Deck 9: Managing Compensation

Question 1

Nonexempt employees are covered by the Fair Labor Standards Act and must be paid at the rate of a rate of one and a half times their regular pay rate for time worked in excess of forty hours in their workweek.

Answer 1

True

Question 2

LennoCorp has introduced a new recognition program in which employees are publicly recognized for outstanding efforts or contributions to the firm. This is a form of nonfinancial compensation.

Answer 2

True

Question 3

Production managers at LennoCorp are required to exercise independent judgment in completing their jobs. They would be classified as exempt employees, which means that they are not covered by the overtime provisions under the Fair Labor Standards Act.

Answer 3

True

Question 4

When the unemployment rate is low, there are fewer qualified workers looking for jobs. This labor market condition may encourage companies to raise wages in order to recruit or retain employees.

Question 5

Josef is a nonexempt employee. His regular pay rate is $20 an hour. It was very busy at work this week, and he worked 46 hours. He earned $180 over his regular pay, so that his gross pay for the week will be $980.

Question 6

Strategic compensation is the term used for all the processes used to determine the market rates to pay employees.

Question 7

Pay secrecy is still prevalent in organizations despite its negative effect on motivation and employee trust.

Question 8

Ari works between 40 and 50 hours every week. How many hours he works in a given week depends on how much work he has. He is paid every other Friday, and the amount of his check is always the same. Ari is an hourly employee.

Question 9

The compensation scorecard creates a comparative tool within the organization that can reinforce desired outcomes that are unique to the company's strategy.

Question 10

Raising selection standards and hiring better-qualified employees can reduce training costs.

Question 11

Rewarding an employee's past performance is not a goal of a strategic compensation policy.

Question 12

Managers in companies with compensation scorecards often struggle to know if the promotions, raises, bonuses, and pay adjustments they make are in line with the rest of the organization and its strategy.

Question 13

Aida is an exempt employee. Her regular pay is $1000 a week, which works out to about $25 an hour. It was very busy at work this week, and she worked 46 hours. She earned $225 over her regular pay, so that her gross pay for the week will be $1225.

Question 14

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

Question 15

If rates of pay are high, which creates a large applicant pool, then organizations may choose to raise their selection standards.

Question 16

LennoCorp is using a form of the OKR system as a way to link compensation to performance. An appropriate objective for the sales team might be "sales should increase by 7 percent this month."

Question 17

Pay-for-performance programs have little, if any, effect on employee productivity.

Question 18

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 19

LennoCorp is using a form of the OKR system as a way to link compensation to performance. An appropriate objective for the production unit might be "productivity should increase."

Question 20

Debbie works anywhere from 8 to 10 hours a day, five days a week. She is paid every other Friday, and the amount of his check is always the same. Ari is a nonexempt employee.

Question 21

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

Question 22

All of the jobs at LennoCorp are grouped according to predetermined grades based on the level of skill, breadth of knowledge, and amount of responsibility each job requires. When a new position needs to be created, its specifications can be compared to the descriptions of each grade to determine the appropriate wage. LennoCorp uses a job ranking system.

Question 23

A point manual can be used to determine the external equity of a job.

Question 24

The Hay profile method is useful for evaluating jobs of all types and levels.

Question 25

The worth of a job is determined formally through the wage and salary survey.

Question 26

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

Question 27

The job classification system is a quantitative job evaluation procedure that determines a job's relative value by calculating the total points assigned to it.

Question 28

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

Question 29

Point manuals contain job descriptions and the number of points assigned to each job type.

Question 30

The worth of a job, as it is determined by its comparative worth with jobs in other firms, is an external factor in the wage mix.

Question 31

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

Question 32

Randall is a clerk in the accounting group at LennoCorp. At a recent lunch with colleagues, who are all clerks in different departments at LennoCorp, Randall discovered that the clerks in the development teams earn higher wages than he does. In this situation, Randall learned that he does not have internal pay equity.

Question 33

Clarissa and her friends are all marketing managers working on different product lines at LennoCorp. When they compared their salaries, they discovered that they all make about the same amount. In this situation, Clarissa and her friends have individual pay equity.

Question 34

Compensable factors include skills, efforts, responsibilities, and leadership.

Question 35

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 36

The consumer price index is available for the nation as a whole and for various U.S. cities.

Question 37

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

Question 38

A critical concern for a successful pay-for-performance system is the perceived fairness of the pay decision.

Question 39

A committee has been formed to evaluate the jobs at LennoCorp. They have written each job title, with a list of its duties and responsibilities, on a separate index card. Now they are putting those cards in order of importance. This committee is using a job ranking system to evaluate the jobs.

Question 40

Real wages represent the difference between wage increases and CPI increases.

Question 41

The wage curve represents the wages paid to jobs after adjustment for cost-of-living.

Question 42

Managers group similar jobs into a pay grade in order to help with the setting of wages for all jobs.

Question 43

Steps within a rate range allow pay increases based on merit or seniority.

Question 44

The National Compensation Survey published by the Bureau of Labor Statistics can provide compensation statistics broken down by wages, salary, and benefits.

