SHRM Quiz
What can an organization do to help it succeed in its pursuit of external pay equity? 1. Change to a lead-lag market competition pay strategy. 2. Increase base pay across the board instead of awarding performance bonuses. 3. Share salary ranges in internal and external job postings. 4. Offer a one-time lump-sum bonus to underpaid employees.
3. Sharing salary ranges in internal and external job postings can increase pay transparency, which helps in pursuit of pay equity (both internal and external). A one-time lump-sump bonus doesn't solve the issue long-term, and, if base-pay levels are still uneven, increasing base pay instead of using performance bonuses may not help solve pay inequities. Using a lead-lag market competition strategy may address pay inequity during the first half of the fiscal year when the organization is leading the market on compensation but could still result in inequities in the second half of the year when it lags the market.
What job evaluation method assesses the responsibilities and requirements of each job and its relationship to other jobs in the organization? A) Market-based B) Survey-based C) Job-content-based D) Quantitative
C) Job-content-based The relative worth of different jobs is based on the assessment of their content, and they can then be compared to other jobs within the organization.
Which component of a total rewards system should an organization consider as an indirect benefit to employees? A) Commissions B) Yearly bonus C) Life insurance D) Competitive salary
C) Life insurance Life insurance is considered an indirect benefit. Salaries, commissions, and bonuses are part of an employee's compensation and are considered direct benefits.
During a workforce planning session, HR identifies that within 5 years, 25% of the workforce will be nearing retirement age. The organization wants to ensure that there is steady recruitment of a new generation. Which activity during the benefits needs assessment is most relevant to the recruitment strategy? A) Analyze the utilization data on all benefit plans. B) Review the organization's management structure. C) Analyze the workforce demographics. D) Review the strategy of the organization's competitor.
A) Analyze the utilization data on all benefit plans. Analyzing the utilization data on all benefit plans could result in changes to the benefit mix based on the demographics and possible elimination of underutilized or high-cost plans for the aging workforce. Reviewing the competitor's strategy or the organization's management culture is not part of the benefit needs assessment activity. It is assumed that the workforce demographics have already been analyzed to identify the population nearing retirement age.
Which is the most important factor an HR leader should use when planning pay increases? A) Financial implication B) Employee support C) HR workload D) HR systems
A) Financial implication HR should consider the potential financial implications of recommendations and actions. Financial analyses and HR decisions are always intertwined. While HR systems, employee support, and HR workload are all viable factors, they are not the most important and are not part of the decision making. They are factors to consider for implementing and communicating the increases.
Which is the best example of indirect compensation? A) Granting compensatory time off to a salaried employee for extra hours worked B) Paying individual bonuses to team members for meeting critical project deadlines C) Paying non-management employees at a higher rate for overtime hours worked D) Awarding store gift cards to top performers in a sales contest
A) Granting compensatory time off to a salaried employee for extra hours worked Compensatory time off is considered indirect compensation. Cash recognition and achievement awards (gift cards), overtime pay, and cash bonuses are all considered direct compensation.
How should an HR leader evaluate an organization's return on labor expenses? A) By adding salaries, overtime, benefits, and bonuses and then dividing by total costs B) Through a well-crafted pay-for-performance program that measures performance compared to goals C) By reviewing the overall employee output compared to the overall sales revenue D) By the number of high performers compared to low performers in the organization
B) Through a well-crafted pay-for-performance program that measures performance compared to goals
An organization implements changes to its pay structure, resulting in new hires now being started at the same wage as workers who have been on the job for two years. What type of pay variation will most likely be created? A) Pay compression B) Lead-market strategy C) Green-circle rates D) Red-circle rates
A) Pay Compression Pay compression, or salary compression, describes situations where there is only a small difference in pay between employees regardless of their experience, skills, level, or seniority. Pay compression can occur if the labor market, inflation, or some other reason causes market pay increases to rise faster than the employer's pay adjustments
Which is a disadvantage of a time-based pay system? A) Pay levels may be raised over time regardless of performance. B) An enhanced performance management and appraisal system will be required. C) Quantity of work may be favored over quality of work. D) The organization could be subject to significant equal pay litigation.
A) Pay levels may be raised over time regardless of performance. A major disadvantage of a time-based pay system is that it does not reflect performance differences, except for unsatisfactory performance, and it can raise average pay levels over time even if performance is below average.
