Mj12e Tb Ch12

Chapter 12Total Rewards and Compensation

MULTIPLE CHOICE

1.McDonalds global rewards program has resulted in lower managerial and employee turnover. In this type of total rewards system why would turnover decline?a.All employees benefit from higher pay, and are less likely to quit.b.Employees receive equal bonuses based on growth in McDonalds profits, and this fair treatment makes employees less likely to quit.c.The increased in employee competition from varying reward levels based on performance encourages high performers to stay.d.Higher performers receive higher incentives than lower performers, so high performers would be less likely to quit.

ANS:DPTS:1DIF:ChallengingREF:p. 359OBJ:1NAT:AACSB AnalyticLOC:HRMTOP:Application

2.Compensation is one of the organizations largest expenditures. Compensation philosophies and systems vary from one organization to the next. Why is that?a.There is no one right way to compensate employees. Many systems will work equally well in any organization.b.Different organizations have different organizational objectives and strategies.c.Legal requirements mandate different types of compensation systems depending on the organizations industry.d.Organizations depend heavily on consultants to design their compensation systems, and each consulting firm has its own system.

ANS:BPTS:1DIF:ChallengingREF:p. 360OBJ:1NAT:AACSB Reflective ThinkingLOC:StrategyTOP:Conceptual

3.All of the following are compensation objectives of the organization EXCEPTa.legal compliance with relevant laws and regulations.b.internal, external and individual equity for employees.c.the lowest total cost of compensation in the industry.d.performance enhancement for the organization.

ANS:CPTS:1DIF:ChallengingREF:p. 360OBJ:1NAT:AACSB Reflective ThinkingLOC:HRMTOP:Conceptual

4.The total rewards compensation approach has three main components. Which of the following is NOT one of these components?a.compensationb.benefitsc.performance and talent managementd.individual, team and organizational-level incentives

ANS:DPTS:1DIF:EasyREF:p. 360 | Figure 12-1OBJ:1NAT:AACSB Reflective ThinkingLOC:HRMTOP:Conceptual

5.In a total rewards compensation approach, it is critical to balancea.the need for the employer to generate profits with the needs of the employees to receive equitable pay.b.the ability of the employer to pay with the needs of the employees for tangible and intangible rewards.c.the strategic goals of the employer with the personal needs and goals of the employees.d.balance the interests and costs of employers with the needs and expectations of employees.

ANS:DPTS:1DIF:ChallengingREF:p. 360OBJ:1NAT:AACSB Reflective ThinkingLOC:HRMTOP:Conceptual

6.Which of the following would be an example of an intrinsic reward?a.a grant of stock optionsb.additional medical insurance coveragec.a membership in a country clubd.verbal praise for a job well done

ANS:DPTS:1DIF:EasyREF:p. 361OBJ:1NAT:AACSB AnalyticLOC:Motivation ConceptsTOP:Application

7.Medical insurance, paid by the employer, is classified as ____ compensation.a.indirectb.directc.intangibled.intrinsic

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8.Tom has just taken his first full time job with a salary of $38,000. He knows that he should plan his personal recurring expenses, such as rent and car payments, around this amount because it is hisa.total compensation.b.total reward package.c.base pay.d.living wage.

ANS:CPTS:1DIF:ModerateREF:p. 361OBJ:1NAT:AACSB AnalyticLOC:HRMTOP:Application

9.A compensation philosophy in which each employee who has gained another year of seniority should have an increase in pay is called the ____ philosophy.a.entitlementb.commitmentc.paternalisticd.the equity-based

ANS:APTS:1DIF:EasyREF:p. 361OBJ:1NAT:AACSB Reflective ThinkingLOC:HRMTOP:Definitional

10.____ are payments directly calculated on the amount of time worked.a.Salariesb.Wagesc.Incentivesd.Bonuses

ANS:BPTS:1DIF:EasyREF:p. 361OBJ:1NAT:AACSB Reflective ThinkingLOC:HRMTOP:Definitional

11.At Artistic Floral Creations, the non-managerial employees all receive the same pay increase every year. Usually this increase is about 5%, but some years it has been as high as 10% depending on changes in the cost-of-living. Artistic Floral Creations has a/an ____ philosophy of compensation.a.performanceb.entitlementc.quartile-basedd.total rewards

ANS:BPTS:1DIF:ModerateREF:p. 361-362OBJ:1NAT:AACSB AnalyticLOC:HRMTOP:Application

12.The two basic compensation philosophies, which should be seen as opposite ends of a continuum, are the ____ and the ____ orientations.a.competency, productivityb.exempt; non-exemptc.entitlement; performanced.equity, equality

ANS:CPTS:1DIF:ModerateREF:p. 361OBJ:1NAT:AACSB Reflective ThinkingLOC:HRMTOP:Conceptual

13.Amber is the manager of a popular clothing store. She regularly works over 40 hour a week. But when new styles are coming in requiring new displays, she may put in as many as 60 hours a week. Ambers paycheck is the same regardless of the number of hours she has worked. Amber is paid on a/ana.total compensation arrangement.b.incentive compensation program.c.wage system.d.salary basis.

ANS:DPTS:1DIF:ModerateREF:p. 361OBJ:1NAT:AACSB AnalyticLOC:HRMTOP:Application

14.Which type of compensation is linked directly to individual, team, or organizational performance?a.variable payb.direct payc.wagesd.salary

ANS:APTS:1DIF:EasyREF:p. 361OBJ:1NAT:AACSB Reflective ThinkingLOC:HRMTOP:Definitional

15.A/an ____ is an indirect reward given to an employee or group of employees for organizational membership.a.incentiveb.bonusc.benefitd.motivator

ANS:CPTS:1DIF:EasyREF:p. 361OBJ:1NAT:AACSB Reflective ThinkingLOC:HRMTOP:Definitional

16.In an organization with a performance-oriented philosophy,a.seniority plays little role in whether an employee receives a raise.b.all employees can at least count on an annual cost-of-living adjustment to their salaries.c.bonuses are based on what other companies in the industries are paying.d.marginal performers tend to be satisfied with their compensation.

ANS:APTS:1DIF:ChallengingREF:p. 362 | Figure 12-2OBJ:1NAT:AACSB Reflective ThinkingLOC:HRMTOP:Conceptual

17.Justin is an hourly employee of Furnace Brick, a company that manufactures a special high-heat-resistant brick for industrial kilns. Justin is unhappy with the new compensation system introduced by the companys new plant manager and HR director. This system has eliminated the practice of annual raises, the Christmas bonus, and raises based on seniority for a new system that ties every employees raise to how well Furnace Brick is performing in the market. Moreover, the plant manager has announced that twenty percent of the employees in the plant will receive no raise at all this year, regardless of the companys performance. Furnace Brick has moved from a/an ____ compensation philosophy, to a/an____ compensation philosophy.a.budget-based, pay-as-you-gob.paternalistic, competitivec.entitlement, performanced.meet-the-market, lag-the-market

ANS:CPTS:1DIF:ModerateREF:p. 362 | Figure 12-2OBJ:1NAT:AACSB AnalyticLOC:HRMTOP:Application

18.Jack and Jerry are twins. Both started working at competing firms in the same industry. Jack and Jerry were given exactly the same starting salary. They have been with their companies for ten years, and both have identical positions and identical performance ratings. Both Jack and Jerry are consistently average performers. Jack works at a company with an entitlement compensation philosophy. Jerry works at a company with a pay-for-performance compensation philosophy. The two companies are identical in revenue and profitability. They allocate the same budget amount for employee raises each year. All other factors remaining equal, which of the following statements is most likely to be true?a.Jerry will have a higher salary than Jack.b.Jack will have a higher salary than Jerry.c.Jerry and Jack will have identical salaries.d.Jerry and Jack will have identical levels of pay satisfaction.

