91. Which of the following is a benefit of reducing the number of pay grades and broadening pay ranges?
a. It reduces the organization’s 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.
92. Which of the following employees will be qualified for the LARGEST pay raise according to a typical pay adjustment matrix? An employee with
a. 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.
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.
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 encountered
a. 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 George’s 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 George’s 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.
b. market ratio
c. target ratio
d. matrix ratio
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 employee’s base pay.
98. The goal in giving pay increases to average performers should be
a. 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 raise
a. 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.
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?
b. lump sum increases
c. across-the-board raises
d. second quartile approach
101. Cost-of-living adjustments are typically tied to changes in the
a. consumer interest rate.
b. prime interest rate.
c. Dow Jones Industrial Average.
d. Consumer Price Index.
102. Wimsey Enterprises has announced that it will give all employees a 5% merit increase this year. This increase should really be termed a/an
a. cost-of-living adjustment.
b. across-the-board increase.
c. lump-sum increase.
d. seniority increase.
103. Of the following, which type of pay adjustment has the most ability to reward employee performance?
a. cost-of-living adjustments.
b. seniority increases
c. lump-sum increases
d. across-the-board increases
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.
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.
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.
4. In a typical division of compensation responsibilities, the HR unit is responsible for evaluating employee performance for compensation purposes.
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.
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.
8. Junior Birdman Children’s Clothing and Toy Company must attract and retain the most creative and talented children’s designers in the industry. It probably uses a third-quartile compensation strategy.
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.
13. Managers and professionals are protected from working more than 60 hours a week by the FLSA, although they are not paid overtime.
14. A non-exempt employee must receive overtime pay under the FLSA.
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.
16. The work week, as defined by the FLSA for overtime purposes, does not have to be a calendar week.
17. The Equal Pay Act of 1963 was passed to achieve pay equity between men and women.
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.
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 women’s 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.
22. An advantage of market pricing is that employees view it as having high face validity.
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.
24. Employers often use outside consultants to conduct pay surveys to avoid charges that the employers are attempting "price fixing" on wages.
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.
28. Pay compression occurs when the range of pay differences among individuals with different levels of experience and performance in the organization becomes small.
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.
30. Collette received a $2,500 lump-sum increase for her performance last year. This increased her base pay by $2,500.
1. What are the two major compensation philosophies and how to they affect employee attitudes and behavior?
2. What is meant by equity? Is equity an important consideration in compensation?
3. Would you recommend that an employer require that all salary information be kept confidential? Why or why not?
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?
5. What are the advantages and disadvantages of using market pricing to set compensation in organizations?