2020 Chapter 8 - Building Pay Structures that Recognize Individual Contributions

Richard's job has a compa-ratio of 0.85. What does this ratio tell about Richard's pay rate? A) It is highly competitive with the market. B) It is not competitive with the market. C) There is no way to judge its competitiveness. D) You need more information to judge it.

It is not competitive with the market.

Which of the following would be considered as an advantage of broadbanding? A) Creation of broad bands lessens employees' job duties and responsibilities. B) Reduced organizational hierarchies support flexibility. C) Creation of management layers promotes quicker decision making. D) Increased responsibility requires supervisors to more closely administer pay.

Reduced organizational hierarchies support flexibility.

Common review dates provide which of the following advantage? A) The company can equate all employees' job performance at the same time. B) The company minimizes the administrative burden of the plan. C) The company trains supervisors about the most effective way to conduct performance reviews. D) Common review dates ensure that some employees' reviews will be overlooked.

The company minimizes the administrative burden of the plan.

If the company adopts a market lead policy, how will that company's pay range midpoint compare to the market average? A) The midpoint will be the same as the market average. B) The midpoint will be higher than the market average. C) The midpoint will be lower than the market average. D) There is not enough information to make this determination.

The midpoint will be higher than the market average.

Which scenario would be appropriate for using a salary-only plan? A) The salesperson is selling high-priced products B) The salesperson has substantial influence over sales C) The company wants to save money due to budget constraints D) The company wants to create competition among its sales staff

The salesperson is selling high-priced products

When ________ spreads are used to develop pay grade widths, the grades are based on a set number of job evaluation points for each grade that increases as an employee moves up the pay structure. absolute job evaluation points pay range pay rate percentage-based job evaluation point

absolute job evaluation point

________ makes sure that employees have at least a minimally acceptable level of skill proficiency upon completion of a training unit.

certification

A company adopting a commissions-oriented sales compensation plan would most likely pursue which type of competitive strategy? A highest quality B lowest-cost C fairest-price D differentiation

lowest cost

Which of the following represents the relationship between a company's valuation of jobs based on job evaluation and the valuation of jobs within the external market as assessed by compensation surveys? A market-competitive pay structure B pay range C market pay line D pay grade

market pay line

The ________ pay value is the centrally located mark between the range minimum and maximum rates.

midpoint

For the purpose of applying pay policies, this term refers to the groupings of jobs based on compensable factors. A market-competitive pay structures B pay grades C pay ranges D market lines

pay grades

Which of the following is a major challenge in setting up skill-based pay programs? A) determining the number of skill blocks B) convincing shareholders that this type of pay system can facilitate competitive advantage C) demonstrating that the benefits of adopting a pay-for- knowledge program outweighs the costs D) pricing individual skill blocks

pricing individual skill blocks

Which types of companies are most likely to utilize two-tier wage systems? A public sector companies B unionized firms C private sector companies D sales firms

unionized firms

This federal act requires contractors with federal contracts worth over $2,000 to pay wages at least equal to those prevailing in the area where the work is being done.

Davis-Bacon Act

A 10 percent merit pay increase budget tells us which of the following? A) The minimum pay increase amounts to 10 percent. B) The maximum pay increase amounts to 10 percent. C) The average pay increase amounts to 10 percent. D) The standard deviation of any pay increase cannot be more than 10 percent below or above the average.

The average pay increase amounts to 10 percent.

The HR manager of a company thinks that they have too many narrow pay grades within the organization. By getting the support from upper management, the manager decided to consolidate existing pay grades and ranges into fewer pay grades and broader pay ranges in order to create a flatter organization in terms of compensation. This is an example of which pay structure variation? A pay compression B multiple-tier pay system C two-tier pay system D broadbanding

broadbanding

________ is a form of compensation based upon a percentage of the selling price of a product or service.

commission

A recently opened car dealership uses an incentive compensation plan for its sales people. The dealer provides money to its salespeople to cover basic living expenses and then shares a fixed percentage of the selling price of each car sold. However, the salesperson should repay the subsistence pay component within a year; otherwise he/she cannot continue in the employment of this dealer. Which type of sales compensation plan does this dealer adopt? salary-plus-bonus commission only salary-plus-commission commission-plus-draw

commission plus draw

________ describe the allocation of monetary resources to fund pay structures.

compensation budgets

Money that covers the basic living expenses of sales professionals is better known as a ________.

draw

Which of the following theories suggests that an employee must regard his own ratio of merit increase pay to performance as similar to the ratio for other comparably performing people in the company? A comparable ratio theory B equity theory C comparable pay theory D equality theory

equity theory

Wherever proprietary information is the subject of training, a company most often relies on which of the following sources of expertise? A) expertise in university professors B) expertise within the company C) both expertise within and outside the company to provide training D) expertise in competitor companies

expertise within the company

John is just hired by a software company as a programmer. He is also a part-time student at the local college and needs just a few credits to graduate from this college. A college degree is required in order to work as a programmer in this software company. Therefore, John receives below-minimum pay rate until he graduates from college. Which type of pay rate does John receive? A two-tier pay B midpoint pay C green circle D red circle

green circle

With which type of sales commission plan does an employee earn a higher rate for all sales made in a given period if the sales level exceeds a predetermined level?

multiple tiered

________, or lump sum bonuses, lend themselves well to cost containment since these bonuses are not permanent percentage increases.

nonrecurring merit increases

Which term is used to describe the situation where the pay spread between newly hired employees and more qualified job incumbents is small? A green circle pay rates B red circle pay rates C pay structures D pay compression

pay compression

Which of the following represents the horizontal dimension of pay structures? A pay spreads B pay grades C job evaluation points D pay ranges

pay grades

Midpoint, minimum, and maximum are values used to define which of the following?

pay ranges

________ represent the vertical dimension of pay structures.

pay ranges

________ assign different pay rates for jobs of unequal worth and provide the basic framework for recognizing differences in individual contributions.

pay structures

A ________ is the difference between the maximum and minimum pay rates of a given pay grade.

range spread

This type of pay rate applies to an employee who is demoted but is paid more than the maximum rate for the pay grade he is now in.

red circle

________ rates pay wages higher than the maximum listed in order to help retain valued employees fielding big job offers elsewhere.

red circle

With which sales compensation plan does the level of pay not vary when sales volume does vary?

salary only

This type of sales incentive compensation plan offers the sales person a salary and further compensation for achievement of specific, exceptional sales goals A salary-plus-draw B salary-plus-commission C salary-plus-graduated commission D salary-plus-bonus

salary plus bonus

Jasmine Black believes that the company should share part of the risk for her sales position. Which sales compensation plan should she pursue? A commission-plus-draw B salary-plus-commission C commission-only D salary-plus-bonus

salary plus commission

This term describes a set of skills necessary to perform a specific job or a group of similar jobs. A skill structure B skill grade C skill block D skill range

skill block

How are compa-ratios calculated? A) the green circle rates midpoint divided by the normal pay range B) the pay rate divided by the market line rate C) the pay rate divided by the pay range midpoint D) the red circle rates divided by the normal pay range

the pay rate divided by the pay range midpoint

Typically, what is the number of skill blocks used in skill-based pay programs? A 1 B 1 to 2 C 2 or more D 1 to 3

two or more

Alejandro Martinez is responsible for setting up the pay structure for his company. He believes that newly hired employees should not be paid as much as established employees. Which type of pay structure should Mr. Martinez use? A sales incentives B two-tiered C merit pay D broadbanding

two tiered