Chapter 11 - Resendez
Which of the following is LEAST likely a benefit of using competency based pay? A) supporting a firm's talent management process B) developing an efficient and legally defensible wage curve C) aiding in the implementation of a high-performance work system D) encouraging the development of skills needed for a firm's strategic goals
B) developing an efficient and legally defensible wage curve
Which form of equity refers to the perceived fairness of the processes used to make decisions regarding the allocation of pay? A) internal B) distributive C) individual D) procedural
D) procedural
What is the primary purpose of offering an executive stock options in a compensation package? A) providing the executive with guaranteed bonuses B) encouraging the executive to increase the firm's value C) enabling the firm to decrease the executive's base pay D) offering the executive long-term retirement security
B) encouraging the executive to increase the firm's value
Which of the following best defines internal equity? A) how a job's pay rate in one company compares to the job's pay rate in other companies B) how fair the job's pay rate is, when compared to other jobs within the same company C) the fairness of an individual's pay as compared to a co-worker's pay for the same job D) the perceived fairness of the processes and procedures used to make compensation decisions
B) how fair the job's pay rate is, when compared to other jobs within the same company
Which of the following is NOT a type of direct financial payment? A) wages B) insurance C) incentives D) commissions
B) insurance
A company using competency-based pay compensates employees for all of the following EXCEPT ________. A) behaviors B) job title C) knowledge D) skills
B) job title
Bonnie, a data analyst, needs to take time off from work to care for her elderly mother. According to the Family and Medical Leave Act, what is the maximum number of weeks of unpaid, job-protected leave that Bonnie may take? A) 4 B) 6 C) 12 D) 16
C) 12
Which of the following terms refers to the ownership employees build up in their pension plans should their employment with a firm end prior to retirement? A) portability B) equity C) vesting D) shares
C) vesting
Which of the following issues is NOT addressed by the Fair Labor Standards Act? A) record-keeping B) overtime pay C) child labor D) termination
D) termination
Jason is an information systems technician in a town in North Carolina with a population of 100,000. He receives an annual salary of $35,000. He recently found out that a nearby town with a similar population pays people in the same position $40,000 annually. With which form of equity is Jason most concerned? A) distributive B) procedural C) internal D) external
D) external
Which of the following best describes the point method of job evaluation? A) ranking each job relative to all other jobs based on pay grade B) categorizing jobs into grades and classes based on specific rules C) deciding which jobs have a higher number of compensable factors D) identifying and quantifying the compensable factors present in a job
D) identifying and quantifying the compensable factors present in a job
Anita, a manager at a department store, needs to determine whether one of her employees is exempt or nonexempt under the Fair Labor Standards Act. Which of the following would be the best resource for Anita? A) organizational chart B) performance appraisal C) business plan D) job description
D) job description
Which of the following is NOT one of the typical methods used by job evaluation committees to determine the worth of a job? A) ranking B) point method C) job classification D) paired comparison
D) paired comparison
Which of the following job evaluation methods is associated with almost every comparable worth lawsuit? A) job classification method B) job grading method C) ranking method D) point method
D) point method
Phil, the owner of Eastline Electronics, recently learned that the current rate being paid for the position of engineering assistant at his firm falls significantly below the wage line. Which of the following steps should Phil most likely take to correct this problem? A) enact a pay freeze for that job B) assess a decrease in wages C) pay a one-time bonus D) provide a pay raise
D) provide a pay raise
Which of the following is the LEAST likely way that an employer would address a cost-of- living differential? A) paying a nonrecurring amount spread over one to three years B) paying a nonrecurring, lump sum amount C) raising an employee's base salary D) raising commission percentages
D) raising commission percentages
Which of the following issues would LEAST likely be negotiated by unions? A) income security B) time off with pay C) health care benefits D) unpaid medical leave
D) unpaid medical leave
Which of the following shows the relationship between the value of the job and the average pay for this job? A) benchmark B) pay grade C) scatter plot D) wage curve
D) wage curve
External equity refers to ________. A) how a job's pay rate in one company compares to the job's pay rate in other companies B) the fairness of an individual's pay as compared to a co-worker's pay for the same job C) the perceived fairness of the processes and procedures used to make decisions about compensation D) the use of salary surveys and job evaluation comparisons to monitor pay levels within an industry
A) how a job's pay rate in one company compares to the job's pay rate in other companies
Which of the following is used to maintain internal equity? A) job analysis comparisons B) organizational charts C) incentive pay D) salary surveys
A) job analysis comparisons
When using the job evaluation method of job classification, raters categorize jobs into groups of similar jobs called ________. A) classes B) sections C) grades D) cohorts
A) classes
What has historically been the key issue in collective bargaining? A) wage rates B) income security C) health care benefits D) cost-of-living adjustments
A) wage rates
Which of the following terms refers to all forms of pay or rewards going to employees and arising from their employment? A) salary B) employee benefits C) wage reimbursement D) employee compensation
D) employee compensation
What are the five main elements of a competency-based pay plan?
