Chapter 5: Compensation & Benefits

The process of adjusting salary data to keep pace with market movement is referred to as A. aging. B. leveling. C. benchmarking. D. compressing.

A. aging. Aging is the practice of adjusting outdated salary survey data and making it current. For example, assume pay increases average 3% a year. If we use data that is a year old, we need to increase the salary by 3%.

To qualify under ERISA, a pension plan must A. be explained verbally to employees. B. allow special provisions for highly compensated executives. C. include a vesting schedule. D. allow all employees to participate.

C. include a vesting schedule. The plan must be in writing and communicated to employees, and it must contain a vesting schedule that lets employees know when they are eligible for accrued benefits. D is not correct since employees cannot contribute until they satisfy eligibility requirements.

Which of the following is considered direct compensation? A. Cash achievement award B. Use of a company car C. Disability insurance D. Deferred pay

A. Cash achievement award Direct compensation deals with pay systems and includes cash achievement awards. Indirect compensation deals with benefits programs and includes items like a company car, disability insurance, and deferred pay.

For private-sector nonexempt employees, how must overtime be paid? A. In cash at a rate of one and one-half times the regular rate of pay B. In compensatory time off at a rate of one and one-half hours for every overtime hour C. In cash or compensatory time, as determined by the employee D. In cash or compensatory time, as determined by the employer

A. In cash at a rate of one and one-half times the regular rate of pay Private-sector nonexempt employees must be paid one and one-half times their regular rate of pay for hours worked in excess of 40 hours in any workweek. Public-sector employers may grant compensatory time off instead of cash.

An employee arrives at work a half hour early, makes coffee for herself, and reads the morning paper at her desk until it is time to start work. Must the employee be paid for this time? A. No, since the employee is not doing work B. No, as long as the employee leaves work one-half hour early C. Yes, since the employee is at her desk D. Yes, unless the employee has permission to come in early

A. No, since the employee is not doing work An employee may come in early and wait for the workday to begin. As long as the employee is not doing work, the employer does not have to pay the employee. However, if the employee does even casual work- such as helping another employee or returning e-mail messages-the employee must be paid.

A state' s minimum wage is $7.50 in comparison to the federal minimum wage of $7.25. An employer in this state must pay employees A. $7.25. B. $7.50. C. an average of the two amounts. D. any amount over $7.25.

B. $7.50. When state and federal minimum wage amounts differ, the employer must follow the regulation that most benefits the employee. Therefore, the employee must be paid $7.50 per hour.

Which of the following is true of a benchmark job? A. The job is in the middle of the pay range for its class. B. . The job is used in the external labor market for setting wages. C. The job content changes frequently and is unique to an employer. D. The job is the entry-level job in its class.

B. . The job is used in the external labor market for setting wages. Benchmark jobs are key jobs that are well known and understood by most employers. They are generic positions that are common throughout almost·a11 industries and therefore are used for setting wages.

Which job evaluation method is commonly used in the government and the public sector? A. Ranking B. Classification C. Point-factor method D. Factor comparison

B. Classification A classification system groups jobs into a predetermined number of grades or classifications, each having a class description used for job comparisons. The best known system is the General Schedule (GS) system used by the federal government.

Which of the following is NOT regulated by the FLSA? A. Exempt status B. Employee benefits C. Minimum wage D. Overtime pay

B. Employee benefits Employee benefits are not governed by the FLSA. Commonly referred to as the Wage and Hour Law, the FLSA governs employee status, child labor, minimum wage, overtime pay, and record keeping.

Exempt status would include a manager who A. makes less than $455 per week. B. directs five people and has hiring and firing responsibility. C. receives overtime pay during a particularly busy work period. D. is docked for less than one full day away from the job.

B. directs five people and has hiring and firing responsibility. Managers who manage at least two or more employees and have hiring and firing authority qualify for the executive exemption.

According to the Equal Pay Act, employers must A. reduce the pay of employees to equalize pay between the sexes. B. pay women and men the same pay for the same work. C. pay the rates set by union contracts even if there are inequities. D. pay similarly for jobs requiring comparable skills and knowledge.

B. pay women and men the same pay for the same work. The Equal Pay Act attempts to prohibit wage discrimination by requiring equal pay for equal work. The law was aimed at remedying the practice of paying women lower wages than men for essentially the same work. Equal work should not be confused with the concept of comparable worth, which is based on similar pay for comparable jobs.

An employee' s son is no longer eligible for coverage under the company's health plan. According to COBRA regulations, the dependent is eligible for how many months of insurance continuation? A. 18 B. 29 C. 36 D. 48

C. 36 A dependent who loses dependent status may continue benefits for 36 months.

Which of the following is a non-quantitative method of job evaluation? A. Factor comparison B. Point-factor method C. Job ranking D. Job qualification

C. Job ranking Job ranking is a non-quantitative method of evaluation that places different jobs in order without a numeric value being assigned. It shows that Job A is more important than Job B but not how much more important. The factor comparison and point factor methods are quantitative methods of evaluation and involve the ranking of jobs using a point scale or weighting.

Which of the following is NOT a compensable factor? A. Skill B. Responsibility C. Seniority D.. Working conditions

C. Seniority Compensable factors reflect how work is done and are supported by documentation such as job descriptions. The compensable factors flow from the work itself and not the employee holding the job. Therefore, seniority is not a compensable factor in determining the relative worth of a job.

Which of the following determines the relative worth of each job in an organization? A. Job analysis B. Job specification C. Job content D. Job evaluation

D. Job evaluation Job evaluation determines the relative worth of each job by establishing a hierarchy of jobs within an organization. It is intertwined with a concern for internal pay equity.

Which of the following legislation encourages employers to hire targeted groups of job seekers? A. Walsh-Healey Act B. ADEA C. Service Contract Act D. Work Opportunity Tax Credit*

D. Work Opportunity Tax Credit The Work Opportunity Tax Credit encourages employers to hire people from nine targeted groups. As an incentive, the employers' federal tax liability decreases.

The Financial Accounting Standards Board (FASB) is a private body that A. determines which compensation plans a company should offer to its employees. B. interprets IRS revenue rulings if requested by an organization. C. enforces accounting standards of for-profit and not-for-profit organizations. D. determines how financial information should be reported to shareholders.

D. determines how financial information should be reported to shareholders. The formation of the FASB marked the separation of the standards setting process from the accounting profession. The FASB derives its authority from the Securities and Exchange Commission and decides how financial executives should report financial information to shareholders.

An employee who is on FMLA leave because of a serious health condition decides not to return to work at the end of 12 weeks. In this situation, the A. employer may not charge the employee for any health insurance premiums paid on behalf of the employee while the employee was on leave. B. employee is entitled to maintain health benefit coverage for 18 months from the date the leave began. C. employee may extend the leave for as long as necessary, with the approval of a physician. D. employee is entitled to maintain health benefit coverage for 18 months from the date the leave expired.

D. employee is entitled to maintain health benefit coverage for 18 months from the date the leave expired. According to COBRA, the employee is entitled to maintain health insurance for 18 months, beginning at the expiration of the leave, which coincides with termination of employment.