Compensation, Benefits & Work Experience Module 4

Question 1

A benchmark job is one that?

A. Is accepted in the external market for setting wages
B. Is worth more than all other jobs in its class
C. Represents the midpoint of a pay range.
D. Requires advanced education

Answer 1

A. Is accepted in the external market for setting wages

Question 2

A company that believes higher-quality employees are more productive is MOST likely to.
Choose only ONE best answer.
A. Pay slightly less in wages and benefits than its competitors.
B. Offer higher wages and better benefits than its competitors.
C. Base its pay and benefits on industry standards.
D. Pay the same wages and benefits as it’s competitors.

Answer 2

B. Offer higher wages and better benefits than its competitors.

Question 3

A manager’s salary is above the maximum for the pay range. What type of pay rate is this?
Choose only ONE best answer.
A. Green-circle
B. Red-circle
C. Compa-ratios
D. Pay compression

Answer 3

B. Red-circle

Question 4

A position has a pay range for the grade of$9.10 to $12.75 per hour. What term would apply to an employee in this position who is earning $8 per hour?
Choose only ONE best answer.
A. Red-circle rate
B. Green-circle rate
C. Broad banded
D. Career-banded

Answer 4

B. Green-circle rate

Question 5

A primary employer advantage of implementing a skill-based pay system is:
Choose only ONE best answer.
A. Increased compensation costs.
B. Increased employee productivity
С. Reduction of training and development expenses.
D. Ease of administration

Answer 5

B. Increased employee productivity

Question 6

After implementing a new job evaluation plan, it is best to deal with red circle rates by:
Choose only ONE best answer.
A. Reducing their salary to the new maximum for their respective job grade.
B. Allowing their base rate to increase as all others do in the same job grade.
C. Reducing the salary to the minimum of the range and providing the employee the
D. Freezing their salary until job-grade maximum increase to catch up with the red circle rate.

Answer 6

D. Freezing their salary until job-grade maximum increase to catch up with the red circle rate.

Question 7

An HR manager reviews widely published salary data to ensure that company compensation is superior to regional competition. A potential outcome of this lead compensation philosophy is.
Choose only ONE best answer.
A. Less likelihood of securing federal contracts.
B. Improved ability to attract and retain scarce-skill employees.
C. Increased need for pay openness in the organization.
D. Fewer categories of nonexempt employees who will qualify for paid overtime.

Answer 7

B. Improved ability to attract and retain scarce-skill employees.

Question 8

In an organization adopting a pay-for-performance philosophy:
Choose only ONE best answer.
A. A greater amount of employee pay is at risk
B. Cost-of-living increases are commonplace
C. Length of service is used in calculating pay Increases.
D. External competitiveness dominates compensation decisions.

Answer 8

A. A greater amount of employee pay is at risk

Pay-for-performance systems are becoming very popular because of their perceived relationship to organizational performance. In a pay-for-performance system, no increases are given except when justified by objective measurable performance increases. Therefore, a greater amount of employee pay is at risk.

Question 9

In translating the results of a salary survey into actual wage rates, what statistical technique would be most appropriate to use?.
Choose only ONE best answer.
A. Least-squares method.
B. Dispersion method.
C. Correlation method.
D. Expected variance method.

Answer 9

A. Least-squares method.

Question 10

Pay compression can be created by several means, including
Choose only ONE best answer.
A. Emphasizing external competitiveness over internal equity.
B. Following a promotion from within a strategy.
C. Granting increases on a percentage basis.
D. Emphasizing job evaluation results

Answer 10

A. Emphasizing external competitiveness over internal equity.

Question 11

The HR group gathered salary data but was unable to analyze it until the following year.
Is the data still considered usable?
Choose only ONE best answer.
A. Yes, if the data is leveled.
B. Yes, if the data is adjusted for wage inflation
C. Yes, if the jobs studied are still comparable.
D. No, salary data over six months is unusable.

Answer 11

B. Yes, if the data is adjusted for wage inflation

Question 12

The process of adjusting salary data to keep pace with market movement is referred to as.
Choose only ONE best answer.
A. Leveling.
B. Benchmarking.
C. Compressing.
D. Aging.

Answer 12

D. Aging

Question 13

What is a major advantage of an organization having internal equity?.
Choose only ONE best answer.
A. It is a sure way to eliminate gender bias
B. It lowers the amount the organization spends on salaries
C. It guarantees that all employees have the same benefits
D. It allows organizations to fairly recognize unique jobs

Answer 13

D. It allows organizations to fairly recognize unique jobs

Question 14

What is one of the advantages of taking a total rewards approach?

