HR ch:9

Strategic compensation is the term used for all the processes used to determine the market rates to pay employees.

If rates of pay are high, which creates a large applicant pool, then organizations may choose to raise their selection standards. a. True b. False

Raising selection standards and hiring better-qualified employees can reduce training costs.

A Bloomberg National Poll showed that most Americans believe that large bonuses for Wall Street companies that took taxpayer bailouts should be prohibited

Rewarding an employee's past performance is not a goal of a strategic compensation policy. a. True b. False

Among the goals of a strategic compensation policy are rewarding past performance, attracting new employees, and reducing turnover. a. True b. False

A formal statement of compensation policy would typically include the rate of pay within the organization and whether it is to be above, below, or at the prevailing market rate.

Pay-for-performance programs have little, if any, effect on employee productivity. a. True b. False

While most managers agree that pay should be linked to performance, employees do not. a. True b. False

Pay equity is achieved when employees' compensation is equal to the value of the work they perform. a. True b. False

Expectancy theory predicts that people expect to be paid as much or more than individuals in a similar job class. a. True b. False

The expectancy theory of motivation predicts that one's level of motivation depends on the attractiveness of the rewards sought by employees and the probability of obtaining those rewards. a. True b. False

The compensation scorecard creates a comparative tool within the organization that can reinforce desired outcomes that are unique to the company's strategy. a. True b. False

. Managers in companies with compensation scorecards often struggle to know if the promotions, raises, bonuses, and pay adjustments they make are in line with the rest of the organization and its strategy. a. True b. False

Pay secrecy is still prevalent in organizations despite its negative effect on motivation and employee trust. a. True b. False

Employees who are compensated on an hourly basis are referred to as salary earners. a. True b. False

Nonexempt employees are not covered by overtime requirements under the Fair Labor Standards Act. a. True b. False

Nonexempt employees are covered by the Fair Labor Standards Act and must be paid at the rate of a rate of one and a half times their regular pay rate for time worked in excess of forty hours in their workweek. a. True b. False

Exempt employees are not covered by the overtime provisions under the Fair Labor Standards Act. a. True b. False

Under the Fair Labor Standards Act, most of hourly workers involved in interstate commerce are considered nonexempt. a. True b. False

. Internal factors that influence wage rates include the worth of a job and the employer's ability to pay. a. True b. False

. The worth of a job is determined formally through the wage and salary survey. a. True b. False

The worth of a job, as it is determined by its comparative worth with jobs in other firms, is an external factor in the wage mix. a. True b. False

. American President Obama enacted a five-year freeze on federal salaries to help the government achieve its objectives of reducing the deficit. a. True b. False

A critical concern for a successful pay-for-performance system is the perceived fairness of the pay decision. a. True b. False

Pay levels are limited in part by profitability of the firm and productivity of employees. a. True b. False

The consumer price index tracks the change in price over time of a "market basket" of goods and services. a. True b. False

The consumer price index is available in separate indexes by size of city and region of the country. a. True b. False

Real wages represent the difference between wage increases and cost-of-living increases. a. True b. False

Wages of unionized employees are generally higher than those of nonunion employees. a. True b. False

. Job evaluation is a non-systematic, qualitative process of determining the relative worth of jobs in order to establish a comparison with the prevailing market and regional value of a job within a job family. a. True b. False

The job ranking system ranks jobs on the basis of relative worth and can be done by a single person familiar with all jobs. a. True b. False

. Job ranking is a simple method that provides a precise measure of each job's worth. a. True b. False

The job classification system is a quantitative job evaluation procedure that determines a job's relative value by calculating the total points assigned to it. a. True b. False

The job classification system is used commonly by smaller employers. a. True b. False

. The point system of job evaluation permits jobs to be evaluated quantitatively based on compensable factors. a. True b. False

Compensable factors include skills, efforts, responsibilities, and working conditions. a. True b. False

Point manuals contain job descriptions and the number of points assigned to each job type. a. True b. False

A point manual can be used to determine the external equity of a job. a. True b. False

