Deck 4: Components of Compensation Strategy

Question 1

One major advantage of job evaluation programs is that they require the use of comprehensive job descriptions.

Answer 1

False

Question 2

Which of the following compensation options typically makes up the largest proportion of an employee's pay package?

A) Benefits
B) Performance pay
C) Indirect pay
D) Base pay

Answer 2

D

Question 3

As an employer you believe it is always a good idea to pay people for their contributions to organizational results.Which of the following pay plans should you consider implementing?

A) Indirect pay
B) Base pay
C) Pay for knowledge
D) Performance pay

Answer 3

D

Question 4

Performance pay plans are difficult to administer and have a high discontinuation rate.

Question 5

Why would an employer prefer to use base pay over output-related pay?

A) It allows the employer some flexibility in the allocation of tasks.
B) It guarantees employee performance.
C) The need for task behaviour is high.
D) It provides the employer flexibility of labour costs.

Question 6

Pay for knowledge systems are beneficial for organizations in which the production or service process peak and ebb at different times.

Question 7

The two key questions that must be addressed in designing any compensation system are: a)what role should each of the three compensation components play in the compensation mix and b)what total level of compensation should be provided?

Question 8

The main types of individual performance pay are piece rates,commissions,merit pay,and special incentives.

Question 9

Which of the following steps is not considered part of formulating the compensation strategy?

A) Determining actual dollar values for jobs and individual employees
B) Determining the total level of compensation to provide
C) Determining how each of the mix choices should be structured
D) Determining the mix of compensation components

Question 10

As the new owner of a car dealership you have limited financial resources and want to focus employee attention on organizational performance.Which of the following pay plans should you consider using?

A) Employee stock plans
B) Targeted incentives
C) Extensive benefits
D) Competency-based plan

Question 11

Indirect pay is widely used by classical firms since it provides task motivation.

Question 12

A disadvantage of indirect pay is that benefits receive less favourable tax treatment than direct pay.

Question 13

Which of the following variable pay alternatives would be included in an organizational performance pay plan?

A) Merit pay
B) Gain-sharing
C) Profit-sharing
D) Targeted incentives

Question 14

An advantage of performance pay is that workers are paid less this way.

Question 15

Which of the following is a reason why employees may prefer base pay over performance pay?

A) Performance pay is not flexible enough.
B) Base pay is directly related to their performance level.
C) They dislike uncertainty about their compensation.
D) Market conditions are always changing.

Question 16

An advantage of base pay is that it demonstrates commitment to employees by the employer.

Question 17

Which of the following conditions make it impractical to use output-related pay?

A) Output is easy to measure.
B) Output is very stable.
C) Output cannot be controlled by the individual employee.
D) Output is easy to price in terms of its value to the employer.

Question 18

Which of the following is an objective of variable pay?

A) To help retain long service employees.
B) To reinforce desirable behaviour.
C) To eensure that performance appraisals will be taken seriously.
D) To act as a replacement for base pay.

Question 19

Competency-based pay,in contrast to skill-based pay,is a practice that has been shown to be highly beneficial over the years.

Question 20

This term is used to describe your base pay when it is calculated on an hourly basis.

A) Commission
B) Wage
C) Piece rate
D) Salary

Question 21

A flexible benefits system with cost-sharing on individual benefits is a good fit for which type of firm?

A) Human relations firm
B) High-involvement firm
C) Classical firm
D) Firm with no managerial strategy

Question 22

Which of the following are methods used to establish base pay?

A) Market pricing, job evaluation, and pay for knowledge
B) Job analysis, competency testing and demographics
C) tenure, job preview, and performance appraisal
D) knowledge, education, and skill assessment

Question 23

Which statement best describes the difference between pay for knowledge systems (PKS)and job-based pay systems?

