Chapter 9 Compensating Employees
Job evaluation compares all of the following except... Skills used Type of relationship with supervisor Knowledge needed Behaviors needed
Answer: Type of relationship with supervisor A job evaluation compares the knowledge, skills, behaviors, and working conditions of all jobs in the organization. The job evaluation then uses this to assign points (or weights) to each job, which also ranks the jobs based on their overall value to the firm. Pay ranges can then be assigned.
Which of the following Organization-Wide Incentive Plans is perceived as more fair to employees? Wage-dividend plan Cash plan Standard hour plan Performing sharing plan
Answer: Wage-dividend plan The Wage-dividend plan is a special type of cash plan that sets the percentage of profits paid to employees according to the amount of dividends paid to stockholders. It is assumed that these plans increase understanding between employees and stockholders and are often perceived of as more fair to employees than regular cash plans.
There are four principal determinants of wages that represent the critical nature of activities in most compensation departments:
1) job evaluation, 2) determination of job classes, 3) establishment of pay structure, and 4) individual wage determinations.
True or False: Labor unions only influence the wages paid to employees; they do not deal with any other type of compensation.
Answer: False Wage levels can be influenced greatly by the existence of a union. A union's influences include not only wage gains, but also wage "givebacks." Unions can also play a part in the job evaluation process and determine the type of pay plan an organization will have.
Measured Day Work
play down the connection between rate and standards. Again, formal production standards are established and employee performance is judged against these standards. But with this, typical standards are less precise. For example, standards may be determined by the results of a ranking procedure rather than by an objective index such as units produced.
Direct compensation consists of:
the basic wage or salary, and performance-based pay
Indirect compensation consists of:
(also known as "non-monetary rewards"), on the other hand, includes employee services, benefits, trainings and/or any other indirect form of compensation or benefit.
For group incentive systems to effectively motivate performance, several conditions must be present:
1) Group performance measures (standards and goals) must be in place; 2) Group members must believe that they can achieve these objectives through effective performance; and 3) Organizational culture must be supportive of group collaboration and cooperation.
True or False: Total compensation only includes the bonuses that are paid with respect to performance-based pay.
Answer: False Compensation includes both direct and indirect compensation. Direct compensation consists of the basic wage or salary, and performance-based pay. Indirect compensation (also known as "non-monetary rewards"), on the other hand, includes employee services, benefits, trainings and/or any other indirect form of compensation or benefit.Total compensation is the entire value of all direct and indirect payments to the employee.
What is perhaps the most important financial relationship for individuals within the organization? The relationship between compensation and HR planning The relationship between compensation and performance appraisal The relationship between job analysis and compensation The relationship between selection and compensation
Answer: The relationship between compensation and performance appraisal The relationship between compensation and performance appraisal is perhaps the most important relationship for individuals within the organization. Especially where performance-based pay exists, the results of the performance evaluation are significant. Without the ability to measure performance in a reliable and valid way, linking such an important reward as pay to the results may lead to diminished motivation and lowered performance.
For compensation to be successful, it relies on other HR functions such as:
job analysis and performance appraisal.
The compensation function of human resources is:
the activity within which organizations evaluate the contributions of employees for the purpose of distributing direct and indirect monetary and non-monetary (not involving cash) rewards. Compensation should follow a strategic approach. As such, in designing compensation, the organization is concerned with creating a program to attract and retain qualified applicants who are most likely to help the organization achieve its strategic goals and objectives.
A job evaluation compares:
the knowledge, skills, behaviors, and working conditions of all jobs in the organization. In the process of job evaluation, a company may assign points (or weights) to each factor, ranking each job's value to the firm based on the overall points received.
Fair Labor Standards Act of 1938 (FLSA)
A federal law that restricts child labor and establishes minimum wage and overtime pay standards for employees. The intent of the law was to "put a floor under wages and a ceiling over hours of work and to abolish abuses of child labor."
Which of the following does not influence the pay system that an organization uses? Building structure Competitive activities Union contracts Legislation
Answer: Building structure In designing compensation, the organization must measure the worth of each job and establish compensation that is fair in relation to other jobs in the organization, and in relation to the prevailing market. Legislation, union contracts, rising prices, and competitive activities influence the pay system.