Most competency-based pay plans contain five elements. The employer defines specific required skills and chooses a method for basing the person's pay on his or her skills. A training system lets employees acquire skills. There is a formal competency testing system. And, the work is designed so that employees can easily move among jobs of varying skill levels.
Which act regulates vesting rights and portability rights? A) Fair Labor Standards Act B) Title VII of the Civil Rights Act C) Employer Retirement Income Security Act D) Equal Pay Act of 1963
C) Employer Retirement Income Security Act
Which compensation-related law contains provisions for minimum wage, maximum hours, overtime pay, equal pay, record-keeping, and child labor? A) Davis-Bacon Act B) Fair Wages Act C) Fair Labor Standards Act D) Walsh-Healey Public Contract
C) Fair Labor Standards Act
Which of the following was enacted in 1931 for the purpose of setting wage rates for laborers and mechanics employed by contractors working for the federal government? A) Walsh-Healey Public Contract B) Fair Labor Standards Act C) Civil Rights Act D) Davis-Bacon Act
D) Davis-Bacon Act
Which of the following states that employees of one sex may not be paid wages at a rate lower than that paid to employees of the opposite sex for doing roughly equivalent work? A) Americans with Disabilities Act B) Title VII of the Civil Rights Act C) Social Security Act D) Equal Pay Act
D) Equal Pay Act
Which job evaluation method is a quantitative technique involving the identification of several compensable factors and the degree to which each of these factors is present in the job? A) ranking method B) point method C) job grading method D) job classification method
B) point method
Which of the following is true for employers who use independent contractors? A) Fair Labor Standards Act overtime requirements do not apply. B) Social Security taxes are higher than for regular employees. C) Federal income taxes are charged at a reduced rate. D) Payroll taxes are paid by the employer.
A) Fair Labor Standards Act overtime requirements do not apply.
Central basic factors that establish how several jobs compare to one another and that determine the pay for each job are called ________. A) compensable factors B) job evaluation factors C) ranking factors D) analysis factors
A) compensable factors
Which of the following laws has the LEAST amount of influence on compensation decisions? A) Americans with Disabilities Act B) Labor Management Relations Act C) Family and Medical Leave Act D) Age Discrimination in Employment Act
B) Labor Management Relations Act
Which of the following jobs is most likely categorized as nonexempt from the overtime pay provisions of the Fair Labor Standards Act? A) taxicab driver B) personnel director C) newspaper writer D) computer systems analyst
C) newspaper writer
In most cases, which of the following occupations is NOT exempt from the overtime provisions of the Fair Labor Standards Act? A) physicians B) engineers C) paralegals D) teachers
C) paralegals
A ________ is comprised of jobs of approximately equal difficulty or importance as established by job evaluation. A) wage curve B) benchmark C) pay grade D) class
C) pay grade
Jill works as a cashier at a grocery store. She earns $10 an hour (or $400 for a 40-hour week). Last week, she worked 46 hours. What is the minimum amount that Jill earned last week? A) $460 B) $490 C) $520 D) $550
B) $490
What theory of motivation states that people are strongly motivated to maintain a balance between what they perceive as their contributions and their rewards? A) Two-factor theory B) Equity theory C) Learned needs theory D) Expectancy theory
B) Equity theory
Which law makes it illegal to discriminate against any individual with respect to compensation because of race, color, religion, sex, or national origin? A) Fair Labor Standards Act B) Title VII of the Civil Rights Act C) Equal Pay Act D) Taft-Hartley Act
B) Title VII of the Civil Rights Act
What are the two primary components of computerized job evaluations? A) compensable factors and benchmark jobs B) grade definitions and factor comparisons C) structured questionnaires and statistical models D) structured questionnaires and grade definitions
C) structured questionnaires and statistical models
Which job evaluation method is used by most modern employers? A) job classification method B) job grading method C) ranking method D) point method
D) point method
What are your compensation options if you are an employer who needs to transfer an employee from a low cost-of-living area to a high cost-of-living area?
