Test Your Knowledge: Chapter 11
In the context of pay, which of the following represents valence in expectancy theory? The perceived likelihood that better sales performance will lead to higher commission pay The perceived likelihood that time and effort will lead to better sales performance Employees being satisfied with their base salary Employees placing a high value on receiving high commission pay
Employees placing a high value on receiving high commission pay
Which of the following is a factor that leads to success in utilizing bonuses? Establishing clear, metric-based employee reviews Paying large amounts as bonuses Distributing bonuses equally to all employees Enabling every employee to reach the minimum performance level to receive bonus
Establishing clear, metric-based employee reviews
To address pay compression, companies can do all of the following EXCEPT: hire people who are looking for promotions rather than higher pay. promote from within. reduce salaries of new recruits. provide equity pay adjustments.
reduce salaries of new recruits.
Which of the following is an example of a perquisite? Health insurance Stress counseling Annual executive bonus Garnishment
Stress counseling
Which of the following represents an input in the equity theory of motivation? Praise Pay Knowledge Recognition
Knowledge
Which of the following is an intrinsic reward? Stock options Autonomy Perquisites Base pay
Autonomy
In the context of HR metrics for compensation, which of the following is a measure of base pay? Percentage of employees receiving bonus Bonus pay percentage Average hourly rate Revenue growth
Average hourly rate
In the context of the Fair Labor Standards Act (FLSA), which of the following is an overtime pay requirement for nonexempt employees? Overtime pay for all hours worked over 35 in a week Two times the regular pay rate for hours worked on weekends and holidays One and a half times the regular pay rate for all hours worked over 10 in a day One and a half times the regular pay rate for all overtime hours
One and a half times the regular pay rate for all overtime hours
_____ occurs when compensation differences among individuals with different levels of experience and performance become small. Broadbanding Pay compression Market banding Salary inversion
Pay compression
Which of the following is another term for variable pay? Intangible rewards Garnishment Pay for performance Competency-based pay
Pay for performance
_____ is the practice of using fewer pay grades with much wider ranges than in a traditional compensation system. Broadbanding Pay compression Market banding Salary inversion
Broadbanding
Which of the following is NOT a recommended approach to bringing a red-circled employee's pay into line? Freezing the employee's pay until the pay range is adjusted upward Cutting the employee's pay Encouraging the employee to take advantage of development opportunities that will lead to a promotion into a higher pay grade Giving the employee a small lump-sum payment but not adjusting the pay rate when others are given raises
Cutting the employee's pay
Rhonda earns $20 an hour and works a 40-hour week. She receives a 3 percent lump-sum increase (LSI) as her yearly pay increase. Assuming she works for 2,080 hours in the year, Rhonda receives a lump sum of: $1,152. $288. $12,480. $1,248.
$1,248.
Richard earns $20 an hour and works a 40-hour week. He receives a 3 percent lump-sum increase (LSI) as his total yearly pay increase. Richard's base pay for the next year will be: $20.06 per hour. Richard earns $20 an hour and works a 40-hour week. He receives a 3 percent lump-sum increase (LSI) as his total yearly pay increase. Richard's base pay for the next year will be: $20.06 per hour. $20 per hour. $26 per hour.
$20 per hour.
Andy is an employee in Pay Grade 2. The pay range for Grade 2 is minimum = $8.50, midpoint = $10.00, and maximum = $11.50. Andy earns $9.30 per hour. Andy's compa-ratio is: 0.93. 0.81. 1.09. 1.08.
0.93.
_____ is an indirect reward given to an employee or group of employees as part of membership in an organization, regardless of performance. An intangible reward Garnishment A benefit Variable pay
A benefit
Which of the following is NOT a criterion for exempt status? Primary duties of managing Payment on a salary basis A minimum pay level of $1,000 per week Pursuit of artistic or creative endeavors
A minimum pay level of $1,000 per week
Based on a typical pay adjustment matrix, which of the following employees would receive the largest percentage pay increase? Pablo, who is in the first quartile and whose performance is below expectations Ann, who is in the fourth quartile and whose performance exceeds expectations Jan, who is in the third quartile and whose performance meets expectations Alex, who is in the second quartile and whose performance exceeds expectations
Alex, who is in the second quartile and whose performance exceeds expectations
Which of the following is an example of an extrinsic reward? Autonomy Professional development Meaningful work Bonus
Bonus
Which of the following statements regarding the entitlement philosophy is NOT true? Pay raises are given across the board. Pay and raises are based on length of service. Pay scales are increased annually. Bonuses are given based on merit.
Bonuses are given based on merit.
Which of the following statements regarding broadbanding is NOT accurate? Broadbanding is more consistent with the increasing incidence of multidimensional jobs. Broadbanding is designed to encourage horizontal movement. In broadbanding, a promotion is unlikely to result in movement into a new pay grade. Broadbanding may lead employees to feel that there are more promotional opportunities.