A. Ensures that the HR strategy will align with the business strategy.
B. Ensures compliance with legal and regulatory requirements.
C. Offers flexibility for customizing total rewards programs in unique proportions.
D. Offers more career opportunities for HR professionals.

Answer 14

C. Offers flexibility for customizing total rewards programs in unique proportions.

Question 15

What is the compa-ratio for an employee who earns $15 per hour where the salary range has a midpoint of $12 per hour?

A. 0.03
B. 0.80
C. 1.25
D. 1.35

Answer 15

C. 1.25

Question 16

What is the FIRST step the vice president of HR should take to determine market rates?

A. Contact a local compensation consultant and arrange to have a salary survey conducted.
B. Review job descriptions to ensure that they reflect actual duties and responsibilities.
C. Review any salary surveys purchased in the past few years, age the salary information to make it current, and compare it to the organization’s salary rates
D. Network with other HR professionals in the same industry to understand what salary levels they are paying their key positions

Answer 16

B. Review job descriptions to ensure that they reflect actual duties and responsibilities.

Question 17

What is the range spread for a job with a minimum salary of $60,000 and a maximum of $90,000?

A. 15%
B. 33%
C. 50%
D.67%

Answer 17

C. 50%

Question 18

Which form of equity refers to the fairness of a job’s pay rate in comparison to other jobs within the same company?

A. External
B. Internal
C. Distributive
D. Procedural

Answer 18

B. Internal

Question 19

For which of the following types of employees are maturity curves most used as a basis of compensation?

A. Executives.
B. Management trainees.
C. Professional personnel.
D. Long-service nonexempt employees.

Answer 19

C. Professional personnel.

Question 20

Two consecutive years of mandated 10% increases in the minimum wage would probably result in which of the following?

A. Compression between the lowest-paid workers and more skilled workers for a retail trade employer.
B. Less pressure on the available pool of discretionary funds for pay increases for most employers who have minimum-wage employees.
C. Reduced leverage of employees making one to two times the minimum wage in asking for larger pay increases.
D. Increased pressure for larger pay increases among employees making one to two times the minimum wage.

Answer 20

A. Compression between the lowest-paid workers and more skilled workers for a retail trade employer.

Question 21

Which of the following factors is not related to pay compression?

A. Higher starting salaries dictated by increased market pressures.
B. Unionized hourly pay increases that overtake supervisory and nonunion hourly rates.
C. Merit increases that reward existing employees for higher productivity
D. Recruitment of new college graduates at pay levels above those of current job holders.

Answer 21

C. Merit increases that reward existing employees for higher productivity

Question 22

Which of the following is a form of indirect compensation?

A. Base pay.
B. Bonus.
C. Flexible benefits.
D. Differential pay.

Answer 22

C. Flexible benefits.

Question 23

which of the following is a non-quantitative method of job evaluation?

A. Job qualification
B. Point-factor method
C. Factor comparison
D. Job ranking

Answer 23

D. Job ranking

Question 24

Which of the following is not used as a method to segment a relevant labor market?

A. Geographic.
B. Type of skill
C. Income level.
D. Industry.

Answer 24

C. Income level.

Question 25

Which of the following is NOT a key consideration when developing a pay plan?

A. It is fiscally sound and based on the organization’s ability to pay.
B. It is perceived as fair to all employees.
C. It satisfies employees’ income requirements.
D. It supports the organization’s vision and goals.

Answer 25

C. It satisfies employees’ income requirements.

While many organizations would like their employees to be content with their pay and not wish for more, this is not a key design consideration. Being able to fund the pay program and ensuring a high degree of fairness are fundamental to effective plan design.

Question 26

Which of the following job classes would typically have the greatest range spread?

A. Production
B. Customer service
C. Supervisor
D. Executive

Answer 26

D. Executive

In general, lower-level jobs typically have a narrow range between minimum and maximum salaries, while the salary ranges for higher-level jobs will be wider. This is because people in entry-level jobs have more promotion possibilities, and therefore tend to stay at the entry level for shorter periods of time, while people in higher-level jobs tend to stay in their range for a longer period of time. Also, the learning time to achieve “job rate” (midpoint) competence is shorter for lower-level job.

Question 27

Which of the following job evaluation methods would be MOST appropriate for an organization that has a large number of people with similar, defined jobs?