ANS:BPTS:1DIF:ChallengingREF:p. 362OBJ:1NAT:AACSB AnalyticLOC:HRMTOP:Application

19.Gigantic Motor Vehicles, which manufactures the Behemoth, the main competitor to the Hummer, has experienced huge losses for the last three years due to collapsing sales of their gas-guzzling vehicles. GMVs stock has plummeted on Wall Street because it has not met projected profits for the 24th straight quarter. GMV has moved to a pure pay-for-performance system that is tied to achievement of organizational profit goals. Which of the statements below are most likely to be true?a.Only high performers at GMV can be certain that they will receive a pay increase.b.No GMV employee can expect he/she will receive a pay increase, regardless of his/her performance.c.All employees except those who are the worst performers can expect that they will receive a pay increase.d.GMV will be able to attract high performing employees from its competitors.


20.The CEO of BizMark Equipment wants to know what return the firm is getting on the money it is spending on its employees. As the director of HR, you know this is considered return on human capital. You will calculate this asa.Total Compensation and Benefits / FTEsb.Revenue - Operating Expense -Pay and Benefits = Adjusted Profit / Pay and Benefitsc.Revenue - Operating Expense - Pay and Benefits + Adjusted Profit / FTEsd.Total Pay and Benefits Expenditures / Operating Expense

ANS:BPTS:1DIF:ChallengingREF:p. 363 | Figure 12-3OBJ:1NAT:AACSB AnalyticLOC:HRMTOP:Application

21.Brian, the director of compensation, has been asked by the board of directors to present the employee cost factor at the next board meeting. Brian needs to do the following calculation:a.total compensation and benefits divided by FTEsb.total pay and benefits expendituresc.revenue minus operating expense minus pay and benefits equal adjusted profits divided by FTEsd.revenue minus operating expense minus pay and benefits equal adjusted profit divided by pay and benefits

ANS:APTS:1DIF:ChallengingREF:p. 363 | Figure 12-3OBJ:1NAT:AACSB AnalyticLOC:HRMTOP:Application

22.In order to show how the rate of compensation changes compares with the rate of changes in the organizations revenues overalla.compensation metrics should be calculated each year and compared with previous years metrics.b.compensation metrics should be calculated for regular employees (excluding compensation for part time employees) and compared with previous years metrics.c.the board of directors should have compensation metrics calculated on a rotating basis: Human value added one year, return on human capital invested the next year, and so forth. This provides the big picture strategically.d.total compensation is charted against total revenues, and any upward change in total compensation is analyzed.

ANS:APTS:1DIF:ChallengingREF:p. 363OBJ:2NAT:AACSB Reflective ThinkingLOC:HRMTOP:Conceptual

23.If employees are dissatisfied with their pay, they are likely to do or feel all the following EXCEPTa.quit.b.be dissatisfied with their jobs.c.lose self-esteem.d.change their job performance.


24.The HR unit is typically responsible fora.recommending pay rates and pay increases for employees.b.monitoring attendance and productivity for compensation purposes.c.attempting to match employee performance with rewards.d.administering the compensation system.

ANS:DPTS:1DIF:EasyREF:p. 364 | Figure 12-4OBJ:1NAT:AACSB Reflective ThinkingLOC:HRMTOP:Conceptual

25.Operating managers typicallya.evaluate employee performance for compensation purposes.b.develop and administer the compensation system.c.conduct wage surveys.d.develop wage and salary structures and policies.

ANS:APTS:1DIF:EasyREF:p. 364 | Figure 12-4OBJ:1NAT:AACSB Reflective ThinkingLOC:HRMTOP:Conceptual

26.As director of HR for Megatherium Products, you are looking for ways to make the compensation function more efficient. You are considering outsourcing some of the compensation functions to an outside vendor. The function you are most likely to outsource will bea.employee performance appraisal.b.development of wage and salary structures.c.payroll processing.d.job evaluation.

ANS:CPTS:1DIF:EasyREF:p. 364OBJ:1NAT:AACSB AnalyticLOC:HRMTOP:Application

27.In a division of compensation responsibilities, ____ typically ensure job evaluations and wage surveys are done.a.operating managersb.HR specialistsc.Department of Labor analystsd.outside consultants

ANS:BPTS:1DIF:EasyREF:p. 364 | Figure 12-4OBJ:1NAT:AACSB Reflective ThinkingLOC:HRMTOP:Conceptual

28.In an equity calculation, an employees base pay, variable pay, and benefits are the ____ he/she receives from a job.a.outcomesb.outputsc.inputsd.motivators

ANS:APTS:1DIF:EasyREF:p. 364OBJ:2NAT:AACSB Reflective ThinkingLOC:Motivation ConceptsTOP:Conceptual

29.The director of HR at Megatherium Industries knows that there are serious flaws in the companys compensation system. If employees freely discuss their salary levels, raises and bonuses, the director is concerned that there will be widespread dissatisfaction and employee questions that will place the HR department and top management in a bad light. Consequently, Megatherium has a strict pay secrecy policy, and employees who discuss their pay are disciplined. Which of the following statements is TRUE?a.Pay secrecy policies are very rare in the U.S.b.If Megatherium opens its pay policies, employee retention will improve.c.Closed pay systems, such as Megatheriums, are illegal unless they meet certain IRS requirements.d.It is possible that Megatheriums policy violates the National Labor Relations Act.

ANS:DPTS:1DIF:ChallengingREF:p. 365OBJ:2NAT:AACSB AnalyticLOC:Legal ResponsibilitiesTOP:Application

30.Simon is outraged that Missy was given a raise because she is related to the chairman of the board. Simons sense of ____ has been violated.a.compensatory equityb.distributive justicec.external equityd.procedural justice

ANS:DPTS:1DIF:ModerateREF:p. 365OBJ:2NAT:AACSB AnalyticLOC:Motivation ConceptsTOP:Application

31.In terms of procedural justice, the process of determining base pay, allocating pay increases, and measuring performance all must be seen by employees asa.fair.b.equal.c.logical.d.open.

ANS:APTS:1DIF:EasyREF:p. 365OBJ:2NAT:AACSB Reflective ThinkingLOC:Motivation ConceptsTOP:Definitional

32.Amanda is upset because she makes the same amount of money Carl does, although Amanda has 18 clients and Carl has only 11 clients. Amanda is making a judgment about a.extrinsic justice.b.intrinsic justice.c.internal equity.d.external equity.

ANS:CPTS:1DIF:ModerateREF:p. 365OBJ:2NAT:AACSB AnalyticLOC:Motivation ConceptsTOP:Application

33.Typical compensation appeals procedures require the employee to discuss the problem first witha.the organizational ombuds.b.the EEOC.c.the HR department.d.his/her supervisor.