True or False: Profit-sharing plans allow all employees in the organization to contribute to and benefit from the success of the organization.
Answer: True Because many organizations need high levels of cooperation among their employees, organizations may use some form of incentive on an organization-wide basis. These plant-wide bonus sharing plans (or profit-sharing arrangements or plans) allow all employees within the organization to contribute to and benefit from the organization's success.
What are givebacks?
A reduction in employee wages or benefits conceded by a labor union in exchange for other benefits or in recognition of unfavorable economic conditions.
True or False: Group incentives reward cooperation.
Answer: True When other jobs are part of a joint effort to achieve results, or when certain jobs are dependent upon other jobs, measuring individual performance becomes difficult. In these cases it would be a good option to use group incentives that reward cooperation.
Sales Incentive Plans
apply to salespeople and managers, who generally receive their pay in the form of commissions. A commission is usually a percentage of the sales revenue generated by the employee. Many salespeople will receive a base salary plus commission. Many managers feel that a this plan often motivates employees to achieve goals.
Stock Options
is an opportunity for a manager to buy an organization's stock at a later date, but at a price established when the option is granted. The idea behind this is that managers will work harder to improve their performance and the profitability of the company, if they can share in the long-term success of the organization.
The Family and Medical Leave Act (FMLA)
which entitles job-protected leave for employees due to family and medical necessity.
The Americans with Disabilities Act (ADA)
which prohibits employers from discriminating against people with disabilities.
True or False: For a position to be exempt from the FLSA, the position must be an hourly wage position, not a salaried position.
Answer: False For a position to be exempt, employers must pay a salary rather than an hourly wage. It should be noted that exempt status is not a title, but a legal classification based largely on job content.
Equity theory states that:
the motivation of an individual is positively correlated with his or her perception of justice and fair treatment as practiced by the management of the company or organization. The employee finds an equilibrium between the efforts he or she contributes (input) and the kind of compensation he or she receives in return (output). The employee compares this input-output balance with that of the other employees in the organization.
Incentive pay plans are:
a specific type of performance-based pay system which is used to encourage specific actions and motivate employees. Incentive pay plans are typically structured in a way that reflects the organization's strategy, culture, objectives and financial capabilities. Incentive programs are often used to attract and retain employees. An effective way to discuss these plans is to examine them at the individual, group, and organizational levels.
Compensation influences other HR activities such as:
recruitment, selection, union-management relationships, and HR planning.
Total compensation is:
the entire value of all direct and indirect payments to the employee.
Pay equity refers to:
what people feel they deserve to be paid in relation to what others deserve to be paid. Generally, people determine what they and others deserve to be paid by comparing what they contribute to the organization with what they receive from of the organization. Employees will compare their inputs such as time, effort, and education to outputs from the employer such as raises, promotions, or general positive treatment. If employees regard their compensation as unfair or inequitable, they are more likely to be dissatisfied and motivated to engage in behaviors that will restore equity (or reduce equity) by limiting their contribution to the organization.
Title VII of The Civil Rights Act of 1964 (including the 1991 revision)
which prohibits employment discrimination based on race, color, religion, sex and national origin;
The Lilly Ledbetter Fair Pay Act of 2009
which relaxes the statute of limitations for filing an equal-pay lawsuit, providing "more effective remedies to victims of discrimination in the payment of wages on the basis of sex...;"
The Equal Pay Act of 1963
which requires nearly all employers to pay men and women equally for the same work;
True or False: For group incentive systems to effectively motivate performance, the culture of the organization must be supportive of group cooperation.
Answer: True For group incentive systems to effectively motivate performance, several conditions must be present: -Group performance measures (standards and goals) must be in place, -Group members must believe that they can achieve these objectives through effective performance, and -Organizational culture must be supportive of group collaboration and cooperation
True or False: Performance contribution is often an explanation for pay differentials, but personal factors also influence individual wages.
Answer: True Performance contribution is an appropriate explanation for pay differentials amoung individuals who work the same job, but personal factors such as seniority, gender, age, size of family, experience, and appearance also influence individual wages. That is illegal. Another variable is an employee's potential and his/her negotiating skills and leverages.