What is the advantage of nonqualified deferred compensation plans? A) They provide incentives for key executives to stay with the organization. B) They allow all company employees to contribute more than the limits prescribed by qualified plans. C) They provide more-favorable tax advantages to employers than qualified plans. D) They protect the plans' funds from creditors in the event of the failure of the business.
A) They provide incentives for key executives to stay with the organization. Nonqualified deferred compensation plans allow organizations to provide additional benefits to a select group of key executives, which motivates them to stay with the organization.
An organization finds that, without consciously meaning to, it is rewarding behaviors that violate its values. As it returns to the beginning of the total rewards strategy process, what factor should the organization be sure to include in its assessment of its total rewards needs? A) What leaders are willing to tolerate in high performers B) Competitive forces that may be driving the behaviors C) Effectiveness of the current code of conduct D) Executive commitment to the required investment for the strategy
A) What leaders are willing to tolerate in high performers In this case, HR needs to ask leadership what behavior they are willing to accept from individuals who are contributing to the organization's strategic success. This will affect the total rewards system's design and implementation. This is not an issue of willingness to invest money but of commitment to the priority of stated values. Competitive factors may be influencing employees' behaviors, but rewarding that behavior through compensation systems goes back to the basic question of whether leaders are willing to sacrifice revenue for the organization's values. The code of conduct defines desired behaviors but may be ineffective in changing behavior if the rewards system is not aligned with the code
Which is the best example of direct compensation? A )Deferred pay B) Cash achievement award C) Use of a company car D) Disability insurance
B) Cash achievement award Direct compensation is cash compensation. It includes wages, commissions, and cash achievement awards. Indirect compensation includes benefit programs and items like a company car, disability insurance, and noncash rewards.
An organization conducts a pay survey and finds that some of its key employees are underpaid. They want to raise the pay for these employees but are concerned about adding to their salary burden. Which of the following is their BEST option? A) Market-based increases B) Incentive pay C) Step-rate adjustments linked to performance D) Cost-of-living adjustments
B) Incentive pay By definition, incentive pay is paying for performance beyond normal expectations. Employees receive the incentive pay only if specific goals are met. As long as incentive pay and base pay are not commingled, employees should perceive it as a reward (and not an entitlement) and the employer will benefit from a greater return on investment for performance beyond normal expectations.
Which metric related to benefits provides feedback on the quality and value of the benefit and helps evaluate the competitiveness of the total compensation strategy? A) Annual increase/decrease in health benefits costs B) Insurance participation rate C) Benefits costs as a percentage of total payroll costs D) Health-care expense per employee
B) Insurance participation rate The insurance participation rate can provide feedback on the quality and value of the insurance benefit that an organization offers. If few employees are taking advantage of the benefit, it may not be perceived as valuable by the employees. If the benefit is perceived as non-valuable by employees, this may indicate that the total compensation strategy is not as competitive as the organization intends or believes it to be.
What is true of a lead-lag market competition pay strategy? A) It leads the market on base pay but lags the market on bonus eligibility. B) It leads the market during the first half of the fiscal year and lags the market during the second half. C) It leads the market during the first half of the calendar year and lags the market during the second half. D) It leads the market on base pay and bonuses but lags the market on other benefits.
B) It leads the market during the first half of the fiscal year and lags the market during the second half. The lead-lag market competition pay strategy leads the market during the first half of the fiscal year and lags the market during the second half of the fiscal year.
After an acquisition, the HR director at the acquiring company is tasked with aligning the total rewards systems of both organizations. Which should the HR director review first? A) Company payroll costs B) Mission and strategy C) Current benefit providers D) Organizational culture
B) Mission & Strategy The mission and strategy must be reviewed first because, in order to be successful, the total rewards system must be an extension of the strategic business plan and mission. Company payroll costs, organizational culture, and current benefit providers should be reviewed after the organization's mission and strategy, not before.
An hourly employee is at the maximum level of a pay range. There are no job openings in the next pay range. Which is the best approach to reward the employee for exceptional performance without adjusting the base wage rate? A) Premium pay B) Performance bonus C) Gainsharing D) Incentive pay
B) Performance bonus The performance bonus approach is an advantage to the organization because other wages and benefits linked to the base rate, such as overtime, shift premium, sick pay, and life insurance, are not impacted.
When creating a benefits program, which key legal factor does the HR benefits leader need to keep in mind? A) Public, national, and bank holidays B) What government-regulated programs are provided C) How much paid time off the organization offers D) Types of involuntary termination severance packages
B) What government-regulated programs are provided The benefits leader needs to understand what is normally provided to employees, what government-regulated programs are provided, and what employees expect.
