Deck 11: Pay Structure Decisions

Question 1

Labor market competition is the amount an organization must pay to compete against other companies that hire similar types of employees.

Answer 1

True
Explanation: Labor market competition is the amount an organization must pay to compete against other companies that hire similar employees. These labor market competitors typically include not only companies that have similar products but also those in different product markets that hire similar types of employees.

Question 2

For blue-collar jobs, particularly those covered by collective bargaining contracts, there may be a single rate of pay for all employees within the job.

Answer 2

True
Explanation: For blue-collar jobs, particularly those covered by collective bargaining contracts, there may be a single rate of pay for all employees within the job.

Question 3

The equity theory suggests that people evaluate the fairness of their situations by comparing them with how they were treated in their previous organization.

Answer 3

False
Explanation: Equity theory suggests that people evaluate the fairness of their situations by comparing them with those of other people. According to the theory, a person (p)compares her own ratio of perceived outcomes O (pay, benefits, working conditions)to perceived inputs I (effort, ability, experience)to the ratio of a comparison other (o).

Question 4

The disadvantage of using pay grade approach is that it increases the administrative burden of setting separate rates of pay for hundreds of different jobs.

Question 5

The number of organizations that are focusing on nonlabor forces while deciding production location is decreasing.

Question 6

Under a two-tier wage plan, employees doing the same job are paid two different rates, depending on when they were hired.

Question 7

Pay level refers to the relative pay of jobs in an organization.

Question 8

The upper bound placed by product market competition is more constrictive when labor costs are a larger share of total costs.

Question 9

Benchmarking is a procedure in which a company compares its different practices with the standard set by the management.

Question 10

Actual market rates are used for key jobs in the pay policy line approach rather than in the market survey data approach.

Question 11

Nonkey jobs are those that are common to many organizations.

Question 12

Organizations usually develop a market pay policy line based on the key jobs for which there are both job evaluation and market pay survey data available.

Question 13

When you move an employee higher in the pay structure to compensate for higher living costs, it becomes easier to adjust the salary downward when the employee moves to a low-cost area.

Question 14

Skill-based pay systems are not suitable for increasing demands that changing technology continues to bring.

Question 15

The compa-ratio directly assesses the degree to which actual pay is consistent with the pay policy.

Question 16

Broad bands with their greater spread between pay minimums and maximums can lead to rising labor costs.

Question 17

Internal job worth can be measured using the administrative tool of job evaluation.

Question 18

Product market comparisons that focus on labor costs deserve greater weight when the product demand is inelastic.

Question 19

Job evaluation is a more appropriate tool for internal equity pay comparisons than market pay surveys.

Question 20

The emphasis that job-based pay structures lay on job levels and status differentials encourages promotion-seeking behavior.

Question 21

_____ refers to the relative pay of different jobs and how much they are paid.

A)Pay grade
B)Pay structure
C)Efficiency wage
D)Benchmark
E)Job evaluation

Question 22

Which of the following observations is true about the equity theory?

A)It suggests that managers compare the performance of employees with their potential to improve.
B)It suggests that employees' performance should be evaluated based on their developmental needs.
C)It suggests that internal equity pay comparisons focus on what employees in other organizations are paid for doing the same general job.
D)It suggests that when a person's outcome-input ratio is greater than the comparison other's ratio, underreward inequity is perceived.
E)It suggests that people evaluate the fairness of their situations by comparing them with those of other people.

Question 23

Which of the following is true of external equity pay comparison?

A)It involves comparisons with employees with lower level jobs in the organization.
B)It involves comparisons with employees with higher level jobs in the organization.
C)It influences whether employees accept transfers.
D)It influences employees' willingness to accept promotions.
E)It influences decisions of employees of whether to stay or move to another organization.

Question 24

According to the _____, a person compares her own ratio of perceived outcomes to perceived inputs to the ratio of a comparison other.

A)reinforcement theory
B)predicted outcome value theory
C)social exchange theory
D)equity theory
E)expectancy theory

Question 25

Which of the following administrative tools is used by organizations to design job structures?

A)Job rotation
B)Job evaluation
C)Market pay survey
D)Job description
E)Job specification

Question 26

Which of the following is a likely consequence of an internal equity perception?

A)Attraction of efficient employees
B)Retention of quality employees
C)Labor costs
D)Job rotation
E)Pay scales of competitors

Question 27

Which of the following is part of cash compensations offered to employees?

A)Paid vacation
B)Unemployment compensation
C)Health insurance
D)Stock options
E)Retirement plans

Question 28

Which of the following is part of benefits offered to employees?