The Hay profile method is useful for evaluating jobs of all types and levels. a. True b. False

The three factors that constitute the evaluation in the Hay profile method are knowledge, mental activity, and accountability. a. True b. False

Employers refer to the area from which they obtain certain types of workers as the labor market. a. True b. False

Equity theory is also referred to as distributive fairness. a. True b. False

The National Compensation Survey published by the Bureau of Labor Statistics can provide local, regional, and national compensations statistics

. An advantage of published wage surveys is compatibility with the organization's jobs. a. True b. False

For employees, pay equity is achieved when the compensation received is equal to the value of the work performed. a. True b. False

The wage curve represents the wages paid to jobs after adjustment for cost-of-living. a. True b. False

. Managers group similar jobs into a pay grade in order to help with the setting of wages for all jobs. a. True b. False

. Employees are likely to accept a promotion if succeeding rate ranges are larger in size. a. True b. False

. Steps within a rate range allow pay increases based on merit or seniority. a. True b. False

. Red circle rates are above the maximum for the pay range and are often frozen until the range shifts upward through market wage adjustments

When employees are paid according to the skills and knowledge they have rather than the specific jobs they perform, they are paid according to competence-based compensation.

53. One of the major criticisms of job-based compensation systems is that they often fail to reward employees for their skills or the knowledge they possess.

54. A major benefit of job-based compensation systems is that they encourage employees to learn new skills and capabilities.

An advantage of competence-based pay from the employee's perspective is that there is no limit to what they can earn by learning new skills.

A major criticism of competence-based pay systems is that after achieving the top wage, employees may be reluctant to continue their educational training.

. Broadbanding refers to collapsing of many traditional salary grades into a few wide salary bands. a. True b. False

Pay secrecy seems to be an accepted practice in many organizations. a. True b. False

Companies are more heavily scrutinized than they have been historically by shareholders, government, and the public for how much they pay their people. a. True

60. Strategic compensation is the compensation of employees in ways that enhance motivation and growth while concurrently aligning their efforts with the goals of the organization.

Because management positions are more difficult to evaluate and involve certain demands not found in jobs at the lower levels, some organizations do not attempt to include them in their job evaluation programs for hourly employees.

. Under the Fair Labor Standards Act (FLSA), an employer must pay an employee for whatever work the employer "suffers or permits" the employee to perform, even if the work is done away from the workplace and even if it is not specifically expected or requested.

63. Indirect compensation includes healthcare benefits and commissions.

64. Seniority, merit, and individual incentive plans are factors affected under the Equal Pay Act.

65. Wages paid above the range maximum are called blue square rates.

66. Competence-based pay systems represent a fundamental change in the attitude of management regarding how work should be organized and how employees should be paid for their work efforts.

A compensation scorecard can cloud the transparency of how people are rewarded and makes managers responsible for how they spend company money.

Which of the following is an example of a nonfinancial compensation? a. Bonuses b. Commissions c. Health insurance d. Employee recognition programs

_____ encompasses employee wages and salaries, incentives, bonuses, and commissions. a. Nonfinancial compensation b. Indirect compensation c. Direct compensation d. Component compensation

_____ includes employee recognition programs, rewarding jobs, organizational support, work environment, and flexible work hours to accommodate personal needs. a. Financial compensation b. Nonfinancial compensation c. Direct compensation d. Indirect compensation

A Bloomberg National Poll showed that more than _____ of Americans thought big bonuses should be banned for Wall Street companies that took taxpayer bailouts. a. 90 percent b. 80 percent c. 85 percent d. 70 percent

Pay-for-performance programs: a. tie rewards to firm profitability. b. are easy to implement and measure. c. tie rewards to employee effort. d. result in negligible increases in output.

The term pay-for-performance can encompass all of the following EXCEPT: a. merit pay. b. base salary. c. cash bonuses. d. gainsharing plans.

