Deck 12: Establishing a Pay Structure

Question 1

In a two-tier wage system, employees doing the same job are paid two different rates, depending on their technical background and training.

Answer 1

False

Question 2

A pay structure helps an organization achieve goals related to cost control.

Answer 2

True

Question 3

Issues affecting an organization's pay structure do not affect its reputation in general.

Answer 3

False

Question 4

Under the FLSA, children aged 14 and 15 may not be employed outside school hours.

Question 5

The laws governing equal employment opportunity guarantee equal pay for all employees of an organization.

Question 6

Implementing broad bands increases the opportunities for promoting employees.

Question 7

Under the Davis-Bacon Act of 1931 and the Walsh-Healy Public Contracts Act of 1936, employees of federal contractors must receive rates less than the prevailing wages in the area.

Question 8

Skill-based pay systems do not support empowerment of employees.

Question 9

The pay offered by an organization is not limited by its presence in a product market.

Question 10

Pay grades allow precise matching of pay for individual jobs to market rates and an organization's job structure.

Question 11

Key jobs are uncommon and have unstable content, making them very difficult to evaluate using pay surveys.

Question 12

Pay level is the total amount an employee pays to the organization.

Question 13

Military pay often exceeds what service members would earn in their civilian jobs.

Question 14

Organizations use pay surveys to benchmark compensation.

Question 15

The most common approach to pay differentials is to move an employee lower in the pay structure to compensate for higher living costs.

Question 16

According to equity theory, employees evaluate job outcomes such as compensation in terms of outputs.

Question 17

Research suggests that employees in the lower tier of the pay structure in a two-tier wage system are less satisfied than the top-tier employees.

Question 18

In a product market, different organizations have exclusive customer bases.

Question 19

If state laws specify minimum wages, in addition to the federal level, employees are entitled to receive whichever rate is higher.

Question 20

The equity of executive pay affects a select few of an organization's employees.

Question 21

Karina, a researcher, believes that an organization needs to plan what they will pay employees in each job. Timmy, her colleague, argues that an employee's pay should be independently negotiated. Which statement weakens Timmy's argument?

A) An unplanned approach will likely result in unfairness and dissatisfaction among the employees.
B) Most of the employees prefer planned pay because negotiation with the management takes time.
C) Independently negotiated pay will increase the workload and rivalry among the employees.
D) When the pay is planned by the organization, it creates more employment opportunities.
E) The pay structure is the same for both an entry-level and a manager-level employee if it has been independently negotiated.

Question 22

Mercia, a healthcare company, provides a lower training rate to its employees belonging to the age group of 18 to 19 years. The rate is applicable for a period of 90 days. In this case, which law justifies the organization's decision to pay the lower pay?

A) laws governing equal employment opportunity
B) Fair Labor Standards Act (FLSA) provisions for minimum wage
C) Fair Labor Standards Act (FLSA) provisions for overtime
D) laws governing prevailing wages
E) Fair Labor Standards Act (FLSA) provisions for child labor

Question 23

Showery Drugs is a pharmaceutical company based in Detroit. Showery Drugs expects its employees to work long hours and achieve increased production rates. Employees earn one and a half times the usual hourly rate for working more than 40 hours in one week. Which law is Showery Drugs abiding by in this scenario?

A) laws governing equal employment opportunity
B) Fair Labor Standards Act (FLSA) of minimum wage
C) Fair Labor Standards Act (FLSA) of overtime
D) laws governing prevailing wages
E) product market laws

Question 24

Connor and McKenzie hold the same position at Delta Inc. However, Connor earns more than McKenzie. Which statement justifies the organization's decision to pay Connor more than McKenzie?

A) Connor meets higher productivity targets than McKenzie.
B) Connor comes from an economically weaker background.
C) McKenzie is male.
D) McKenzie is younger than Connor.
E) McKenzie is not a U.S. citizen.

Question 25

Ring Associates, an insurance company, defines the difference in pay between an entry-level recruiter and an entry-level assembler, as well as the difference between an entry-level recruiter, an HR manager, and the vice president of the human resource department. What is being exemplified in this scenario?

