People - Total Rewards
Which component of a total rewards system should an organization consider as an indirect benefit to employees? Answers Life insurance Commissions Competitive salary Yearly bonus
: Life insurance Item lsna-19-307 Rationale Life insurance is considered an indirect benefit. Salaries, commissions, and bonuses are part of an employee's compensation and are considered direct benefits.
A competency-based pay approach works best in an environment that fosters which of the following? Answers Acquiring knowledge and skill that enhances employee performance and satisfaction Focusing predominantly on seniority and longevity versus performance Linking measures of quality or goals to individual performance Comparing inputs and outcomes by employees to those of their peers
: Acquiring knowledge and skill that enhances employee performance and satisfaction Item ls2-2-21 Rationale Competency-based pay fosters acquisition of knowledge and skills.
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? Answers Completely redo the survey from the beginning. Age the data to make it current. Level the data to determine relevance. Weight the data compared to other survey data.
: Age the data to make it current. Item ls2-4-36 Rationale 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.
How does a broadbanding approach support an egalitarian organization? Answers By encouraging de-layering efforts By decreasing the involvement of line managers By reducing the value of pay ranges By restricting employee movement
: By encouraging de-layering efforts Item ls2-4-13 Rationale 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 example of direct compensation? Answers Cash achievement award Disability insurance Deferred pay Use of a company car
: Cash achievement award Item ls2-4-2 Rationale 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.
HR is in the process of recruiting a senior-level position for a global organization. Which benefit might distinguish the organization from the competition? Answers Termination payments Unemployment insurance Club membership Social security
: Club membership Item ls2-4-58 Rationale Perquisites are special incidental payments, benefits, or privileges given to individuals over and above their regular rewards. Often awarded to senior-level positions, "perks" may extend to furnished housing, luxury transportation, and membership in exclusive clubs. Social security and unemployment will vary by country but not by organizations within the same country. Termination payments will vary by country and may not be at the sole discretion of the employer where unions are in place.
When conducting a benefits needs assessment, what is the next step HR should take after analyzing the design and utilization data for all benefit plans? Answers Review the organization's total rewards philosophy, compensation approach, and related objectives. Review the organizational strategy to align with the current benefits offered. Analyze the current and projected demographics of the organization's workforce. Compare organizational needs, employee needs, and current benefit offerings.
: Compare organizational needs, employee needs, and current benefit offerings. Item ls2-4-5 Rationale A gap analysis compares organizational needs, employee needs, and the existing set of benefits to identify the benefits that best match the needs of the organization and its employees.
When developing a pay structure, which data set should the HR practitioner use during the development process? Answers Overall points or values used during job evaluation Average of low-paying and high-paying positions Compiled job analysis, job documentation, and job evaluation Information gathered from surveys, local markets, and like institutions
: Compiled job analysis, job documentation, and job evaluation Item lsna-19-229 Rationale Once the job analysis, job documentation, and job evaluation are completed and other relevant information is collected, an organization uses all the data to develop its pay structure. Information gathered from surveys, local markets, and like institutions may assist with information gathering for benchmarking the position but only a part of the overall data collection for creating a pay structure. An organization should look at all positions, not just low- or high-paying positions. Job evaluation is only one aspect of developing a pay structure.
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? Answers Creating a cost analysis and dropping the most expensive benefit Polling employees, asking which benefits do not have value Conducting a utilization review of all benefits Instituting cost-containment strategies to reduce organizational costs
: Conducting a utilization review of all benefits Item lsre-2-4-50 Rationale 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 HR manager discovers a discrepancy between the organization's current compensation policy and the laws of the location the organization operates in. Which is the best first step the HR manager should take to address this? Answers Investigate regulations that most benefit the organization. Determine which regulation most benefits the employee. Request that the governmental agency provide a recommended approach. Ask the CEO his opinion on what approach is best.
: Determine which regulation most benefits the employee. Item ls2-4-53 Rationale The general rule is to follow the regulation that most benefits the employee. This needs to happen as a first step in order to be able to analyze the impact to the organization and provide an effective recommendation to the CEO and other organizational leaders (demonstrating the Consultation competency).
Which is the most important factor an HR leader should use when planning pay increases? Answers HR workload Financial implication Employee support HR systems
: Financial implication Item lsna-19-217 Rationale 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.
To better meet the growing need for new parents to balance work with family, which program should HR include as part of the organization's employee benefits? Answers Employee assistance program Flexible work schedules Automatic increased vacation time Unlimited unpaid leave
: Flexible work schedules Item lsna-19-215 Rationale Flexible work schedules help employees balance work roles with family roles. Increasing vacation time selectively will create problems with engagement and compliance. Unlimited paid leave is not equitable to the organization. Employee assistance programs can provide advice possibly but not relief for the basic problem here, the competition of work and life demands.
Which is an organizational benefit of using differential pay? Answers It can incent employees to perform less desirable work or work in undesirable locations. It can identify employees who are not suited for certain types of work activities. It can reduce employees' taxable income while increasing benefit options for all. It can improve key measures when comparing individual and group collaboration and performance.
: It can incent employees to perform less desirable work or work in undesirable locations. Item ls2-4-22 Rationale By using differential pay, organizations are able to incent employees to perform less desirable work (shift work, hazardous area, being on-call or standby, frequent or regular travel) or in less desirable locations or locations that have a higher cost of living. The differential pay is provided separate from the employee's base pay to allow for organizational flexibility, resulting in the ability to better control fixed labor costs.