Broadbanding may lead employees to feel that there are more promotional opportunities.
In the context of legal issues, which of the following statements is true of pay surveys? Companies participating in pay surveys must safeguard employee privacy. Pay surveys must not be administered by a third party. Employers must conduct pay surveys to avoid a potential violation of antitrust laws. The survey data must be traceable to individuals so that its accuracy can be verified.
Companies participating in pay surveys must safeguard employee privacy.
_____ rewards individuals for the capabilities they demonstrate and acquire. Equity-based pay Tenure-based pay Performance-based pay Competency-based pay
Competency-based pay
Which of the following statements regarding overtime pay issues is NOT true? Travel time must be counted as work time if it occurs during normal work hours for the benefit of the employer. Time spent in training related to a job must be counted as time worked by nonexempt employees. Employers must add the amount of direct work-related incentives to a nonexempt employee's base pay and use the adjusted base when calculating overtime pay. Employers in the private sector are allowed to offer compensatory time off to nonexempt employees in lieu of payment for extra time worked.
Employers in the private sector are allowed to offer compensatory time off to nonexempt employees in lieu of payment for extra time worked.
The _____ prohibits companies from using different wage scales for men and women performing substantially the same jobs. Affordable Care Act Equal Pay Act National Labor Relations Act Fair Labor Standards Act
Equal Pay Act
The major federal law that affects compensation is the: Paycheck Fairness Act. Equal Pay Act. Civil Rights Act. Fair Labor Standards Act.
Fair Labor Standards Act.
Which of the following is a common work unit/team incentive? Gainsharing Sales commissions Profit sharing plans Gift cards
Gainsharing
Which of the following is one of the primary ways for distributing team incentives? Rewarding team leaders but not other team members Giving the entire incentive to the team member who made the maximum contribution Allowing team members to vote on the size of each member's reward Giving the same size reward to each member of the team
Giving the same size reward to each member of the team
In hotels, which of the following is often used as the basis for providing recognition awards to front-desk representatives, housekeepers, food and beverage workers, and other hourly employees? Guest comment cards Inspections by management Ethnocentric attitude Performance appraisals
Guest comment cards
In the context of HR metrics for compensation, which of the following is a measure of sales incentives? Revenue growth Return on investment Profit growth Increase in market share
Increase in market share
_____ are elements of compensation that cannot be easily measured or quantified. Intangible rewards Extrinsic rewards Stock option plans Bonuses
Intangible rewards
Which of the following statements is true of gainsharing? It is typically used to reward longevity with a company. It is an organizational-level incentive. It is an intrinsic reward. It is a team-level incentive.
It is a team-level incentive.
Which of the following is a disadvantage of market pricing? It is not likely to be perceived as a more credible method than internal job evaluations. It is likely to get distorted because of internal job evaluations. It is likely to lead to wide fluctuations in pay. Employees are not likely to view it as an objective method.
It is likely to lead to wide fluctuations in pay.
Which of the following statements regarding a pay adjustment matrix is NOT accurate? It is used in a company that has an entitlement philosophy. It considers employees' level of performance and their position in the pay range. It is typically revised based on the budgeted increase level. It reflects employees' eligibility for pay increase.
It is used in a company that has an entitlement philosophy.
In the context of executive compensation, which of the following is true of a clawback provision? It ensures that an employee does not share any confidential information once he or she leaves a job and joins another company. It helps attract executives from other organizations. It prohibits an employee from joining an organization that is a direct competitor. It permits an organization to require an employee to return rewards obtained through unethical or negligent actions.
It permits an organization to require an employee to return rewards obtained through unethical or negligent actions.
Which of the following statements is true of variable pay? It is preferred by labor unions. It is prevalent in the public sector. It is an expression of the entitlement philosophy. It shifts some risk to employees.
It shifts some risk to employees.
Which of the following statements regarding minimum wage is NOT accurate? Many states have a higher minimum wage than the federal standard. The current minimum wage is $7.25 per hour. Minimum wage is automatically adjusted to inflation and the cost-of-living index. The minimum wage for tipped employees is $2.13, but average tips must put average earnings at or above $7.25 per hour.
Minimum wage is automatically adjusted to inflation and the cost-of-living index.
Which of the following statements explains the basic concept behind organizational incentive plans? Everyone can excel in some or other field in an organization. Overall results depend on company-wide efforts and cooperation. Pay given to new hires should not exceed the compensation provided to more senior employees. Every employee's pay must be increased to compensate for inflation.
Overall results depend on company-wide efforts and cooperation.