A. Paired comparison
B. Factor comparison
C. Job ranking
D. Job classification.

Answer 27

D. Job classification.

Question 28

Which of the following job evaluation methods would provide a small organization with a quick and inexpensive way to compare one job to another?
Choose only ONE best answer.
A. Ranking
B. Paired comparison
C. Point-factor
D. Factor comparison

Answer 28

A. Ranking

Job ranking is a fairly quick, inexpensive method and is easily explained to managers and employees. However, it may not be clear why one job is valued over another, and there may not be much of differential between jobs, making the ranking ineffective. In addition, job ranking is not usually feasible when evaluating a large number of positions.

Question 29

Which of the following philosophies would an entitlement-oriented organization embrace?

A. Lifelong employment
B. Individual rewards
C. Bringing in new talent
D.Performance-driven pay

Answer 29

A. Lifelong employment

Question 30

Which of the following statements about market-based job evaluation is true?

A. It is difficult to explain to employees.
B. It requires reliable survey data.
C. It is more legally defensible than job-content approaches.
D. It emphasizes internal equity.

Answer 30

B. It requires reliable survey data.

A market-based job evaluation depends solely on survey data. Without reliable data, the evaluation has no credibility. It has little to do with internal equity, is not especially difficult for employees to understand, and is not more legally defensible than a job-content approach to job evaluation.

Question 31

Which of the following statements about person-based pay systems is true?

A. They pay higher performers more aggressively.
B. They pay more to employees with long service.
C. They pay employees for what they are capable of doing
D. They work best in companies with a few professional employees

Answer 31

C. They pay employees for what they are capable of doing

Under competency or skill-based plans, employees are paid for the highest level of skill/competence they have achieved, regardless of the work they perform

Question 32

Which of the following statements regarding job evaluation methods is correct?
Choose only ONE best answer.
A. Quantitative methods are more easily explained to employees.
B. Quantitative methods do not establish the relative order of jobs.
C. Non-quantitative methods evaluate the whole job.
D. Non-quantitative methods evaluate job worth

Answer 32

C. Non-quantitative methods evaluate the whole job.

Non-quantitative methods include job ranking and job classification, are often referred as whole-job methods, as they evaluate the entire job and place different jobs in hierarchical order without a numeric value being assigned to each job.

Question 33

Which of the following would be considered direct compensation?

A. Unpaid leave
B. Deferred pay
C. Cash bonus
D. Perquisites

Answer 33

C. Cash bonus

Pay stem is a direct compensation, including base pay and variable pay. Cash bonus is a kind of variable pay.

Question 34

Which of the following would be considered indirect compensation?.

A. Granting a spot bonus to a salaried employee for extra hours worked at a convention.
B. Paying the difference between jury duty pay and the employee’s regular wages.
C. Paying individual bonuses to team members for meeting critical project deadlines.
D. Awarding organization-paid cruises to top performers in a sales contest.

Answer 34

D. Awarding organization-paid cruises to top performers in a sales contest.

Recognition and achievement awards (noncash)
are indirect compensation.

Question 35

Which pay strategy offers wage rates and benefits packages similar to that of the competition and is the most common approach?
Choose only ONE best answer.
A. Lead competition.
B. Lag competition.
C. Match competition.
D. External equity.

Answer 35

C. Match competition.

Question 36

A bank is considering an incentive pay program for its customer service representatives. A customer feedback survey is the main component on which the incentive payout will be based. Which plan necessity is the bank using?.
Choose only ONE best answer.
A. Sunset clause.
B. Incentive program alignment.
C. Line-of-sight.
D. Incorporation of long term goals

Answer 36

C. Line-of-sight

Line-of-sight refers to the ability of an employee to control or influence the components of the incentive plan. The employee needs a level of control over the component in order to believe that the incentive plan is fair and worth the extra effort.

Question 37

A company should use which of the following pay programs to compensate programmers?

A. Output-based
B. Seniority-based
C. Knowledge-based
D. Step increase

Answer 37

C. Knowledge-based

Programmers are typically compensated on the level of knowledge they have in their defined field; therefore, the only applicable pay program listed is knowledge-based. HR will need to determine the factors such as college degrees or understanding of various computer languages that differentiate its programmers learn what competitors pay programmers with this knowledge, and establish pay rates based on those factors.

Question 38

A compensation method related to an employee’s individual performance is known as?

A. An incentive pay plan.
B. A Scanlon plan
C. A step plan
D. A merit pay plan

Answer 38

D. A merit pay plan

The performance-based pay system is commonly called merit pay or pay for performance.

Question 39

A time-based step-rate pay system is MOST appropriate when?

A. Labor costs are known
B. Units of output are easily measured
C. Work flow is regular and delays are few
D. Employee qualifications increase with time.

