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Communication portals

These help managers and/or workers understand compensation policies and practices by answering frequently asked questions and describing how compensation systems affect their pay.

Software packages that support manager self-service

These help managers pay their workers appropriately.

The variable component

This varies in line with business performance.

Instances where employees are paid below the minimum ranges are referred to as

green circle rates

Which of the following statements is true of bottom-up budgeting?

The budget forecasted by managers represents a plan, and deviations due to unforeseen changes are common.

Identify the possible reasons for managers paying employees at rates that exceed the intended policy. (Check all that apply.)

There may be few new hires. The majority of employees may be workers with high seniority. There may be low turnover. There may be low promotion rates.

True or false: The design of ranges and the evaluation of jobs need not be reexamined if red circle rates become prevalent throughout an organization.

false

True or false: A shortage of business-related knowledge among compensation managers restricts the usefulness of compensation software.

true

Rank the steps involved in WorldatWork's six-stage process of communication in the correct order. ---evaluate the success of an employee communication program ---select communication tools and media ---define the objectives of an employee communication program ---conduct communication sessions with employees ---obtain information and identify the facts

---define the objectives of an employee communication program ---obtain information and identify the facts ---select communication tools and media ---conduct communication sessions with employees ---evaluate the success of an employee communication program

Rank the steps involved in top-down budgeting in an organization in the correct order. ---managers distribute a total budget among subordinates ---a total budget is allocated to each manager ---pay increase budget for the entire organization is estimated by top management

---pay increase budget for the entire organization is estimated by top management ---a total budget is allocated to each manager ---managers distribute a total budget among subordinates

How is the turnover effect calculated?

Annual turnover multiplied by the planned average increase

Which of the following is an index that is used to evaluate how managers actually pay employees in relation to range midpoints?

Compa-ratios

Contingent workers

Employment agreements of these employees may cover only short, specific time periods.

Which of the following is true of creating a compensation budget?

It requires trade-offs.

In the context of the factors that influence wages in the labor market, which of the following statements is true of the consumer price index (CPI)?

The CPI measures changes in prices over time.

In the context of managing labor costs, it is a viable option to _____ when the costs of fixed benefits are high.

add overtime

In order to seek bankruptcy protection from creditors, some companies have eliminated _____.

defined benefit (pension) plans

True or false: In the context of raising average pay level of employees, financially troubled employers increase employees' copays and deductibles for benefits as a last resort.

false

A typical approach to top-down budgeting is planned _____ , which is essentially the percentage increase in average pay for the unit that is planned to occur.

pay-level rise

True or false: In the past, financial planning associated with managing compensation was solely about costs.

true

Activities that are not unique to an organization and those that can be done cheaper (and perhaps also better) by an outside provider are called

transactional activities

What are the factors included in the labor cost model? (Check all that apply.)

Cash compensation Number of employees Hours worked

Software packages that process transactions

These standardize forms, run analysis, and generate reports at the click of the mouse.

Which of the following is a feature of broad bands?

They are accompanied by external market "reference rates."

Which of the following is true of contingent workers?

They can be independent contractors or vendors.

A communication approach

This approach focuses on explaining practices, details, and the way wages are ascertained.

A marketing approach

This approach focuses on strategy, values, and benefits of overall policies and may be silent on details such as range maximums, increase guides, and the like.

The cost of living

This concept is measured by examining the personal expenditures of each employee.

Changes in wages in labor markets

This concept is measured through pay surveys.

Distributing forecasting instructions and worksheets

This involves providing managers with the forms and directives necessary to preplan raises.

Fixed components

This is generally paid irrespective of business performance.

Average salary (fixed payments) level plus variable compensation payments such as bonuses, gain sharing, stock plans, and/or profit sharing comprise _____

average cash compensation

Decisions to raise the average pay level of employees is in part a function of an organization's _____.

financial circumstance

In order to reduce benefits costs, most companies have recently resorted to _____.

suspending their matching contributions to employee 401(k) plans

A decentralized strategy

This compensation strategy and function is more likely to be found in organizations that are larger and/or compete in different product (or geographic) markets. This refers to a management strategy of giving separate business units the responsibility of designing and administering their own systems.