A)Stock options
B)Unemployment compensation
C)Salary
D)Merit increases
E)Bonuses

Question 29

Which of the following is true about pay?

A)Pay is not helpful when it comes to aligning employees' interests with those of the broader organization.
B)Pay has a small impact on employee attitudes and behavior.
C)From the employees' view, pay policies do not affect their standard of living.
D)Companies often look for ways to reduce pay by jeopardizing their relationship with the workforce.
E)Employees attach great importance to pay decisions when they evaluate their relationship with the organization.

Question 30

One limitation of the comparable worth policy is that it targets single employers, ignoring that men and women tend to work for different employers.

Question 31

Internal equity pay comparison is:

A)influenced primarily by an organization's choice of pay level.
B)the primary administrative tool organizations use in choosing a pay level.
C)focused on what employees within the same organization but in different jobs are paid.
D)determined using market pay surveys.
E)more likely to influence the decisions of applicants to accept job offers than external equity pay comparison.

Question 32

Which of the following is true of labor market competition?

A)Labor market focuses primarily on competing through providing quality product or service at a competitive price in the market.
B)Labor market places an upper bound on labor costs and compensation.
C)The upper bound placed by the labor market is more constrictive when labor costs are a very small share of the total costs.
D)An indirect payment such as Social Security, a major component of labor costs, is not included in calculating the average cost of an employee.
E)Labor market competition places a lower bound on pay levels.

Question 33

The Title VII of the Civil Rights Act focuses on equal pay for jobs of equal content, while Equal Pay Act of 1963 focuses on equal pay for jobs of equal value or worth.

Question 34

Inventory levels can be dramatically reduced through just-in-time production, but suppliers need to be in close physical proximity for this to work.

Question 35

Nonexempt employees of the Fair Labor Standards Act are eligible for overtime pay.

Question 36

_____ refers to the relative pay of jobs in an organization.

A)Pay level
B)Pay grade
C)Compa-ratio
D)Range spread
E)Job structure

Question 37

The average compensation-including wages, salaries, and bonuses-of jobs in an organization is called the _____.

A)range spread
B)compa-ratio
C)pay level
D)job structure
E)pay grade

Question 38

External equity pay comparisons focus on what:

A)other employees within the same organization in the same job are paid.
B)other employees within the same organization but in a different job are paid.
C)employees in other organizations are paid for doing the same general job.
D)employees in other organizations are paid for doing other jobs with higher responsibility.
E)employees in other organizations are paid for doing other jobs with lower responsibility.

Question 39

Long-term compensation, typically in the form of stock plans, is the major component of CEO pay.

Question 40

Which of the following is a likely consequence of external equity perception?

A)Job rotation
B)Transfer
C)Retention
D)Promotion
E)Cooperation among employees

Question 41

Under the _____ approach, jobs of similar worth or content are grouped together for pay administration purposes.

A)market survey data
B)pay policy line
C)compa-ratio
D)skill-based
E)pay grade

Question 42

Which of the following is the definition of compensable factors?

A)They are jobs that are unique to organizations and that cannot be directly valued or compared through the use of market surveys.
B)They are the characteristics of jobs that an organization values and chooses to pay for.
C)They are the jobs that have relatively stable content and are common to many organizations.
D)They are the factors that describes the relationship between a job's pay and its job evaluation points.
E)They are the jobs that are of similar worth or content grouped together for pay administration purposes.

Question 43

A _____ system is composed of compensable factors and a weighting scheme based on the importance of each compensable factor to the organization.

A)job analysis
B)job description
C)job design
D)job specification
E)job evaluation

Question 44

The _____ is a mathematical expression that describes the relationship between a job's pay and its job evaluation points.

A)range spread
B)compa-ratio
C)rate range
D)pay policy line
E)pay grade

Question 45

Which of the following is an administrative procedure used to measure internal job worth using measurable factors?

A)Job enlargement
B)Job description
C)Job design
D)Job specification
E)Job evaluation

Question 46

Which of the following concepts addresses the fact that different employees in the same job may have different pay rates?

A)Range spread
B)Rate ranges
C)Key jobs
D)Compensable factors
E)Pay grades

Question 47

A firm that has a manufacturing unit in China considers shifting production to Cambodia. Which of the following would be a possible reason for it to not shift the production base?

A)Lower wages for labor in Cambodia
B)Lesser skilled labor in Cambodia
C)Higher productivity in Cambodia
D)Rising labor costs in China
E)Higher transportation cost in China

Question 48

Which of the following theories describes the conditions when the benefits of higher pay outweigh higher costs?