Answer 39

D. Employee qualifications increase with time.

In a time-based step-rate pay system, the rate is based on longevity in the job. Pay increases occur based on a predetermined schedule as employees gain proficiency in the job.

Question 40

Gain sharing is a type of?

A. Profit sharing
B. Individual incentive plan
C. Group incentive
D. Commission.

Answer 40

C. Group incentive

In gain sharing plans (also called Scanlon plan), a portion of the gains an organization realizes from group effort is shared with the group.

Question 41

In order to determine eligibility to participate in a group variable pay plan, what is the most critical question that must be answered?

A. Can the employees influence results?
B. How will the plan be funded?
C. Is there low variability in performance?
D. Who should assess the plan?

Answer 41

A. Can the employees influence results?

There are various types of true group variable pay programs, such as group sharing, goal sharing and profit sharing. Each must be predetermined and have the ability of employees to influence results. The other three questions are all issues that can be addressed in plan design.

Question 42

One problem with team-based incentives is that they?

A. Can create competition among team members.
B. Are more costly than individual incentives.
C. Can result in Equal Pay Act claims.
D. Can be perceived as unfair by high performers.

Answer 42

D. Can be perceived as unfair by high performers.

Question 43

Which common practice in a pay-for-performance system is most likely to hinder performance?

A. Small merit increase range amounts.
B. Open sharing with all employees of performance expectations.
C. A common date for merit increases.
D. Multiple measures of employee performance.

Answer 43

A. Small merit increase range amounts.

Small pay increase ranges can significantly hinder performance.

Question 44

Which compensation system guarantees a base wage and then pays an additional amount for each unit produced?

A. Straight piece-rate system
B. Differential piece-rate system
C. Production bonus system
D. Commission system

Answer 44

A. Straight piece-rate system

With a straight piece-rate system, the employee receives a base wage rate and is awarded additional compensation for the amount of output produced.

Question 45

Which of the following statements about a single-rate pay system is true?

A. It provides opportunity for progression within a grade.
B. It is typically used for exempt jobs.
C. It disregards performance or seniority.
D. It is not applicable in a union environment.

Answer 45

C. It disregards performance or seniority.

Question 46

Which of the following would be a recommended compensation practice for a startup business that wishes to create an innovative, entrepreneurial culture?
A. Offer incentive bonuses and stock ownership plans.
B. Establish high starting pay rates to attract the most talented employees.
C. Offer a benefits program that exceeds competitors.
D. Establish step- or longevity-based pay increases

Answer 46

A. Offer incentive bonuses and stock ownership plans.

Question 47

After giving two weeks’ notice, an employee falls while on the premises, breaks an ankle, and is unable to work for the remaining two weeks. In this situation, which of the following is the primary benefit?

A. Unemployment compensation
B. Sick pay
C. Social Security disability
D. Worker’s compensation

Answer 47

D. Worker’s compensation

This is a work-related injury that keeps the employee from working the remaining two weeks. Therefore, it is covered under workers’ compensation.

Question 48

As part of conducting a benefit plan needs assessment, the HR professional has looked at the organization’s business strategy and compensation philosophy. What is the NEXT step that should be taken?

A. Look at market conditions to see what benefits competitors offer.
B. Determine which benefits should be included in the plan.
C. Conduct a utilization review to determine how benefits are used.
D. Determine employee needs with regard to benefits.

Answer 48

D. Determine employee needs with regard to benefits.

Question 49

At the beginning of a given year, a shipping department has four people, each paid $1,000 per month. In that year, each of these employees receives a pay raise of $100 per month. The raises are given Jan. 1, March 1, July 1 and Nov. 1, respectively. The salary increases raise the payroll cost for the year by?

A. 6.25%.
B. 7%
C. 9%
D. 10%

Answer 49

A. 6.25%.

Count up the remaining months of the increase for January (12), March (10), July (6) and November (2) (equals 30 months at $100 per month) Divide 3,000 by the total starting payroll costs (4100012=48,000). The increase is 6.25%

Question 50

What is the BEST payroll system for a small growing company whose employees are paid biweekly?

A. Manual system
B. In-house mainframe
C. Networked microcomputer system
D. Payroll service provider

Answer 50

D. Payroll service provider

Question 51

What is the preferred method of communicating the benefit plans to employees?
Choose only ONE best answer.
A. Direct communication
B. Benefit surveys
C. Annual enrollment period meeting
D. Written communication

Question 52

What is the primary purpose of a flexible benefits plan?
Choose only ONE best answer.
A. Enable employers to allow staff to select the benefits that suit them.
B. Require less maintenance by employers
C. Pass along benefit premium increases to employees.
D. Decrease cost because there was a significant differential between the cheapest and most expensive quote.