The Piecework Plan
is one of the most common types of incentive pay plans. Under this plan, employees are guaranteed a standard pay rate for each unit of output, also called a piece rate. The rate per hour is frequently determined by the time-and-motion studies of standard output and the current base pay of the job. For example, if the base pay of a job is $45 per hour and the employee can produce, at a normal rate, 45 units an hour, the piece rate may be established at $1 per unit. The "normal" rate is usually more than what the time-and-motion studies indicate, because it should represent 100 percent efficiency. The final rate will be adjusted to reflect the bargaining power of the employees, the economic conditions of the organization and community, and what the competition is paying.
Standard Hour Plan
Another common incentive plan, which is essentially a piecework plan, except that standards are denoted in time per unit of output rather than money per unit. Tasks are broken down according to the amount of time it takes to complete them. This can be determined by historical records, time-and-motion studies, or a combination of both. The time to perform each task then becomes a "standard time."
Wage surveys help determine which type of pay equity? Internal External
Answer: External Wage surveys can be used to develop compensation levels, wage structures, and even payment plans. Job evaluation helps ensure internal equity, and wage surveys provide information to help ensure external equity.
Incentive pay plans are usually structured in a way to reflect all of the following about the organization except... Strategy Building structure Financial capabilities Culture
Answer: Building structure Incentive pay plans are a specific type of performance-based pay system that is used to encourage specific actions and motivate employees. They are typically structured in a way that reflects the organization's strategy, culture, objectives, and financial capabilities. Incentive programs are often used to attract and retain employees. They can be used at the individual, group, and organizational levels.
What did the 2004 revision of the Fair Labor Standards Act do in regards to blue-collar workers, police, firefighters, paramedics and other first responders? Clarify that they are not able to be exempted at all from the provisions of the FLSA Clarify that none of them are exempt from the overtime provisions of the FLSA Clarify that they are exempt from the overtime provisions of the FLSA Clarify that they are all exempt from the provisions of the FLSA
Answer: Clarify that none of them are exempt from the overtime provisions of the FLSA In 2004, the Fair Labor Standards Act was revised to provide additional clarification regarding the status of exempt and nonexempt employees, including the following: -Clarification for the exemption for executives, administrators, computer employees, professionals (learned and creative), outside sales, and highly compensated employees. -Clarification that blue-collar workers, police, firefighters, paramedics, and other first responders are not exempt from overtime provisions of FLSA.
How is HR planning connected to compensation? Compensation is integrated into the organization's strategic planning objectives Compensation is separate from the organization's strategic planning objectives Compensation is what determines the organization's strategic planning objectives Compensation is not connected to HR planning because HR planning takes place at the beginning of the HR process and compensation decisions are made at the end
Answer: Compensation is integrated into the organization's strategic planning objectives Compensation is normally integrated into the organization's strategic planning objectives. Depending on the organizations strategic plan, compensation may change or be used differently for differnt jobs or departments.
Which of the following correctly describes what variable compensation is? Compensation that is independent of performance Compensation that is linked to employee and organizational performance Varrying how much an individual is paid based on race, gender, or appearance Pay that is based on seniority
Answer: Compensation that is linked to employee and organizational performance Variable compensation links employee pay to employee and organizational performance. Variable compensation is typically based upon either the employee's performance or the company's performance.
What does an organization need to do to make their compensation function have a strategic approach? Create a program to get and keep individuals who will benefit the organization Give the best compensation to employees, when compared to its competitors An organization must create a program that has the goal of making more money Create a program to award compensation based on the employees' personalities
Answer: Create a program to get and keep individuals who will benefit the organization Compensation should take a strategic approach. As such, in designing compensation, the organization is concerned with creating a program to attract and retain qualified applicants who are most likely to help the organization achieve its strategic goals and objectives
Compensation that includes the basic wage and performance-based pay is what type of compensation? Direct Total Simplified Indirect
Answer: Direct Compensation includes both direct and indirect compensation. Direct compensation includes basic wage (or salary) and performance-based pay. Indirect compensation includes employee services, benefits, trainings, and any other indirect form of compensation or benefit. Total compensation is the entire value of all direct and indirect payments to the employee.
