the following can such a practice lead to?

A) wage inversion
B) pay equity
C) wage-rate compression
D) high turnover across the board

Question 61

The job classification system is commonly used by smaller employers.

Question 62

Job evaluation is a non-systematic, qualitative process of determining the relative worth of jobs in order to establish a comparison with the prevailing market and regional value of a job within a job family.

Question 63

Labour market conditions have little impact on wage rates paid to employees.

Question 64

Pay levels are limited in part by profitability of the firm and productivity of employees.

Question 65

Internal factors that influence wage rates include the worth of a job, and the employer's ability to pay.

Question 66

The expectancy theory of motivation predicts that one's level of motivation depends on the attractiveness of the rewards sought by employees and the probability of obtaining those rewards.

Question 67

Employees who earn pay for hourly work are referred to as salaried employees.

Question 68

The use of job evaluation is widespread in the private sector but is rarely used in the public sector.

Question 69

Pay equity is achieved when employees' compensation is equal to the value of the work they perform.

Question 70

The point system of job evaluation permits jobs to be evaluated quantitatively based on compensable factors.

Question 71

Wage survey data can be obtained from government sources, trade associations, or professional groups, or organizations can conduct their own surveys.

Question 72

Wage compression can be avoided by granting wage increases solely on the basis of the CPI.

Question 73

Among the goals of strategic compensation policy are rewarding past performance, attracting new employees, and reducing turnover.

Question 74

Real wages represent the difference between wage increases and cost-of-living increases.

Question 75

Granting wage increases solely on the basis of the CPI helps compress pay rates within a pay structure, thereby ensuring equity among those who receive the wage increase.

Question 76

Expectancy theory predicts that people expect to be paid as much or more than individuals in a similar job class.

Question 77

Job ranking is a simple method that provides a precise measure of each job's worth.

Question 78

When time off is given in exchange for overtime work, it must be given hour-for-hour to the number of hours worked overtime.

Question 79

The consumer price index tracks the change in price over time of a "market basket" of goods and services.

Question 80

HR professionals establish predetermined wage grades as a basis for evaluating jobs in the job classification system of job evaluation.