Which of the following compensation options would not qualify under the term pay-for-performance? a. Seniority-based pay b. Group incentive c. Pay banding d. Gainsharing plans

Which of the following is NOT a common goal of a strategic compensation policy? a. To reward employees' past performance b. To mesh employees' past performance with organizational goals c. To remain competitive in the labor market d. To attract new employees

The fact that people make comparisons to others is central to: a. expectancy theory. b. the need for pay secrecy. c. pay-for-performance programs. d. equity theory.

. When the organization pays wages that are relatively equal to that of other employers for similar work, it is the basis of: a. comparable worth. b. external equity. c. compensable factors. d. equal pay.

The concept that employees should exert greater work effort if they have reason to expect it will result in a valued reward forms the basis of: a. expectancy theory. b. equity theory. c. instrumentality. d. internal equity.

. Instrumentality refers to: a. wage rates of acceptable level. b. development of both internal and external pay equity. c. wage rates above the pay range maximum. d. rewards that are valued and motivate employees.

There is reason to believe that pay secrecy can do all of the following EXCEPT: a. generate distrust in the compensation system. b. reduce employee motivation. c. inhibit organizational effectiveness. d. generate feelings of commitment.

Employees whose compensation is calculated on the basis of weekly, biweekly, or monthly periods are classified as: a. salaried employees. b. hourly employees. c. management employees. d. white-collar employees.

In ____, employees are paid according to the number of units they produce. a. hourly work b. piecework c. commission d. production work

. Employees covered by the overtime provisions of the Fair Labor Standards Act are labeled: a. protected workers. b. nonexempt employees. c. salaried workers. d. exempt employees.

Under the Fair Labor Standards Act, exempt employees: a. are required to be paid at the rate of one and a half times their regular pay rate for hours worked in excess of 40 hours in a week. b. must be paid at the rate of one and a half times their regular hourly wage for time worked in excess of eight hours in a day. c. are those employees not covered by the overtime provisions of the Act. d. include most hourly personnel employed in interstate commerce.

. The exempt or nonexempt status of employees is determined by: a. the National Labor Relations Board. b. the Secretary of Labor. c. the Office of Programs and Budgets. d. the U.S. Department of Labor.

Which of the following is an internal factor that can influence the rates at which employees are paid? a. Labor market conditions b. Collective bargaining c. The employer's ability to pay d. Cost of living

Which of the following is an external factor that can influence the rates at which employees are paid? a. The worth of the job b. The employees' relative worth c. The employer's ability to pay d. Cost of living

. Equity theory is also known as: a. procedural justice. b. distributive fairness. c. administrative justice. d. moral justice.

An employee's relative worth can be determined by: a. job analysis. b. labor market conditions. c. wage-rate surveys. d. an effective performance appraisal system.

Pay levels are limited in part by: a. the organization's profits and the productivity of employees. b. collective bargaining limitations. c. strategic compensation planning. d. the mobility of employee skills.

The measure of the average change in prices over time in a fixed "market basket" of goods and services is known as: a. cost-of-living allowance. b. cost-of-living adjustment. c. the consumer price index. d. the inflation index.

Clauses in labor agreements that provide for quarterly cost-of-living adjustments in wages, basing the adjustments on changes in the consumer price index are known as: a. maintenance clauses. b. escalator clauses. c. roll-up clauses. d. guarantee clauses.

The most common cost-of-living adjustments are ____ per hour for each .3-point or .4-point change in the consumer price index (CPI). a. 1 cent b. 2 cents c. 3 cents d. 4 cents

For real wages to increase, which of the following must be true? a. An employee's wage increase must be greater than the increase in the consumer price index (CPI). b. An employee must receive a lump-sum wage increase equal to the increase in the consumer price index (CPI). c. An employee's wage must simply increase with out the influence of consumer price index (CPI). d. The consumer price index (CPI) must increase at least as much as the employee's wage.

Wages gained through collective bargaining extend: a. to hourly employees only. b. to both hourly and management employees. c. beyond the segment of the labor force that is unionized. d. to both exempt and nonexempt employees.

. Job evaluation helps to establish: a. job classifications. b. the organization's ability to pay. c. internal equity. d. labor market conditions that affect pay.