ANS:DPTS:1DIF:EasyREF:p. 365OBJ:2NAT:AACSB Reflective ThinkingLOC:HRMTOP:Conceptual

34.What is a likely outcome when an organization's compensation is viewed by employees and outsiders as lacking external equity?a.lower than average turnoverb.employees discussing their pay with other employeesc.little effect on employee morale, because internal equity is most important to employeesd.difficulty recruiting qualified and high-demand employees

ANS:DPTS:1DIF:ModerateREF:p. 365OBJ:2NAT:AACSB Reflective ThinkingLOC:Motivation ConceptsTOP:Conceptual

35.Organizations that have specific policies about where they wish to position themselves in the labor market use a/an ____ strategy.a.industry b.quartile c.benchmarking d.labor market

ANS:BPTS:1DIF:EasyREF:p. 366OBJ:2NAT:AACSB Reflective ThinkingLOC:HRMTOP:Conceptual

36.Abundance Nurseries needs large numbers of unskilled employees every spring and summer to plant, maintain, and harvest the flower fields. Abundance is located in an area where there is a large supply of unskilled workers, and it has few problems recruiting workers as needed. It would be reasonable for Abundance Nurseries to position its pay for these workers in the ____ -quartile of the labor market. a.first b.secondc.thirdd.fourth


37.A third-quartile approach is a compensation strategya.in which the company pays higher wages than its competitors do.b.to pay below the average in the labor market.c.where one-third of the competitors in the labor market pay higher wages than what the company does.d.in which the company pays the median of what its competitors pay.

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38.A company that structures its compensation system so that half of its competitors pay their employees more than it does and half of its competitors pay less than it does is using a ____ the market strategy.a.lagb.meetc.leadd.follow

ANS:BPTS:1DIF:EasyREF:p. 366 | Figure 12-5OBJ:2NAT:AACSB Reflective ThinkingLOC:HRMTOP:Definitional

39.Larry has decided to go back to his hometown of Mellonburg and set up an architectural design business. Mellonburg is a depressed farming community of 351 residents. It is 20 miles from the nearest restaurant, 70 miles from the nearest Starbucks coffee shop, and the local schools are the worst in the state. The winters are severe, the summers are oppressive. Few single people live there, and the social and cultural life is negligible. In order to attract good quality architects, Larry will probably a.need to ignore the market compensation for architects and pay employees on an entitlement basis.b.be able to lag the market significantly in pay because of the low cost of living.c.have pay somewhat more than the market because of the unappealing location.d.have to pay as much as if he were hiring top quality architects in the most expensive cost-of-living area, such as New York City.

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40.Paul is a single-parent. He received consistently high performance appraisals from his employer, until the company was wiped out by Hurricane Katrina. Now, Paul is looking for a new job away from the Gulf Coast. As the recruiter at MilqueMaid Chocolate, you are very interested in Paul. But, your firm has a lag-the-market compensation strategy. You know that Paul has had an offer from a firm that has a meet-the-market strategy. Your best way to lure Paul to MilqueMaid is toa.point out MilqueMaids broad-based performance incentive programs.b.emphasize MilqueMaids entitlement compensation philosophy.c.discuss the method that MilqueMaid used to determine its quartile strategy.d.discuss MilqueMaids broadband pay structure.


41.An organization can benefit from a properly designed and implemented competency-based pay system througha.lower overall labor costs.b.reduction of overtime costs by the move to an all-salaried workforce.c.greater workforce skills and knowledge.d.improved participative decision making.


42.In a competency-based pay system employees are paid a.on the skills and knowledge they have, whether they use these or not.b.according to their job performance, measured either by quality or quantity.c.on the basis of their scores on annual competency tests.d.on whether they have added value to the organization in the last year.

ANS:APTS:1DIF:ModerateREF:p. 367OBJ:2NAT:AACSB Reflective ThinkingLOC:HRMTOP:Conceptual

43.Which of the following is the typical structure of team-based compensation?a.individual pay-for-performance based on team member inputb.skill-based pay plus a percentage of base payc.equal pay for each team member based on team performanced.team-based variable pay on top of individual base pay

ANS:DPTS:1DIF:ModerateREF:p. 367OBJ:2NAT:AACSB Reflective ThinkingLOC:HRMTOP:Conceptual

44.As HR director, you are discussing the implementation of a competency-based compensation system with the companys CEO. You point out that in order for the competency system to be effectivea.the company must place its base pay in the third quartile.b.the companys pay structure must be broad-banded.c.the company must invest heavily in employee training programs.d.the company must employ a pay-for-performance system.

ANS:CPTS:1DIF:ModerateREF:p. 367OBJ:2NAT:AACSB AnalyticLOC:HRMTOP:Application

45.As director of HR for a medium-sized firm, you are implementing your companys first overseas location. You will be transferring ten current employees to the companys foreign location for assignments lasting up to three years. You are considering all of the following factors in these employees future compensation EXCEPTa.travel allowances.b.tax equalization.c.cost-of-living adjustments.d.assignment abandonment penalties.

ANS:DPTS:1DIF:ModerateREF:p. 368 | Figure12-6OBJ:2NAT:AACSB AnalyticLOC:Environmental InfluenceTOP:Application

46.Steven, the vice president of manufacturing for a U.S. textile firm that is opening up a plant in India, must decide how to pay the hourly workers in the Indian plant. After much consultation with his peers at other companies he decides to follow the common practice ofa.paying wages negotiated with the local community leaders in India.b.paying local Indian wages.c.paying the U.S. wage in Indian rupees.d.paying higher than the local Indian wages, but lower than the equivalent U.S. wage.

ANS:BPTS:1DIF:ChallengingREF:p. 368-369OBJ:2NAT:AACSB AnalyticLOC:Environmental InfluenceTOP:Application

47.Compensation plans for internationally-assigned employees that attempt to be comprehensive in providing base pay, incentives, benefits and relocation expenses regardless of the country to which the employee is assigned are called ____ compensation plans.a.balance-sheetb.global marketc.tax equalizationd.supply and demand

ANS:BPTS:1DIF:ChallengingREF:p. 369OBJ:2NAT:AACSB Reflective ThinkingLOC:Environmental InfluenceTOP:Conceptual

48.If the Wage and Hour Division of the U.S. Labor Department investigates an employers files looking for violations of the FLSA, it will focus ona.time records.b.pay levels for all protected classesc.tax withholding records.d.calculation of compra-ratios.

