Deck 10: Compensation Strategies and Practices

Question 1

Which of the following statements is characteristic of an organization with a performance-oriented philosophy?

A)Seniority plays little role in whether an employee receives a raise.
B)Marginal performers tend to be satisfied with their compensation.
C)Bonuses are based on what other companies in the industries are paying.
D)All employees can at least count on an annual cost-of-living adjustment to their salaries.

Answer 1

A

Question 2

Tom has just taken his first full-time job with a salary of $28 000. He knows he should plan his personal finances, such as rent and car payments, around this amount. Which of the following does this amount represent?

A)base pay
B)total compensation
C)subsistence pay
D)indirect income

Answer 2

A

Question 3

Which of these options does NOT provide an example of indirect compensation?

A)health/medical insurance
B)stock options
C)paid time off
D)pension plans

Answer 3

B

Question 4

At Artistic Floral Creations, the non-managerial employees all receive the same pay increase every year. Usually, this increase is about 5 percent, but some years it has been as high as 10 percent depending on changes in the cost of living. Which philosophy of compensation does Artistic Floral Creations act upon?

A)entitlement
B)quartile-based
C)total rewards
D)performance

Question 5

Amber is the manager of a popular clothing store. She regularly works over 40 hours a week. When new styles are coming in requiring new displays, she may put in as many as 60 hours a week. Regardless of the number of hours she has worked, Amber's paycheque is the same. Which of the following identifies how Amber's pay is determined?

A)salary basis
B)wages system
C)total compensation arrangement
D)incentive compensation program

Question 6

Which of the following describes the type of compensation the employer provides when it pays for medical insurance?

A)intrinsic
B)intangible
C)indirect
D)direct

Question 7

Which of the following roles do operating managers typically play?

A)developing wage and salary structures and policies
B)developing and administering the compensation system
C)evaluating employee performance for compensation purposes
D)conducting wage surveys

Question 8

Which type of compensation is linked directly to individual, team, or organizational performance?

A)variable pay
B)wages
C)motivators
D)salary

Question 9

An employee or group of employees may receive an indirect reward for being part of the organization. Which of the following terms best applies?

A)motivator
B)perk
C)benefit
D)incentive

Question 10

What are the names of the two orientations at opposite ends of a continuum of compensation philosophies?

A)time; productivity
B)exempt; non-exempt
C)union; non-union
D)entitlement; performance

Question 11

Some payments to employees are directly calculated on the amount of time worked. Which of the following terms applies?

A)wages
B)salaries
C)bonuses
D)incentives

Question 12

In a division of compensation responsibilities, who typically makes sure that job evaluations and wage surveys are conducted?

A)operating managers
B)senior management
C)outside consultants
D)HR specialists

Question 13

Mark, the vice president of compensation for a large national retailer, is satisfied with the overall design and operation of the compensation system. Nevertheless, Mark wants to reduce the administrative cost of the compensation system without affecting any of the organization's main compensation objectives. Which of the following options is Mark most likely to seriously consider?

A)recommending that top executives take a 20 percent cut in pay
B)transforming all hourly employees from regular employees to part-time employees
C)eliminating raises for employees
D)offering automatic payroll deposit

Question 14

Which of the following statements provides the best assessment of a compensation system based on job descriptions, job evaluations, pay ranges, and pay grades when the system is put in the context of other types of compensation systems?

A)It is more legally defensible.
B)It is less likely to be viewed as fair by employees.
C)It is more appropriate for dynamic companies and industries.
D)It is more effective at retaining top performing employees.

Question 15

Which of the following would be an example of an intrinsic reward given by a manager to a subordinate?

A)additional medical insurance coverage
B)a membership in a country club
C)"You really pulled off a difficult project."
D)a grant of stock options

Question 16

At Ludlow Engineering, traditionally the employees receive a lavish Christmas luncheon catered by one of the best restaurants in town complete with a choir singing Christmas tunes. This year, the party was not scheduled, and each employee received a ham. Many employees were shocked and unhappy. Which of the following is the compensation philosophy that Ludlow Engineering is clearly moving away from?

A)performance
B)entitlement
C)third quartile
D)merit-based

Question 17

Which of the following does NOT represent a valid compensation objective for an organization?