What is a standard hour plan? Employees are guaranteed a standard pay rate for the time per unit of output Standards are determined by the results of a ranking procedure Employees are guaranteed a standard pay rate for each unit of output Employees are paid a base salary plus commission
Answer: Employees are guaranteed a standard pay rate for the time per unit of output The standard hour plan is essentially a piecework plan, except that standards are denominated in time per unit of output rather than money per unit. Tasks are broken down by the amount of time it takes to complete them. The time to perform each task then becomes a "standard time".
What is one disadvantage to grouping jobs into classes? It makes it harder to justify small differences in pay It is not a very efficient means of salary administration Employees can find fault if they feel their job is more important than others in their group It creates more errors than were created in the classification process
Answer: Employees can find fault if they feel their job is more important than others in their group A disadvantage to grouping jobs into classes is that employees can find fault with the classification results, if their jobs are grouped with jobs they feel are less important. Another negative is that the jobs that are grouped together may be dissimilar when there are too few classes of jobs.
Generally, if an employee feels that their compensation is unfair or inequitable (they are doing more work than someone else for the same pay), what are they more likely to do? Engage in behaviors that will limit their contribution to the organization Work harder so they will get paid more in the future Engage in behaviors that will help them stand out more Actively engage in finding out the organization's strategic goals and work towards them
Answer: Engage in behaviors that will limit their contribution to the organization In comparing themselves to others, people may decide whether or not they are being paid fairly, that is, what they deserve to be paid in relation to what others are being paid. If they regard their compensation as unfair or inequitable, they are more likely to be dissatisfied and be motivated to engage in behaviors that will restore their sense of equity by limiting their contribution to the organization.
What did the Equal Pay Act ensure when it was amended to the FLSA in 1963? Ensured that both genders are paid similarly for similar jobs Amended the statute of limitations for filing an equal pay lawsuit Ensured that those with a protected group status could not be discriminated against, with regards to compensation and benefits Ensured that all protected group status employees could not be discriminated against with regard to wages
Answer: Ensured that both genders are paid similarly for similar jobs The Equal Pay Act of 1963 amended the FLSA to ensure that both genders are paid similarly if they do similar or roughly equivalent work.
While there have been amendments to this law that have influenced and updated the law, the basic premise hasn't changed. This law is the primary law governing wages and salaries. Which of the following is this law? Equal Pay Act Family and Medical Leave Act Fair Labor Standards Act Civil Rights Act
Answer: Fair Labor Standards Act While there are a number of laws that govern compensation and benefits in the United States, the Fair Labors Standards Act (FLSA) has been the primary law governing wages and salaries since 1938. While periodic amendments, such as the 2004 amendment, have influenced and updated the law, the basic premise of the law hasn't changed. It provides guidance on minimum wage, hours worked, overtime pay, equal pay, record-keeping and child labor provisions.
True or False: There are only two types of profit-sharing plans: the cash plan and the wage-dividend plan.
Answer: False Although cash flow plans and wage-dividend plans are the most common types of profit-sharing plans, organizations continue to develop and customize plans to meet their own individual needs.
True or False: Pay equity is what people deserve to be paid in relation to what others deserve to be paid.
Answer: False An important element of any compensation structure is pay equity. Pay equity refers to what people feel they deserve to be paid in relation to what others deserve to be paid.
True or False: Compensation is a tool used only to motivate employees.
Answer: False Compensation becomes a significant and timely tool to carry out the companies' task of attracting, retaining, and motivating the best employees. This helps companies maintain a competitive edge in the world marketplace.
True or False: Unlike most HR activities, compensation has little relation to a wide range other HR activities.
Answer: False Compensation, being one of the most important HR activities to individuals, as well as organizations, has an extensive set of relationships with other HR activities. For example, for compensation to be successful, it relies on job analysis and performance appraisal as both these functions provide input in determining total compensation. Compensation also influences other HR activities such as recruitment, selection, union-management relationships, and HR planning.
True or False: Because most employees make job-choice decisions according to maximum pay level, HR departments need to make sure they are paying the maximum to get the best employees.
Answer: False Employees differ in the value they attribute to pay. If HR departments can determine how important pay is to individuals, they can recruit people to fill specific jobs with specific pay policy options. They don't necessarily need to pay the maximum pay level, because many employees make job-choice decisions based on many factors, such as the location of the organization, its reputation, what friends think of the company, the nature of the job, and the pay level offered.
True or False: Job evaluation is the process of evaluating the person performing the job.
