Question 1

Which of the following is an advantage of a lump-sum increase (LSI)plan compared with traditional raises?

Accepted Answer

LSI plans make the reward for performance more explicit and immediate, thereby increasing employees' awareness of the connection between their performance and their compensation. Traditional raises, which are often smaller and spread out over time, may not provide as clear a signal of this relationship.

Question 2

The consensus among compensation and motivation experts is that compensation systems strongly affect the types of behavior that employees demonstrate.

Accepted Answer

Compensation systems can influence employee behavior by incentivizing certain actions or outcomes, and by providing feedback on performance expectations. This can include things like setting goals, offering bonuses or raises for meeting specific targets, or providing recognition or other types of rewards. However, it's worth noting that compensation is just one factor that can affect employee motivation and behavior, and other factors like job satisfaction, work culture, and career development opportunities can also play a role.

Question 3

The total rewards approach to compensation is focused on attracting and retaining employees through a compensation system that rewards membership in the organization through predictable and secure direct and indirect compensation.

Accepted Answer

The total rewards approach to compensation encompasses not only predictable and secure direct and indirect compensation but also includes elements such as work-life balance, performance and recognition, and development and career opportunities, aiming to attract, motivate, and retain employees by addressing a broader spectrum of their needs and contributions.

Question 4

The "employee cost factor" is total compensation and benefits per employee.

Accepted Answer

The "employee cost factor" refers to the total compensation and benefits paid to each employee, including salaries or wages, healthcare, retirement benefits, and other expenses. It is often used by companies to analyze and compare their labor costs and determine the profitability and efficiency of their workforce.

Question 5

Cost-of-living adjustments are typically tied to changes in the

Accepted Answer

Cost-of-living adjustments are typically tied to changes in the Consumer Price Index (CPI), which measures the average change in prices for goods and services consumed by households. The CPI is used to adjust salaries, wages, and benefit payments to reflect changes in the cost of living.

Question 6

Which of the following employees will be qualified for the LARGEST pay raise according to a typical pay adjustment matrix? An employee with

Accepted Answer

In a typical pay adjustment matrix, employees with a higher compa-ratio (above 100) are considered overpaid and will not receive a pay raise as high as those with a lower compa-ratio (below 100). Therefore, option C is out of the question. Between A and B, employees who exceed performance expectations are usually rewarded with a higher pay raise than those who just meet expectations. Therefore, option B is a better choice. Combining these two factors, option D, an employee with a compa-ratio of 115 who exceeds performance expectations, is the best choice for the largest pay raise.

Question 7

Gillian,a meteorologist at a regional TV station,is angry that she received a large raise from her boss because she is "cute as a button." Although her income has gone up considerably,Gillian is upset because of a failure of procedural justice.

Accepted Answer

Gillian is upset because the process used to determine her raise was not based on her professional performance or qualifications, but rather on her appearance, which is a failure of procedural justice.

Question 8

The goal in giving pay increases to average performers should be

Accepted Answer

The goal in giving pay increases to average performers should be to keep their pay competitive with the labor market. This helps to prevent them from leaving the organization for better pay elsewhere, and also maintains fairness in compensation among employees. However, pay increases alone may not necessarily motivate average performers to improve their performance, so additional measures may be needed for that. Encouraging them to leave the organization is not a desirable goal for pay increases, and achieving a compa-ratio of 100 may not always be feasible or necessary.

Question 9

Some types of compensation are given to employees just for being members of the organization,regardless of their level of performance on the job.

Accepted Answer

This type of compensation is known as "membership compensation" and is given to employees solely for being part of the organization, irrespective of their job performance.

Question 10

George is a long-term exceptional performer.He has a compa-ratio of 120 and once again his performance has exceeded expectations.But,George only gets a raise of 3%,which is less than some of his co-workers who have less seniority and whose performance only meets expectations.George is incensed and waiting in your office.As director of HR,how will you explain this situation to George?

