Chapter 11: Compensation

Question 1

Employee Compensation

Answer 1

all forms of pay going to employees and arising from their employment

Question 2

Direct Financial Payments

Answer 2

wages, salaries, commissions and bonuses

Question 3

Indirect Financial Payments

Answer 3

employer-paid insurance, vacations

Question 4

Four Basic Considerations Influencing the Formulation of a Pay Plan

Answer 4

1. legal requirements
2. union issues
3. rewards alignment
4. equity

Question 5

Total Rewards

Answer 5

approach to determine the best mix of reward that are aligned with a business strategy and that provide employee value all within the cost constraints of the organization

Question 6

Equity Theory of Motivation

Answer 6

a theory that suggests that people are motivated to maintain a balance between their perceived contributions and their rewards

Question 7

External Equity

Answer 7

an employee’s perception of pay as fair given the pay rates of comparable jobs in other organizations

Question 8

Internal Equity

Answer 8

an employee’s perception of pay as fair given the pay rates of others in the organization

Question 9

Individual Equity

Answer 9

an evaluation of the fairness of an individuals pay as compared with what their co-workers are earning for the same or very similar jobs within the company. Based on each person’s performance

Question 10

Procedural Equity

Answer 10

perceived fairness of the procedures used to make decisions regarding the allocation of pay

Question 11

Pay Equity

Answer 11

providing equal pay to jobs of equal value as determined by a gender neutral decisions criteria

Question 12

Three Stages in Establishing Pay Rates

Answer 12

1. prepare for job evaluation
2. conduct wage/salary survey
3. combine job evaluation and salary survey information to determine pay

Question 13

Job Evaluation

Answer 13

systematic comparison to determine the relative worth of jobs within a firm

Question 14

Benchmark Jobs

Answer 14

job that is critical to the firm’s operations or that is commonly found in other organizations

Question 15

Job Evaluation Methods

Answer 15

• ranking method
• job classification method
• point method

Question 16

Ranking Method

Answer 16

simplest job evaluation method that ranks each job relative to all other jobs based on some overall factor

Question 17

Job Classification Method

Answer 17

a method for categorizing similar value jobs into groups for pay purposes

Question 18

Job Classes

Answer 18

Groups of jobs based on compensable factors for each class. Classes usually contain similar jobs.

Question 19

Job Grades

Answer 19

groups of jobs based on a set of rule for each grade, where jobs are similar in difficulty but otherwise different

Question 20

Grade/Group Description

Answer 20

a written description of the level of compensable factors required by jobs in each grade, used to combine similar jobs into grades or classes

Question 21

Point Method

Answer 21

a job evaluation method in which a number of compensable factors are identified, the degree to which each of these factors is present in the job is determined, and an overall point is calculated

Question 22

Pay Grade

Answer 22

Comprises jobs of approximately equal value

Question 23

Wage/Salary survey

Answer 23

a survey aimed at determining prevailing wage rates

Question 24

Wage Curve

Answer 24

shows the pay rates currently paid for jobs, relative to the points assigned to each job by the job evaluation

Question 25

Pay Ranges

Answer 25

a series of steps or levels within each pay grade, usually based on years of service

Question 26

Broadbanding

Answer 26

combining salary grades and ranges into just a few levels or “bands”, each of which then contains a relatively wide range of jobs and salary levels

Question 27

Red Circle Pay Rates

Answer 27

a rate of pay that is above the pay range maximum

Question 28

Competency Based Pay Plans

Answer 28

plans that pay employees for the range, depth, and types of knowledge that they are capable of using rather than for the job that they currently hold

Question 29

Core Competencies

Answer 29

knowledge and behaviours that employees throughout the organization must exhibit for the organization to succeed

Question 30

Market Pricing Approach

Answer 30

an approach to evaluate professional jobs based on values established for similar benchmark jobs in the market