Changes in prices in the product and service markets

This concept is measured by certain government indexes such as the consumer price index (CPI).

A centralized strategy

This compensation strategy and function is more likely to be found in smaller and/or single line of business organizations. This refers to a management strategy which positions the design and administration obligations at corporate headquarters.

Checking data and compiling reports

This involves auditing the pay raises forecasted by managers to ensure that they do not exceed the pay guidelines and are consistent with appropriate ranges.

Reviewing and revising forecasts and budgets with management

This involves consulting with managers regarding the analysis of their forecast and any suggested changes.

Providing consultation to managers

This involves giving advice and salary information services to managers upon request.

guarantee that different managers grant consistent raises to employees with similar performance ratings and in the same position in their ranges.

merit increase guidelines

What is the role of pay in strategic changes in business strategy?

Compensation has to be realigned with changes in business strategy.

Conducting feedback with management

This involves presenting statistical summaries of forecasting data by department and establishing unit goals.

Analyzing forecasts

This involves reviewing each manager's forecast and suggesting changes based on noted inequities among various managers.

Instructing managers in compensation policies and techniques

This involves training managers in the concepts of a sound pay-for-performance plan and in standard company remuneration techniques.

In the context of embedded controls, which of the following is meant to offer managers greater flexibility compared to a grade-range design?

Broad bands

Which of the following is true of outsourcing?

Cost savings are a major potential advantage of outsourcing.

Vestal Productions Inc., a multinational entertainment company, intends to raise the average salary of all its employees during its annual appraisal cycle. The company's managers have carefully factored in the current year's rise, ability to pay, market adjustments, turnover effects, changes in the cost of living, and geographic differentials. After doing so, the company has decided that the planned rise in average salary for the current cycle is 7.6 percent. In this scenario, what is the implication of the company's decision?

It means that the company has a set target of 7.6 percent as the hike in average salary.

Which of the following are headcount reduction strategies that are used by organizations to cut labor costs? (Check all that apply.)

Layoffs Exit incentives

Core employees

Organizations desire a long-term relationship with these employees.

What are the problems associated with headcount reductions? (Check all that apply.)

Owing to increases in unemployment insurance taxes, workforce reductions are costly in tangible terms up front. Workforce reductions, if not handled well, can be detrimental to employee relations. Regulatory requirements make it difficult to make targeted cuts. Organizations with greater workforce reductions experience greater voluntary turnover.

The management of Lighthouse Publications, a multinational publishing company, has to decide the compensation budget for the next fiscal year. After considering current year's rise, the company's ability to pay, market adjustments, turnover effects, changes in the cost of living, and geographic differentials, the management decides that the planned rise in average salary for the new fiscal year will be 5 percent. Identify the implication of this decision.

The average salary calculated to include all employees will be 5 percent higher in the next fiscal year.

Software packages that support employee self-service

These help workers access their personal information, allocate savings between value or growth investment funds, make choices about which health care coverage they prefer, and access vacation schedules.

True or false: In the context of allocating a salary budget to subordinates, some companies use forced distribution approaches to minimize the number of employees placed in low performance categories.

false

True or false: Shifts in pay mix do not reflect changes in business strategy and restructuring.

false

In the context of increasing the average pay levels of employees, the _____ recognizes the fact that when workers depart (through layoffs, quitting, retiring), they are usually replaced by workers who earn lesser wages.

turnover effect

What are the reasons for managers paying employees at rates that are less than the intended policy? (Check all that apply.)

Employees may be poor performers. Promotions may be occurring rapidly. The majority of employees may be new.

Monitoring budgeted versus actual increases

This involves controlling the forecasted raises versus the real raises by tracking and reporting periodic status to management.