Accepted Answer

George's compa-ratio of 120 indicates he is already being paid above the market midpoint for his role, which limits the percentage increase he can receive compared to employees who are lower in their pay range.

Question 11

Pay secrecy systems have been consistently upheld as legal in the courts.

Accepted Answer

Many jurisdictions have laws that prohibit pay secrecy policies and encourage or require pay transparency to some extent, aiming to address wage discrimination and promote equality.

Question 12

An individual's ____ is that employee's current pay level divided by the midpoint of the pay range.

Accepted Answer

The term used to describe an individual's pay level relative to the midpoint of the pay range is compa-ratio. It is calculated by dividing the employee's current pay by the midpoint of the pay range, and is often used in determining if an employee's pay is fair and competitive. The other options (market ratio, target ratio, matrix ratio) do not accurately describe this calculation.

Question 13

In a typical division of compensation responsibilities,one of the manager's main responsibility in the compensation system is to evaluate employee performance and recommend pay increases.

Accepted Answer

One of the manager's main responsibilities in the compensation system is to evaluate employee performance and recommend pay increases.

Question 14

A true cost-of-living raise

Accepted Answer

A true cost-of-living raise is tied to economic indicators such as the CPI (Consumer Price Index) which tracks the average price of goods and services in an economy. It is not necessarily based on the cost of living in the local area, as the CPI takes into account national inflation rates. It is also not the same thing as an automatic increase or a merit raise, which are based on factors other than the cost of living.

Question 15

Of the following,which type of pay adjustment has the most ability to reward employee performance?

Accepted Answer

Lump-sum increases have the most ability to reward employee performance as they are given as a one-time payment for exceptional performance or achievement of set goals. This type of pay adjustment is not dependent on factors like cost of living or seniority and can be tailored to an individual employee's performance, making it a more effective way of recognizing and rewarding high performers.

Question 16

Wimsey Enterprises has announced that it will give all employees a 5% merit increase this year.This increase should really be termed a/an

Accepted Answer

An across-the-board increase is when all employees receive the same percentage increase in salary or wages, regardless of their individual performance or skills. This is what Wimsey Enterprises has announced, as all employees will receive a 5% increase. It is not a cost-of-living adjustment, which is typically based on inflation rates and the economic climate, and may vary for different employees based on location or other factors. It is also not a lump-sum increase, which would involve a fixed amount of money rather than a percentage increase, or a market rate alignment, which would involve adjusting salaries to be competitive with industry norms.

Question 17

In the last decade the pressures of the U.S.economy have compelled most private-sector,for-profit organizations to eliminate the entitlement approach to compensation and to change to true pay-for-performance compensation systems.

Accepted Answer

The answer of In the last decade the pressures of...

Question 18

An organization which has a compensation system with significant internal inequities is likely to have a "closed" system which prohibits employees from discussing their pay with co-workers.

Accepted Answer

A compensation system with significant internal inequities is often kept secret and not discussed openly to avoid conflict and dissatisfaction among employees. Prohibiting employees from discussing their pay with co-workers helps to maintain this closed system and prevent the spread of information about pay disparities.

Question 19

Research of compensation databases shows that about one-third of the people who think they are underpaid are actually underpaid.

Accepted Answer

The statement is true, as per the research of compensation databases.

Question 20

As a young employee who consistently meets (but does not exceed)performance expectations,which type of pay increase system would most likely be to your personal financial benefit considering that you expect to stay with the company another 10 years?

Accepted Answer

Across-the-board raises typically benefit employees who consistently meet expectations, as these raises are usually given to all employees regardless of individual performance. This system ensures that employees receive a consistent increase in pay over time, which can be particularly beneficial for someone planning to stay with the company for an extended period, like 10 years.

Quiz 11: Total Rewards and Compensation

Which of the following is an advantage of a lump-sum increase (LSI) plan compared with traditional raises?