Employers have different ways of handling cost-of-living differentials. One is to give the transferred person a nonrecurring payment in a lump sum amount. Another is to pay a differential for ongoing costs in addition to a one-time allocation. Others simply raise the employee's base salary. For international transfers, companies can go with a home-based or host-based salary plan. With a home-based salary plan, an international transferee's base salary reflects his or her home country's salary. The employer then adds allowances for cost-of-living differences-housing and schooling costs, for instance. This is a reasonable approach for short-term assignments, and avoids the problem of having to change the employee's base salary every time he or she moves. In the host-based plan, the firm ties the international transferee's base salary to the host country's salary structure. In other words, the manager from New York who is sent to France would have his or her base salary changed to the prevailing base salary for that position in France, rather than keep the New York base salary. The firm usually tacks on cost-of-living, housing, schooling, and other allowances here as well. Most multinational enterprises set expatriates' salaries according to the home-based salary plan.
In a brief essay, discuss the purpose of job evaluations. Discuss the similarities and differences between job evaluations conducted for managerial positions and lower level positions at a firm.
Job evaluation aims to determine a job's relative worth. The job evaluation is a formal and systematic comparison of jobs to determine the worth of one job relative to another. Job evaluation eventually results in a wage or salary structure or hierarchy (this shows the pay rate for various jobs or groups of jobs). The basic principle of job evaluation is this: Jobs that require greater qualifications, more responsibilities, and more complex job duties should receive more pay than jobs with lesser requirements. Many employers use job evaluation for pricing managerial jobs in most large firms. The basic approach is to classify all executive and management positions into a series of grades, each with a salary range. As with non-managerial jobs, one alternative is to rank the executive and management positions in relation to each other, grouping those of equal value. However, firms also use the job classification and point evaluation methods, with compensable factors like position scope, complexity, and difficulty. Job analysis, salary surveys, and the fine-tuning of salary levels around wage curves also play roles.
Which of the following is used to anchor the employer's pay scale? A) grades B) job metric C) benchmark job D) human resource metric
C) benchmark job
Homelife, a national chain of high-end furniture stores, employs nearly 800 workers. In the past few years, the company's market share has dropped significantly, and employee turnover has increased. Upper management is considering the implementation of a new compensation policy in its efforts to turn the company around. Historically, the company has paid all employees similarly with some variation for seniority but no distinction between high and low performers. Which of the following, if true, best supports the argument that Homelife should distribute salary surveys before establishing new pay rates? A) Homelife executives want to identify benchmark jobs before determining the worth of other jobs. B) Homelife executives plan to use the compensable factors emphasized by the Equal Pay Act. C) Computerized job evaluation systems will be used by Homelife to generate questionnaires. D) A wage curve needs to be established by Homelife for the purpose of federal compliance.
A) Homelife executives want to identify benchmark jobs before determining the worth of other jobs.