ANS:APTS:1DIF:ModerateREF:p. 369OBJ:3NAT:AACSB Reflective ThinkingLOC:Legal ResponsibilitiesTOP:Conceptual

49.A compensation plan for expatriates that equalizes the cost differences between the international assignment and the same assignment in the home country of the individual or the corporation is the ____ approach.a.global market b.cost equalization c.total rewardsd.balance sheet

ANS:DPTS:1DIF:ModerateREF:p. 369OBJ:2NAT:AACSB Reflective ThinkingLOC:Environmental InfluenceTOP:Definitional

50.The aggregate employer costs for the typical expatriate employee, including all allowances, is about ____ the expatriates salary.a.10% ofb.halfc.doubled.three or four times

ANS:DPTS:1DIF:EasyREF:p. 369OBJ:2NAT:AACSB Reflective ThinkingLOC:Environmental InfluenceTOP:Conceptual

51.The major federal law that regulates compensation in the U.S. is thea.Fair Labor Standards Actb.Workers Compensation Actc.National Labor Relations Actd.Pay Equity Act

ANS:APTS:1DIF:EasyREF:p. 369OBJ:3NAT:AACSB Reflective ThinkingLOC:Legal ResponsibilitiesTOP:Definitional

52.Which of the following is a NOT major objective of the Fair Labor Standards Act?a.to give labor unions the right to organizeb.to limit the number of hours employees work each weekc.to establish a minimum waged.to outlaw all child labor

ANS:APTS:1DIF:ModerateREF:p. 370OBJ:3NAT:AACSB Reflective ThinkingLOC:Legal ResponsibilitiesTOP:Conceptual

53.Marcia is very upset. She applied for a waitstaff position at a local restaurant and she was told her base wage would be $4 an hour. Marcia knows this is much lower than minimum wage.a.Marcia should report the restaurant to the U.S. Department of Labor for violating the FLSA.b.The wage offered is consistent with the FLSA because Marcia would be in a tipped position.c.The wage offered is consistent with the FLSA because Marcia is only 16, and youths can be paid a special learners wage.d.Marcia should report the restaurant to the U.S. Department of Labor because this is not a living wage.

ANS:BPTS:1DIF:ModerateREF:p. 370OBJ:3NAT:AACSB AnalyticLOC:Legal ResponsibilitiesTOP:Application

54.____ is the amount needed for a family of four to be supported by one worker so that family income is above the officially-identified poverty level.a.An honest wageb.A fair wagec.The minimum waged.The living wage

ANS:DPTS:1DIF:EasyREF:p. 370OBJ:3NAT:AACSB Reflective ThinkingLOC:Ethical ResponsibilitiesTOP:Definitional

55.Chuck has applied to a residential roofing firm for a job as a roofer during school vacation because the pay is very good. Roofing is considered hazardous work. Under the FLSA Chuck cannot be hired unless he is at least ____ years old.a.14b.16c.18d.21

ANS:CPTS:1DIF:ModerateREF:p. 371OBJ:3NAT:AACSB AnalyticLOC:Legal ResponsibilitiesTOP:Application

56.Which of the following are NOT paid overtime under the Fair Labor Standards Act?a.salaried employeesb.nursesc.exempt employeesd.public sector employees

ANS:CPTS:1DIF:ModerateREF:p. 371OBJ:3NAT:AACSB Reflective ThinkingLOC:Legal ResponsibilitiesTOP:Definitional

57.Which of the following is a TRUE statement about the overtime provisions for non-exempt employees of the Fair Labor Standards Act?a.A manufacturing firm with a 4-day/10-hour schedule must pay overtime for the two hours above 8 each day.b.Overtime pay is set at one and one-half times the regular pay rate for all hours in excess of 40 per week.c.Compensatory time off must be paid at straight time for all hours over 40 in a week or 8 in a day.d.The work week is defined as beginning at 12:01 a.m. Monday and running until midnight Sunday.

ANS:BPTS:1DIF:ModerateREF:p. 371OBJ:3NAT:AACSB Reflective ThinkingLOC:Legal ResponsibilitiesTOP:Conceptual

58.Under the FLSA, which of the following would be classified as a non-exempt employee?a.an artist creating murals for a prestigious restaurantb.a sales representative who travels 3 days a weekc.the lead engineer on a construction projectd.an electrician on staff at a casino

ANS:DPTS:1DIF:ModerateREF:p. 371OBJ:3NAT:AACSB AnalyticLOC:Legal ResponsibilitiesTOP:Application

59.Terri is a salaried line worker at Chicken Delight Poultry Processors. Terri joking refers to herself as a chicken dis-assembler. She often works more than 40 hours a week, and is not paid overtime.a.Terris pay is consistent with the FLSA because she is a salaried worker.b.Terri should be paid overtime according to the FLSA because she is an exempt employee.c.Terris pay is not consistent with the FLSA because she is a non-exempt employee.d.Terri should be given compensatory time off but not overtime because she is a salaried worker.

ANS:CPTS:1DIF:ChallengingREF:p. 372OBJ:3NAT:AACSB AnalyticLOC:Legal ResponsibilitiesTOP:Application

60.Marie has been offered work as an employee trainer for AgriEnterprise. In this job, Marie will use the employers training materials, and she will train employees at AgriEnterprises three locations at the times that the company determines. Marie has been promised that the company will continue to use her services as long as her performance is satisfactory. Marie has agreed not to work as a trainer for any other company while she is working for AgriEnterprise. The company is paying Marie as an independent contractor. Which of the following statements is correct?a.Marie is a contractor.b.Marie is an employee.c.Marie is an independent contractor with only one client.d.Marie would properly be classified as a creative professional employee.

ANS:BPTS:1DIF:ChallengingREF:p. 371 | Figure 12-7OBJ:3NAT:AACSB AnalyticLOC:Legal ResponsibilitiesTOP:Application

61.Compensatory time-off can be given to non-exempt employees in the private sectora.if it is given to employees at the rate of one and one-half times the hours worked over a 40-hour week.b.if the comp time can be carried over for 60 days.c.if the employees hourly wage is at least one and one-half times the minimum wage.d.only if the employer is a federal government contractor with contracts over $50,000.

ANS:APTS:1DIF:ChallengingREF:p. 372OBJ:3NAT:AACSB Reflective ThinkingLOC:Legal ResponsibilitiesTOP:Conceptual

62.Clemmie is a non-exempt employee of a large law firm. During a particular trial 15 percent of her employers staff caught a particularly virulent flu, resulting in everyone else having to do their own work as well as the sick employees work. One particularly intense week, Clemmie worked 115 hours. Which of the following statements is true?a.Clemmie will be entitled to time and a half overtime for every hour over 8 that she worked each day.b.Clemmie will be entitled to 112.5 hours of time off which she can take within the calendar year.c.Clemmies overtime pay will be the same amount of pay as if she had worked 112.5 hours of straight time.d.Clemmie will have her choice of receiving either 75 hours of overtime pay or 75 hours of compensatory time off.

ANS:CPTS:1DIF:ChallengingREF:p. 372OBJ:3NAT:AACSB AnalyticLOC:Legal ResponsibilitiesTOP:Application

63.For an employer, the primary advantage of classifying a worker as an independent contractor is thata.independent contractors are typically more productive than regular employees.b.independent contractors can be fired at any time, unlike regular employees.c.the employer does not have to pay Social Security, workers compensation, or unemployment costs.d.employers do not have to verify that contractors have valid work permits.

ANS:CPTS:1DIF:ModerateREF:p. 373OBJ:3NAT:AACSB Reflective ThinkingLOC:Legal ResponsibilitiesTOP:Conceptual

64.Orville Brothers Construction, Inc., is making a bid for a federal government contract to build a bridge. In that bid, the construction company must allow for ____ wages for the employees.a.median national industryb.minimumc.living d.prevailing

ANS:DPTS:1DIF:ModerateREF:p. 373OBJ:3NAT:AACSB AnalyticLOC:Legal ResponsibilitiesTOP:Application

65.The Equal Pay Act prohibits wage differentials based ona.race.b.job classification.c.seniority.d.gender.