In the context of administrative responsibilities, which of the following HR functions is likely to be the first to be outsourced? Developing base pay programs Conducting job evaluations Processing payroll Evaluating employee performance
Processing payroll
Which of the following represents an outcome in the equity theory of motivation? Commitment Time Enthusiasm Recognition
Recognition
In the context of HR metrics for compensation, which of the following is a measure of variable pay on the organizational level? Increase in market share Return on investment Customer satisfaction Customer acquisition rate
Return on investment
_____ occurs when the pay given to new hires is more than the compensation provided to more senior employees. Broadbanding Pay compression Market banding Salary inversion
Salary inversion
Which of the following sales compensation plans is useful when an organization emphasizes serving and retaining existing accounts over generating new sales and accounts? Bonuses Straight commission Salary plus commission Salary only
Salary only
Which of the following is the most widely used individual incentive? Stock option plans Gainsharing Sales incentives Spot bonus
Sales incentives
Which of the following is a basic assumption that underlies the philosophical foundation of variable pay? External equity is more important than internal equity to establish compensation fairness. Some people or groups contribute more to organizational success than do others. Everyone should receive the same rate of compensation. All risk should not be borne by employees.
Some people or groups contribute more to organizational success than do others.
In the context of developing a base pay system, which of the following methods of determining the worth of jobs in an organization has an external focus? The classification method The ranking method The market pricing method The point factor method
The market pricing method
Which of the following statements is true of the child labor provisions of the Fair Labor Standards Act (FLSA)? The minimum age for employment with limited hours outside of school hours is 14 years. The minimum age for employment with unlimited hours is 17 years. Employers are not responsible for verifying an individual's age before hiring the individual. The minimum age for employment in hazardous occupations is 21 years.
The minimum age for employment with limited hours outside of school hours is 14 years.
Which of the following job evaluation methods is a simple system that places jobs in order, from highest to lowest? The classification method The ranking method The point factor method The factor comparison method
The ranking method
Which of the following statements is true of pay surveys? They should not include data from different industries and locales. They are an important element for establishing external pay equity. Management consulting companies are not a reliable source for pay surveys. They cannot be used if market pricing is used for job evaluation.
They are an important element for establishing external pay equity.
Which of the following statements is true of benchmark jobs? They are common across different employers. They are not likely to have stable content. They cannot be used for comparison if market pricing is used for job evaluation. They are performed by a limited number of high-performing employees.
They are common across different employers.
Which of the following statements is true of executive compensation packages? They typically include short-term incentives. They are not likely to include noncash elements. They are handled the same as employee pay in most public corporations. They are frequently determined by the governing board of directors.
They are frequently determined by the governing board of directors.
Which of the following statements regarding cost-of-living adjustments (COLA) raises is true? They are tied to the pay adjustment matrix. They recognize employees for their relative contributions to the organization. They are given to all employees to compensate for inflation and rising prices. They are lump-sum increases.
They are given to all employees to compensate for inflation and rising prices.
In the context of the administrative responsibilities related to compensation, which of the following statements is true of managers? They typically conduct job evaluations and wage surveys. They are not likely to be able to help employees see the connections between their performance and the expected rewards. They are often the first point of contact for employees with questions about pay fairness. They are not likely to be involved in administering compensation programs.
They are often the first point of contact for employees with questions about pay fairness
Which of the following statements is true of standardized pay adjustments? They are not used to compensate for inflation and rising prices. They are used by companies that have an entitlement philosophy. They reflect an age-based pay increase. They reward employees that have earned a pay increase.
They are used by companies that have an entitlement philosophy.
Which of the following statements is true of salaried workers? Their payments are calculated directly on the basis of time worked. They receive the same consistent payments each pay period. Their salary for a pay period depends on the commission they receive in that period. Their paycheck fluctuates from one pay period to the next.
They receive the same consistent payments each pay period.
Which of the following is the primary objective of profit sharing plans? To focus individuals on career goals To reduce social loafing To focus employees on organizational goals To evaluate performance of all employees
To focus employees on organizational goals
Which of the following is the goal of employee stock option plans? To improve cooperation among employees To encourage employees to excel To compensate for inflation and rising prices To get employees to think like owners
To get employees to think like owners
Which of the following is NOT a reason for adopting variable pay? To transfer some risk to employees To link strategic business goals and employee performance To reward employees financially for the amount of time that they work To reduce fixed costs
To reward employees financially for the amount of time that they work
Which of the following statements regarding lump-sum increase (LSI) plans is NOT accurate? LSIs slow down the increase of base pay and thus reduce or avoid the compounding effect on succeeding raises. An LSI plan heightens employees' awareness of what their performance levels merited. Unions generally insist on LSI programs as part of a total rewards package. Workers who receive LSIs may become discouraged because their base pays do not change.
Unions generally insist on LSI programs as part of a total rewards package.