According to many experts, which of the following would most likely reduce the wage gap between men and women? A) education B) union intervention C) federal legislation D) competency-based pay
A) education
Which of the following is NOT one of the forms of equity related to compensation issues? A) group B) external C) individual D) procedural
A) group
John is a sales representative in a jewelry store. He typically works 40 hours per week and his pay is completely based on his sales. He earns a 5% commission for every sale he makes. Which of the following terms best describes John's situation? A) pay for performance B) indirect financial compensation C) time-based compensation D) piecework pay
A) pay for performance
The purpose of the wage curve is to ________. A) show the relationship between the value of the job and the current average pay rates B) equate jobs of similar difficulty or importance as established by job evaluation C) choose benchmark jobs within each pay grade D) cluster jobs into logical groupings
A) show the relationship between the value of the job and the current average pay rates
Homelife, a national chain of high-end furniture stores, employs nearly 800 workers. In the past few years, the company's market share has dropped significantly, and employee turnover has increased. Upper management is considering the implementation of a new compensation policy in its efforts to turn the company around. Historically, the company has paid all employees similarly with some variation for seniority but no distinction between high and low performers. Which of the following, if true, best supports the argument that Homelife executives should primarily address internal equity issues when developing a new compensation plan? A) Homelife employees receive annual performance appraisals at which time they set career goals. B) Salary surveys indicate dissatisfaction among the Homelife managers in different departments. C) Online pay sites show the pay range for sales associates at both Homelife and its competitors. D) Homelife pays its sales managers commissions in addition to base salaries and health benefits.
B) Salary surveys indicate dissatisfaction among the Homelife managers in different departments.
Which of the following sets basic labor standards for employees working on any government contract that amounts to more than $10,000? A) Davis-Bacon Act B) Walsh-Healey Public Contract C) Fair Wages Act D) Fair Labor Standards Act
B) Walsh-Healey Public Contract
Which of the following questions is most relevant to developing a market-competitive pay system? A) What is the ranking of each job? B) What is the relevant labor market? C) What percentage of workers are contingent? D) What are the local and federal pay regulations?
B) What is the relevant labor market?
Which of the following is NOT one of the compensable factors emphasized in the Equal Pay Act? A) skills B) accountability C) responsibility D) working conditions
B) accountability
Which of the following terms refers to the requirement to pay men and women equal wages for jobs of roughly equivalent value to the employer? A) strategic compensation B) comparable worth C) broadbanding D) job grading
B) comparable worth
In most cases, the majority of the members on a job evaluation committee are ________. A) managers B) employees C) HR specialists D) union representatives
B) employees
Which of the following terms refers to a systematic comparison done in order to determine the worth of one job relative to another? A) job analysis B) job evaluation C) job description D) job classification
B) job evaluation
Which of the following terms refers to a series of steps or levels within a pay grade? A) pay metric B) pay range C) wage class D) wage curve
B) pay range
Which of the following terms refers to a compensation plan that advances a firm's strategic goals? A) strategic management B) performance pay plan C) aligned reward strategy D) workers' compensation package
C) aligned reward strategy
Which of the following factors has the LEAST effect on the design of an organization's pay plan? A) legal B) union C) company vision D) company policy
C) company vision
Beth, a small business owner, wants to ensure external equity when establishing pay rates. Beth should most likely ________. A) use wage curves to price each pay grade B) compare performance appraisals C) conduct a salary survey D) check online pay sites
C) conduct a salary survey
Which form of equity refers to how a job's pay rate in one company compares to the job's pay rate in other companies? A) distributive B) internal C) external D) procedural
C) external
Which of the following terms refers to pay in the form of financial benefits, such as insurance? A) direct financial payments B) out-of-pocket expenses C) indirect financial payments D) sales commissions
C) indirect financial payments
Audrey is a lawyer in a mid-size firm in Chicago. She recently learned that another lawyer who joined the firm at the same time earns a lower salary than she does. Which form of equity is most relevant to Audrey's situation? A) internal B) distributive C) individual D) procedural
C) individual
Richard was recently offered a position as vice president of marketing at a national retail chain. As a top executive at the firm, Richard will most likely be compensated with all of the following EXCEPT ________. A) stock options B) pension plans C) sales commissions D) supplemental life insurance
C) sales commissions
Which of the following gives employees the right to organize, bargain collectively, and engage in concerted activities for the purpose of collective bargaining? A) Equal Pay Act B) Civil Rights Act C) Fair Labor Standards Act D) National Labor Relations Act
D) National Labor Relations Act
Homelife, a national chain of high-end furniture stores, employs nearly 800 workers. In the past few years, the company's market share has dropped significantly, and employee turnover has increased. Upper management is considering the implementation of a new compensation policy in its efforts to turn the company around. Historically, the company has paid all employees similarly with some variation for seniority but no distinction between high and low performers. Which of the following questions is LEAST relevant to Homelife's decision to develop an aligned reward strategy? A) What compensation programs should Homelife use to reinforce necessary employee behaviors? B) How well does Homelife's current compensation program match the company's strategic aims? C) What compensation programs should Homelife use to reinforce desired employee behaviors? D) What are the results of Homelife employee salary surveys in regards to wage satisfaction?
