Deck 4: Components of Compensation Strategy

Question 1

Which condition make it impractical to use output-related pay?

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

Answer 1

C

Question 2

Which methods are used to establish base pay?

A) market pricing,job evaluation,and pay for knowledge
B) job analysis,competency testing,and demographics
C) tenure,job preview,and environmental analysis
D) knowledge,education,and market pricing

Answer 2

A

Question 3

Generally,research supports the notion that employees prefer compensation strategies that have performance pay as the key compensation mechanism.

Answer 3

False

Question 4

Why can medical and dental coverage can be purchased more cheaply by the employer than the employee?

A) indexation
B) economies of scale
C) utility
D) dividends

Question 5

The main types of individual performance pay are piece rates,commissions,merit pay,and goal-sharing plans.

Question 6

An advantage of indirect pay is that benefits receive more favourable income tax treatment than direct pay.

Question 7

Competitive pressure may force some firms to provide indirect pay.

Question 8

Johnny is compensated based on a rate of $25.00 per hour worked.Which term best describes the manner in which Johnny is compensated?

A) commission
B) wage
C) piece rate
D) salary

Question 9

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

Question 10

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

Question 11

As a general rule,organizations using a high-involvement managerial strategy use indirect pay as a way to encourage which of the following relationships?

A) employer-community
B) employee-task
C) employer-employee
D) employer-union

Question 12

As a human resource consultant,you have been asked to provide some rationale on why an organization may decide to use base pay as a cornerstone for a compensation scheme.Which of the following should you advance in supporting your argument?

A) It provides an organization with more labour flexibility in the allocation of tasks.
B) It guarantees employee performance and aligns salaries to performance.
C) It encourages team work.
D) Unions are most likely to agree with management's approach,given this scheme encourages individual performance.

Question 13

Competency-based pay is usually applied at the managerial and professional levels.

Question 14

Research cited in the textbook suggests that performance pay plans have relatively high discontinuation rates.

Question 15

Which of the following is an example of mandatory indirect pay?

A) major health benefits such as medical coverage
B) registered retirement savings plans (RRSPs)benefits
C) employee services
D) workers' compensation benefits

Question 16

Which of the following is NOT a method used to determine employee base pay?

A) profit sharing
B) pay-for-knowledge
C) job evaluation
D) market pricing

Question 17

An advantage of base pay is that it directly links pay with output or performance.

Question 18

Pay for knowledge systems are beneficial for organizations that require great task flexibility from their labour force.

Question 19

As a consultant,you have been asked by an organization to provide a menu of indirect benefits that the employer doesn't have to provide by law.Which of the following would you NOT include in your menu?

A) employment insurance
B) company pension plan
C) psychological counselling
D) supplemental medical coverage

Question 20

Which of the following steps is NOT considered in designing a compensation system?

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

Question 21

Which of the following is a group performance pay plan?

A) gain sharing
B) profit sharing
C) stock options
D) piece rates

Question 22

A particular organization wants to include in their compensation system some element of organizational performance linkage,while at the same time it wants to encourage employee commitment.In addition to base pay,what would most likely be included in this compensation mix?

A) merit pay
B) piece rates
C) profit sharing
D) targeted incentives

Question 23

As the CEO of a small start-up firm,you would like to reward employees based,in part,on organizational performance.However,cash flow is low.Which pay plan should you consider using?

A) employee stock plans
B) high base pay
C) extensive benefits
D) commissions

Question 24

Peter,a manager at a local manufacturing firm,is perplexed that employees tend to respond to management's request by evoking the dreaded "That is not on my job description," or "That is above my pay grade." From a compensating perspective,which base pay method is normally associated with the aforementioned responses?

A) market pricing
B) job evaluation
C) competency-based pay
D) skill-based pay

Question 25

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

A) stock options
B) skill-based pay
C) team-based pay
D) piece rates

Question 26

Which base pay method best supports behaviours needed by high-involvement firms?

A) market pricing
B) pay for knowledge
C) job evaluation
D) broad banding

Question 27

Why might employees prefer base pay over performance pay?

A) Performance pay is more predictable.
B) Base pay is directly related to their performance level.
C) They dislike uncertainty about their compensation.
D) Market conditions are always changing.

Question 28

Which statement best explains the reason for the decrease in popularity of "defined benefit plans" by employers in Canada?

A) There has been increased longevity of employees.
B) Defined benefit plans are simply not popular among employees.
C) They help organizations plan more accurately; hence,they make it easier to fund these liabilities.
D) Employers believe defined contribution plans are much more unpredictable from a funding perspective.

Question 29

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

A) mandatory benefits
B) wages
C) merit pay
D) salaries

Question 30

Which statement best describes the notion of pay for knowledge systems?

A) There is little empirical evidence supporting the validity of competency-based pay models.
B) Competency-based pay models are usually associated with operational level roles.
C) Pay for knowledge requires very detailed job descriptions for every role in an organization.
D) Pay for knowledge fits well with classical management styles,requiring employee flexibility in skill sets.

Question 31

Your company offers you pay for time not worked,disability benefits,supplemental medical coverage,and a full range of free employee services.Which component of the compensation mix includes these items?

A) direct pay
B) base pay
C) indirect pay
D) performance pay

Question 32

What are two key advantages of market pricing?

A) simplicity and cost
B) equity and fairness
C) equity and efficiency
D) range and depth

Question 33

Your executive vice president has asked you to explain the basic notion of "skill blocks" within the context of skill-based pay systems design.What two variables would you emphasize?

A) different skills and depth of each skill
B) skill certification and criterion
C) key competencies and training requirements
D) broad banding and market value

Question 34

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

A) identifying competencies that demonstrably affect performance
B) devising methods to measure achievement of each competency
C) providing learning opportunities
D) developing the merit pay grid

Question 35

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

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

Question 36

ABC Inc.is a very small firm.It has decided to pay its employees at rates that are similar to other small firms in its geographic area.What method of pay is ABC Inc.using?

A) job evaluation
B) market pricing
C) competency-based pay
D) geographic-based pay

Question 37

As an employer,you believe it is always a good idea to pay people for their contributions to organizational results.Which plan would likely be the key component of the compensation plan?

A) indirect pay
B) base pay
C) pay for knowledge
D) performance pay

Question 38

Which of the following refers to job evaluation?

A) determining how well a job is performed
B) surveying the market
C) ranking all jobs according to their value to the firm
D) establishing the skill level of each employee

Question 39

In Canada approximately what percentage of an employer's total compensation costs are employee benefits?

A) 10-20
B) 20-30
C) 30-40
D) 40-50

Question 40

For the majority of employees in Canada,what is the largest component of the pay package?

A) benefits
B) performance pay
C) indirect pay
D) base pay

Question 41

Briefly explain the three methods for establishing base pay.

Question 42

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

Question 43

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

Question 44

Briefly discuss the advantages and disadvantages of using indirect pay.

Question 45

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

Question 46

Explain why organizations pursuing a high-involvement management strategy may find the notion of offering indirect pay to employees somewhat problematic and at odds with the principles of high involvement?