A)Equity theory
B)Expectancy theory
C)Reinforcement theory
D)Efficiency wage theory
E)Social exchange theory

Question 49

Which of the following is true of nonkey jobs?

A)They have stable content.
B)They can be used in pay surveys.
C)They can be valued directly.
D)They can be compared through market survey.
E)They are unique to organizations.

Question 50

Which of the following is the most widely used method in job evaluation that yields scores for each compensable factor?

A)Range spread approach
B)Point-factor system
C)Market survey system
D)Pay policy line
E)Pay grade approach

Question 51

Which of the following theories states that pay influences worker productivity?

A)Structuration theory
B)Social exchange theory
C)Efficiency wage theory
D)Perceptual-motor theory
E)Expectancy theory

Question 52

Which of the following is a disadvantage of the pay grade approach?

A)The administrative burden of setting separate rates of pay for numerous employees is increased.
B)It is inflexible when it comes to moving employees from job to job.
C)Demotions are not well received in a pay-grade system when compared to a job-based system.
D)It might give rise to some jobs being underpaid and some being overpaid.
E)It does not recognize that performance difference in the higher levels has much impact on the organization.

Question 53

Compensable factors are employee's job characteristics that:

A)are immeasurable.
B)go unrecognized by the company.
C)do not motivate employees to work better.
D)primarily lead to intrinsic motivation.
E)the company is willing to pay for.

Question 54

Product market comparisons that focus on labor costs are likely to deserve greater weight when:

A)product demand is inelastic.
B)the supply of labor is elastic.
C)attracting and retaining qualified employees is difficult.
D)the costs of recruiting replacements are high.
E)labor costs represent a large share of total costs.

Question 55

Which of the following is true of the point-factor system?

A)In this system, job evaluators apply a weighting method before generating scores for the compensable factors.
B)When a priori weights method is used, factors are weighted using expert judgments.
C)In a priori weights method, weights are assigned to noncompensable factors.
D)Multiple regression is an example of a priori weights method.
E)When the weights are derived empirically, factors determining pay in the labor market are excluded.

Question 56

Labor market comparisons are more important than product market comparisons when:

A)product demand is elastic.
B)the costs of recruiting replacements are low.
C)attracting and retaining qualified employees is difficult.
D)the supply of labor is inelastic.
E)employee skills are specific to the product market.

Question 57

Which of the following is true of key jobs?

A)They are unique to organizations.
B)They can be used in pay surveys.
C)They have unstable content.
D)They cannot be compared through market survey.
E)They are not benchmark jobs.

Question 58

Which of the following is true of the pay grade approach to developing a pay structure?

A)It permits greater flexibility in moving employees from job to job.
B)It increases the administrative burden of setting up rates of pay.
C)It has a range spread that is smaller at higher levels.
D)It ensures that all of the jobs have fair rates of pay.
E)It tends to contribute to reduced labor costs.

Question 59

Which of the following refers to a procedure in which an organization compares its own practices against those of the competition?

A)Delayering
B)Forecasting
C)Offshoring
D)Benchmarking
E)Job evaluation

Question 60

Organizations use benchmarking primarily to compete:

A)for talent.
B)for market share.
C)on costs.
D)on product differentiation.
E)for consumer loyalty.

Question 61

According to the study by Peter Cappelli and Peter Sherer, which of the following is true of two-tier wage plans?

A)The plans are characterized by instances where two employees doing different level of jobs get the same pay.
B)The lower-paid employees always move to the higher-paying tier.
C)The lower-tier employees are more satisfied despite being paid less money for the same work.
D)The employees in the lower tier have lower comparison standards than those in the higher tier.
E)The lower-tier employees remain dissatisfied until they move into the higher-paying tier.

Question 62

The _____ is an index of the correspondence between actual and intended pay.

A)pay grade
B)pay midpoint
C)compa-ratio
D)range spread
E)pay range

Question 63

Which of the following pay structures would a company adopt, if it wants to adopt a pay structure that rewards employees based on their knowledge and competency?

A)Delayering approach
B)Skill-based pay approach
C)Pay grade approach
D)Market survey data approach
E)Pay policy line approach

Question 64

Job-based pay structure:

A)discourages topdown decision making.
B)encourages lateral employee movement.
C)discourages promotion-seeking behavior.
D)encourages a lack of initiative on the part of employees.
E)discourages performance evaluation by the manager.

Question 65

_____ refers to the process of reducing the number of job levels to achieve more flexibility in job assignments and in assigning merit increases.

A)Decentralizing
B)Departmentalizing
C)Forecasting
D)Delayering
E)Benchmarking

Question 66

Which of the following pays is similar to pay structures based on individual characteristics such as skill or knowledge but usually refers to a plan that covers exempt employees?

