Deck 12: Establishing a Pay Structure

Question 1

The upper limit that product markets place on the pay offered by an organization is significant when the organization's total costs are mainly comprised of labor costs and when price is a significant factor for the organization's consumers.

Answer 1

True
Explanation: Product markets place an upper limit on the pay an organization will offer. This upper limit is most important when labor costs are a large part of an organization's total costs and when the organization's customers place great importance on price.

Question 2

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

Answer 2

False
Explanation: Product markets place an upper limit on the pay an organization will offer.

Question 3

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

Answer 3

False
Explanation: A drawback of pay grades is that 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.

Question 4

When job structure conflicts with market data,organizations should base their pay only on market forces because this approach does not have any practical drawbacks.

Question 5

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

Question 6

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 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

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

Question 9

Implementing broad bands increases the opportunities for promoting employees.

Question 10

An organization's policies,rather than the wages,salaries,and bonuses that employees earn,determine the job structure and pay levels within that organization.

Question 11

The laws governing Equal Employment Opportunity guarantee equal pay for all employees of an organization.

Question 12

The job characteristics that an organization deems valuable and decides to pay for are termed as compensable factors.

Question 13

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

Question 14

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

Question 15

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

Question 16

Organizations use pay surveys to benchmark compensation.

Question 17

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

Question 18

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

Question 19

Paying a salary does not necessarily mean that a job is exempt from overtime pay.

Question 20

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

Question 21

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

Question 22

An organization's job structure and pay levels:

A) reflect the organization's knowledge about inflationary pressures.
B) reflect the decisions about how much to pay each employee.
C) provide the total amount an organization pays for a particular job.
D) are annual earnings of key employees in the organization.
E) are policies of the organization.

Question 23

Which of the following 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 24

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

Question 25

Caroline,a researcher,believes that an organization needs to plan what they will pay employees in each job.Mark,her colleague,argues that an employee's pay should be independently negotiated.Which of the following statements will weaken Mark'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 26

Which of the following will most likely be a 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

The comparable-worth policy:

A) advocates remedies for any undervaluation of jobs based on market-pay data.
B) is designed to reduce the wage gap between women and minority groups exclusively.
C) has been consistently upheld in court rulings.
D) uses job evaluation of an organization's jobs in terms of such criteria as their difficulty.
E) is the only non-controversial pay policy.

Question 28

Which of the following 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 29

Which of the following statements 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 30

Which of the following provisions 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 31

Which of the following statements 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 32

A compa-ratio is 1 if actual pay is not consistent with the pay structure of an organization.

Question 33

Which of the following 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 34

The equity of executive pay has a limited effect on other employees.

Question 35

Hamish Life,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,the HR manager,and the organization's Vice President.Which of the following is being exemplified in this scenario?

A) Straight piecework plan
B) Job structure
C) Merit pay system
D) Pay differential
E) Balanced scorecard

Question 36

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

Question 37

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

A) Alex belongs to a poor family.
B) Alex has more experience compared to Cindy.
C) Alex is younger than Cindy.
D) Alex can work for longer hours than Cindy because he is a male.
E) Cindy is an introvert.

Question 38

David 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 39

Which of the following is a federal law that establishes a minimum wage and requirements for overtime pay and child labor?

A) FLSA
B) ADA
C) FMLA
D) ERISA
E) EAP

Question 40

Mark and Chloe hold the same position at Rue & West Bros.However,Mark earns more than Chloe.Which of the following will justify the organization's decision to pay Mark more than Chloe?

A) Mark meets higher productivity targets than Chloe.
B) Mark comes from an economically weaker background.
C) Mark is more skilled than Chloe because he is male.
D) Chloe is younger than Mark.
E) Chloe is not a U.S. citizen.

Question 41

Perlis Inc.is a whole food distributor.The hourly pay of employees working at Perlis is lower than the earnings required to rise above poverty level.In this scenario,which of the following laws is violated by the company?

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 42

Which of the following statements 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 43

John is the head of the insurance claims department.John works for longer hours than his subordinates.However,John is not paid overtime for working more than 40 hours per week.Under the FLSA,which of the following will justify the organization's decision not to give John overtime pay?

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

Question 44

_____ 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 45

Scorla Automobiles is a manufacturing company based in Nevada.The employees of Scorla are paid the lowest amount under federal or state law,which is stated as an amount of pay per hour.Which of the following laws 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 46

Spark Inc.,a manufacturing company,hires employees belonging to the age group of 14 to 25.However,the company ensures that employees belonging to the age group of 14 to 18 are employed in nonhazardous environment and for limited time periods.In this scenario,which of the following laws is complied by the company?

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) Fair Labor Standards Act (FLSA) of child labor

Question 47

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 48

Teno Industries Inc.is a manufacturing company based in Texas.Teno Industries implemented the comparable-worth policy to establish equal pay for all employees.However,the organization incurred losses of about $20 million.In this scenario,which of the following is most likely the reason for the failure of the comparable-worth policy?

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 pay structure based on market rate.
D) The employer ignores consider the evaluation points for each job.
E) The lower-paid jobs are encouraged to meet the goal of comparable worth.

Question 49

Cliff Stiff Inc.,a cement company,receives more than $2,000 in federal money.The company hires employees belonging to the age group of 25 to 40.The company 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 best explains 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% above the minimum wage.
C) The company hires employees belonging to the age group of 25 to 30, 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 50

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 wage rates found prevailing in the locality.
E) covers all government contractors receiving $10,000 or more in federal funds.