A) straight piecework plan
B) job structure
C) merit pay system
D) pay differential
E) balanced scorecard

Question 26

What will most likely be the result of using an unplanned approach, in which each employee's pay is independently negotiated?

A) dissatisfied employees
B) equal pay distribution
C) rates that are stable
D) easy employment
E) cost control

Question 27

Ergo Co. is a manufacturing company based in Texas. In the year after Ergo Co. implemented a comparable-worth policy, its expenses increased, and as a result, profits declined. What difficulty of comparable-worth policies does this example illustrate?

A) The employer is at an economic disadvantage because of increased pay for some jobs.
B) The policy overlooks the undervalued work performed by women.
C) The policy uses job enrichment to establish a pay structure based on market rates.
D) The employer ignores the evaluation points for each job.
E) Employees in lower-paid jobs are encouraged to meet the goal of comparable worth.

Question 28

What is a drawback of a minimum wage in terms of social policy?

A) It assumes people will take differences in pay into account when they choose a career.
B) It is one and a half times the employee's usual hourly rate.
C) It applies only to the hours worked beyond 40 in one week.
D) It places the employer at an economic disadvantage relative to employers that pay the living wage.
E) It tends to be lower than the earnings required for a full-time worker to rise above the poverty level.

Question 29

Which provision is included in the Fair Labor Standards Act (FLSA)?

A) personal finance
B) minimum wage
C) wage discrimination
D) environmental hazards
E) retirement plans

Question 30

What is a drawback of a comparable-worth policy?

A) A free-market economy assumes people will not take differences in pay into account when they choose a career.
B) Employees may conclude that pay rates are unfair.
C) The courts prohibit organizations from defending themselves against claims of discrimination by showing that they pay the going market rate.
D) Grouping jobs will result in rates of pay for individual jobs that do not precisely match the levels specified by the market and the organization's job structure.
E) Raising pay for some jobs places the employer at a disadvantage relative to employers that pay the market rate.

Question 31

Techniques., a software company, uses job evaluations to establish the value of its jobs in terms of criteria such as their difficulty and their importance to the organization. The company then compares the evaluation points awarded to each job with the pay for each job. If jobs have the same number of evaluation points but are not paid equally, the pay of the lower-paid job is raised. Based on the scenario, identify the policy adopted by the company.

A) comparable-worth policy
B) minimum wage policy
C) average pay policy
D) merit pay policy
E) piecework rate policy

Question 32

Which statement is true of equal employment opportunity laws?

A) These laws guarantee equal pay for whites and minorities.
B) The goal of these laws is for employers to provide equal pay for equal work.
C) Job descriptions and job structures cannot help organizations demonstrate that they are upholding these laws.
D) These laws guarantee equal pay for men and women.
E) Under these laws, employers cannot tie differences in pay to business-related considerations.

Question 33

Willow Producers is a manufacturing company based in Iowa. The employees of Willow Products are paid the lowest amount under federal or state law, which is stated as an amount of pay per hour. Which law is the organization abiding by in this scenario?

A) laws governing equal employment opportunity
B) Fair Labor Standards Act (FLSA) of minimum wage
C) Fair Labor Standards Act (FLSA) of overtime
D) laws governing prevailing wages
E) product market laws

Question 34

Which sentence best describes a situation that comparable-worth policies were designed to address?

A) In a manufacturing company, there are no female managers.
B) A consumer products company has been sued for racial discrimination.
C) An agency works with a supermarket's HR department to design a job that could be held by people with mental disabilities.
D) In a city government, positions mostly held by women pay less than positions mostly held by men.
E) At a utility company, jobs that involve physical strain and danger pay more than office jobs.

Question 35

Ty earns a base rate of $12 an hour and receives a weekly attendance award of $20. He works 40 hours this week. What would be his total compensation for the week?

A) $480
B) $600
C) $500
D) $520
E) $250

Question 36

Which element establishes an organization's pay structure?

A) pay ranges and pay differentials
B) cost control and equity
C) legal requirements and job descriptions
D) individual salaries of its employees
E) job structure and pay level

Question 37

Which federal law establishes a minimum wage and requirements for overtime pay and child labor?