ANS:DPTS:1DIF:EasyREF:p. 373OBJ:3NAT:AACSB Reflective ThinkingLOC:Legal ResponsibilitiesTOP:Definitional

66.MetroUrban Bank has 27 branches, each with a branch manager. These branches range in size from mini-branches in grocery stores, to large branches with many business and investment clients. Mini-branches may have only three or four employees. Large branches may have as many as fifty employees. Of MetroUrbans branch managers, 15 are female and 12 are male. Female branch managers average pay is 75% of the male branch managers pay. As the director of compensation for MetroUrban Bank, what proof should you provide that shows your bank has not broken the Equal Pay Act?a.Women branch managers are not a protected class in this case because a majority of branch managers are female.b.The bank only began hiring women to be branch managers about 10 years ago. Consequently, the female branch managers have been with the bank a fewer number of years than the males. Typically, the branch managers of the larger branches are bank officers who have more years of experience with the bank.c.Business clients prefer to do business with male branch managers. Consequently, the larger branches are assigned male managers. Since these branch manager positions are much more challenging jobs, the bank can legally pay managers at these branches more than they pay managers of other branches.d.Although female and male branch managers have the same job descriptions, the male managers are assigned to branches in dangerous neighborhoods. Consequently, they are paid approximately 25 percent more in hazardous duty pay.

ANS:BPTS:1DIF:ChallengingREF:p. 374OBJ:3NAT:AACSB AnalyticLOC:Legal ResponsibilitiesTOP:Application

67.____ is the concept that the pay for all jobs requiring comparable knowledge, skills, and abilities should be similar even if actual duties and market rates differ significantly.a.Pay equityb.The living wagec.Unbiased compensationd.Equality in compensation

ANS:APTS:1DIF:EasyREF:p. 374OBJ:3NAT:AACSB Reflective ThinkingLOC:Motivation ConceptsTOP:Definitional

68.____ is a court action in which a portion of an employee's wages is set aside to pay a debt the employee owes to someone.a.Alimonyb.Creditor reimbursementc.Garnishmentd.Debt deduction

ANS:CPTS:1DIF:EasyREF:p. 374OBJ:3NAT:AACSB Reflective ThinkingLOC:Legal ResponsibilitiesTOP:Definitional

69.Aesthetic Decor, Inc., has made the philosophical decision to have absolute internal equity in its pay structure. To that end, every job in the organization has been rigorously evaluated and assigned points according to the worth of the job to the organization. The result is that many traditionally female-dominated jobs are paid more than what they are typically paid, and some traditionally male-dominated jobs are paid less than what they are typically paid. Which of the statements below is most likely to be TRUE?a.This system is based on the concept of pay equality.b.Although this system looks ethical on its face, it actually violates the Equal Pay Act because it will discriminate against male employees.c.Aesthetic Decor will have a hard time staffing any of the gender-stereotyped jobs in its organization.d.Aesthetic Decors compensation for traditional male jobs will not be externally competitive.


70.In a job evaluation, every job in an organization is examined and wages are set according toa.the educational qualifications needed for employment.b.the relative worth of the job to the organization.c.the value of employees holding the job.d.the job's level in the organizational hierarchy.

ANS:BPTS:1DIF:ModerateREF:p. 375OBJ:5NAT:AACSB Reflective ThinkingLOC:HRMTOP:Conceptual

71.When using the point method of job evaluation, a ____ factor is used to identify a job value that is commonly present throughout a group of jobs.a.compensableb.Haysc.valued.KSA

ANS:APTS:1DIF:ModerateREF:p. 375OBJ:5NAT:AACSB Reflective ThinkingLOC:HRMTOP:Definitional

72.Which of the following is a major drawback to the point method of job evaluation?a.It is too simplified to apply to complex jobs.b.It is too complex to implement in most organizations.c.It reinforces traditional organizational structures.d.It is available only through consulting firms, consequently this system is too expensive for many small employers.

ANS:CPTS:1DIF:ModerateREF:p. 375-376OBJ:5NAT:AACSB Reflective ThinkingLOC:HRMTOP:Conceptual

73.Of the following methods of job evaluation, the ____ method is the most subjective.a.classificationb.pointc.factor-comparisond.Hay system


74.Traditional job evaluation programs have been criticized as being gender-biased against women. Employers argue thata.female-dominated jobs are concentrated in lower-paying industries and smaller firms which have lower pay levels.b.job evaluation is based on internal equity, and so the resulting pay levels are by definition non-discriminatory.c.male-dominated jobs require physical strength and endurance of severe working conditions, which makes these jobs objectively more valuable to the organization.d.job evaluations reflect the pay rates the market economy sets for jobs.

ANS:DPTS:1DIF:ModerateREF:p. 376OBJ:5NAT:AACSB Reflective ThinkingLOC:Ethical ResponsibilitiesTOP:Conceptual

75.George, a compensation specialist for a large frozen foods company, has been asked to identify compensable factors specific to the job of forklift operator in the companys extensive warehouse. This warehouse is one of the largest refrigerated warehouses in the country. George would probably include all the following in his list EXCEPTa.working environment.b.safety hazards.c.use of specialized equipment.d.consequences of errors.

ANS:DPTS:1DIF:ModerateREF:p. 376 | Figure 12-9OBJ:5NAT:AACSB AnalyticLOC:HRMTOP:Application

76.Much of the accuracy of the market pricing method of job evaluation depends ona.the industry in which the organization operates.b.whether gender bias can be eliminated from the system.c.the quality of the job matches between the survey and the employers jobs.d.the depth and appropriateness of the compensable factors used.

ANS:CPTS:1DIF:ChallengingREF:p. 377OBJ:5NAT:AACSB Reflective ThinkingLOC:HRMTOP:Conceptual

77.The CEO of your company wants to move to a pure market pricing approach to compensating all the employees. She argues that it is foolish to pay more for any resource (including human resources) than they are worth on the open market. She argues that a pure market pricing approach would be the most efficient use of organizational funds. It is her idea to review the market price for each job in the company annually, and revise the employees pay up or down as indicated. She knows this is an unconventional idea, but she is convinced it would work. You make all the following arguments EXCEPTa.a pay structure based entirely on market pricing would be hard to defend in court against charges of discrimination.b.employees pay may fluctuate wildly from year to year.c.it will not be possible to find pay survey data for jobs that are unique to your company.d.for many jobs there is little pay survey data that is gathered in a methodologically-sound manner.


78.Simon is a compensation specialist for Coreopsis, Inc. He is collecting data on compensation rates for workers performing similar jobs at other organizations,. Simon is conducting aa.external equity study.b.pay survey.c.market review.d.competitive evaluation.

ANS:BPTS:1DIF:ModerateREF:p. 377OBJ:5NAT:AACSB AnalyticLOC:HRMTOP:Application

79.A ____ job is one that is found in many organizations and performed by several individuals who have similar duties and require similar KSAs.a.comparableb.red-circledc.genericd.benchmark

ANS:DPTS:1DIF:EasyREF:p. 377OBJ:5NAT:AACSB Reflective ThinkingLOC:HRMTOP:Definitional

80.Celeste, the vice president of compensation, is preparing a report for the executive committee recommending that the company move from using a traditional job evaluation system to a system using market pricing. Celeste will probably include all of the following arguments in her presentation EXCEPT market pricinga.keeps the companys pay levels in line with competitors pay levels.b.is less likely to be distorted by internal job evaluation.c.can reduce wide fluctuations in data on which pay rates are based.d.is viewed by employees as having high face validity.