. With respect to pay equity, which of the following is NOT considered an input? a. Salary b. Ability c. Skill d. Experience

Which is the simplest and oldest method of job evaluation? a. Job worth system b. Job ranking system c. Job grade system d. Point system

Which system of job evaluation is being used when cards that list the duties and responsibilities of the job are arranged by raters in order of the importance of the job? a. Point method b. Job ranking c. Job grade system d. Factor comparison method

Which of the following is NOT a form of pay equity? a. Internal equity b. External equity c. Collective equity d. Individual equity

Which system of job evaluation is being used when jobs are classified according to a series of predetermined wage grades? a. Hay profile method b. Job ranking system c. Factor comparison method d. Job classification system

. Elements of the compensation package are said to have _____ when an employee's high performance leads to monetary rewards that are valued. a. validity b. consistency c. instrumentality d. reliability

. The federal civil service job classification system uses which type of job evaluation system? a. Point method b. Job ranking c. Factor comparison method d. Job classification system

. A quantitative job evaluation procedure that determines a job's relative value on the basis of quantitative assessments of specific job elements is known as: a. the point system. b. the job ranking system. c. the factor comparison method. d. the job grade system.

The elements of a job such as skills, efforts, responsibilities, and working conditions are referred to as: a. job specifications. b. job classification factors. c. compensable factors. d. factor comparisons.

Using the point method of job evaluation requires that managers: a. employ either a standardized program or customize a point method to fit their particular jobs. b. compare the job descriptions against the various factor-degree descriptions. c. link point totals to the wage curve. d. rank jobs by compensable factors.

. The relative worth of a job evaluated using the point manual is determined by: a. benchmark jobs contained in the point manual. b. the wage mix. c. the number of steps within the pay grade. d. the total points that have been assigned to that job.

. The job evaluation system that seeks to measure a job's worth through its value to the organization is known as the: a. point method. b. job ranking system. c. work valuation system. d. Hay profile method.

Which job evaluation system serves to direct compensation dollars to the type of work pivotal to organizational goals? a. Point method b. Job ranking c. Work valuation d. Hay profile method

Because of its focus, the Hay profile method is most useful for evaluating which type of jobs? a. Blue-collar jobs b. Entry level jobs c. Executive and managerial positions d. Jobs within a specific wage range

The Hay profile method uses which three factors for evaluating jobs? a. Knowledge, skill, and responsibility b. Responsibility, mental ability, and skill c. Responsibility, knowledge, and mental ability d. Knowledge, accountability, and mental ability

. The area from which employers obtain certain types of workers is known as the: a. labor market. b. region. c. recruiting area. d. supply region.

In conducting a wage and salary survey for office personnel, the relevant labor market to be surveyed is most likely: a. regional. b. local. c. national. d. international

. A U.S. survey found that _____ of employees say they work in a place where discussions of pay are "formally prohibited and/or employees caught discussing wages could be punished." a. 19 percent b. 38 percent c. 57 percent d. 76 percent

. The relationship between the relative worth of jobs and their wage rates can be represented by means of a: a. regression line. b. wage survey. c. salary progression chart. d. wage curve.

Employers wishing to encourage employees to accept a promotion to a job in a higher grade would: a. increase the size of successive rate ranges. b. increase the point spread of pay grades. c. decrease the size of successive rate ranges. d. decrease the point spread of pay grades.

Jobs that are grouped into the same pay grade should: a. all receive the same wage rate in order to achieve equality. b. be paid within a range that does not overlap with bordering job grades so that distinctions between grades are maintained. c. be paid within a range that may overlap with adjoining grades, so that an employee with experience can be paid as much as or more than a newer employee in a higher grade. d. be paid at different wage rates because the worth of these jobs to the organization may differ.

Red circle rates above the maximum for the range can result because: a. promotional opportunities are plentiful. b. employees have high seniority. c. employees are demoted. d. grades are added to the range.

The predominant approach to employee compensation is: a. pay-for-performance. b. competence-based pay. c. job-based pay. d. individual contract.

