LS Ch. 1 The Pay Model - MGT 461

____ ____ refers to the process used to make pay decisions and suggests that the way a pay decision is made may be equally as important to employees as the results of the decision.

Procedural Fairness

Relational returns

Psychological in nature

Recognition and status, employment security, challenging work, and opportunities to learn are examples of _____. A. Long-term incentives B. Income protection C. Relational returns D. Total Compensation

Relational returns

The decisions to implement pay for performance, flat rate pay, and profit sharing are examples of _____ policy decisions. A. internal alignment B. efficiency C. employee contributions D. management

employee contributions

Is based on an objective measure of performance.

An incentive program

Improving performance and quality, pleasing customers and stockholders, and keeping labor costs under control.

Efficiency

It is influenced by employees' motivation to choose increased training and more responsibility in dealing with customers.

Efficiency

Is usually based on a subjective rating of performance.

A merit increase program

_____ refers to all forms of financial returns and tangible services and benefits employees receive as apart of an employment relationship.

Compensation

Identify the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

- "Say on pay" that makes it obligatory for public companies to submit their executive compensation plan to a vote by shareholders - Clawback provisions designed to allow companies to take back compensation from executives in some instances

Edward Lazear conducted an informative study on incentive and sorting effects in which he measured individual worker productivity before and after a glass installation company switched one of its plants from a salary-only system to an individual incentive plan. What were the findings of his study?

- Approximately one-half of the increase in productivity was caused by less productive workers leaving and being replaced by more productive workers - Switching from a salary-only system to an individual incentive plan caused an increase in productivity

Which of the following can form the basis for a cost of living adjustment (COLA) to base wages? - Changes in living costs - Changes in incentive plans - Changes in performance evaluation results - Changes in experience or skill - Changes in what other employers are paying for the same work

- Changes in what other employers are paying for the same work - Changes in living costs - Changes in experience or skill

Identify common examples of income protection benefits provided by employers. - Allowances - Incentive programs - Medical insurance - Retirement programs - Life Insurance

- Medical insurance - Retirement programs - Life insurance

Which of the following are likely to be the focus of employees when they are given long-term incentives in the form of stock ownership? - Return on investment - Compliance with guidelines - Market Share - Return on net assets - Service level agreement targets

- Return on investment - Market share - Return on net assets

Identify the true statements about incentives. - They restrict employee efforts to short-term results - They are one-time payments - They permanently increase labor costs - They are often known as variable pay

- They are one-time payments - They are often known as variable pay

Identify the true statements about the employees whose pay is referred to as salary in the United States.

- They include managers and professionals - Their pay is calculated at an annual or monthly rate

Identify the examples of programs that help employees balance their work and personal responsibilities. - Income protection - Flexible work arrangements - Housing and transportation allowances - Time away from work - Access to services to meet specific needs

- Time away from work - Access to services to meet specific needs - Flexible work arrangements

Identify the ways in which pay can influence employee motivation and behavior - Via an incentive effect - Via a sorting effect - Via a turnover effect - Via a spillover effect

- Via an incentive effect - Via a sorting effect

Which of the following features of research should be kept in mind while deciding the usefulness and relevance of a research study? - Whether the research is useful - Whether the research was conducted globally - Whether the results of the research have ever been successfully applied - Whether the research separates correlation from causation - Whether there are alternate explanations

- Whether the research is useful - Whether the research separates correlation from causation - Whether there are alternate explanations

Which compensation objective has a company failed to meet if it is unable to comprehend the statistics used to measure competitors' pay rates? A. Ethics B. Compliance C. Efficiency D. Fairness

A. Ethics

Why do some stockholders support the use of stock to pay employees? A. They feel that it creates a sense of ownership among employees that will improve performance B. They feel that it reflects the justice and equity prevalent in society C. They believe that it stabilizes a company's overall equity structure D. They believe that it encourages employees to take risks

A. They feel that it creates a sense of ownership among employees that will improve performance

Which of the following is true of allowances? A. They often grow out of whatever is in limited supply B. They often help in protecting employees from financial risks C. They are aimed at helping employees better integrate their work and life responsibilities D. They are part of the relational returns offered by an organization

A. They often grow out of whatever is in limited supply

Which of the following statements about compensation may be seen as a reflection of equity or justice in society? A. individuals and businesses in the United States spend a significant amount of money per year on health care. B. Stockholders believe that using stock to pay employees creates a sense of ownership that improves performance C. U.S. companies exhibit strong links between executive pay and company performance D. Higher pay levels help organizations attract more high-quality applicants