D) What are the results of Homelife employee salary surveys in regards to wage satisfaction?
The point method of job evaluation is the most frequently used job evaluation method, but it is also associated with lawsuits involving comparable worth. In a brief essay, explain the point method of job evaluation and why it is problematic for firms in regards to comparable worth.
The point method is a quantitative technique. It involves identifying (1) several compensable factors, each having several degrees, as well as (2) the degree to which each of these factors is present in the job. Assume there are five degrees of "responsibility" a job could contain. Further, assume you assign a different number of points to each degree of each factor. Once the evaluation committee determines the degree to which each compensable factor (like "responsibility" and "effort") is present in the job, it can calculate a total point value for the job by adding up the corresponding points for each factor. The result is a quantitative point rating for each job. Comparable worth has implications for job evaluation. Virtually every comparable worth case that reached a court involved the use of the point method of job evaluation. By assigning points to dissimilar jobs, point plans facilitate comparability ratings among different jobs. Perhaps the wisest approach is for employers to price their jobs as they see fit (with or without point plans), but to ensure that women have equal access to all jobs. In other words, eliminate the wage discrimination issue by eliminating sex-segregated jobs..
Trevor, a sales manager at IBM, recently learned that an IBM human resources manager with comparable responsibilities and spans of control earns a higher salary than Trevor. Which form of equity is of most concern to Trevor? A) external B) internal C) distributive D) individual
B) internal
Which form of equity refers to the fairness of a job's pay rate in comparison to other jobs within the same company? A) external B) internal C) distributive D) individual
B) internal
According to the Fair Labor Standards Act, what rate of normal pay would a covered employee receive for working more than 40 hours in a workweek? A) 50% B) 100% C) 150% D) 200%
C) 150%
Joseph worked 6 hours of overtime this week but has decided to take time off instead of overtime pay. How many hours will Joseph receive in time off from work? A) 3 hours B) 6 hours C) 9 hours D) 18 hours
C) 9 hours
________ means collapsing salary grades and ranges into just a few wide levels, each of which contains a relatively wide range of jobs and salary levels. A) Comparable worth B) Job evaluation C) Broadbanding D) Job grading
C) Broadbanding
Homelife, a national chain of high-end furniture stores, employs nearly 800 workers. In the past few years, the company's market share has dropped significantly, and employee turnover has increased. Upper management is considering the implementation of a new compensation policy in its efforts to turn the company around. Historically, the company has paid all employees similarly with some variation for seniority but no distinction between high and low performers. Which of the following, if true, best supports the decision by Homelife executives to implement competency-based pay? A) Homelife will be using the comparable worth method of determining pay to avoid legal problems. B) Most Homelife managers are men, but executives hope to increase the number of minority women working for the company. C) Homelife plans to organize employees into teams, provide regular training, and frequently assess workers' skills and knowledge. D) In an effort to save money, Homelife will be reducing the employee training budget over the next three years.
C) Homelife plans to organize employees into teams, provide regular training, and frequently assess workers' skills and knowledge.
What type of equity is a manager most likely trying to maintain through the use of performance appraisals and incentive pay? A) internal B) external C) individual D) procedural
C) individual
Which form of equity refers to the fairness of an individual's pay as compared with what his or her co-workers are earning for the same or very similar jobs within the company, based on each individual's performance? A) internal B) distributive C) individual D) procedural
C) individual
Explain the equity theory of motivation. What are the four forms of equity?