Which of the following is NOT a type of variable pay? Bonuses Wages Commissions Equity awards
Wages
Which of the following is NOT one of the three general types of sales compensation plans? Wages only Straight commission Salary plus commission Salary only
Wages only
An example of a tangible direct reward is: a paid vacation. a cash bonus. life insurance. autonomy.
a cash bonus.
An example of an intangible reward is: a paid vacation. a cash bonus. life insurance. autonomy.
autonomy.
A _____ is a percentage of the revenue generated by sales that is given to an agent or salesperson. perquisite commission recognition award service award
commission
To determine each individual employee's standing in relationship to the midpoint of a pay range, many organizations use a value called the: pay compression. pay gap. compa-ratio. mid-cap index.
compa-ratio.
To determine whether a pay survey is relevant and valid, an organization should ascertain that it: does not report all elements of compensation separately. covers a realistic sample of the employers with whom the organization competes for employees. does not contain job summaries to protect the identities of the participants from their employers. is specific and includes data from organizations of the same size and industry.
covers a realistic sample of the employers with whom the organization competes for employees.
An example of a tangible, indirect reward is: dental insurance. a cash bonus. salary. a supportive work environment.
dental insurance.
The _____ states that individuals judge fairness in compensation by comparing their inputs and outcomes against the inputs and outcomes of referent others. equity theory of motivation expectancy theory of motivation reinforcement theory two-factor theory
equity theory of motivation
The _____ states that an employee's motivation is based on the probability that his or her efforts will lead to a presumed level of performance that is linked to a valued reward. equity theory of motivation expectancy theory of motivation reinforcement theory two-factor theory
expectancy theory of motivation
The expectancy theory of motivation emphasizes the importance of: peer influence. equity compensation. transparency in the rewards system. finding valued rewards for employees.
finding valued rewards for employees.
A company targets pay ranges so that 75 percent of other firms pay above it and 25 percent pay below it. The company is using a _____ strategy. second-quartile first-quartile fourth-quartile third-quartile
first-quartile
In a piece-rate system, people are paid: for the work completed. different rates. on the basis of the capabilities they acquire. for the amount of time they work.
for the work completed.
A(n) _____ is an incumbent who is paid below the range set for a job. green-circled employee exempt employee nonexempt employee red-circled employee
green-circled employee
An exempt employee is an employee who: holds a position for which he or she is not paid overtime. has waived his or her right to the protections under the Fair Labor Standards Act. is not a U.S. citizen. is entitled to a salary but not benefits.
holds a position for which he or she is not paid overtime.
An organizational incentive system compensates all employees according to: the current economy. their performance. the increase in the productivity of the organization. how well the organization performs.
how well the organization performs.
Communicating an organization's pay philosophy to employees is: likely to enhance younger workers' satisfaction and retention. not likely to help them understand the total rewards package provided by the employer. not likely to enable employees to perform in ways that enhance their compensation. likely to affect employees' work attitudes negatively.
likely to enhance younger workers' satisfaction and retention.
In the context of variable pay, the term _____ refers to the idea that employees can clearly see how their actions and decisions lead to desired outcomes. field of vision beeline visible horizon line of sight
line of sight
A(n) _____ is a one-time payment of all or part of a yearly pay increase. lump-sum increase bonus cost-of-living adjustment across-the-board increase
lump-sum increase
In the context of employee pay grades, green-circled problems are likely to be the result of: broadbanding. market pricing. the flattening of organizational levels. opportunistic hiring.
opportunistic hiring.
The term _____ refers to groupings of individual jobs that have approximately the same value to an organization. job family pay compression pay grade job cluster
pay grade
Labor unions are likely to oppose variable pay because they: do not believe in the entitlement philosophy. prefer that employees be paid for the amount of time they work. are opposed to using salaries as an incentive for employees. want employee efforts to be closely aligned with organizational objectives.
prefer that employees be paid for the amount of time they work.
A company that follows a pay-for-performance philosophy is most likely to: provide raises for length of service. increase pay scales annually. provide market-adjusted pay scales. offer holiday bonuses to all employees.
provide market-adjusted pay scales.
A(n) _____ is an incumbent who is paid above the range set for a job. green-circled employee exempt employee nonexempt employee red-circled employee
red-circled employee
In the context of work teams, free riders are also called: social loafers. red-circled employees. flexible workers. exempt employees.
social loafers.
In _____ of job evaluation, descriptions of job categories are written and then each job is put into the category it best matches. the classification method the ranking method the point factor method the factor comparison method
the classification method
The effectiveness of any variable pay program relies on its consistency with: the organization's culture. the economy. the entitlement philosophy. similar plans at other companies.
the organization's culture.
Firms that have contracts with the U.S. government must pay their employees: the prevailing wage in their geographic area for similar work. the minimum wage set by law. bonuses for finishing projects on schedule. garnishment.
the prevailing wage in their geographic area for similar work.
