Total Rewards

Question 1

Benefits

Answer 1

Mandatory or voluntary payments or services provided
to employees, typically covering retirement, health care,
sick pay/disability, life insurance, and paid time off.

Question 2

Broadbanding

Answer 2

Combining several salary grades or job classifications
with narrow pay ranges into one band with a wider salary
spread.

Question 3

Perquisites

Answer 3

Compensation provided on an individual basis in the form
of goods or services.

Question 4

Compa-ratio

Answer 4

Pay rate divided by the midpoint of the pay range.

Question 5

Compensation

Answer 5

All financial returns (beyond any tangible benefits
payments or services), including salary and allowances.

Question 6

Compensation philosophy

Answer 6

Short but broad statement documenting an organization’s
guiding principles and core values about employee
compensation

Question 7

Cost-of-living adjustment (COLA)

Answer 7

Pay adjustment given to eligible employees regardless of
performance or organizational profitability; usually linked
to inflation.

Question 8

Domestic partners

Answer 8

Unmarried couples, of the same or opposite sex, who
live together and seek economic and noneconomic
benefits comparable to those granted to their married
counterparts.

Question 9

External equity

Answer 9

Situation in which an organization’s compensation levels
and benefits are similar to those of other organizations
that are in the same labor market and compete for the
same employees.

Question 10

Flat-rate pay

Answer 10

Provides each incumbent of a job with the same rate of
pay, regardless of performance or seniority; also known
as single-rate pay.

Question 11

General pay increase

Answer 11

Pay increase given to employees based on local
competitive market requirements; awarded regardless of
employee performance.

Question 12

Green-circle rates

Answer 12

Situations in which an employee’s pay is below the
minimum of the range.

Question 13

Incentive pay

Answer 13

Form of direct compensation where employers pay for
performance beyond normal expectations to motivate
higher performance.

Question 14

Internal equity

Answer 14

Extent to which employees perceive that monetary and
other rewards are distributed equitably, based on effort,
skill and/or relevant outcomes

Question 15

Job classification

Answer 15

Job evaluation method in which descriptions are written
for each class of jobs; individual jobs are then put into the
grade that best matches their class description.

Question 16

Job evaluation

Answer 16

Process of determining a job’s value and price for
the purpose of attracting and retaining employees
by comparing the job against other jobs within the
organization or against similar jobs in competing
organizations.

Question 17

Job ranking

Answer 17

Job evaluation method that involves establishing a
hierarchy of jobs from lowest to highest based on each
job’s overall value to the organization

Question 18

Job-content-based job evaluation

Answer 18

Job evaluation method in which the relative worth
and pay structure of different jobs are based on an
assessment of their content and their relationship to other
jobs within the organization.

Question 19

Lump-sum increase (LSI)

Answer 19

One-time payment made to an employee; also called
performance bonus.

Question 20

Market-based job evaluation

Answer 20

Job evaluation method in which the relative worth and
pay structure of different jobs are based on their market
value or the going rate in the marketplace.

Question 21

Merit pay

Answer 21

Situation where an individual’s performance on the
job is the basis for the amount and timing of pay
increases; also called performance-based pay or pay for
performance.

Question 22

Paired-comparison method

Answer 22

Job evaluation method in which each job is compared
with every other job being evaluated; the job with the
largest number of “greater than” rankings is the highestranked job, etc.

Question 23

Pay compression

Answer 23

Occurs when there is only a small difference in pay
between employees regardless of their experience, skills,
level, or seniority; also known as salary compression.

Question 24

Pay for performance (P4P, PfP)

Answer 24

Situation where an individual’s performance on the job
is the basis for the amount and timing of pay increases;
also called merit pay or performance-based pay

Question 25

Pay grades

Answer 25

Used to group jobs that have approximately the same
relative internal or external worth and are paid at the
same rate or within the same pay range.

Question 26

Pay ranges

Answer 26

Set the upper and lower bounds of possible
compensation for individuals whose jobs fall within a pay
grade.

Question 27

Performance bonus

Answer 27

One-time payment made to an employee; also called a
lump-sum increase (LSI).

Question 28

Performance-based pay

Answer 28

Situation where an individual’s performance on the job
is the basis for the amount and timing of pay increases;
also called merit pay or pay for performance.

Question 29

Person-based pay

Answer 29

Pay systems in which employee characteristics, rather
than the job, determine pay.

Question 30

Point-factor system

Answer 30

Job evaluation method that looks at compensable factors
(such as skills and working conditions) that reflect how
much a job adds value to the organization; points are
assigned to each factor and then added to come up with
an overall point value for the job.

Question 31

Productivity-based pay

Answer 31

Pay based on the quantity of work and outputs that can
be accurately measured.

Question 31

Premiums

Answer 31

Payments in return for the achievement of specific, timelimited, targeted objectives.

Question 32

Red-circle rates

Answer 32

Situations in which employees’ pay is above the range
maximum.

Question 33

Remuneration surveys

Answer 33

Instruments that collect information on prevailing market
compensation and benefits practices (including starting
wage rates, base pay, pay ranges, statutory and market
cash payments, variable compensation, and paid time
off).

Question 34

Single-rate pay

Answer 34

Provides each incumbent of a job with the same rate of
pay, regardless of performance or seniority; also known
as flat-rate pay.

Question 35

Time-based step-rate pay

Answer 35

System in which pay is based on longevity in the job and
pay increases occur on a pre-determined schedule.

Question 36

Total rewards

Answer 36

Direct and indirect remuneration approaches that
employers use to attract, recognize, and retain workers.

Question 37

Total rewards strategy

Answer 37

Plan or method implemented by an organization that
provides monetary, benefits-in-kind, and developmental
rewards to employees who achieve specific business
goals

Question 38

Benefits

Answer 38

Mandatory or voluntary payments or services provided
to employees, typically covering retirement, health care,
sick pay/disability, life insurance, and paid time off.