81.Bruce, the director of compensation for a regional medical center, wishes to examine pay survey data for the various classifications of nurses in the organization. Bruce is aware of some concerns over price fixing of wages. He decides that he will use all of the following sources of information on nursing pay EXCEPTa.a pay survey of regional healthcare institutions that he will conduct himself during an upcoming conference of healthcare executives.b.nurses pay data from the National Bureau of Labor Statistics.c.a management consulting firm that specializes in pay surveys of healthcare workers.d.a pay survey conducted by the local HR association.

ANS:APTS:1DIF:ChallengingREF:p. 379OBJ:5NAT:AACSB AnalyticLOC:Legal ResponsibilitiesTOP:Application

82.As director of compensation and benefits, you are deciding whether you should purchase a new pay survey. You consider all the of following characteristics of pay surveys in your decision EXCEPTa.On what dates were the survey data gathered?b.Is the survey focused exclusively on companies of your size, the city in which you operate, and your industry?c.Are you familiar with the reputation of the company or organization that produced the survey?d.Does the survey include data from companies with which you compete for employees?

ANS:BPTS:1DIF:ChallengingREF:p. 378-379OBJ:5NAT:AACSB AnalyticLOC:HRMTOP:Application

83.In the next five years pay surveys will bea.undergoing a major legal challenge due to widespread accusations of price-fixing on wages.b.conducted largely electronically, using Web-based technology.c.conducted by linking company payroll databases to the surveying company.d.less popular because of the way market pricing distorts the internal equity of the compensation system.

ANS:BPTS:1DIF:ChallengingREF:p. 378OBJ:5NAT:AACSB TechnologyLOC:Information TechnologiesTOP:Conceptual

84.Angela, one of the companys best administrative employees, has made an appointment with you, the vice president of HR. Angela is extremely upset because she has done an Internet search on compensation levels for her particular job. She has found that her salary falls below both the industry median and industry average, even though she has been with the company for four years and has had outstanding performance reviews. Angela is a valuable employee and she would be difficult to replace. In addition, if Angelas morale declines, her attitude will strongly affect her co-workers. The compensation system at your company has a strong emphasis on internal equity, and it is a solid and legal system. Which of the following arguments would be LEAST effective for retaining Angela and maintaining her morale?a.Tell Angela that the company has done extensive job evaluation studies, and although she is a highly-valued employee, you cant justify paying her any more.b.Demonstrate that your company offers higher benefits than does the average company listed in the surveys she has found.c.Point out to Angela that your company is located in a small, rural town and that the data she has gathered from the Internet is based on companies that operate in all geographic locations.d.Explain that Angelas job does not include responsibility for budgeting that the benchmark job in the Internet survey includes.


85.A____ is a group of jobs having common organizational characteristics.a.market bandb.occupational categoryc.benchmark groupd.job family


86.Organizations use pay grades toa.group individual jobs having approximately the same job worth.b.guard against pay differentials based on sex or race.c.compare similar jobs across a variety of organizations.d.cluster jobs having common organizational characteristics.


87.The last step in establishing a pay structure is toa.compute pay ranges.b.review individual pay.c.compare current pay to pay ranges.d.establish pay grades.

ANS:BPTS:1DIF:ModerateREF:p. 380 | Figure 12-10OBJ:4NAT:AACSB Reflective ThinkingLOC:HRMTOP:Conceptual

88.The ____ shows the relationship between job value, as determined by job evaluation points, and pay survey rates.a.compra-ratiob.isobarc.quartiled.market line


89.The ____ derived from the pay survey is/are used to develop pay range minimums and maximums.a.midpoint of the survey averageb.minimum and maximum of the pay ranges in the survey.c.minimum and the maximum of the pay ranges in the survey with outliers eliminated.d.the lesser of the statistical average or the median pay level of the market bands.

ANS:APTS:1DIF:ChallengingREF:p. 381OBJ:4NAT:AACSB Reflective ThinkingLOC:HRMTOP:Conceptual

90.____ is the practice of using fewer pay grades with much wider ranges than in traditional compensation systems.a.Pay scalingb.Flexible gradesc.Broadbandingd.Grade reduction

ANS:CPTS:1DIF:ModerateREF:p. 381OBJ:4NAT:AACSB Reflective ThinkingLOC:HRMTOP:Definitional

91.Which of the following is a benefit of reducing the number of pay grades and broadening pay ranges?a.It reduces the organizations overall compensation expense.b.It encourages employees to take horizontal job moves.c.It enhances the distinctions between various jobs.d.It increases employee opportunities for upward mobility.

ANS:BPTS:1DIF:ModerateREF:p. 381OBJ:4NAT:AACSB Reflective ThinkingLOC:HRMTOP:Conceptual

92.Which of the following employees will be qualified for the LARGEST pay raise according to a typical pay adjustment matrix? An employee witha.a compra-ratio of 85 who does not meet performance expectations.b.a compra-ratio of 115 who exceeds performance expectations.c.a compra-ratio of 115 who meets performance expectations.d.a compra-ratio of 85 who exceeds performance expectations.

ANS:DPTS:1DIF:ChallengingREF:p. 382 | Figure 12-12OBJ:6NAT:AACSB AnalyticLOC:HRMTOP:Application

93.Which of the following approaches is recommended for bringing a red-circled employee's pay into line?a.Transfer the employee to a lower paying job.b.Keep pay levels and ranges confidential.c.Cut the employee's pay so it falls within the range.d.Freeze the employee's pay until the pay range is adjusted upward.

ANS:DPTS:1DIF:ModerateREF:p. 383OBJ:6NAT:AACSB Reflective ThinkingLOC:HRMTOP:Conceptual

94.Martha has been a professor at a major state university for 20 years. Martha loves her work and is satisfied with the university. Because of her high level of publications and her high quality of teaching, Martha has received the highest raises possible every year. Since this a public university, Martha has access to all the salary data for all her fellow professors. She has learned that the last three professors hired in her field at her level were paid one-quarter more than she is paid. This amounts to tens of thousands of dollars. Martha is shocked and gathers data on the job market in her field. She finds that her pay is much lower than the market rate. Martha has encountereda.the failure of step progression.b.gender-based pay inequity.c.compensation stagnation.d.pay compression.


95.George is a long-term exceptional performer. He has a compra-ratio of 120 and once again his performance has exceeded expectations. But, George only gets a raise of 3%, which is less than some of his co-workers who have less seniority and whose performance only meets expectations. George is incensed and waiting in your office. As director of HR, how will you explain this situation to George?a.You should discipline George because employees should not discuss their pay.b.You explain that Georges compra-ratio shows that he is at the top of his pay range and that he is already earning above the market midpoint set in his pay grade.c.That the pay adjustment matrix is out of date, and that you will classify him as a green-circled employee who should receive accelerated raises.d.You decide to give George a lump-sum increase equivalent to a 10% raise. This will recognize Georges exceptional performance without affecting his base pay.


