Question 1

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

Accepted Answer

A salary-only plan would be appropriate for a salesperson who is selling high-priced products with long lead times, as the sales process may require a significant amount of time and effort, and traditional commission-based plans may not be well-suited for this type of sales process. A salary-only plan may provide a stable income for the salesperson, which can be particularly useful during periods of slow sales. However, it should be noted that a salary-only plan may not provide enough incentive for salespeople to exceed their targets, so it may be necessary to incorporate other incentives to motivate them to perform at their best.

Question 2

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

The plan described is a "commission-plus-draw" system, where salespeople receive a draw (advance) against future commissions to cover living expenses, which they must repay.

Question 3

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

Accepted Answer

Pay grades are the groupings of jobs based on compensable factors. They help organizations determine the pay structure for each level of work, and allow for consistency and fairness in pay policies. Market lines refer to the boundaries of the external labor market, while market-competitive pay structures and pay ranges are related to the actual pay rates for specific jobs within the organization.

Question 4

Which of the following theories 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

The theory described in the question is the equity theory, which states that employees strive for fairness and equity in the workplace and will compare their inputs (such as effort and performance) to their outcomes (such as pay and recognition) with those of others, in order to ensure a perceived balance or fairness. This includes the idea that an employee must perceive their own ratio of merit increase pay to performance as similar to that of other comparably performing people within the company, to feel that they are being treated fairly.

Question 5

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 salesperson's pay does not vary with sales volume. The salesperson receives a fixed salary regardless of the level of sales achieved, making this a good option for businesses in which sales are stable or difficult to measure.

Question 6

How are compa-ratios calculated?

Accepted Answer

Comp-ratios are calculated by dividing an employee's pay rate by the pay range midpoint. This helps to determine where an employee's pay falls within the pay range and if it's below, at, or above market rates.

Question 7

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 worth over $2,000 to pay wages at least equal to those prevailing in the area where the work is being done, specifically for construction projects. The Fair Labor Standards Act sets national minimum wage and overtime requirements, while the Equal Pay Act prohibits gender-based wage discrimination, and the Civil Rights Act of 1964 prohibits discrimination on the basis of race, color, religion, sex, or national origin in employment.

Question 8

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

Accepted Answer

The answer of In establishing pay grades,which pay rate is...

Question 9

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

John receives a green circle rate, which is a pay rate below the minimum of the pay range for his position, due to not yet meeting the educational requirement.

Question 10

When these spreads 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 based on a set number of job evaluation points for each grade, which increases as an employee moves up the pay structure.

Question 11

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

A salary-plus-commission plan allows for a fixed salary, which shares the risk with the company, while also providing commission based on sales performance.

Question 12

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

The salary-plus-bonus plan is the best choice because it offers a guaranteed salary, which provides a sense of stability and financial security for the salesperson. Additionally, the possibility of earning a bonus if they exceed their sales goal can motivate them to work harder and be more productive. This type of plan is often used for sales positions that require a lot of customer relationship building and long sales cycles, as it encourages the salesperson to focus on building strong, long-term relationships with customers.

Question 13

Which of the following represents the horizontal dimension of pay structures?

Accepted Answer

Pay grades represent the horizontal dimension of pay structures, grouping jobs of similar value or worth into the same grade, thereby establishing a hierarchy or levels within an organization's pay structure.

Question 14

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 is the ratio of an employee's current salary to the midpoint of the salary range for their position. A ratio of 1.0 means the employee's salary is at the midpoint, while a ratio of less than 1.0 means their salary is below the midpoint. Richard's compa-ratio of 0.85 indicates that his salary is not competitive with the market, as he is earning only 85% of what is typically paid for his position.

Question 15

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 there is a small pay spread between newly hired employees and more qualified job incumbents. Option A (pay structures) may refer to the overall system of pay within an organization but does not specifically relate to this situation. Options C and D (red circle pay rates and green circle pay rates) refer to special pay rates for employees who are paid above their salary range or market rate (red circle) or below their salary range or market rate (green circle).

Question 16

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 is lower than the market average. Therefore, the midpoint will be lower than the market average.

Question 17

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 means the company aims to pay above market rates to attract and retain top talent. Therefore, the midpoint of the company's pay range will be higher than the market average.

Question 18

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 is the spread between the lowest and highest amount of pay for a particular job or grade. Pay grades refer to the classification of jobs based on skills, responsibilities, and duties, while pay structures and pay levels refer to the overall compensation system and hierarchy within an organization.

Question 19

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

The market pay line represents the relationship between a company's internal job valuation and the external market valuation, helping to align internal pay structures with market rates.

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

Red circle 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. This pay rate is temporary and the employee's pay will be reduced over time until it reaches the maximum pay rate for his current position.

Quiz 8: Building Pay Structures That Recognize Individual Contributions