Broadbanning
Broadbanding is the combination of a number of related job classifications into a single pay band, for which a broad range of compensation levels is allowed. This approach gives management a wider pay range within which to pay employees.
A compensation and benefits specialist conducted a salary data survey last year but did not have time to benchmark the results to the organization's pay structure. What action should the specialist take at this point in time? A) Level the data to determine relevance. B) Completely redo the survey from the beginning. C) Age the data to make it current. D) Weight the data compared to other survey data.
C) Age the data to make it current. When data is aged, older wage survey data is changed to reflect the movement of salaries in the market since the survey was conducted. If the data is aged, it is still usable.
New leadership is in place at a large retailer, resulting in a business unit undergoing a detailed review of its support of the organizational strategy. It has been identified that the benefit offerings are not reflective of the organization's total rewards philosophy and that many benefits overlap, creating inefficiencies. Which action should be taken first by HR take to remedy the situation? A) Polling employees, asking which benefits do not have value B) Instituting cost-containment strategies to reduce organizational costs C) Conducting a utilization review of all benefits D) Creating a cost analysis and dropping the most expensive benefit
C) Conducting a utilization review of all benefits A utilization review is an audit of benefits use and charges to identify which benefits are used and to make certain that costs are appropriate.
An exit interview assessment finds that the primary reason employees leave is for better total rewards offered at other organizations. Which is the best action HR should take to gather information on competitive total rewards packages to potentially offer its employees? A) Conduct a focus group session for management input on the effectiveness of total rewards. B) Send an internally developed survey to local competitors asking what total rewards they offer. C) Participate in an external remuneration survey to assess the competitiveness of the organization's current offerings. D) Survey employees to identify what total rewards the company should offer to them.
C) Participate in an external remuneration survey to assess the competitiveness of the organization's current offerings Using an external remuneration survey to collect information draws on extensive databases of incumbents and industry benchmarks. These benchmarks can be used to assess competitiveness.
Which is an advantage of using the point-factor method in job evaluation? A) Reduces administration, thus is less time-consuming B) Easier for employees to understand C) Provides documentation and an audit trail D) Relies on some degree of judgment by evaluators
C) Provides documentation and an audit trail The correct answer is the most distinguishable feature of the point-factor method; it is the most systematic and analytical method and it includes documentation of the process. Other job evaluation methods do not have this.
How does a broadbanding approach support an egalitarian organization? A) By reducing the value of pay ranges B) By decreasing the involvement of line managers C) By restricting employee movement D) By encouraging de-layering efforts
D) By encouraging de-layering efforts Surveys indicate that broadbanding reduces the number of job grades within an organization. This approach can be used to support de-layering efforts, which reduce the number of reporting levels within an organization.
Which is the best method for an HR compensation manager to use to evaluate the jobs and salary ranges of the organization's key positions compared to those of its competitors? A) Job ranking approach to establish a hierarchy of positions B) Point-factor scheme that appraises each position C) Job classification process to group like positions together D) Market-based evaluation to establish the worth of positions
D) Market-based evaluation to establish the worth of positions A market-based job evaluation assesses the relative worth and pay structure of different jobs based on their market value or the going rate in the marketplace.
In addition to salary, health benefits, and welfare benefits, which item should be included in an individualized total compensation statement? A) Alternative work locations B) Employee discount programs C) Flexible work schedule D) Paid time off
D) PTO Paid time off should be included in the compensation statement; a dollar figure for it can be calculated based on salary. There is no consistent or tangible way to calculate the value of a flexible work schedule or an alternative work location. Employee discount programs (gym, movie theaters, streaming services, etc.) are based on the volume of participants; therefore, determining an accurate dollar value would be difficult.
Which scenario illustrates a geocentric global orientation as described by Perlmutter? Senior management from all countries are considered to be part of a single global resource pool Senior management moves between countries within regions Policies are created independently within global regions Senior management remains primarily within the borders of each country of a region
In a geocentric global orientation, the organization is viewed as a single international business. Headquarters and subsidiaries work together as one team.
geocentric organization
In a geocentric organization, an international company is seen as a single global business, with management coming from any location in the enterprise. The strategic plan is global in orientation, while the need to balance global strategy with local culture and regulations is well understood.
regiocentric global orientation as described by Perlmutter
In a regiocentric global orientation, operations are managed regionally. Communication and coordination are high within regions and less so between regions.