Answer: False Job evaluation is defined as the process of comparing jobs by the use of formal and systemic procedures to determine their relative worth within the organization. After jobs are formally evaluated, they are grouped into classes or grades. Within each class, jobs are arranged in order of importance, and ranges of pay are established with the aid of wage surveys.
True or False: Most organizations are usually able to subscribe to a single survey to get all of the wage survey information that they need.
Answer: False Most organizations use wage surveys extensively. Separate surveys are published for different occupational groups, and many larger organizations subscribe to a number of surveys. For example, there are surveys for clerical workers, programmers, professional workers, managers and executives. Separate surveys are conducted not only because there are such wide differences in skill levels, but also because labor markets are so different. For example, an organization surveying clerical workers may need only to survey companies within a ten-mile radius, whereas a survey of managerial salaries may cover the entire country.
True or False: To maintain a competitive edge, companies realize they only need to attract the right employees and they will be competitive in today's market.
Answer: False To maintain a competitive edge in the world marketplace, companies realize that they not only need to attract, but also retain and motivate the best employees that they can find. Compensation becomes a significant and timely tool to carry out this task.
What is the first step in the wage determination process? Grouping jobs into classes or grades Formally evaluating the jobs Establishing pay ranges Arranging jobs in order of importance
Answer: Formally evaluating the jobs Job evaluation is the process of comparing jobs by the use of formal and systemic procedures, to determine their relative worth within the organization. First the jobs must be formally evaluated. After jobs are formally evaluated, they are grouped into classes or grades. Within each class, jobs are arranged in order of importance, and ranges of pay are established with the aid of wage surveys.
How many principal determinants of wages represent the majority of activities in most compensation departments? Eight Six Four Two
Answer: Four There are four principal determinants of wages that represent the majority of activities in most compensation departments: 1) job evaluation 2) determination of job classes 3) establishment of pay structure 4) individual wage determinations
When using a performance-based system, which of the following is usually the major portion of the individual's compensation? Incentive pay Merit pay
Answer: Incentive pay The major portion of an individual's compensation under a performance-based system is from incentive pay. Merit pay plans affect a relatively small percentage of an individual's total salary.
Which of the following is not one of the four principal determinants of wages? Individual Wage Determinations Individual Teamwork Determination Establishment of Pay Structure Job Evaluation
Answer: Individual Teamwork Determination There are four principal determinants of wages, which represent the majority of activities in most compensation departments: 1) Job Evaluation 2) Determination of Job Classes 3) Establishment of Pay Structure 4) Individual Wage Determinations
Which of the following is an advantage to grouping jobs into classes? Small errors may occur in classifying the jobs It is an efficient way to administer salaries Jobs that are grouped together are always similar Employees don't find fault with the classification results
Answer: It is an efficient way to administer salaries One reason for grouping jobs into classes is efficiency of salary administration. It also helps to justify the small differences in pay that may exist between jobs. Further, small errors that occur in the evaluation of the jobs can be eliminated in the classification process. Some disadvantages are that employees may find fault in the classification, and jobs that are grouped together may be dissimilar if there are too few classes of jobs.
How are compensation and job analysis related? Job analysis measures performance Job analysis creates the organization's strategic planning objectives Job analysis determines the job description, which determines the job evaluation Job analysis determines how much new employees will make
Answer: Job analysis determines the job description, which determines the job evaluation Job analysis is what determines how the job is described in the formal job description. That in turn heavily influences the job evaluation process which is what determines the relative worth of a job, which then determines compensation. Job evaluation and job analysis influence the basic compensation structure for the organization, including job classes and individual and job wage rates.
What is the foundation for a solid compensation program? Using merit pay plans Using basic wage pay Job evaluation Good employees
Answer: Job evaluation Job evaluation is the foundation for a solid compensation program. The purpose of job evaluation is to establish a relative value for each job in an organization and to assign a rate or range of pay for those jobs. It is also concerned with the establishment of internal equity among the different jobs in the organization.
Job classes are based on what? Organizational evaluations Performance evaluations Supervisor evaluations Job evaluations
Answer: Job evaluations Once job evaluations are conducted, and before salaries are determined, job classes or job families are created, based on the results of the job evaluation. Determining job classifications (or job families) includes grouping together all jobs that are similar in value.