A) Fair Labor Standards Act
B) Americans with Disabilities Act
C) Family and Medical Leave Act
D) Employee Retirement Income Security Act
E) Equal Pay Act

Question 38

Karen and Ethan execute the same roles and responsibilities at their organization. However, Ethan earns more than Karen. Under the laws governing equal employment opportunity, which statement will justify the organization's decision to pay Ethan more than Karen?

A) Ethan is white, and Karen is black.
B) Ethan has more experience than Karen.
C) Karen has a hearing impairment.
D) Men have more stamina, so they can work longer hours.
E) Karen is an immigrant.

Question 39

Which statement is true of the FLSA requirements for overtime pay?

A) The overtime rate is one and a half times the employee's hourly rate, excluding any bonuses or piece-rate payments.
B) Time worked includes hours spent on production or sales, but not on activities such as attending required classes, cleaning up the work site, and so on.
C) Overtime must be paid whether or not the employer specifically asked or expected the employee to work the extra hours.
D) Everyone is eligible for overtime pay.
E) Most workers paid on an hourly basis are exempt and therefore not subject to the laws governing overtime pay.

Question 40

Which description best defines an organization's job structure?

A) It consists of the relative pay for different jobs within the organization.
B) It is the average amount an organization pays for a particular job.
C) It comprises the characteristics of jobs that the organization values and chooses to pay.
D) It comprises regular pay, overtime pay, and bonuses.
E) It refers to the standard amount that employers must pay under federal and state law.

Question 41

Under the FLSA, exempt status of employees depends on their

A) job responsibilities and salary.
B) organizational commitment.
C) job title.
D) work experience.
E) job qualifications.

Question 42

Mighty Mixers, a cement company, receives more than $2,000 in federal money. The company hires employees belonging to the age group of 25 to 40. Soon after, Mighty Mixers is charged for violation of law under the Davis-Bacon Act of 1931 and the Walsh-Healy Public Contracts Act of 1936. Which of the following would most likely explain the reason for the company being sued?

A) The employees of the company are not being paid at rates at least equal to the prevailing wages in the area.
B) Cement industry employees are being paid only 15 percent above the minimum wage.
C) The company hired employees belonging to the age group of 25 to 40, and they are being employed in hazardous environments.
D) Individuals eligible for overtime are being paid at one and a half times the employee's regular pay rate.
E) Employees below the age of 25 are not being hired by the company.

Question 43

Which statement is true about labor markets?

A) Organizations compete to sell labor in the labor market.
B) Competition for labor establishes the minimum an organization must pay to hire an employee for a particular job.
C) Changes in the CPI do not affect the labor market.
D) Cost-of-living considerations have little impact on labor-market rates.
E) An organization's competitors in labor markets only include companies with different products.

Question 44

Rashana is a human resource specialist at Piper Co., a business consulting company. To support human resource planning, Rashana monitors trends in the Consumer Price Index. In recent months, the CPI has been rising at an increasing rate. What can Rashana predict based on this information?

A) A rising cost of living will lead workers in the labor market to seek higher pay.
B) A falling cost of living will cause workers to leave the labor market.
C) A rise in employment costs will lead companies to demand more labor.
D) Competitors in Piper Co.'s product markets will hold wages steady.
E) Uncertainty about prices will cause workers to accept lower-paying jobs.

Question 45

Deed Manufacturers, a heavy machinery company, has employees belonging to the age group of 17 to 30. Todd, a 17-year-old, is prohibited from working with heavy machinery tools. Instead, he works in the mail room. Under the laws governing Fair Labor Standards Act (FLSA), which statement justifies the organization's decision to forbid Todd from doing heavy machinery work?

A) Todd cannot be employed in hazardous occupations because he is 17 years old.
B) Todd is expected to work in a safe environment because he is male.
C) Todd is not a U.S. citizen, therefore he is prohibited from working in a hazardous environment.
D) Todd has not yet completed college, therefore he should only be given administrative duties.
E) Todd comes from an economically weaker background, therefore he is expected to perform clerical duties.