Question 45

Howard is responsible for performing job evaluations. To do so, he considers the knowledge, mental activity, and accountability required by the position. Howard is using the Hay profile.

Question 46

A major criticism of competence-based pay systems is that after achieving the top wage, employees may be reluctant to continue their educational training.

Question 47

Marni works for a company that uses a job-based compensation system. The very nature of this system encourages her to learn new skills, which will expand her career options and also increase her value to the company.

Question 48

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 49

Employees at LennoCorp are motivated to work hard because they know that their performance will lead to monetary rewards that are worth the extra effort. According to the Expectancy theory, this compensation package has instrumentality.

Question 50

Broadbanding refers to collapsing of many traditional salary grades into a few wide salary bands.

Question 51

An advantage of competence-based pay from the employee's perspective is that there is no limit to what they can earn by learning new skills.

Question 52

Sandra is a clerk in a mid-size office. She has two friends who have similar jobs in other offices. All three friends have been in their jobs for about the same length of time, and their wages are almost identical. Sandra has pay equity.

Question 53

Changes in technology have required LennoCorp to create several new jobs in the company. Because LennoCorp uses a job classification system, the specifications of each new position can be compared to the descriptions of each grade to determine the appropriate wage.

Question 54

Elias works at Lenno Landscaping as a mower. He is paid a set rate for each lawn that he mows. Elias receives piecework compensation.

Question 55

Employees are likely to accept a promotion if succeeding rate ranges are larger in size.

Question 56

Red circle rates are above the maximum for the pay range and are often frozen until the range shifts upward through market wage adjustments.

Question 57

When employees are paid according to the skills and knowledge they have rather than the specific jobs they perform, they are paid according to competence-based compensation.

Question 58

One of the major criticisms of job-based compensation systems is that they often fail to reward employees for their skills or the knowledge they possess.

Question 59

Employers refer to the area from which they obtain certain types of workers as the labor market.

Question 60

An advantage of published wage surveys is compatibility with the organization's jobs.

Question 61

Because it makes managers responsible for how they spend company money, a compensation scorecard can cloud the transparency of how people are rewarded.

Question 62

Which of the following compensation options would not qualify under the term pay-for-performance?

A)Seniority-based pay
B)Group incentive
C)Pay banding
D)Gainsharing plans

Question 63

When the organization pays wages that are relatively equal to that of other employers for similar work, it is the basis of

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

Question 64

Because management positions are more difficult to evaluate and involve certain demands not found in jobs at the lower levels, some organizations do not attempt to include them in their job evaluation programs for hourly employees.

Question 65

Pay-for-performance programs

A)tie rewards to firm profitability.
B)are easy to implement and measure.
C)tie rewards to employee effort.
D)result in negligible increases in output.

Question 66

The concept that employees should exert greater work effort if they have reason to expect it will result in a valued reward forms the basis of

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

Question 67

Indirect compensation includes healthcare benefits and commissions.

Question 68

Steve has to submit a timecard every week and his compensation is based upon the amount of time he works, rather than what he accomplishes. Steve is compensated based on

A)piecework.
B)competence.
C)skilled labor.
D)hourly work.

Question 69

Which of the following is an example of a nonfinancial compensation?

A)Bonuses
B)Commissions
C)Health insurance
D)Employee recognition programs

Question 70

Sally is a freelance editor. She is paid by the page for each page that she edits. Sally is an hourly employee.

Question 71

__________ encompasses employee wages and salaries, incentives, bonuses, and commissions.

A)Nonfinancial compensation
B)Indirect compensation
C)Direct compensation
D)Component compensation

Question 72

Because pay rate compression is an external pay equity issue, employees who face it are more likely to seek advancement within the firm.

Question 73

The term pay-for-performance can encompass all of the following EXCEPT

A)merit pay.
B)base salary.
C)cash bonuses.
D)gainsharing plans.

Question 74

A company that is facing the challenge of pay rate compression might want to increase the size of pay increases for merit-worthy employees and redesign its pay structure to increase the spread between hourly and supervisory employees.

Question 75

There is reason to believe that pay secrecy can do all of the following EXCEPT

A)generate distrust in the compensation system.
B)reduce employee motivation.
C)inhibit organizational effectiveness.
D)generate feelings of commitment.

Question 76

The fact that people make comparisons to others is central to

A)expectancy theory.
B)the need for pay secrecy.
C)pay-for-performance programs.
D)equity theory.

Question 77

Instrumentality refers to

A)wage rates of acceptable level.
B)development of both internal and external pay equity.
C)wage rates above the pay range maximum.
D)rewards that are valued and motivate employees.

Question 78

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

A)To reward employees' past performance
B)To mesh employees' past performance with organizational goals
C)To remain competitive in the labor market
D)To attract new employees

Question 79

Elaine sometimes checks work-related e-mail from home on the weekend and follow up on it, even when her supervisor does not specifically ask her to. Under the Fair Labor Standards Act (FLSA), her employer must pay her for this work.

Question 80

__________ includes employee recognition programs, rewarding jobs, organizational support, work environment, and flexible work hours to accommodate personal needs.

A)Financial compensation
B)Nonfinancial compensation
C)Direct compensation
D)Indirect compensation