Which of the following is an example of variable compensation? (Select all that apply) Martha gets a bonus of $10,000 a year if she meets her sales quota Mary gets paid $55,000 each year, with a possibility of a raise after each 3 year period Jonathan gets paid on commission, meaning that he directly receives a small portion of his sales Maddy gets stock options in the company based on her yearly performance John gets paid $12 an hour
Answer: Jonathan gets paid on commission, meaning that he directly receives a small portion of his sales; Maddy gets stock options in the company based on her yearly performance; Martha gets a bonus of $10,000 a year if she meets her sales quota Variable compensation links employee pay to employee and organizational performance. Variable compensation is typically based upon either the employee's performance or the company's performance. For example, variable compensation may come in the form of profit sharing, bonuses and/or stock options. Variable pay is typically a one-time payment that must be re-established and re-earned during each performance period. Organizations will often use variable pay to provide incentives and align the interest of management with shareholders. Fixed pay, on the other hand, is compensation that does not vary according to performance. Also known as "base pay," fixed pay is nondiscretionary compensation that is independent of performance. Two of the most common types of fixed pay include an hourly wage and/or a yearly salary. In both of these situations, employees are paid regardless of performance.
Which of the following statements is true? Both managers and unions put more emphasis on seniority than on performance for pay differences Both managers and unions put more emphasis on performance than seniority for pay differences Managers say pay differences should be based on performance and unions often put more emphasis on seniority Unions say pay differences should be based on performance and managers often put more emphasis on seniority
Answer: Managers say pay differences should be based on performance and unions often put more emphasis on seniority Individual wage determinations are often based on both personal contributions and performance. Many managers would argue that pay differences based on performance are more equitable than those based on such personal contributions as seniority. Unions, on the other hand, regard seniority highly and believe that it should be a critical factor in determining pay rate.
Which of the following types of organizations can usually base job classes on already-existing wage rates? Newly established organizations Mature organizations
Answer: Mature organizations Although job classes are determined to establish wage rates, job classes are often based on wage rates that already exist. Because most mature organizations already have established pay schedules, mature organizations only need to determine job classes when new jobs are introduced or if the organization has never had a sound job analysis program. Newly established organizations, on the other hand, often need to establish job classes (and pay structures) for the first time.
Which of the following incentive plans is less precise on the typical standards? Piecework plan Measured day work plan Performance plan Standard hour plan
Answer: Measured day work plan Measured day work plans play down the connection between rate and standards. Formal production standards are established and employee performance is judged against these standards, but the typical standards are less precise. For example, standards may be determined by the results of a ranking procedure rather than by an objective index such as units produced.
All of the following are personal factors that may affect pay differentials among individuals with similar jobs, except for... Performance Appearance Seniority Age
Answer: Performance Personal factors such as seniority, gender, age, size of family, experience, and appearance have been found to influence individual wages, along with performance contributions. Variables such as an employee's potential and his/her negotiating skills also play a role in determining compensation levels. In reality, individual wage determinations are often based on personal contributions and performance, not performance alone.
Which of the following is a type of direct compensation? Benefits Employee services Performance-based pay Trainings
Answer: Performance-based pay Compensation includes both direct and indirect compensation. Direct compensation includes basic wage and performance-based pay. Indirect compensation includes employee services, benefits, trainings and any other indirect form of compensation or benefit. Total compensation is the entire value of all direct and indirect payments to the employee.
Which of the following types of individual incentive plans is the most common? Piecework plan Stock options Standard hour plan Measured day work plans
Answer: Piecework plan A piecework plan is one of the most common type of incentive pay plans. Under the piecework plan, employees are guaranteed a standard pay rate for each unit of output.
Which of the following individual incentive plans guarantees a standard pay rate for each unit of output? Standard hour plan Measured day work plan Stock options Piecework plan
Answer: Piecework plan A piecework plan is one of the most common types of incentive pay plans. Under the piecework plan, employees are guaranteed a standard pay rate for each unit of output. Other individual incentive plans are the standard hour plan, the measured day work plan, the sales incentive plan, and stock options.