A. individuals and businesses in the United States spend a significant amount of money per year on health care

A company that justifies comparatively low starting offers with assurances of large future pay increases is _____. A. Trying to help protect applicants from the financial risks inherent in daily life. B. Selling the present value of the future stream of earnings C. Emphasizing the relational returns that can be obtained from work D. Involving employees in the company's long-term financial objectives

B. Selling the present value of the future stream of earnings

Which of the following is true of the income protection benefits provided by employers? A. They help employees better integrate their work and life responsibilities B. They help protect employees from the financial risks inherent in daily life. C. They are not legally required in the United States D. They are not included in employees' total compensation

B. They help protect employees from the financial risks inherent in daily life

_____ _____ is the cash compensation that an employer pays an employee for the work performed.

Base Wage

Allowances are a type of _____. A. Incentive B. Cash Compensation C. Benefit D. Relational Return

C. Benefit

Wall Street financial services firms and banks rewarded employees for developing "innovative" new financial investment vehicles and for taking risks that helped them and their firms earn a significant amount of money by using ____. A. flexible benefit plans B. Cafeteria benefit plans C. Incentive plans D. Broad-based options plans

C. Incentive plans

Unlike merit increases, merit bonuses are ____. A. given as increments to base pay B. based on performance assessment C. paid in the form of a lump sum D. Provided in the form of long-term incentives

C. paid in the form of a lump sum

Conforming to federal and state compensation laws and regulations.

Compliance

It is influenced by the basis used while making internal comparisons among employees.

Compliance

Identify a true statement about relative compensation costs and productivity rates across nations.

Countries like Mexico and China have much lower hourly compensation rates than the United States

Which policy decisions of the pay model emphasizes paying for performance? A. Internal Alignment B. Compliance to guidelines C. External competitiveness D. Employee contributions

D. Employee Contributions

_____ force managers to consider the affordability of their compensation decisions. A. The results of job evaluation studies B. Shareholder proposals C. The nature of relational returns D. Global and local competitive pressures

D. Global and local competitive pressures

Which of the following caused companies like Chrysler and General Motors to go through bankruptcy? A. A national credit crisis B. Producing more of the goods that consumers were not willing to buy and failing to adapt to changing consumer needs C. A rise in fuel prices D. Paying employees more than their competitors without corresponding advantages in productivity and quality

D. Paying employees more than their competitors without corresponding advantages in productivity and quality

Identify a true statement about merit increases. A. They do not include any kind of cash compensation B. They are paid in the form of a lump sum C. They do not permanently increase labor costs D. They are based on an assessment of employees' performance in the recent past

D. They are based on an assessment of employees' performance in the recent past

Which of the following is an example of a relational return? A. Short Term incentives B. long term incentives C. Employment Securities D. income protection

Employment Securities

____ ____ refers to pay comparisons with competitors.

External competitiveness

Equitable treatment of all employees through the recognition of employee contributions and needs.

Fairness

It is influenced by employees' comparisons of their pay to the pay of other employees in an organization.

Fairness

T/F: Even if the federal compensation laws change, it is unnecessary to change pay systems to ensure continued compliance.

False

T/F: Since HR research contains information useful to managers, most managers read research in HR management, and compensation journals.

False

T/F: The nature of the legal framework governing pay highlights the fact that pay is not important to employees in the employment relationship.

False

T/F: A present-value perspective focuses on the value of a company's initial offers to job applicants.

False. A present-value perspective shifts the comparison of a company's initial offers to consideration of future bonuses, merit increases, and promotions.

Which of the following means ensuring that the right people get the right pay for achieving the right objectives in the right way? A. Management B. Compliance C. Internal Alignment D. External Competitiveness

Management

In the United States, the pay for employees who are exempt from regulations of the Fair Labor Standards Act, (FLSA) and hence do not receive overtime pay is referred to as _____.

Salary

The extent to which pay influences individual and aggregate motivation among employees at a particular point in time.

The Incentive Effect

The effect of differences in the types of pay strategies on the types of people who apply to and stay with an organization.

The Sorting Effect

Total Compensation

Transactional in nature

Managers seek internal alignment within their organization by: A. matching the competitor's pay rate B. Following FLSA guidelines C. using fair merit increases D. paying on the basics of similarities among jobs

paying on the basics of similarities among jobs