Question 46

Which statement is true according to the Davis-Bacon Act of 1931 and the Walsh-Healy Public Contracts Act of 1936?

A) Under these laws, individuals aged 18 and 19 may not be employed in hazardous occupations defined by the Department of Labor.
B) Federal contractors must pay their employees at rates at least equal to the prevailing wages in the area.
C) The overtime rate applies to the hours worked beyond 45 in one week.
D) Employers must pay a training wage to workers under the age of 15 for a period of up to 60 days.
E) Organizations can defend themselves against claims of discrimination by showing that they pay the going market rate.

Question 47

The pay ration reporting policy, as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, requires that companies report the ratio of their average worker's pay to that of

A) other workers in the same industry.
B) minimum wage.
C) their competitor's average pay.
D) exempt employees.
E) the CEO.

Question 48

The Walsh-Healy Public Contracts Act of 1936

A) requires that a lower "training wage" be paid to workers under the age of 20 for a period of up to 90 days.
B) mandates that employers pay higher wages for overtime, defined as hours worked beyond 40 hours per week.
C) covers construction contractors that receive more than $2,000 in federal money.
D) requires general contractors performing services on prime contracts in excess of $2,500 to pay service employees in various classes no less than the prevailing local wage rates.
E) covers all government contractors receiving $10,000 or more in federal funds.

Question 49

Which statement is true about the Fair Labor Standards Act (FLSA)?

A) The overtime rate under the FLSA is two and a half times the employee's hourly rate.
B) The FLSA permits federal contractors to pay less than the prevailing wage rate.
C) The FLSA permits a subminimum training wage equal to 95 percent of the minimum wage.
D) Nonexempt employees are covered by FLSA and include most hourly workers.
E) Under the FLSA, executive, professional, and administrative employees are considered nonexempt employees.

Question 50

Which statement is true about the Consumer Price Index (CPI)?

A) The CPI helps organizations in the product markets decide an upper limit on the pay they will offer.
B) Following and studying changes in the CPI helps employers prepare for changes in the demands of the labor market.
C) The CPI helps organizations lure top-quality employees.
D) The CPI helps control labor markets' demand for pay increases.
E) The CPI helps organizations to compete with companies in other industries that hire similar employees.

Question 51

Quey Inc., a construction company, receives more than $2,000 in federal money. The company pays its employees at rates at least equal to the prevailing wages in the area. The calculation of prevailing rates by the company is based on 30 percent of the local labor force. In this case, which law does the company comply with?

A) the Lloyd-La Follette Act of 1912
B) the Smith-Connally Act of 1943
C) the Julie Jargon Act of 1940 and the Eric Morath Act of 1945
D) the Davis-Bacon Act of 1931 and the Walsh-Healy Public Contracts Act of 1936
E) the Humphrey-Hawkins Full Employment Act

Question 52

Organizations under pressure to cut labor costs may respond by

A) retaining staff levels.
B) providing pay increases to prevent employee turnover.
C) postponing hiring decisions.
D) requiring employees to bear less of the cost of benefits such as insurance premiums.
E) avoiding automation of routine tasks.

Question 53

Under the FLSA, which statement is true of child labor?

A) Children aged 18 and 19 may not be employed in hazardous occupations defined by the Department of Labor.
B) Children aged 14 and 15 may not be employed in any work associated with interstate commerce.
C) The FLSA's restrictions on the use of child labor apply to children younger than 18.
D) Children aged 18 and 19 may work only outside school hours, in jobs defined as nonhazardous, and for limited time periods.
E) All the states have laws requiring working papers or work permits for minors.

Question 54

Which statement is true about a product market?

A) The cost of labor does not affect the product market because it is an insignificant part of an organization's costs.
B) Product-market considerations are of particular concern to a company when its customers place greater importance on product rather than price.
C) Organizations in a product market are competing to serve the same customers.
D) Product markets typically place a lower limit on the pay an organization will offer its employees.
E) Organizations in a product market must increase the cost of labor every quarter.

Question 55

According to the FLSA, which individual is most likely a nonexempt employee?

