Deck 11: Total Rewards and Compensation

Question 1

Which of the following is true of an employer who uses the second-quartile strategy of compensation?

A) The employer pays the employees above market levels.
B) The employer determines the pay independent of the market scenario.
C) The employer pays the employees below market levels.
D) The employer pays the employees on par with the market levels.

Answer 1

D

Question 2

Which of the following is typical of the performance philosophy of compensation?

A) Pay and raises based on length of service
B) No raises for poorly performing employees
C) Across-the-board raises
D) Pay scales increased annually

Answer 2

B

Question 3

In the context of worker motivation, which of the following is classified as an input in equity theory?

A) Job security
B) Praise
C) Loyalty
D) Vacation

Answer 3

C

Question 4

Which of the following is true of the point factor method of job evaluation?

A) In this method, descriptions of job classes are written and then each job is put into a grade according to the class it best matches.
B) It is a complex quantitative method that combines the ranking and classification methods.
C) It looks at compensable factors in a group of similar jobs and assigns weights to them.
D) It is a simple system that places jobs in order, from highest to lowest, by their value to the organization.

Question 5

The relationship between job value as determined by job evaluation points and job value as determined by pay survey rates is shown by a _____.

A) market grade
B) market band
C) market line
D) market scale

Question 6

In the context of job evaluation, external pay data are used to identify the relative value of jobs based on what other employers pay for similar jobs in the _____.

A) factor-comparison method
B) ranking method
C) point factor method
D) market pricing method

Question 7

In the context of worker motivation, which of the following is classified as an outcome in equity theory?

A) Loyalty
B) Time
C) Effort
D) Praise

Question 8

Groupings of individual jobs that have approximately the same value to the organization, used when establishing a pay structure, are called _____.

A) pay scales
B) pay grades
C) pay compressions
D) pay expansions

Question 9

Most federal and state entities rely on the criteria for independent contractor status identified by the _____.

A) National Labor Relations Board
B) Internal Revenue Service
C) Department of Labor
D) U.S. Treasury Department

Question 10

A collection of data on compensation rates for workers performing similar jobs in other organizations is known as a _____.

A) pay survey
B) pay analysis
C) pay scale
D) pay grade

Question 11

The FLSA established overtime pay requirements for nonexempt employees at 1.5 times the regular pay rate for all hours worked over _____.

A) 50 in a week
B) 45 in a week
C) 40 in a week
D) 35 in a week

Question 12

A court order that directs an employer to set aside a portion of an employee's wages to pay a debt owed to a creditor is known as _____.

A) liquidation
B) sequestration
C) garnishment
D) distraint

Question 13

Payments calculated directly on the basis of the time worked by employees are called _____.

A) benefits
B) commissions
C) salaries
D) wages

Question 14

The right of employers to terminate employees whose pay is subject to a single garnishment order is restricted by the _____.

A) Davis-Bacon Act
B) Walsh-Healy Public Contracts Act
C) McNamara-O'Hara Service Contract Act
D) Consumer Credit Protection Act

Question 15

Which of the following is typical of the entitlement philosophy of compensation?

A) Pay and raises based on length of service
B) No raises for poor-performing employees
C) Market-adjusted pay scales
D) Industry comparisons of total rewards

Question 16

Which of the following is true of an employer who uses the third-quartile strategy of compensation?

A) The employer pays the employees above market levels.
B) The employer determines the pay irrespective of the market scenario.
C) The employer pays the employees below market levels.
D) The employer pays the employees on par with the market levels.

Question 17

Which of the following is true of an employer who uses the first-quartile strategy of compensation?

A) The employer pays the employees above market levels.
B) The employer determines the pay independent of the market scenario.
C) The employer pays the employees below market levels.
D) The employer pays the employees on par with the market levels.

Question 18

According to the Fair Labor Standards Act, if a state's minimum wage is higher than the federal minimum wage, _____.

A) employers must pay the higher wage
B) employers must pay the lower wage
C) employers are free to choose between either of the two
D) employers must pay the difference as employee benefits

Question 19

The act that does not require employers to pay overtime for salaried exempt jobs is the _____.

A) Employment Non-Discrimination Act
B) Equal Pay Act
C) Fair Labor Standards Act
D) Civil Rights Act

Question 20

The rate paid for a job by a majority of the employers in the appropriate geographic area determines _____.

A) commission
B) gainsharing
C) monetary incentives
D) prevailing wages

Question 21

A pay adjustment matrix considers two factors-the employee's level of performance as rated in an appraisal and the employee's position in the pay range, which is often related to experience and tenure.

Question 22

Integrating performance appraisal ratings with pay changes can be done through the development of a merit-based performance matrix.

Question 23

In the context of compensation quartile strategies, the match-the-market strategy is also called the third-quartile strategy.