What is a job evaluation? Process of comparing employees to other employees to determine the job's worth to the organization Process of comparing jobs to determine their relative worth within the organization Evaluation of the group of employees performing the job Evaluation of the person performing the job
Answer: Process of comparing jobs to determine their relative worth within the organization Job evaluation is defined as the process of comparing jobs by the use of formal and systemic procedures to determine their relative worth within the organization. It should be noted that job evaluation is the process of evaluating the job - not the person performing the job. It is used to establish internal equity within the organization.
Which of the following individual incentive plans is NOT used for line employees in manufacturing or other, similar-type industries? Sales incentive plans Measured day work plans Piecework plan Standard hour plan
Answer: Sales incentive plans Piecework, standard hour, and measured day work plans are all usually applied to line employees in manufacturing or other, similar-type industry. Sales incentive plans apply to salespeople and managers, who generally receive their pay in the form of commissions. Many salespeople will receive a base salary plus commission. Many managers feel that a sales incentive plan will often motivate employees to achieve goals.
Which of the following individual incentive plans does not include a cash bonus? Sales incentive plans Measured day work plan Piecework plan Stock options
Answer: Stock options Another form of compensation other than cash bonuses are stock options, which are often used as a managerial incentive. A stock option is an opportunity for a manager to buy an organization's stock at a later date but at a price established when the option is granted. The idea behind this is that managers will work harder to increase their performance and the profitability of the company if they can share in the long-term success of the organization.
What is Pay Equity? That people get paid what they feel they deserve in relation to others That individuals get paid just like everyone else with the same title That everyone in the organization is paid the same That women and men are paid the same
Answer: That people get paid what they feel they deserve in relation to others An important element of any compensation structure is pay equity. Pay equity refers to what people feel they deserve to be paid in relation to what others deserve to be paid.
Which of the following Laws has been the Primary Law governing wages and salaries? The Lilly Ledbetter Fair Pay Act The Fair Labor Standards Act The Equal Pay Act Family Medical Leave Act
Answer: The Fair Labor Standards Act While there are a number of laws that govern compensation and benefits in the United States, the Fair Labor Standards Act (FLSA) has been the primary law governing wages and salaries since 1938. While periodic amendments, such as the 2004 amendment, have influenced and updated the law, the basic premise of the law hasn't changed. The Fair Labor Standards Act provides guidance on minimum wage, hours worked, overtime pay, equal pay, record-keeping and child labor provisions.
Which of the following laws relaxed the statute of limitations for filing equal-pay discrimination lawsuits? The Family and Medical Leave Act The Lilly Ledbetter Fair Pay Act of 2009 The Americans with Disabilities Act The Civil Rights Act of 1964
Answer: The Lilly Ledbetter Fair Pay Act of 2009 The Lilly Ledbetter Fair Pay Act of 2009 amended the statute of limitations for filing an equal pay lawsuit: the 180-day statute of limitations for filing an equal pay lawsuit begins anew with every discriminatory paycheck issued. The other three Acts - the Civil Rights Act of 1964, the Americans with Disabilities Act (ADA) and the Family and Medical Leave Act (FMLA) - all make it unlawful to discriminate against an employee based on protected group status. This includes compensation and benefits as well as wages.
Which of the following is NOT a principal determinant of basic wage? The establishment of a pay structure The value/worth of the job The determination of employee classes The individual wage determination
Answer: The determination of employee classes There are four principal determinants of basic wage: 1) The value/worth of the job which is established through the evaluation process 2) The determination of job classes 3) The establishment of a pay structure through wage and salary surveys 4) The individual wage determination, which is often based on both performance and personal contributions
How are jobs grouped together in job families? The jobs can be different types of jobs and can be different in value The jobs needs to be similar type jobs and similar in value The jobs can be different types of jobs but need to be similar in value The jobs need to be similar type jobs and different in value
Answer: The jobs can be different types of jobs but need to be similar in value Determining job classifications (or job families) includes grouping together all jobs that are similar in value. The jobs within the same class may be quite different, but they should be roughly comparable in value to the organization. All jobs in each class are assigned one salary or one range of salaries.