Question 51

SalientVision 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% of the local labor force.In this case,which of the following laws 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

Ramon Inc.,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 53

The Davis-Bacon Act of 1931:

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) requires general contractors performing services on prime contracts in excess of $2,500 to pay service employees in various classes no less than the wage rates found prevailing in the locality.
D) covers all government contractors receiving $10,000 or more in federal funds.
E) covers construction contractors that receive more than $2,000 in federal money.

Question 54

Sapheda Inc.,a heavy machinery company,has employees belonging to the age group of 17 to 30.Noah,a 17-year-old,is prohibited from working with heavy machinery tools.His work involves working in the mail room.Under the laws governing Fair Labor Standards Act (FLSA),which of the following will justify the organization's decision to forbid Noah from doing heavy machinery work?

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

Question 55

According to the FLSA,which of the following individuals is most likely a nonexempt employee?

A) The CEO
B) A senior administrative employee
C) An hourly paid employee
D) An HR manager
E) The director of marketing

Question 56

Which of the following statements 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% 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 57

Blyrie Pharma is a pharmaceutical company based in Alabama.Blyrie Pharma 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 of the following laws is Blyrie Pharma 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 58

Pentrall,a healthcare company,provides a lower training rate to its employees belonging to the age group of 18 to 20 years.The rate is applicable for a period of 90 days.In this case,which of the following laws will justify the organization's decision to pay the lower pay?

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) Fair Labor Standards Act (FLSA) of child labor

Question 59

Under the FLSA,which of the following statements 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 60

Carbon Fine Inc.,a mining industry,hires employees belonging to the age group of 16 to 30.The company provides overtime pay for its employees.The company is charged for violation of law under the FLSA.Which of the following best explains the reason for the company being sued?

A) Individuals aged 16 and 17 are being employed as mine workers.
B) Executive employees of the company are not being provided overtime pay.
C) Employees are being paid overtime only if they work beyond 40 hours in one week.
D) Mine workers are being paid only 25% above the minimum wage.
E) Individuals eligible for overtime are being paid at one and a half times the employee's regular pay rate, including bonuses.

Question 61

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 62

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 63

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 64

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 65

Capnos Inc.,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 of the following procedures is adopted by Capnos?

A) Benchmarking
B) Job evaluation
C) Regression analysis
D) Delayering
E) Pay structuring

Question 66

Inverness 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 of the following statements is true about Inverness?

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 67

Which of the following 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 68

Quasio Inc.,a business consulting company,considers the cost of living of an employee while deciding the average pay.In this case,which of the following measures helps the company prepare for changes in the demands of the labor market?

A) Consumer Price Index
B) Wholesale Price Index
C) Producer Price Index
D) Retail Price Index
E) Customer Interest Index

Question 69

Which of the following statements is true about the Consumer Price Index (CPI)?

A) The CPI helps organizations in the product markets decide an upper limit on the pay it 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 market's demand for pay increases.
E) The CPI helps organizations to compete with companies in other industries that hire similar employees.

Question 70

Small Leaf Resort and Cresgrove Resort are established hotels in the hospitality industry.However,Small Leaf Resort has a larger net profit than that of Cresgrove Resort.In order to remain financially viable in the hospitality market,Cresgrove Resort decides to charge more for their rooms and other services.In this scenario,which of the following best explains the reason behind Cresgrove Resort incurring losses?

A) Cresgrove Resort has high labor-related expenses.
B) Cresgrove Resort hires employees belonging to the age group of 15 to 20.
C) Cresgrove Resort has better quality and customer service than Small Leaf Resort.
D) Cresgrove Resort considers its employees as resources.
E) Cresgrove Resort's compa-ratio is less than 1.

Question 71

Which of the following statements 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 72

Which of the following statements 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 73

_____ holds that the most profitable pay level,all things being equal,would be at the market rate.

A) Equity theory
B) Economic theory
C) Justice theory
D) Wage theory
E) Market theory

Question 74

Which of the following statements 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 75

Trevor,a researcher,believes that having higher labor costs than competitors is not necessarily bad.His colleague,Nick,supports Trevor's opinion by stating that employees must be paid according to the market rate.Which of the following strengthens their statements?

A) An organization may gain an advantage by paying above the market rate if it uses this method to attract top talent and uses employees' knowledge to be more innovative.
B) High pay will encourage an employee to work on holidays and produce higher quality goods in order to balance the labor expense with high productivity.
C) Employees can be forced to work long hours because they are paid higher than the market rate.
D) The work environment is friendly when employees are paid higher than the market rate.
E) Organizations can guarantee employee satisfaction if they increase employees' salaries above the market rate.

Question 76

Los Amigo Inc.,a clothing manufacturer,believes that employees must be paid above the average market rate.The company aims to provide good customer service and to increase its sales.In this case,which of the following is most likely the reaction of employees working at Los Amigo?

A) The employees will be motivated to work hard.
B) The employees will put less effort at work.
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 will resign from their current jobs.

Question 77

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 78

Das Work and Edge Tech are electronics manufacturing companies competing to serve the same customers.The labor-related expenses per product for Das Work is $30 higher than that for Edge Tech.However,Das Work makes more profits than Edge Tech.In this case,which of the following actions has contributed to the profits made by Das Work?

A) It produces high quality goods and charges more for these products than competitors.
B) It does not provide overtime pay to employees who work more than 40 hours in one week.
C) It has recently introduced the comparable-worth policy for employees.
D) It provides free home delivery of purchased goods.
E) It has a company website where customers can purchase goods online.

Question 79

Which of the following U.S.organizations 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 80

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