Question 24

Pay compression occurs when the pay differences among individuals with different experience and performance levels become small.

Question 25

The entitlement philosophy assumes that compensation decisions reflect performance differences.

Question 26

Equity theory states that individuals judge fairness in compensation by comparing their inputs and outcomes against the inputs and outcomes of referent others.

Question 27

Which of the following is true of green-circled employees?

A) They are paid above the range set for a job.
B) They are paid below the range set for a job.
C) They are paid on par with the range set for a job.
D) Their pay is not determined by the ranges set for a job.

Question 28

The Equal Pay Act of 1963 prohibits companies from using different wage scales for men and women performing substantially the same jobs.

Question 29

Which of the following is true of a pay adjustment matrix?

A) It reflects an employee's horizontal movement in an organization.
B) It is used to determine the compensation benchmark in a specific industry.
C) It is used to determine the compensation benchmark in a specific organization.
D) It reflects an employee's eligibility for pay increase based on merit.

Question 30

Which of the following is true of pay compression?

A) It is the phenomenon by which all employees' pay decreases significantly in an economic downturn.
B) It occurs when the employer groups employees with different pay grades together.
C) It is frequently a result of labor market pay levels increasing faster than current employees' pay adjustments.
D) It occurs when pay differences among individuals with different levels of experience and performance become large.

Question 31

Pay grades are groupings of individual jobs that have different values for the organization.

Question 32

Salary inversion occurs when the pay given to new hires is higher than the compensation provided to more senior employees.

Question 33

Not having to pay Social Security, unemployment, or workers' compensation costs to independent contractors offers major advantages to the employer.

Question 34

If an organization has implemented competitive pay practices and has a fair and reasonable pay structure, employee concerns about inequity can be reduced by sharing this information.

Question 35

Compliance with FLSA provisions on employee compensation is enforced by the National Labor Relations Board.

Question 36

Grouping jobs into pay grades based on similar market survey amounts is known as _____.

A) market scaling
B) market pegging
C) market lining
D) market banding

Question 37

Which of the following is true of red-circled employees?

A) They are paid above the range set for a job.
B) They are paid below the range set for a job.
C) They are paid on par with the range set for a job.
D) Their pay is not determined by the ranges set for a job.

Question 38

The practice of using fewer pay grades with much broader ranges than in traditional compensation systems is called broadbanding.

Question 39

An individual whose pay is above the range for a job is referred to as a green-circled employee.

Question 40

Compa-ratio = _____.

A) total pay divided by the total number of employees
B) pay level divided by the midpoint of the pay range
C) total pay divided by the midpoint of the pay range
D) pay level divided by the total number of employees

Question 41

Describe the various components of compensation.

Question 42

Differentiate between exempt employees and nonexempt employees.

Question 43

Describe the Fair Labor Standards Act and the major areas on which it focuses.

Question 44

Describe market competitive compensation.

Question 45

Describe the different methods of job evaluation.

Question 46

Hikoma LLC, a toy manufacturer, provides employees with incentives depending on their individual performances. This best exemplifies _____.

A) an employee stock plan
B) a commission
C) gainsharing
D) deferred compensation

Question 47

Define competency-based pay.

Question 48

Discuss individual pay.

Question 49

Describe two motivation theories and their relationship with compensation.

Question 50

What is garnishment?

Question 51

Define job evaluation.

Question 52

Describe the entitlement philosophy of employee compensation.

Question 53

Team Spark LLC, a producer of consumer goods, used to practice gainsharing. After organizational restructuring, the management decides to replace its gainsharing plans with a piece-rate system. Which of the following is true of Team Spark LLC?

A) It used to provide team incentives, but now it provides individual incentives.
B) It used to provide individual incentives, but now it provides team incentives.
C) It used to provide team incentives, but now it provides organizational incentives.
D) It used to provide individual incentives, but now it provides organizational incentives.

Question 54

Group Viewer LLC, a software company, used to provide profit sharing plans for its employees. After organizational restructuring, the management decides to replace the profit sharing plans with commissions for each employee. Which of the following is true of Group Viewer LLC?

A) It used to provide individual incentives, but now it provides team incentives.
B) It used to provide individual incentives, but now it provides organizational incentives.
C) It used to provide team incentives, but now it provides individual incentives.
D) It used to provide organizational incentives, but now it provides individual incentives.

Question 55

The compa-ratio is calculated by dividing the individual's pay rate by the lowest point in the pay range.

Question 56

Describe the Lilly Ledbetter Fair Pay Act.

Question 57

Describe the pay-for-performance philosophy of employee compensation.

Question 58

Define base pay.

Question 59

AirCar LLC, a producer of consumer electronics, used gainsharing to compensate its employees. However, after a change in management, the company decides to replace gainsharing with a stock option plan. Which of the following statements is true of AirCar LLC?

