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Total Rewards Management (T1/GR1) > Module 2 Compensation > Flashcards

Module 2 Compensation Flashcards

1
Q

What are the two primary elements of compensation?

A

Fixed and variable pay

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2
Q

To ensure compliance, what is the safest course on which to base pay decisions?

A

Job-related factors

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3
Q

Which job evaluation method involves collecting competitors’ data to identify the prevailing rate for a job?

A

Market pricing

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4
Q

Which statement is most accurate regarding pay grades?

A. Pay grades rarely overlap.
B. Pay grades should not allow for career progression.
C. Pay grades distinguish between skill or responsibility.

A

C. Pay grades distinguish between skill or responsibility.

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5
Q

Payment that is typically based on an individual employee’s rate of production is referred to as which type of base pay?

A

Piece rate

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6
Q

Which of the following best describes a primary category of variable pay?

A. Salary
B. Commissions
C. Competency-based pay
D. Pay for performance

A

B. Commissions

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7
Q

Most common types of compensation

A

Hourly wages
Salaries
Bonuses

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8
Q

What is comp that is contingent on discretion, performance, or results achieved (aka pay at risk)

A

Variable pay

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9
Q

Factors influencing compensation (5)

A
  1. Compensation philosophy & strategy
  2. HR strategy
  3. Competitive environment
  4. Financial resources
  5. Regulatory & other reqs
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10
Q

Types of pay-related laws (3)

A
  1. Minimum wage & overtime
  2. Pay equity
  3. Anti-competitive price fixing
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11
Q

Facets of base pay

A

Definition can vary by country
Monthly equivalent salaries vary by country
Bottom-line fixed pay practices need to be based on market practice & competitive strategy for each country

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12
Q

Frequency of review, allowances, & government mandates are factors that affect ________

A

Base pay

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13
Q

Types of base pay (3)

A
  1. Salary
  2. Hourly wages
  3. Piece rate
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14
Q

Base pay structure design (4)

A

Job analysis > job documentation > job evaluation > job hierarchy > base pay structure

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15
Q

What is the systematic, formal study of duties & responsibilities that comprise job content & provides key information about nature & level of work performed. Must occur before jobs can be documented.

A

Job analysis

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16
Q

What is written information about job content, functions of the job, and KSAs.

A

Job documentation, its common form is the job description.

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17
Q

What is the structured process to determine the value of an org’s jobs relative to each other

A

Job evaluation

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18
Q

What is the grouping or categorization of jobs relative to other jobs (e.g. pay grades or job ladders)

A

Job worth hierarchy, sometimes referred to as job architecture

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19
Q

Created using established hierarchy and utilized as a framework for pay decisions

A

Base pay structure

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20
Q

Purpose of job analysis (4)

A
  1. Create job documentation
  2. Determine where job fits in ladder or family
  3. Support recruitment, training, performance mgmt, & other HR processes
  4. Provide a basis for legal & regulatory compliance
21
Q

Three types of job documentation

A
  1. Job profiles
  2. Job descriptions (most common)
  3. Job ladders
22
Q

Types of content-based job evaluation approaches

A
  1. Nonquantitative (ranking, classification)

2. Quantitative methods (point factor, job component)

23
Q

Aka whole-job method, views job globally in terms of its importance to the company. Simplest form is ranking. Classification method also compares jobs on whole-job methods, sometimes called “job slotting” (ex: Professional 1, 2, 3, or Manager 1 & 2).

A

Nonquantitative content-based job evaluation

24
Q

Aka factor methods, examines the importance of jobs in terms of compensable factors using statistical analysis. Corresponding points for that level are then awarded to the job & combined to derive a total score. Very uncommon & rarely used.

A

Quantitative content-based job evaluation

25
Q

A standard job used to make pay comparisons, easily defined & found in other orgs

A

Benchmark job

26
Q

Why collect market data

A

Analyze pay competitiveness, identify pay trends, identify competitive pay practices

27
Q

Market-based job evaluation approach

A

Market pricing technique - collection & interpretation of external market data & identification of the prevailing rate for a job

28
Q

Helps to establish relationship between jobs by grouping similar jobs as established in the job evaluation process.

Used to determine & ensure internal &/or external equity among positions or groups of positions. Job grades/pay structures are then based on that internal &/or external equity.

A

Job hierarchy

29
Q

Job hierarchy approaches

A

Job content approach (internal)

Market-based approach (external)

30
Q

Base pay structure

A

Management tool that reflects the collection & organization or internal & external comp data to support job values. Consists of a series of pay ranges that represent jobs of similar internal &/or external worth.

31
Q

Components of base pay structure

A

Number of pay grades/bands
Pay range
Midpoint-to-midpoint differential

32
Q

Number of pay structures/bands may be affected by (3)

A 
Diversity of jobs in the org
Functional area (nursing, engineering, marketing)
Job level (admin, professional, technical, executive, etc.)
33
Q

Midpoint-to-midpoint differential

A

Difference in rates paid at midpoint of two adjacent grades. 10-15% differentials are common.

34
Q

Most common base pay adjustments (6)

A
  1. Merit increase
  2. COLA
  3. Equity adjustments
  4. General increase
  5. Skill-based
  6. Lump-sum payment
35
Q

Types of differential pay

A

Shift differential
Weekend or holiday differential
Geographic differential

36
Q

Variable pay

A

Rewards accomplishments & results for org, group, or individual results
Not guaranteed

37
Q

Most common types of short-term variable pay plans (3)

A

Bonuses
Incentives
Commissions

Short-term = 1 year or less

38
Q

Bonus plans

A

More discretionary than incentives
Typically not based on specific metrics or formulas
May be individual, team, or org performance-based

39
Q

Other common types of bonus plans

A

Hiring
Referral
Retention (stay bonus)

40
Q

Incentive plans

A

STI plan in which criteria determined in advance, based on performance measures, weighted between individual/team/org performance, payouts typically % of targeted award w/ targets based on job or level

41
Q

Commission plans

A

STI plan for sales employees. Cash payments, % of sales, typically large portion of total pay, & are considered part of sales compensation, a specialized area of comp design

42
Q

Long-term incentive plans (definition & types of plans)

A

LTI plans = greater than 1 year, typically 3-5

Equity-based - company stock, value is based on stock performance, actual awards may be in the form of stock or cash
Cash-based - not based on stock or equity

43
Q

Types of equity incentives

A

Stock options
Restricted stock
Performance units

44
Q

Short description/1-2 paragraph summary of job, often found in salary survey descriptions

A

Job profile

45
Q

Provides info on multiple levels within the same job family. May include general summary of the family & then specific level descriptors within the family, e.g. entry, intermediate, senior.

A

Job ladder

46
Q

Describes job itself & includes duties & responsibilities, level of work to be performed, working conditions, where job fits in hierarchy, job specifications - EE characteristics required for competent performance

A

Job description

47
Q

When building a base pay structure, what % of jobs should be benchmarked

A

At least 50%

48
Q

Data may be used for benchmarking purposes if what % of the job content is similar

A

70%

Total Rewards Management (T1/GR1) (8 decks)

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