Equity theory states that people are strongly motivated to maintain a balance between what they perceive as their inputs or contributions and their rewards. If a person perceives an inequity, a tension or drive will develop in the person's mind and the person will be motivated to reduce or eliminate the tension and perceived inequity. The four forms are external, internal, individual, and procedural. External equity refers to how a job's pay rate in one company compares to the job's pay rate in other companies. Internal equity refers to how fair the job's pay rate is when compared to other jobs within the same company. Individual equity refers to the fairness of an individual's pay as compared with what his or her co-workers are earning for the same or very similar jobs within the company, based on each individual's performance. Procedural equity refers to the perceived fairness of the processes and procedures used to make decisions regarding the allocation of pay.
What are the primary factors involved in determining compensation for a firm's CEO? What reasons best explain compensation reductions for top executives in recent years?
For a CEO position, job evaluation typically has little relevance. One recent study concluded that three main factors: job complexity (span of control, the number of functional divisions over which the executive has direct responsibility, and management level), the employer's ability to pay (total profit and rate of return), and the executive's human capital (educational level, field of study, work experience) accounted for about two-thirds of executive compensation variance. There are various reasons why boards are clamping down on executive pay. The Dodd-Frank law of 2010 requires American companies give shareholders a "say on pay." Law firms are filing class-action suits demanding information from companies about their senior executives' pay decisions. As of 2007, the Securities and Exchange Commission (SEC) required filing more compensation-related information, including a detailed listing of all individual "perks" or benefits if they total more than $100,000. As of 2005, the Financial Accounting Standards Board required that most public companies recognize as an expense the fair value of the stock options they grant. The Sarbanes-Oxley Act makes executives personally liable, under certain conditions, for corporate financial oversight lapses.
What are the advantages for employers of claiming that someone doing work for them is an independent contractor rather than an employee? What generally makes a worker classified as an "independent contractor"?
There are many advantages to organizations. The Fair Labor Standards Act does not apply to independent contractors. The employer does not have to pay unemployment compensation, payroll taxes, Social Security taxes, or city, state, and federal income taxes. In general, an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. However, there is no single rule or test. Instead, the courts will look at the total situation. The major consideration is this: The more the employer controls what the worker does and how he or she does it, the more likely it is that the courts will find the worker to be an employee, not an independent contractor.
What are the two primary ways to make direct financial payments to employees? How does compensation for managers or professionals differ from compensation for clerical or production workers at a firm?
There are two basic ways to make direct financial payments to employees: base them on increments of time or on performance. Time-based pay is still the foundation of most employers' pay plans. Blue-collar and clerical workers get hourly or daily wages, for instance, and others, like managers or Web designers, tend to be salaried and paid by the week, month, or year. The second direct payment option is to pay for performance. Piecework and sales commissions are examples of performance-based compensation. Developing compensation plans for managers or professionals is similar in many respects to developing plans for any employee. The basic aim is the same: to attract and keep good employees. Managerial jobs tend to stress harder to quantify factors like judgment and problem solving more than do production and clerical jobs. There is also more emphasis on paying managers and professionals based on results—based on their performance or on what they can do—rather than on the basis of static job demands like working conditions. So, job evaluation, although still important, usually plays a secondary role to non-salary issues like bonuses, incentives, market rates, and benefits.
What are the key differences between competency-based pay and traditional job-based pay? Which method would you prefer if you were an employee? Why?
With job-based pay (JBP), the employee receives the pay attached to the job regardless of whether the employee has the necessary competency for performing the job. With competency-based pay (CBP), the supervisor certifies employee competency prior to any pay increases. With JBP, pay changes when one switches jobs. With CBP, one must demonstrate proficiency prior to getting a raise. Also, one could do a lower-paying job but still receive a higher pay based on skill. JBP systems may tie pay to grade or seniority. CBP pays for competencies, not seniority. There is more advancement possible with CBP plans than with JBP. CBP enhances organizational flexibility because workers' skills are applicable to more jobs, and therefore more portable.