Answer 52

A. Enable employers to allow staff to select the benefits that suit them

Question 53

Which of the following defined benefit plans is portable for the employee?
Choose only ONE best answer.
A. Flat-dollar formula
B. Cash balance plan
C. Final-pay formula
D. Career-average formula

Answer 53

B. Cash balance plan

Question 54

Which of the following is generally NOT a function of the payroll department?

A. It is integrated with Social Security benefits
B. It expires after 26 weeks of disability.
C. It becomes effective once an employee’s sick-leave benefits expire.
D. It covers both work and non-work related injuries.

Answer 54

A. It is integrated with Social Security benefits

Question 55

Which of the following is NOT a part of a payroll audit?
A. Check for fictitious employees
B. Calculation of comparatio
C. Administration of wage garnishments
D. Calculation of overtime

Answer 55

B. Calculation of comparatio

The compa-ratio is used to determine if managers are adhering to pay policy guidelines. It can also be an indication that a particular workforce has accumulated significant seniority. The purpose of a payroll audit is to detect fraud and uncover patterns of errors and omissions. Checking for fictitious employees, wage garnishments, and overtime administration are all part of standard payroll auditing practices.

Question 56

Which of the following statements about long-term disability protection is generally true?

A. It is integrated with Social Security benefits.
B. It expires after 26 weeks of disability.
C. It becomes effective once an employee’s sick-leave benefits expire.
D. It covers both work and non-work related injuries

Answer 56

A. It is integrated with Social Security benefits.

Question 57

Which type of benefits plan recognizes individual differences in terms of characteristics such as age, family status and lifestyle?

A. Concierge.
B. Cafeteria.
C. Insured.
D. Funded.

Answer 57

B. Cafeteria.

Question 58

All of the following are good examples of employment branding on a corporate Web page EXCEPT

A. An offer to receive periodic updates about career development.
B. A link to information about balancing work and family life.
C. Information about a pro bono engagement to help the Special Olympics.
D. A chance to win free flying lessons for submitting a qualified resume.

Answer 58

D. A chance to win free flying lessons for submitting a qualified resume.

Question 59

The primary advantage of continuous recruiting is that:

A. Is less expensive than intermittent recruiting
B. Helps the employer maintain visibility and branding in the labour market.
C. Creates the impression that the organization is growing.
D. Results in a more efficient staffing process.

Answer 59

B. Helps the employer maintain visibility and branding in the labour market.

Question 60

Which of the following actions might be a likely way to increase employee engagement?

A. Promote a higher degree of centralization
B. Raise salary
C. Empowerment or delegation
D. Implement matrix organization

Answer 60

C. Empowerment or delegation

Question 61

Which of the following is NOT an outcome of employee engagement?
Choose only ONE best answer.
A. Employees are motivated by pay increases.
B. Employees have pride in their employer.
C. Employees stay longer with the organization.
D. Employees work extra to deliver excellent

Answer 61

A. Employees are motivated by pay increases.

Question 62

The first strategy for improving employee retention is to
Choose only ONE best answer.
A. Transfer or redesign job.
B. Increase pay.
C. Improve job satisfaction.
D. Provide training.

Answer 62

C. Improve job satisfaction.

Question 63

The employee value proposition is?

A. The amount people are paid by their organization.
B. The collection of what an organization offers in exchange for employment.
C. The amount an employee manages to negotiate for themselves on joining an organization.
D. The total pay and bonuses available to an employee.

Answer 63

B. The collection of what an organization offers in exchange for employment.

Question 64

What employee and employer can offer each other aligns people with organization?
A. employee value proposition
B. employee engagement
C. employee survey
D. employee salary

Answer 64

A. employee value proposition

Question 65

Why do employers invest in employee engagement?
Choose only ONE best answer.
A. To encourage employees to trust their managers
B. To make a work life balance
C. To make employees work harder for less
D. To attach employees to their works and organization

Answer 65

D. To attach employees to their works and organization

Question 66

Which of the following is most effective in improving retention?
Choose only ONE best answer.
A. Needs analysis.
B. Exit survey.
C. Supervisory training.
D. Wage analysis

Answer 66

C. Supervisory training.

Research has consistently shown that the relationship that an employee has with his or her supervisor is the single greatest factor affecting his or her decision to leave a company.