A)performance enhancement for the organization
B)lowest total compensation cost in the industry
C)internal, external, and individual equity for employees
D)legal compliance with relevant laws and regulations

Question 18

In which type of organization are bonuses determined paternalistically?

A)entrepreneurial
B)entitlement-oriented
C)performance-oriented
D)quartile-based

Question 19

Which of the following functions is the HR unit typically responsible for?

A)monitoring attendance and productivity for compensation purposes
B)attempting to match performance with rewards
C)administering the compensation system
D)recommending pay rates and pay increases

Question 20

Compensation is one of the organization's largest expenditures. Compensation philosophies and systems vary from one organization to the next. Which of the following statements explains why?

A)Different organizations have different organizational objectives and strategies.
B)Organizations depend heavily on consultants to design their compensation systems, and each consulting firm has its own system. These systems are relatively interchangeable.
C)There is no "one right way" to compensate employees. Many systems will work equally well in any organization.
D)Legal requirements mandate different types of compensation systems depending on the organization's industry and whether it is in the public or private sector.

Question 21

Organizations may have specifically stated policies about where they wish to be positioned in the labour market. If so, which of the following have they adopted as a strategy?

A)competitive-position
B)quartile
C)labour market
D)benchmarking

Question 22

Which of the following terms encompasses the base pay, variable pay, and benefits that someone receives from a job?

A)outcomes
B)inputs
C)outputs
D)intrinsic rewards

Question 23

An organization can benefit from a properly designed and implemented competency-based pay system. Which is the main benefit of the system?

A)improved participative decision-making
B)greater workforce skills and knowledge
C)lower overall labour costs compared with other systems
D)employee expectations of career progression

Question 24

Which of the following is an example of an employee-oriented outcome of a competency-based pay system?

A)increased employee dissatisfaction, turnover, and absenteeism
B)rapid employee career progression
C)fewer bottlenecks in the work flow
D)increased compensation as more skills are gained

Question 25

Which of the following represents the most successful use of team-based compensation?

A)equal pay for each team member based on team performance
B)skill-based pay plus a percentage of base pay
C)team-based variable pay on top of base pay
D)individual pay-for-performance based on team member input

Question 26

Which of the following best explains what a third-quartile approach is?

A)a strategy for paying below market compensation.
B)a team-based approach
C)a strategy in which the company pays more than the competition
D)a useful strategy when lower-skilled employees are required

Question 27

Amanda is upset because she makes the same amount of money that Carl does, but Amanda has 18 clients and Carl has only 11 clients. About which issue is Amanda making a judgment?

A)external equity
B)intrinsic justice
C)internal equity
D)extrinsic justice

Question 28

On which of the following factors are the compensation levels of third-country nationals often based?

A)global wages
B)home country of the individual
C)regional market conditions
D)local wages

Question 29

What a person brings to the organization includes knowledge, skills, and abilities, as well as responsibilities and accomplishments. In a discussion of internal equity, what are these assets called?

A)inputs
B)qualifications
C)outputs
D)outcomes

Question 30

The goal is to show how the rate of changes in compensation compares with the rate of changes in the organization's revenues overall. Which sort of measurement needs to be made?

A)calculating compensation metrics for regular employees (excluding part-time employees) and comparing with previous year's metrics
B)calculating compensation metrics on a rotating basis: human value added one year, return on human capital invested the next year, and so forth
C)charting total compensation against total revenues (and addressing any upward change in total compensation)
D)calculating compensation metrics each year and comparing with previous year's metrics

Question 31

Jacob, the director of compensation for Golightly Jewelry. He is redesigning the compensation system to retain top performers and to be more flexible when the economy goes up or down (the company is sensitive to changes in the economy). Of the options below, which offers the approach to compensation that would work best for Golightly Jewelry?

A)total rewards
B)entitlement
C)traditional compensation
D)lag-the-market

Question 32

Ambrose, the vice president of compensation for a large software company, has attended several conferences on compensation design. He has decided that the total rewards approach would work well given his company's strategy and philosophy. Which of these actions will Ambrose NOT recommend as part of his efforts to transform the company's compensation system?