A) Pay for knowledge systems involve basing pay on the capabilities of individuals, and job-based pay is based on the characteristics of the job.
B) Pay for knowledge systems are applied to managerial employees and job-based pay is applied to operational-level employees.
C) Pay for knowledge systems are more widely used by Canadian firms than job-based pay systems.
D) Pay for knowledge systems involve low training costs and are easier to administer than job-based pay systems.

Question 24

Which of the following would be an example of mandatory benefits?

A) Employment insurance
B) Company pension plan
C) Psychological counseling
D) Supplemental medical coverage

Question 25

Which of the following methods is more likely to create a "not my job" attitude,inhibiting change,flexibility and skill development?

A) Market pricing
B) Job evaluation
C) Competency-based pay
D) Skill-based pay

Question 26

What compensation option do unions continue to bargain strongly for at the negotiation table?

A) Comprehensive benefits
B) Performance pay
C) Mandatory benefits
D) Union dues

Question 27

Which of the following terms is used to describe the basic component of a skill-based pay system?

A) Skill block
B) Skill certification
C) Key competencies
D) Broad-banding

Question 28

Which of the following best explains why medical and dental coverage can be purchased more cheaply by the employer than the employee?

A) Indexation
B) Economies of scale
C) Utility
D) Dividends

Question 29

You company offers you pay for time not worked,disability benefits,supplemental medical coverage,and a full range of free employee services.These items refer to which component of the compensation mix?

A) Direct pay
B) Base pay
C) Indirect pay
D) Performance pay

Question 30

Which of the following is the most important potential disadvantage of performance pay?

A) It increases the need for layoffs in poor economic conditions.
B) It does not fit well with high-involvement management.
C) It is mainly effective in small companies.
D) It does not pay off for some employers.

Question 31

Which pay type usually makes up a small proportion of total compensation,and may not be used at all by some employers?

A) Mandatory benefits
B) Wages
C) Merit pay
D) Salaries

Question 32

Which of the following is not an example of indirect pay?

A) Mandatory benefits
B) Employee services
C) Life and health benefits
D) Gain sharing plans

Question 33

Which of the following refers to job evaluation?

A) Determining how well a job is performed.
B) Surveying the market.
C) Ranking all jobs according to their value to the firm.
D) Establishing the skill level of each employee.

Question 34

As the owner of a large hotel,you expect your employees to be flexible,learn a variety of skills,and shift around from one job to another as needed. Which of the following plans will best fit your needs?

A) Competency-based pay
B) Skill-based pay
C) Team-based pay
D) Piece rates

Question 35

Which of the following is a potential disadvantage of pay for knowledge?

A) Employees are usually paid more than under job-based pay.
B) Administering intelligence tests is difficult.
C) The market does not support pay for knowledge.
D) Pay for knowledge fits only classical management styles.

Question 36

Which of the following base pay methods best supports behaviours needed by high involvement firms?

A) Market pricing
B) Pay for knowledge
C) Job evaluation
D) Broad-banding

Question 37

Which of the following is not a key issue in competency-based pay systems?

A) Identifying competencies that demonstrably affect performance
B) Devising methods to measure achievement of each competency
C) Providing learning opportunities
D) Developing the merit pay grid

Question 38

Child care,elder care,and flexible work schedules are examples of which type of benefits?

A) Mandatory
B) Long-term income protection
C) Family-friendly
D) Shared-cost

Question 39

Which of the base pay methods is most likely to undervalue the work performed by women?

A) Job evaluation
B) Competency-based
C) Market pricing
D) Skill-based

Question 40

You need to attract competent employees and are more concerned with external competitiveness than internal alignment.Which is the best method for you to use to determine base pay?

A) Job evaluation
B) Person-based pay
C) Competency-based pay
D) Market pricing

Question 41

Briefly explain the three methods for establishing base pay.

Question 42

Briefly describe the three main categories of performance pay,and provide examples for each category.

Question 43

Briefly discuss the advantages and disadvantages of using indirect pay.

Question 44

Identify and briefly describe the issues in developing a skill-based pay system.

Question 45

According to the text,what are the key conditions for using output-related pay?