Compensation programs that compensate employees for the knowledge they possess are known as: a. competence-based pay plans. b. performance-based pay plans. c. merit-based pay plans. d. seniority-based pay plans.

_____ is a pay system in which employees are paid according to the number of units they produce. a. Piecework b. Hourly work c. Non-exempt work d. Exempt work

One of the basis for compensation centers on whether employees are classified as nonexempt or exempt under the _____. a. Equal Pay Act b. Fair Labor Standards Act c. Taft-Hartley Act d. Employment Classification Act

Which of the following is NOT an internal factor affecting the pay mix? a. Worth of job b. Cost of living c. Employer's ability to pay d. Employee's relative worth

The biggest challenge with competence-based pay is: a. encouraging employees to take advantage of it. b. reduction in organizational flexibility. c. loss of productivity. d. developing appropriate measures of skills and competencies.

Collapsing many salary grades into a few wide salary bands is known as: a. red circling. b. broadbanding. c. pay ranging. d. factor comparison.

____ helps eliminate the obsession with grades and, instead, encourages employees to move to jobs they can develop in their careers and add value to the organization. a. Red circling b. Broadbanding c. Pay ranging d. Factor comparison

In a 2010 survey of more than 1,000 entrepreneurs, _____ of all small businesses in the United States had to make pay cuts. a. 10 percent b. 35 percent c. 50 percent d. 65 percent

The federal wage law that is criticized for a rule that allows minimum pay to be based on the prevailing rate, which often includes higher union wages is: a. Equal Pay Act. b. Davis-Bacon Act. c. Fair Labor Standards Act. d. Walsh-Healy Act.

The federal wage law that may require government contractors to pay overtime for work more than eight hours a day is: a. Equal Pay Act. b. Davis-Bacon Act. c. Fair Labor Standards Act. d. Walsh-Healy Act.

The major provisions of which act are concerned with minimum wage rates and overtime payments, child labor, and equal rights? a. Equal Pay Act b. Davis-Bacon Act c. Fair Labor Standards Act d. Walsh-Healy Act

Which of the following is NOT a component of the Consumer Price Index? a. Clothing b. Automobiles c. Charges for medical services d. Transportation fares

The Fair Labor Standards Act prohibits the employment of those between the ages of _____ in hazardous occupations such as mining, logging, and meatpacking. a. 14 and 21 b. 16 and 18 c. 16 and 21 d. 18 and 21

The simplest and oldest system of job evaluation is the _____, which arrays jobs on the basis of their relative worth. a. job valuation system b. point system c. job classification system d. job ranking system

. A _____ is a system of job evaluation in which jobs are classified and grouped according to a series of predetermined wage grades. a. point system b. job valuation system c. job classification system d. job ranking system

The Equal Pay Act prohibits wage discrimination based on: a. seniority. b. gender. c. merit. d. individual incentive.

. A job evaluation system that seeks to measure a job's worth through its value to the organization is known as: a. job ranking. b. job classification. c. work valuation. d. the point system.

The _____ collects and displays the results for all the measures that a company uses to monitor and compare compensation among internal departments or units. a. red circle rate b. competence-based pay system c. compensation scorecard d. point system

According the compensation scorecard, functions with a compa ratio below ______ are considered to be paying their employees below the company norm. a. 25 percent b. 50 percent c. 75 percent d. 100 percent

The Fair Labor Standards Act permits employers to pay a "training wage" of _____ per hour for employees younger than the age of twenty during their first ninety days of employment, provided their employment does not displace other workers. a. $5.26 b. $5.76 c. $6.16 d. $6.56

. Employers may _____ their workforce to help them identify the most valuable contributors. a. segment b. reorganize c. educate d. overhaul

_____ may create problems for managers who wish to maintain pay secrecy among employees. a. NASDAQ information b. Internet salary survey data c. FLSA requirements d. Davis-Bacon standards

Most pay increases may lack motivational value to employees when _____. a. legality is questionable b. they are too large c. salary budgets are low d. benefits are insignificant

When cost-of-living pay increases are given routinely, employees may view them as _____. a. insults b. entitlements c. highly motivating d. long overdue