96.A person's ____ is that employee's current pay level divided by the midpoint of the pay range.a.compra-ratiob.market ratioc.target ratiod.matrix ratio

ANS:APTS:1DIF:EasyREF:p. 384OBJ:6NAT:AACSB Reflective ThinkingLOC:HRMTOP:Conceptual

97.Which of the following is an advantage of a lump-sum increase (LSI) plan compared with traditional raises?a.LSI plans involve less administrative work for HR managers.b.Employees are more satisfied with LSIs.c.It heightens employees' awareness of what reward their performance merited.d.It increases the compounding effect of succeeding raises on the employees base pay.


98.The goal in giving pay increases to average performers should bea.to align their pay with the labor market.b.on retaining and rewarding them.c.on encouraging them to leave the organization.d.on achieving a compra-ratio of 100.


99.A true cost-of-living raisea.must be implemented both in times of inflation and deflation.b.must be tied to economic indicators.c.is the same thing as an automatic increase.d.is the same thing as a merit raise.

ANS:BPTS:1DIF:EasyREF:p. 385OBJ:1NAT:AACSB Reflective ThinkingLOC:HRMTOP:Conceptual

100.As a young employee who consistently meets (but does not exceed) performance expectations, which type of pay increase system would most likely be to your personal financial benefit considering that you expect to stay with the company another 10 years?a.broadbandingb.lump sum increasesc.across-the-board raisesd.second quartile approach


101.Cost-of-living adjustments are typically tied to changes in thea.consumer interest rate.b.prime interest rate.c.Dow Jones Industrial Average.d.Consumer Price Index.

ANS:DPTS:1DIF:EasyREF:p. 385OBJ:6NAT:AACSB Reflective ThinkingLOC:HRMTOP:Conceptual

102.Wimsey Enterprises has announced that it will give all employees a 5% merit increase this year. This increase should really be termed a/ana.cost-of-living adjustment.b.across-the-board increase.c.lump-sum increase.d.seniority increase.

ANS:BPTS:1DIF:EasyREF:p. 385OBJ:6NAT:AACSB AnalyticLOC:HRMTOP:Application

103.Of the following, which type of pay adjustment has the most ability to reward employee performance?a.cost-of-living adjustments.b.seniority increasesc.lump-sum increasesd.across-the-board increases

ANS:CPTS:1DIF:EasyREF:p. 386OBJ:6NAT:AACSB Reflective ThinkingLOC:HRMTOP:Conceptual

TRUE/FALSE

1.Although non-monetary rewards are valued by employees, they are not included in the concept of organizational compensation, which is limited to direct and indirect extrinsic rewards.

ANS:FPTS:1DIF:ChallengingREF:p. 361OBJ:1NAT:AACSB Reflective ThinkingLOC:HRMTOP:Conceptual

2.Some rewards, such as benefits, are given to employees just for being members of the organization, regardless of their level of performance on the job.

ANS:TPTS:1DIF:EasyREF:p. 361OBJ:1NAT:AACSB Reflective ThinkingLOC:HRMTOP:Conceptual

3.In the last decade the pressures of the U.S. economy have compelled most private-sector, for-profit organizations to change to a pay-for-performance compensation philosophy.

ANS:FPTS:1DIF:ChallengingREF:p. 362OBJ:2NAT:AACSB Reflective ThinkingLOC:HRMTOP:Conceptual

4.In a typical division of compensation responsibilities, the HR unit is responsible for evaluating employee performance for compensation purposes.

ANS:FPTS:1DIF:ModerateREF:p. 364OBJ:1NAT:AACSB Reflective ThinkingLOC:HRMTOP:Conceptual

5.Gillian, a meteorologist at a regional TV station, is angry that she received a large raise from her boss because she is cute as a button. Although her income has gone up considerably, Gillian is upset because of a failure of procedural justice.

ANS:TPTS:1DIF:ModerateREF:p. 365OBJ:2NAT:AACSB AnalyticLOC:Motivation ConceptsTOP:Application

6.An increasing number of organizations are keeping pay information secret, thus avoiding disputes and lawsuits about pay fairness.


7.Research of compensation databases shows that about one-third of the people who think they are underpaid are actually underpaid.

ANS:TPTS:1DIF:ModerateREF:p. 365OBJ:2NAT:AACSB Reflective ThinkingLOC:HRMTOP:Conceptual

8.Junior Birdman Childrens Clothing and Toy Company must attract and retain the most creative and talented childrens designers in the industry. It probably uses a third-quartile compensation strategy.

ANS:TPTS:1DIF:ModerateREF:p. 366-367OBJ:2NAT:AACSB AnalyticLOC:HRMTOP:Application

9.A competency-based pay system rewards employees who are versatile and have continued to develop their skills.


10.Compensation practices are simplified as organizations shift to using work teams, because everyone on a team is paid the same amount.


11.Tax equalization plans require an expatriate employee to pay only the U.S. taxes on his/her income, not the taxes of the foreign country in which he/she is stationed.


12.The Fair Labor Standards Act sets minimum wage standards and hours of work for all employees in the private sector.

ANS:FPTS:1DIF:ModerateREF:p. 369-370OBJ:3NAT:AACSB Reflective ThinkingLOC:Legal ResponsibilitiesTOP:Definitional

13.Managers and professionals are protected from working more than 60 hours a week by the FLSA, although they are not paid overtime.

ANS:FPTS:1DIF:ModerateREF:p. 371OBJ:3NAT:AACSB Reflective ThinkingLOC:Legal ResponsibilitiesTOP:Conceptual

14.A non-exempt employee must receive overtime pay under the FLSA.

ANS:TPTS:1DIF:EasyREF:p. 371OBJ:3NAT:AACSB Reflective ThinkingLOC:Legal ResponsibilitiesTOP:Definitional

15.Lucy is a nurse at Mountaineer Assisted Living. She works three 12-hour days in a row and receives 40 hours pay for 36 hours of work. Lucy also receives 12 hours of time and a half overtime pay per week for the four hours over 8 she works on each of her three workdays. This pay is mandated by the special healthcare occupation rules of the FLSA.

ANS:FPTS:1DIF:ChallengingREF:p. 372OBJ:3NAT:AACSB AnalyticLOC:Legal ResponsibilitiesTOP:Application

16.The work week, as defined by the FLSA for overtime purposes, does not have to be a calendar week.

ANS:TPTS:1DIF:ModerateREF:p. 372OBJ:3NAT:AACSB Reflective ThinkingLOC:Legal ResponsibilitiesTOP:Definitional

17.The Equal Pay Act of 1963 was passed to achieve pay equity between men and women.

ANS:FPTS:1DIF:ModerateREF:p. 373OBJ:3NAT:AACSB Reflective ThinkingLOC:Legal ResponsibilitiesTOP:Conceptual

18.The city in which YellowCraft Boat is located has passed a super-minimum wage that is fifty cents higher per hour than the federal minimum wage. YellowCraft Boat must pay its workers at least this super-minimum wage.

ANS:TPTS:1DIF:ModerateREF:p. 374OBJ:3NAT:AACSB AnalyticLOC:Legal ResponsibilitiesTOP:Application

19.Job evaluation provides a formal, systematic basis for determining the relative worth of jobs within an organization.