A) the CEO
B) a senior administrative employee
C) an hourly paid production line employee
D) an HR manager
E) the director of marketing

Question 56

________ means that an employee is paid a given amount regardless of the number of hours worked or quality of the work.

A) Pay level
B) Nonexemption
C) Pay policy line
D) Piecework rate
E) Salary basis

Question 57

GR Designs, a manufacturing company, hires employees ranging in age from 14 to 25. Which practice by GR would ensure that it complies with child labor laws?

A) The employees are all paid the same amount.
B) The teenage employees earn a training wage for the first year.
C) Only the workers over 20 earn overtime pay.
D) All the employees have part-time schedules.
E) The employees aged 14 and 15 work only in office jobs and for limited time periods.

Question 58

Although labor and product markets limit organizations' choices about pay levels, there is a range within which organizations can make decisions. The size of this range depends on the

A) minimum and maximum wages fixed by the government.
B) pay of federal contractors.
C) organization's competitive environment.
D) quality of employees.
E) organization's global reputation.

Question 59

Roger is the head of the insurance claims department. Roger works for longer hours than his subordinates, however, he is not paid overtime for working more than 40 hours per week. Under the FLSA, which statement justifies the organization's decision not to give Roger's overtime pay?

A) Roger is not a U.S. citizen.
B) Roger comes from an economically strong background.
C) Roger is unmarried.
D) Roger is considered as an exempt employee.
E) Roger has lower educational qualifications than his subordinates.

Question 60

An organization's choices about ________ are limited by its response to the economic forces of product markets and labor markets.

A) pay rates
B) pay structure
C) pay differentials
D) pay grades
E) pay ranges

Question 61

What is an advantage of a two-tier wage system?

A) It helps move jobs out of the country.
B) It helps eliminate jobs without any legal hassles.
C) It helps reduce labor costs without cutting employees' existing salaries.
D) It helps provide more pay to new employees.
E) It provides better standards for benchmarking.

Question 62

Research on the effects of two-tier wage plans found that

A) lower-paid employees were less satisfied on average than higher-paid employees.
B) lower-paid employees were more satisfied on average than higher-paid employees because they made comparisons with lower-paying alternatives for themselves.
C) lower-paid employees expected to be promoted into the second tier in a short time span.
D) equity theory did not come into play for either group and neither group experienced more or less job satisfaction than the other.
E) both existing employees and new employees have a similar pay rate.

Question 63

Some employees at Opal Coin, a clothing manufacturer, investigate pay rates on Salary.com and learn that Opal Coin has been paying them significantly more than the national average for their jobs. In this case, what is the most likely reaction of the employees at Opal Coin?

A) The employees will conclude that there must be regional differences in pay.
B) The employees will be motivated to work much harder.
C) The employees will find their jobs less challenging.
D) The employees will find a way to increase their outcomes by stealing.
E) The employees' attitudes and behaviors will continue unchanged.

Question 64

Employees' conclusions about equity depend on

A) what they choose as a standard of comparison.
B) how much money they think the company CEO makes.
C) what level of income they believe they should be at by this point in their lives.
D) what benefits they receive.
E) if they think they can bargain for a higher rate of pay.

Question 65

Which statement is true about pay ranges?

A) Pay ranges are most common for blue-collar jobs and those covered by union contracts.
B) Pay ranges are widest for employees who are at lower levels in terms of their job evaluation points.
C) Pay ranges generally are designed so they do not overlap.
D) The market rate or the pay policy line generally serves as the midpoint of a range for the job.
E) The less overlap, the more flexibility in transferring employees among jobs.

Question 66

A pay policy line

A) shows the mathematical relationship between the minimum pay and the maximum pay in an organization.
B) can be generated using a statistical method called regression analysis.
C) requires market-pay-rate data on all jobs in the organization.
D) can seldom provide information on the market pay level for a given job evaluation.
E) reflects the pay structure in the market, which always matches rates in the organization.