A)Internal equity pay
B)Market survey pay
C)Competency-based pay
D)Job-based pay
E)External equity pay

Question 67

Which of the following is the primary focus of the Title VII of the Civil Rights Act?

A)It makes it mandatory for firms to give women maternity leave.
B)It restricts the setting up of labor unions.
C)It promotes the setting up of labor unions.
D)It supports equal pay for jobs of equal content.
E)It supports equal pay for jobs of equal value.

Question 68

During the recent financial crisis, the U.S. government, as part of the _____, decided it was appropriate to further regulate executive pay in firms receiving government "bailout" money.

A)NCUA Corporate Stabilization Program
B)Troubled Asset Relief Program (TARP)
C)Public-Private Investment Program
D)Lilly Ledbetter Fair Pay Act
E)Emergency Economic Stabilization Act

Question 69

Which of the following hypotheses argues that women were historically restricted to entering a small number of occupations, and as a result, the supply of workers far exceeded demand, resulting in lower pay for such occupations?

A)Macho hypothesis
B)Strain hypothesis
C)Crowding hypothesis
D)Contact hypothesis
E)Calibration hypothesis

Question 70

Which of the following is true of a job-based pay structure?

A)It encourages employee initiatives.
B)It allows the organization to take advantage of the skills of those closest to production.
C)It encourages lateral movement of employees.
D)It reinforces a topdown decision making process.
E)It discourages promotion-seeking behavior.

Question 71

Which of the following is true of skill-based pay?

A)It rarely provides the opportunity for leaner staffing levels.
B)It helps in making alternative arrangements for employee turnover.
C)It reduces worker flexibility.
D)It leads to a shortage of multi-skilled employees.
E)It gives rise to centralization of decision making.

Question 72

Which of the following is a disadvantage of skill-based pay?

A)It is not suited for jobs that require skills to adapt to change in technology.
B)It decreases worker flexibility.
C)It does not give knowledgeable people opportunities to make decisions.
D)It does not help deal with absenteeism or turnover.
E)It may give rise to large new labor costs but with little payoff.

Question 73

Which of the following is true of broad bands?

A)More the use of broad brands, the lesser is the use of delayering in a firm.
B)More the use of broad brands, the lesser is the opportunity for promotions.
C)Broad bands with greater range spread lead to weaker budgetary control.
D)Broad bands with greater range spread give rise to lower labor costs.
E)Broad bands with smaller range spread permit managers to recognize high performance with high pay.

Question 74

Which of the following is typically used to measure pay equity?

A)Job evaluation
B)Job analysis
C)Job description
D)Job design
E)Job enlargement

Question 75

Athen Tech., a software company, changed its pay structure from 3,000 job titles and 12 pay grades to a simpler structure with 1,000 jobs and 5 pay grades. The managers were then asked to choose pay levels that were based on the market. This is an example of _____.

A)decentralizing
B)departmentalizing
C)forecasting
D)delayering
E)benchmarking

Question 76

Which of the following is an example of an equal employment opportunity regulation that prohibits sex- and race-based differences in employment outcomes such as pay, unless justified by business necessity?

A)2009 Lilly Ledbetter Fair Pay Act
B)Title VII of the Civil Rights Act
C)Equal Pay Act of 1963
D)Taft-Hartley Act
E)Mann Act

Question 77

Which of the following best describes gross domestic product?

A)It is a measure of personal income.
B)It is the cost of producing a certain number of outputs produced in an economy.
C)It is the output produced by an employee in contrast to the input used by him.
D)It is the total output of an economy.
E)It is the total input used by an economy to produce a definite output.

Question 78

The two-tier wage plan supports the _____ through its focus on the way employees compare their pay with other jobs and the need for managers to take this into consideration.

A)reinforcement theory
B)social exchange theory
C)equity theory
D)expectancy theory
E)efficiency wage theory

Question 79

Which of the following best describes a broad band in job-based pay structures?

A)It refers to the distance between the minimum and maximum pay in a grade.
B)It refers to the wider grouping of jobs accomplished through delayering.
C)It is an index of the correspondence between actual and intended pay.
D)It is a mathematical expression that describes the relationship between a job's pay and its job evaluation points.
E)It refers to the characteristics of jobs that an organization values and chooses to pay for.

Question 80

_____ is a public policy that focuses primarily on advocating remedies for any undervaluation of women's jobs.

A)Equal opportunity
B)Glass ceiling
C)Efficiency wage
D)Comparable worth
E)Minimum wage