A)rationalizing the multiple existing plans under one organization-wide pay plan
B)providing flexible and portable benefits to employees
C)implementing knowledge-/skill-based broadbands
D)offering variable pay in addition to base pay

Question 33

A plan for expatriates equalizes the cost differences between the international assignment and the same assignment in the home country of the individual or the corporation. Which of the following names this compensation approach?

A)balance-sheet
B)cost equalization
C)total rewards
D)global market

Question 34

Brian, the director of compensation, has been asked by the board of directors to present the "employee cost factor" at the next board meeting. Which of the following calculations does Brian need to do?

A)revenue minus operating expense minus pay and benefits equal adjusted profit divided by pay and benefits
B)total pay and benefits expenditures
C)revenue minus operating expense minus pay and benefits equal adjusted profits divided by FTEs
D)total compensation and benefits divided by FTEs

Question 35

Larry has decided to go back to his hometown of Mellonburg, Ontario, and set up an architectural design business. Mellonburg is a depressed farming community of 351 residents. It is 20 km from the nearest movie theatre and 70 km from the nearest Starbucks coffee shop. In which quartile will Larry probably have to pay in order to attract highly skilled architects?

A)first
B)second
C)third
D)fourth

Question 36

Michael is the vice president of manufacturing for a textile firm that is opening up a plant in India. Michael must decide how to pay the hourly workers in the Indian plant. After much consultation with his peers at other companies, he decides to follow a common practice. Which of the following options is it most likely to be?

A)paying wages negotiated with the local community leaders in India
B)paying local Indian wages
C)paying higher than local Indian wages, but lower than the equivalent Canadian wages
D)paying the equivalent Canadian wages

Question 37

A company structures its compensation system so that half of its competitors pay employees more than it does and half of its competitors pay less than it does. Which strategy is it using?

A)lead the market
B)meet the market
C)follow the market
D)lag the market

Question 38

Abundance Nurseries needs large numbers of unskilled employees every spring and summer to plant, maintain, and harvest the flower fields. Abundance Nurseries is located in an area where there is a large supply of unskilled workers, and it has few problems recruiting workers as needed. Which quartile approach to compensation strategy would be most reasonable for Abundance Nurseries to use?

A)second
B)fourth
C)first
D)third

Question 39

Which of the following is NOT a typical component of expatriate compensation?

A)housing allowance
B)hardship premiums
C)bodyguard provision
D)educational allowances for children

Question 40

A company views sending employees to different countries for differing lengths of time to fulfill assignments as a continual fact of organizational life. Which approach to international compensation is the most appropriate for this company to use?

A)global market
B)tax equalization
C)supply and demand
D)balance-sheet

Question 41

Addressing the concept of pay equity involves determining the value of a job based on levels of certain key factors. Which of the following lists these factors?

A)skill, knowledge, effort, and working conditions
B)effort, knowledge, responsibility, and working conditions
C)skill, effort, responsibility, and working conditions
D)knowledge, skill, responsibility, and working conditions

Question 42

When employees and outsiders consider an organization's compensation as lacking in external equity, what is a likely outcome?

A)lower than average turnover
B)employees discussing their pay with other employees
C)little effect on employee morale because internal equity is most important to employees
D)difficulty recruiting qualified and high-demand employees

Question 43

Simon is outraged that Missy was given a raise because she is related to the chair of the board. His sense of fairness has been violated. Which of the following is at issue?

A)compensatory equity
B)external equity
C)distributive justice
D)procedural justice

Question 44

Job evaluation committees should include representation from many different groups. Which of these areas does NOT need to be specifically addressed?

A)gender
B)ethnic groups
C)age
D)different levels of authority

Question 45

Which criterion is NOT a ground for justifying pay differences between genders?

A)seniority
B)merit
C)quantity of work
D)knowledge

Question 46

Which of these goals is behind comparing the job of a file clerk with that of a labourer to determine if a wage gap exists?

A)equal pay for work of equal value
B)equal pay for equal work
C)pay equity
D)employment equity

Question 47

Terri is a manager at Chicken Delight Poultry Processors. She often works more than 40 hours a week and is not paid overtime. Which of the following statements provides an accurate assessment of Terri's legal position?

A)Terri's pay is consistent with the law because she is a salaried manager.
B)Terri's pay is inconsistent with the law because she is a non-exempt employee.
C)Terri should be paid overtime because she is an exempt employee.
D)Terri should be given compensatory time off, but not overtime because she is salaried.