What conditions must not be present for group incentive systems to effectively motivate performance? There must be individual performance measures The organizational culture must support group cooperation The group's members must believe they can achieve the objectives There must be group performance measures
Answer: There must be individual performance measures For group incentive systems to effectively motivate performance, several conditions must be present: 1) Group performance measures (standards and goals) must be in place, 2) Group members must believe that they can achieve their objectives through effective performance 3) Organizational culture must be supportive of group collaboration and cooperation
Which of the following is a correct statement about an employee that is exempt from FLSA requirements? They must be a salaried employee They must be an independent contractor They must be an hourly employee that contributes too little to the company They can be any hourly employee
Answer: They must be a salaried employee FLSA often distinguishes between "exempt" and "nonexempt" employees. Nonexempt employees are covered by FLSA rules and regulations. Exempt employees are not. For a position to be exempt, employers must pay a salary rather than an hourly wage. It should be noted that exempt status is not a title, but a legal classification based largely on job content.
What is the compensation function of HR? To give the employees rewards based on how well their supervisor likes them To evaluate the contributions of employees and give rewards To make sure that employees are satisfied with their compensation To make sure that employees are paid above average
Answer: To evaluate the contributions of employees and give rewards The compensation function of human resources is the HR activity in which organizations evaluate the employee contributions with the purpose of distributing direct and indirect monetary and non-monetary rewards.
What is an objective of performance-based pay systems? To help workers all function at the same level To motivate workers to perform better than their coworker To motivate workers to perform at high levels To motivate workers to look good for their supervisor
Answer: To motivate workers to perform at high levels Performance-based pay plans can motivate workers to perform at high levels. That is, in large part, the objective of performance-based pay systems.
True or False: Although job classes are determined for establishing wage rates, they are often based on wage rates that already exist.
Answer: True Although job classes are determined for the purpose of establishing wage rates, job classes are often based on wage rates that already exist. While this practice may seem somewhat backwards, it is very common within most organizations.
True or False: Job compensation and wages are not only based on job performance and personal contributions, but also on job-related contributions.
Answer: True Although organizations generally compensate individuals on the basis of their job performance and personal contributions, organizations implicitly recognize job-related contributions by assigning pay in accordance with the difficulty and importance of jobs. Most organizations use some type of formal job evaluation or informal comparison of job content to determine the relative worth of job-related contributions.
True or False: Compensation relies on other HR functions to be successful.
Answer: True Compensation, one of the most important HR activities for individuals and organizations, has an extensive network of relationships with other HR activities. It relies on other HR functions such as job analysis and performance appraisal but compensation also influences other HR activities such as recruitment, selection, union-management relationships, and HR planning.
True or False: Merit-based pay plans reward performance with salary increases.
Answer: True The basis of merit-based pay plans is to reward performance with merit salary increases. Effective use of merit pay plans necessitates the determination of the size of the merit pay raises, the times at which they are given, and the relationships between merit pay increments and position in the salary range. Make sure to keep merit salary increases separate from cost of living or other salary increases to help employees realize they these increases are specifically for performance, and not just an annual "entitled" raise.
Which of the following organizational incentive plans gives cash to employees based on the amount of dividends paid to stockholders?
Answer: Wage-dividend plans A wage-dividend plan is a special type of cash plan that sets the percentage of profits paid to employees according to the amount of dividends paid to stockholders. It is assumed that these plans increase understanding between employees and stockholders and are often perceived as more fair to employees than regular cash plans.
When is it a good idea to use group incentive plans rather than individual plans? When the jobs are a joint effort When the jobs are individually based When it is easy to measure individual performance When the jobs don't need cooperation
Answer: When the jobs are a joint effort As organizations become more complex, a growing number of jobs become interdependent in terms of their sequencing actions or operations. In other words, the jobs that are performed by other employees that either precede and/or follow the employee will affect the employee's performance. Other jobs may be part of a joint effort that is necessary to achieve results. Group incentives offer a viable option.
Fair Labor Standards Act of 1938 (FLSA): The 2004 amendment provided what?
clarification regarding the exemption for executives, administrators, computer employees, professionals (learned and creative), outside sales, and highly compensated employees. Further, it provided clarification that no blue collar workers, police, firefighters, paramedics, and other first responders are exempt from overtime provisions of FLSA.
Job evaluation is defined as:
the process of comparing jobs by the use of formal and systemic procedures to determine their relative worth within the organization. After jobs are formally evaluated, they are grouped into classes or grades. Within each class, jobs are arranged in order of importance, and ranges of pay are established with the aid of wage surveys.