A) It used to provide individual incentives, but now it provides organizational incentives.
B) It used to provide individual incentives, but now it provides team incentives.
C) It used to provide team incentives, but now it provides organizational incentives.
D) It used to provide organizational incentives, but now it provides individual incentives.

Question 60

Leah LLC, a producer of sporting goods, used to provide its employees with a stock option plan. After organizational restructuring, the management decides to replace the stock option plan with profit sharing. Which of the following is true of Leah LLC?

A) It used to provide organizational incentives, but now it provides individual incentives.
B) It used to provide organizational incentives, but now it provides team incentives.
C) It used to provide organizational incentives, but now it provides the same.
D) It used to provide individual incentives, but now it provides the same.

Question 61

RedCat LLC, a footwear manufacturing company, used to practice gainsharing. After organizational restructuring, the management decides to replace gainsharing with profit sharing. Which of the following is true of RedCat LLC?

A) It used to provide individual incentives, but now it provides team incentives.
B) It used to provide organizational incentives, but now it provides individual incentives.
C) It used to provide individual incentives, but now it provides organizational incentives.
D) It used to provide team incentives, but now it provides organizational incentives.

Question 62

Special benefits-usually noncash items-for executives are termed _____.

A) executive salaries
B) base salaries
C) perquisites
D) golden parachutes

Question 63

Executive compensation in public corporations is subject to shareholder approval via a "say-on-pay" provision in the _____.

A) Sarbanes-Oxley Act
B) Dodd-Frank Act
C) Lilly Ledbetter Fair Pay Act
D) Walsh-Healy Public Contracts Act

Question 64

Which of the following is a disadvantage of profit sharing plans?

A) Employees must trust that management will accurately disclose financial and profit information.
B) Employees are taxed heavily on the income that they generate from profit sharing plans.
C) Employees cannot access the funds that they receive from profit sharing plans for up to three years.
D) Employers get little or no rebate on income tax for choosing profit sharing plans.

Question 65

Under a straight piece-rate system, wages are determined by dividing the number of units produced by the piece rate for one unit.

Question 66

Which of the following is a metric of sales programs in variable pay plans?

A) Return on investment
B) Turnover costs
C) Accident rates
D) Increase in market share

Question 67

Variable pay plans attempt to provide tangible rewards, or incentives, to employees for performance beyond normal expectations.

Question 68

Stock option plans give employees the right to purchase a(n) _____.

A) unlimited number of shares of company stock at a specified exercise price for a limited period of time
B) unlimited number of shares of company stock at a specified exercise price for an unlimited period of time
C) fixed number of shares of company stock at a specified exercise price for a limited period of time
D) fixed number of shares of company stock at a specified exercise price for an unlimited period of time

Question 69

The most prevalent forms of organization-wide incentives are piece-rate systems, sales commissions, and individual bonuses.

Question 70

Nonfinancial rewards cannot be used as incentives in pay-for-performance plans.

Question 71

Which of the following statements is true of a discretionary system of determining bonuses?

A) The federal and state governments decide the bonuses.
B) All the shareholders of the company decide the bonuses.
C) The labor unions and employees decide the bonuses.
D) The CEO and the board of directors decide the bonuses.

Question 72

A provision that permits an organization to require an employee to return rewards obtained through unethical or negligent actions is known as a(n) _____.

A) say-on-pay provision
B) clawback provision
C) double jeopardy provision
D) excessive fines provision

Question 73

Cost reduction is classified as a work unit/team incentive.

Question 74

In the context of incentives, an example of gainsharing is _____.

A) using employee committees to calculate and pass on savings to employees
B) distributing surplus yields among employees when their performance improves above the baseline
C) identifying favorable employee behavior and rewarding employees who adhere to the set standards
D) using employee unions to encourage and promote a positive environment in organizations

Question 75

A percentage of the revenue generated by sales that is given to an agent or salesperson is called _____.

A) severance pay
B) wage
C) basic salary
D) commission

Question 76

Which of the following statements is true of the salary-only approach?

A) The salary-only approach is useful when an organization emphasizes serving and retaining existing accounts.
B) The salary-only approach is useful when an organization emphasizes generating new sales and accounts.
C) The salary-only approach is useful only when an organization is compensating experienced sales executives.
D) The salary-only approach is not useful in compensating sales representatives who are new to the job.

Question 77

Describe employee stock ownership plans.

Question 78

Which of the following is the most accurate metric of organizational performance in variable pay plans?

A) Customer satisfaction
B) Accident rates
C) Revenue growth
D) Employee satisfaction

Question 79

The most common means of providing individual variable pay are profit sharing plans and employee stock plans.

Question 80

The straight commission system is the most frequently used form of sales compensation.