Question 48

Where jobs are the same or basically the same, but are performed by people of opposite genders, they may be directly compared. Which of the following names that process?

A)equal pay for work of equal value
B)compensation equity
C)pay equity
D)equal pay for equal work

Question 49

Typically, where will organizational policies first direct an employee who wants to complain about his/her pay?

A)to the person's supervisor
B)to the HR department
C)to the Employment Equity Committee
D)to co-workers

Question 50

The relative value of jobs within an organization is established by evaluating every job in the organization according to various criteria. Which of the following options represents the criteria?

A)the nature of job tasks, duties, responsibilities, and competencies
B)the skill, effort, responsibility, and working conditions
C)the mental demands of the job
D)the physical difficulty of the job

Question 51

In the point method of job evaluation, a type of factor is used to identify a job value commonly present throughout a group of jobs. Which of the following best describes it?

A)KSA
B)functional
C)compensable
D)value-creating

Question 52

In a job evaluation, which of the following is being assessed?

A)the relative worth of the job to the organization
B)the job's level in the organizational hierarchy
C)the value of employees holding the job
D)the educational qualifications needed for employment

Question 53

Which of the following is NOT characteristic of the open pay system?

A)Each employee knows about company compensation policies.
B)Each employee can see his/her pay level published on the company intranet.
C)Each employee is given a general description of the compensation system.
D)Each employee knows where his/her pay falls within the pay grade.

Question 54

In terms of procedural justice, how must all the processes of determining base pay, allocating pay increases, and measuring performance be seen?

A)as logical
B)as fair
C)as equal
D)as open

Question 55

Which kind of legislation lacks a focus on equal pay?

A)human rights
B)employment standards
C)employment equity
D)pay equity

Question 56

Marie has been offered work as an employee trainer for AgriEnterprise. Her job is to implement the company's training plans. Marie must meet the company's timeline for completing the training sessions because training is integral to this business. Marie has been promised that she will have work with the company as long as her performance is satisfactory. The company is paying Marie as an independent contractor. Which of the following statements best describes Marie's status as an independent contractor?

A)Marie is an independent contractor because the terms of her employment meet the appropriate tests.
B)Marie is an employee, but she is a contingent employee rather than a regular employee.
C)Marie is an independent contractor with one client.
D)Marie is an employee because the conditions of her employment fail to meet the tests for an independent contractor.

Question 57

Which of the following is NOT a type of job evaluation ranking method?

A)ordered
B)straight
C)alternation
D)paired-comparison

Question 58

The first main thing the Pay Equity Act requires is that jobs be evaluated. What is the second main thing?

A)that work is compared regardless of gender
B)that types of work traditionally performed by men are compared
C)that types of work traditionally performed by women are compared
D)that work traditionally performed by men is compared to work performed mostly by women

Question 59

For an employer, there are advantages to classifying a worker as an independent contractor. Which of the following is a primary advantage?

A)The penalties for misclassifying an employee as an independent contractor are mild.
B)It saves the costs associated with employment insurance, workers' compensation, and the Canada Pension Plan.
C)Independent contractors typically have better work ethics and higher qualifications than do regular employees.
D)Independent contractors are typically more productive than regular employees are.

Question 60

Which job evaluation method considers the entire job rather than its individual components?

A)factor comparison method
B)classification method
C)point method
D)compensable factor method

Question 61

Which of the following is a major drawback to the point method of job evaluation?

A)It is too complex to implement in most organizations.
B)It is too simple to apply to complex jobs.
C)It reinforces traditional organizational structures.
D)It is available only through the Hay Group.

Question 62

Which of the following is NOT a step in establishing a pay structure?

A)developing compensation strategy
B)identifying different pay structures
C)developing a market line
D)establishing pay grades

Question 63

Which of the following is the job evaluation method most likely to be viewed as complex, difficult to use, and time-consuming to establish and develop?

A)ranking method
B)classification method
C)point method
D)factor comparison method

Question 64

Celeste, the vice president of compensation, is preparing a report for the executive committee. She is recommending that the company move from using a traditional job evaluation system to a system using market pricing. Which argument is she LEAST likely to include in her presentation on market pricing?