How does communicating the guiding principles behind employee pay support an effective compensation philosophy? Answers It eliminates local conditions in pay considerations. It creates a framework for transparency. It guarantees how much employees are paid. It removes leadership from pay decisions.
: It creates a framework for transparency. Item lsna-19-181 Rationale A compensation philosophy creates a framework for consistency and transparency. Communicating the guiding principles behind employee pay plays a key role in being transparent. A compensation philosophy will guide how an organization pays employees, but it will not guarantee how much an employee will be paid. Compensation philosophies are typically created in collaboration with leadership. Compensation philosophies take local conditions into consideration as part of the review for competitiveness.
What job evaluation method assesses the responsibilities and requirements of each job and its relationship to other jobs in the organization? Answers Job-content-based Survey-based Market-based Quantitative
: Job-content-based Item ls2-4-11 Rationale 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.
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? Answers Lead-market strategy Red-circle rates Green-circle rates Pay compression
: Pay compression Item ls2-4-19 Rationale 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? Answers Quantity of work may be favored over quality of work. The organization could be subject to significant equal pay litigation. Pay levels may be raised over time regardless of performance. An enhanced performance management and appraisal system will be required.
: Pay levels may be raised over time regardless of performance. Item ls2-4-21 Rationale 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.
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? Answers Performance bonus Incentive pay Premium pay Gainsharing
: Performance bonus Item ls2-4-44 Rationale 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.
Which is an advantage of using the point-factor method in job evaluation? Answers Relies on some degree of judgment by evaluators Reduces administration, thus is less time-consuming Easier for employees to understand Provides documentation and an audit trail
: Provides documentation and an audit trail Item ls2-4-52 Rationale 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.
Which type of survey should an HR professional use to collect information on base pay, incentive plans, and benefits? Answers Competitiveness Marketplace Global Remuneration
: Remuneration Item ls2-4-23 Rationale Remuneration surveys, the global terminology for compensation and benefit surveys, are used to collect information on prevailing market compensation and benefit practices. This type of survey allows an organization to check its remuneration structures against global and local trends.
What is the advantage of nonqualified deferred compensation plans? Answers They allow all company employees to contribute more than the limits prescribed by qualified plans. They provide incentives for key executives to stay with the organization. They provide more-favorable tax advantages to employers than qualified plans. They protect the plans' funds from creditors in the event of the failure of the business.
: They provide incentives for key executives to stay with the organization. Item lspp-19-107 Rationale 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.
How should an HR leader evaluate an organization's return on labor expenses? Answers By the number of high performers compared to low performers in the organization By adding salaries, overtime, benefits, and bonuses and then dividing by total costs Through a well-crafted pay-for-performance program that measures performance compared to goals By reviewing the overall employee output compared to the overall sales revenue
: Through a well-crafted pay-for-performance program that measures performance compared to goals Item lsna-19-189 Rationale A well-crafted and executed pay-for-performance program allows an organization to evaluate the return on labor expenses.
When creating a benefits program, which key legal factor does the HR benefits leader need to keep in mind? Answers How much paid time off the organization offers Types of involuntary termination severance packages What government-regulated programs are provided Public, national, and bank holidays
: What government-regulated programs are provided Item lsna-19-239 Rationale The benefits leader needs to understand what is normally provided to employees, what government-regulated programs are provided, and what employees expect.
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? Answers Executive commitment to the required investment for the strategy What leaders are willing to tolerate in high performers Competitive forces that may be driving the behaviors Effectiveness of the current code of conduct
: What leaders are willing to tolerate in high performers Item lsna-19-248 Rationale 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.
A differential piece-rate pay system works best in which type of environment? Answers When a link between the attainment of goals or achievement and the level of desired pay is needed When the focus is on what employees can become as opposed to the skills they already have When managers need flexibility to determine who should be paid what rate when employees are hired When the current employee skill set needs to be recognized while encouraging individuals to increase skills and knowledge
: When a link between the attainment of goals or achievement and the level of desired pay is needed Item ls2-4-20 Rationale With differential piece-rate systems, the employee receives one piece rate up to the standard and then a higher rate once the standard has been exceeded. This type of system provides employees with a pay basis but then links the attainment of certain productivity goals or achievements directly to their pay. For example, a salesperson may receive a certain base pay but will earn more if he or she meets a sales quota. Another example is a manufacturing employee who earns a premium over her base rate of pay by exceeding the daily productivity goal.
Under which circumstances should a market-based job evaluation be used? Answers In smaller organizations where jobs are grouped by job families When using generic job characteristics to reflect skill and responsibility When an organization is positioning against its compensation philosophy In larger organizations where a hierarchy of positions is being established
: When an organization is positioning against its compensation philosophy Item ls2-4-12 Rationale The market-based approach is common due to its simplicity, as it looks at external data to form the basis for market pricing. The organization uses job descriptions to compare jobs to like positions in the external marketplace. Pay data is collected from published sources, and the value of the position in the competitive market is determined. Positioning pay against the organization's compensation philsophy allows an understanding of whether the pay program achieves the basic objectives of the compensation philosophy. It also allows for a better understanding of internal equity.
