Ch 7. Employee Compensation & Incentives

Which of the following is NOT an example of indirect financial compensation?

Salary

Cathy works as a stylist cutting hair. She gets paid for each haircut. Why is this example of piecework?

She is paid per unit produced or service performed.

Which of the following is an example of non-financial compensation?

Your manager deciding you're doing such a good job that he will give you more autonomy in decision making.

Stock options are considered _____

a benefit

Jonas, the owner of a small engine repair shop, is going to give all of his employees a paid day off on New Year's Eve if profit goals for the year are achieved. This form of compensation is called:

an incentive.

Which of the following statements best describes the current trend of executive compensation in the United States?

Executive compensation is growing at a faster rate than employee compensation.

How are benefits calculated in Fred's cash balance retirement plan?

His benefits are based on a hypothetical cash balance.

Beth receives stock options from her employer as part of her overall compensation package. What type of compensation is this?

Indirect

What type of compensation is employer-sponsored health care?

Indirect financial compensation

_____ is a voluntary benefit offered by employers.

401(k) plan

Tiffany's employer set up a retirement account for her where she can contribute part of her salary. The plan also provides that her employer will make yearly contributions to her retirement account as well. Which of the following best describes the plan?

A 401(k) plan

What do stock options, profit sharing, and gain sharing have in common?

All align employees' interests with the owners' interests

Which of the following is an example of internal equity in the context of compensation?

All employees that have the same level of experience and skill receiving the same sum of money

Mary receives a bonus at the end of the year based on a percentage of money she and her fellow employees saved the company by improving efficiency and reducing waste. Why is this an example of gain sharing?

Because it rewards employees for reducing waste and improving efficiency

Jane is a CEO of an IT company and the department that she manages raised in 2 days what it takes other departments to earn in a month. For that Jane received a $100,000 bonus. Why is this an example of a spot bonus?

Because it was earned in a relatively short period

At the end of the year, Sue receives an additional payment representing a fraction of the net earnings of her company for the year. Why is this an example of profit sharing?

Because she receives part of the company's profit

What is the difference between bonuses and stock options?

Bonuses are variable and conditional on executives achieving certain performance standards, while stock options allow executives to purchase company stock at a set price for a certain period of time.

Which of the following would NOT be part of an executive's lucrative benefits?

Commissions

David sells shoes in a retail company. His boss agreed to pay him a commission for each pair of shoes he sells. Which of the following statements is an example of what his boss promised?

Dave has a base salary and also receives 5% of the value for each pair of each shoes he sells.

John and Mary work as computer programmers at the same company. John has an additional programming certification and three more years at the company so he is paid more. This is an example of which of the following?

Employee equity

Bob is a machinist who discovers that machinists at the neighboring factory are paid a higher wage than he is for doing the same job. This is an example of what?

External inequity

John is working for an IT company based upon a contract and the company doesn't withhold any payroll taxes when it pays him. Which is most likely true about John's employment?

He is self-employed and working as an independent contractor so payroll taxes are not withheld

Stan is paid $10 for each hour he works. Why is this an example of a wage?

It is a sum of money paid for a fixed period.

Bob's annual performance review showed a marked improvement in his productivity. As a result, he is given a raise. Why is this an example of merit pay?

It is additional pay based on past results in the company.

Alex is paid a salary of $35,000 a year with the potential for further money if he meets certain performance goals. Why is this an example of direct financial compensation?

It is an example of direct payment for labor.

How are mandatory benefits different from voluntary benefits?

Only mandatory benefits are required by law.

Which of the following can result from compensation inequity?

Resentment

Which benefit is only partly paid by employers?

Social Security benefits

Which of these is correct about a defined contribution retirement plan?

The employer puts a specified amount into the plan each year.

Non-exempt employees who receive wages are paid _____.

for every hour they work