A)Market pricing is less subject to internal organizational politics.
B)Market pricing is viewed by employees as having high face validity.
C)Market pricing can reduce wide fluctuations in data on which pay rates are based.
D)Market price can eliminate subjectivity of job evaluation.

Question 65

What is it called when jobs are grouped into pay grades based on similar market survey amounts?

A)benchmarking
B)market banding
C)broadbanding
D)market lining

Question 66

Which of the following options represents an advantage of Internet-based pay surveys?

A)applicability to individual firms
B)level of accuracy
C)time savings
D)completeness

Question 67

George, a compensation specialist for a large frozen foods company, has been asked to identify compensable factors specific to the job of forklift operator in the company's huge warehouse. This warehouse is one of the largest refrigerated warehouses in the country. Which possible factor is George LEAST likely to include on his list?

A)safety hazards
B)use of specialized equipment
C)consequences of errors
D)working environment

Question 68

Most of the following are advantages of the point method of job evaluation. Which option has NOT been identified as an advantage?

A)stability of the rating scales
B)flexibility of implementation
C)consideration of job components rather than total job
D)relative ease of use

Question 69

There is an element that shows the relationship between job value as determined by job evaluation points and job value as determined by pay survey rates. Which of the followings terms is the best match?

A)market line
B)isobar
C)compa-ratio
D)quartile

Question 70

Found in many organizations, these jobs are performed by individuals who have similar, relatively stable duties and similar knowledge, skills, and abilities. Which kinds of jobs are these?

A)comparable
B)benchmark
C)matching
D)red-circled

Question 71

Traditional job evaluation programs have been criticized as being gender-biased against women. Which of the following arguments do employers typically make in their defence?

A)Male-dominated jobs require physical strength and endurance of severe working conditions, which makes these jobs more valuable to the organization.
B)Female-dominated jobs are objectively worth less to the organization.
C)Job evaluation is based on internal equity, and so the resulting pay levels are, by definition, non-discriminatory.
D)Job evaluations reflect the rates that the "market economy" sets for jobs.

Question 72

Which of the following predictions about the use of pay surveys is most likely to be realized in the next five years?

A)They will be conducted largely electronically, using Web-based technology.
B)The way market pricing distorts the internal equity of the compensation system will make them less popular.
C)They will be under a major legal challenge due to widespread accusations of price fixing on wages.
D)Those conducted by linking company payroll databases to a surveying company will be illegal because of invasion of privacy considerations.

Question 73

On what does much of the accuracy of the market pricing method of job evaluation depend?

A)the quality of the pay surveys used
B)the depth and appropriateness of the computerized bank of compensable factors used
C)the ability to eliminate "political correctness" from the system
D)the industry in which the organization operates

Question 74

There is a measurement derived from the pay survey and used to develop pay range minimums and maximums. Which of these descriptions best applies to it?

A)minimum and maximum of the pay ranges in the survey
B)the lesser of the statistical average, or the median pay level of the market bands
C)midpoint of the survey average
D)minimum and maximum of the pay ranges in the survey with outliers eliminated

Question 75

In one pay-setting practice, fewer pay grades are used than in traditional compensation systems, and the grades have much wider ranges. Which of the following is the name of the practice?

A)variable scheduling
B)pay scaling
C)grade reduction
D)broadbanding

Question 76

Which of the following explains why organizations use pay grades while establishing a pay structure?

A)to ensure against pay differentials based on sex or race
B)to compare similar jobs across a variety of organizations
C)to develop a pay structure that is based on market rates
D)to group individual jobs of about the same job worth

Question 77

Which of the following is a term usually associated with a group of jobs having common organizational characteristics?

A)benchmark group
B)job family
C)market band
D)occupational category

Question 78

Of the following methods of job evaluation, which is the most subjective?

A)classification
B)factor-comparison
C)Hay system
D)point

Question 79

Simon is a compensation specialist for Amber Waves, Inc. He is collecting data on compensation rates for workers performing similar jobs at other organizations. Which of the following is Simon conducting?

A)a pay survey
B)a competitive evaluation
C)a market review
D)a wage benchmarking study

Question 80

Which of the following is the last step in establishing a pay structure?

A)establishing pay grades
B)computing pay ranges
C)comparing current pay-to-pay ranges
D)reviewing individual pay