Question 67

Assuming an organization wants to motivate employees through promotions, and assuming enough opportunities for promotions are available, the organization would want to

A) increase the overlap from one level to the next.
B) reduce its compa-ratio to less than 1.
C) implement a broadband pay structure.
D) limit the overlap from one pay range to the next.
E) use a fixed interval promotion policy.

Question 68

What is a drawback of setting pay rates based strictly on a pay policy line?

A) It increases the administrative burden of managing the compensation system.
B) Employees have difficulty interpreting regression analysis.
C) The estimated pay for a job may not reflect conditions in the labor market.
D) It increases the costs of surveying the market.
E) It groups jobs, which will result in rates of pay for individual jobs that precisely match the levels specified by the market.

Question 69

Overlapping ________ give the organization more flexibility in transferring employees among jobs, because transfers need not always involve a change in pay.

A) pay rates
B) pay ranges
C) pay policies
D) pay differentials
E) pay ranks

Question 70

Malto Inc., a manufacturing company, bases employees' pay entirely on market forces. In this case, what is a practical drawback faced by the company?

A) Employees might conclude that the pay rates are unfair.
B) Supervisors of the company will expect to receive lower pay because of less responsibility.
C) The highly paid employees will likely be dissatisfied because of more work.
D) The managers will participate in rotation of responsibilities because they receive lower pay.
E) All employees will be categorized as exempt employees.

Question 71

Keegan, the human resource manager at R&S Inc., is advising the company's business executives that paying more for labor than competitors can support the company's strategy. Under what conditions might Keegan's idea be most valid?

A) R&S pays more to attract top talent, applying employees' knowledge to be more innovative than competitors.
B) R&S intends to charge more than competitors for the same kinds of products.
C) R&S hopes other companies will eventually match R&S's pay scale.
D) Labor costs are a large part of R&S's total costs.
E) R&S is developing a low-price strategy that will generate more sales.

Question 72

Pay ranges are most common for

A) white-collar jobs.
B) piece-rate jobs.
C) jobs that are covered by union contracts.
D) automotive workers.
E) construction workers.

Question 73

Pay policies are one of the most important human resource tools for

A) reducing competition in the product market.
B) automating routine activities.
C) persuading customers that high quality is worth a premium price.
D) making decisions about product pricing.
E) encouraging desired employee behaviors.

Question 74

Gilly Brothers, an insurance company, incurred losses of about $100 million. To analyze its losses and to overcome them, the company began comparing its own practices against those of its successful competitors. In this scenario, which procedure is adopted by Gilly Brothers?

A) benchmarking
B) job evaluation
C) regression analysis
D) delayering
E) pay structuring

Question 75

Which statement is true of compensable factors?

A) They are generally statistically derived.
B) They are the characteristics of a job that a firm values and chooses to pay for.
C) They refer to the factors that are important for setting the two-tier wage system.
D) They describe all aspects of the jobs being evaluated.
E) They are used to ensure equity among employees.

Question 76

According to ________, people measure outcomes such as pay in terms of their inputs.

A) expectancy theory
B) equity theory
C) retributive justice theory
D) progressive justice theory
E) economic theory

Question 77

Which U.S. organization conducts an ongoing National Compensation Survey measuring wages, salaries, and benefits paid to the nation's employees?

A) Bureau of Labor Statistics
B) Society for Human Resource Management
C) American Management Association
D) AFL-CIO
E) Bureau of Economic Analysis

Question 78

Economic theory holds that the most profitable pay level, all things being equal, would be at the

A) lowest possible level.
B) market rate.
C) highest possible level.
D) mid-range level.
E) CPI rate.

Question 79

Abbel Inc., a manufacturing company, believes that pay is an investment that can generate returns in attracting, retaining, and motivating a high-quality workforce. In this case, which statement is true about Abbel Inc.?

A) It considers its employees as resources.
B) It gives the least importance to profits.
C) It is a customer-friendly firm.
D) It tries to keep its labor costs minimal.
E) It helps employees find higher-paying jobs.

Question 80

What is a set of possible pay rates defined by a minimum, maximum, and midpoint of pay for employees holding a particular job?

A) pay grade
B) pay range
C) pay differential
D) compa-ratio
E) compensation differential