20.The ranking method typically ranks jobs in value to the organization based on three or four compensable factors.


21.Those interested in womens rights tend to be strong promoters of traditional job evaluation methods because these methods reflect rates of pay in the market economy, thus ensuring pay equity for women.

ANS:FPTS:1DIF:ChallengingREF:p. 376OBJ:4NAT:AACSB Reflective ThinkingLOC:Ethical ResponsibilitiesTOP:Conceptual

22.An advantage of market pricing is that employees view it as having high face validity.

ANS:TPTS:1DIF:ModerateREF:p. 377OBJ:5NAT:AACSB Reflective ThinkingLOC:HRMTOP:Conceptual

23.External benchmarking is a job evaluation method that uses market pay data to identify the value of jobs based on what other employers pay for similar jobs.

ANS:FPTS:1DIF:ModerateREF:p. 377OBJ:5NAT:AACSB Reflective ThinkingLOC:HRMTOP:Definitional

24.Employers often use outside consultants to conduct pay surveys to avoid charges that the employers are attempting "price fixing" on wages.

ANS:TPTS:1DIF:ModerateREF:p. 379OBJ:5NAT:AACSB Reflective ThinkingLOC:Legal ResponsibilitiesTOP:Conceptual

25.Typically, clerical and professional jobs are classified in the same job family because they are both white collar occupations.


26.Broadbanding is most appropriate in a traditional, hierarchical organization where the managers have careers based on steady advancement and promotions.


27.A green-circled employee is an incumbent who is paid above the range set for the job.

ANS:FPTS:1DIF:EasyREF:p. 382OBJ:4NAT:AACSB Reflective ThinkingLOC:HRMTOP:Definitional

28.Pay compression occurs when the range of pay differences among individuals with different levels of experience and performance in the organization becomes small.

ANS:TPTS:1DIF:EasyREF:p. 383OBJ:4NAT:AACSB Reflective ThinkingLOC:HRMTOP:Definitional

29.Josephine has been a high performing employee for Clockman Publications for many years. She is at the top of her pay grade and has a high compra-ratio. Clockman Publications uses the pay adjustment matrix method for calculating raises. Josephine should expect a very small pay increase, if any this year.

ANS:TPTS:1DIF:ChallengingREF:p. 385 | Figure 12-13OBJ:6NAT:AACSB AnalyticLOC:HRMTOP:Application

30.Collette received a $2,500 lump-sum increase for her performance last year. This increased her base pay by $2,500.

ANS:FPTS:1DIF:EasyREF:p. 385OBJ:6NAT:AACSB AnalyticLOC:HRMTOP:Application

ESSAY

1.What are the two major compensation philosophies and how to they affect employee attitudes and behavior?

ANS:There are two major compensation philosophies: entitlement and performance. Most organizations fall somewhere on a continuum between the two extremes. The entitlement philosophy assumes that employees are entitled to (that is, they deserve) annual increases in pay regardless of their individual performance. Automatic increases, cost-of-living increases, and many mis-called merit systems fall under the entitlement philosophy. Employees expect their raises and bonuses in this system, seniority is rewarded, and performance is not emphasized. The pay-for-performance philosophy requires that compensation changes reflect individual performance differences. Employees who perform well receive larger raises than those performing satisfactorily (that is, at average levels). Poorly performing employees may not receive any raise at all. Bonuses and incentives are based on individual, group, and/or organizational performance. This system focuses employee attention on performance. In addition, individual incentive plans and team/group reward systems may increase organizational performance, reduce employee turnover and increase employee commitment and retention.

PTS:1DIF:ModerateREF:p. 361-362OBJ:1NAT:AACSB Reflective ThinkingLOC:HRMTOP:Conceptual

2.What is meant by equity? Is equity an important consideration in compensation?

ANS:Equity is the perceived fairness of the relation between a person's inputs and outcomes. Inputs are what a person brings to the job, that is, their effort and performance. Outcomes are what the person receives from the organization, their rewards A sense of inequity occurs when there is a perceived imbalance between inputs and outcomes. Comparisons are made both within the organization and externally. If employees view their pay as unfair, there are negative effects on their performance, their view of their jobs, and their view of their employers. If employees feel the organization pays too little in relation to other organizations (external inequity), the organization will not be able to attract and keep high performing employees. If the employees feel the organization is unfair in how it decides and distributes pay (internal equity, procedural justice, distributive justice), the employees will have negative attitudes.

PTS:1DIF:ModerateREF:p. 364-365OBJ:2NAT:AACSB Reflective ThinkingLOC:Motivation ConceptsTOP:Conceptual

3.Would you recommend that an employer require that all salary information be kept confidential? Why or why not?

ANS:Organizations sometimes choose to keep pay information secret in "closed" systems. This information includes how much people make, what raises have been received, and what pay grades and ranges exist in the organization. Several court rulings have ruled that companies who prohibit employees from even discussing their pay with one another violate the National Labor Relations Act. A growing number of organizations are opening up their pay systems to allow employees to make more accurate equity comparisons. Having more open pay system has positive effects on employee retention and organizational effectiveness.

PTS:1DIF:ModerateREF:p. 365OBJ:2NAT:AACSB Reflective ThinkingLOC:HRMTOP:Conceptual

4.What are exempt and non-exempt jobs? How are exempt and non-exempt jobs identified in the organization? What are independent contractors and why is it important for the organization to identify who is a contractor and who is an employee?

ANS:The FLSA requires that some employees be paid time-and-one-half overtime for any hours worked over 40 in a week. The jobs that the law applies to are called non-exempt. The jobs that the FLSA does not apply to are called exempt, and they are not entitled to overtime. There are five categories of exempt jobs: executive, administrative, professional, computer employees, and outside sales staff. Independent contractors do not have to be paid overtime, nor does the employer have to incur unemployment, workers compensation or Social Security expenses for contractors. The IRS has twenty factors that it considers when classifying workers as independent contractors or employees. Mainly this involves whether the worker has to comply with instructions and limitations set by the employer or whether the worker operates at his/her own discretion.

PTS:1DIF:ModerateREF:p. 371-372OBJ:3NAT:AACSB Reflective ThinkingLOC:Legal ResponsibilitiesTOP:Conceptual

5.What are the advantages and disadvantages of using market pricing to set compensation in organizations?

ANS:Market pricing uses market pay data to identify the relative value of jobs in an organization based on what other employers pay for similar jobs. Data is gathered through pay surveys on jobs that are good matches with the organizations jobs. The main advantage of market pricing is that it closely ties organizational pay levels with what is actually being paid by other organizations competing for employees. This prevents compensation levels from being distorted by internal job evaluation. Also, market pricing is easy to explain to employees, and employees tend to see this method as objective and having face validity. The main disadvantage of market pricing is that pay survey data is limited for many jobs and may not be gathered in methodologically sound ways. Also, it is sometimes difficult to find good matches between jobs in the pay survey and jobs within the organization. Finally, tying pay levels to the market data may lead to wide fluctuations in pay.

PTS:1DIF:ModerateREF:p. 377OBJ:5NAT:AACSB Reflective ThinkingLOC:HRMTOP:Conceptual

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