Chapter 10 – Compensation: Base Pay and Fringe Benefits
Chapter 10 Compensation: Base Pay and Fringe Benefits
True/False Questions
[QUESTION]
1. The term pay refers to all forms of financial returns and tangible benefits that employees
receive as part of an employment relationship.
2. According to equity theory, pay satisfaction is a function of the comparisons of an
individual’s input–outcome ratio with his or her perceptions about the input–outcome ratios of
referent others.
3. Managers should execute a compensation strategy that is in line with the organizations
long-term strategy and as a consequence there is no need to consider the firms ability to pay.
4. Cash compensation is the direct pay provided by employers for work performed.
5. Uniform allowances and merit increases are examples of fringe compensation.
6. Know-how, problem solving, and accountability are the three major factors within the Hay
plan. The impact of the job on end results is one of the sub factors of know-how.
Chapter 10 – Compensation: Base Pay and Fringe Benefits
[QUESTION]
7. In a point-factor plan, a job’s relative worth is the sum of the numerical values for each
degree within each factor.
8. Salary survey is the principal tool for establishing market pricing approach.
9. The most common traditional pay structure involves grouping similar jobs into pay grades
and assigning a salary range, with a minimum, midpoint, and maximum.
10. Pay rates provide increased flexibility that enables managers to consider particular job–
related characteristics of individual employees or job candidates.
11. Broadbanding allows managers to make very precise differentiations in pay through the
large number of pay grades.
12. Broadbanding can increase worker productivity and product quality, while decreasing
absenteeism, turnover, and accident rates.
13. Team pay plans are based on the assumption that professional competence increases with
training and longevity.
Chapter 10 – Compensation: Base Pay and Fringe Benefits
[QUESTION]
14. The use of broadbanding is suited to situation where the compensation system should
support team based pay plans.
15. The Equal Pay Act (EPA) of 1963 sets minimum wage, overtime pay requirements, and
rules governing child labor.
16. Where an employee is subject to both the state (or city) and federal minimum wage laws,
the employee is entitled to the lower of the two minimum wages.
17. FLSA’s overtime provisions establish that employers pay workers at least 0.5 times their
regular hourly rate for all work in excess of 45 hours in any workweek.
18. The job title should be the determinative factor when deciding whether jobs are
substantially equal.
19. The Consolidated Omnibus Budget Reconciliation Act and the Family and Medical Leave
Act both address an employees’ right to maintain their health care benefits.
Chapter 10 – Compensation: Base Pay and Fringe Benefits
[QUESTION]
20. In the tax protection approach, firms withhold taxes based on the home-country tax
obligation and pay all taxes in the host country.
21. When considering the compensation package of an expatriate moving to a location where
housing costs are substantially lower than the home country, management should consider
providing a housing allowance.
22. Foreign service premiums are provided with the intention to offer an incentive to take an
expatriate assignment.
23. When considering what level of benefits to provide to an expatriate, tax implications need
to be considered.
24. Determining a fair rate of pay for expatriates is complicated by issues such as exchange
rates fluctuations.
25. When communicating benefits information to employees it is best to focus on general
information that is relevant to all employees rather than focus on individual customized
reports that explain the employee’s coverages and costs.
Chapter 10 – Compensation: Base Pay and Fringe Benefits
Multiple Choice Questions
[QUESTION]
26. A group of jobs having the same basic nature of work but requiring different levels of
skill, effort, responsibility or working conditions are known as __________.
A) job classification
B) job family
C) job broadbanding
D) job evaluation
E) job hierarchy
27. A loan clerk evaluating his/her pay relative to that of a teller within the company is an
example of __________.
A) internal equity
B) external equity
C) pay equity
D) worth equity
E) wage equity
28. The __________ pension plan guarantees a specific payment based on a percentage of
pre-retirement income.
A) accumulation
B) defined contribution
C) defined benefit
D) profit sharing
E) 401K
29. Which of the following are three major factors of the Hay plan?
A) Know-how, problem solving, accountability.
B) Problem solving, job rank, accountability.
C) Know-how, interpersonal skills, problem solving.
D) Physical demands, interpersonal skills, working conditions.
E) Education, experience, interpersonal skills.
Chapter 10 – Compensation: Base Pay and Fringe Benefits
[QUESTION]
30. Which of the following is an example of job family?
A) Secretary, receptionist, assembler
B) Word processor, receptionist, administrative assistant
C) Scientist, engineer, doctor
D) Lawyer, doctor, engineer
E) Psychologist, teacher, doctor
31. The defined benefit plans purchase insurance with the __________, which insures pension
moneys in the event that the company goes bankrupt.
A) EEOC
B) DC
C) PBGC
D) FLSA
E) COBRA
32. Which of the following are elements of cash compensation?
A) Base pay and pay contingent on performance
B) Legally required programs and discretionary programs
C) Base pay and discretionary programs
D) Discretionary programs and pay contingent on performance
E) base programs and legal contingency
33. __________ involves comparing a specific position to the generic descriptors and
deciding which level fits best.
A) Job ranking
B) Job analysis
C) Point-factor plans
D) Job classification
E) Job description
Chapter 10 – Compensation: Base Pay and Fringe Benefits
[QUESTION]
34. Know-how, problem solving, and accountability are the three major factors within the
Hay plan. Which of the following is a sub factor of know-how?
A) Freedom to act
B) The thinking environment in which problems are solved
C) Interpersonal skills
D) Magnitude
E) The impact of the job on end results
35. Which of the following is true about the point-factor plan?
A) Point-factor plans rank jobs in an organization purely based on a comparison of one
against another.
B) The point-factor approach does not break jobs down into component parts and assigns
point values for various characteristics.
C) Point-factor plans are inexpensive to design.
D) Point-factor plans tend to have a high level of integrity.
E) Difficult for organization to trace, analyze, and document differences among jobs.
36. __________ means a company’s pay practices are similar to the practices of other
organizations competing for the same talent.
A) Externally equitable
B) Internally equitable
C) Market pricing
D) Benchmarking
E) Relevant salary market
37. Which of the following law has a provision that workers employed in construction
industry must be paid at the prevailing local pay rate when working on government contracts?
A) Fair Labor Standards Act (FLSA) of 1938
B) Equal Pay Act (EPA) of 1963
C) Davis-Bacon Act of 1931
D) Walsh-Healey Act of 1936
E) Services Contract Act of 1965
Chapter 10 – Compensation: Base Pay and Fringe Benefits
[QUESTION]
38. Which law focuses on three main areas: minimum wage, overtime pay, and child labor
rules.
A) Fair Labor Standards Act (FLSA) of 1938
B) Equal Pay Act (EPA) of 1963
C) Davis-Bacon Act of 1931
D) Walsh-Healey Act of 1936
E) Services Contract Act of 1965
39. Which of the following law amended the FLSA to include a prohibition against pay
differentials based on gender?
A) Minimum Wage Law of 1938
B) Equal Pay Act (EPA) of 1963
C) Davis-Bacon Act of 1931
D) Walsh-Healey Act of 1936
E) Services Contract Act of 1965
40. You have just been hired into a job and you find that you are being paid at the max of the
range for the grade. You hope to have a long career with this company and are hoping for a
promotion within the year. Your reaction should be:
A) Glee, because they are showing how much they truly value you.
B) Anxiety, because you have no room for financial growth in this position.
C) Happiness, because you are making more than the guy hired after you.
D) Frustration, because of external equity factors.
E) Start looking for another job because you are being undervalued.