Fundamentals of HR Management, 8e (Noe)
Chapter 12 Establishing a Pay Structure
1) Pay level is the total amount an employee pays to the organization.
2) A pay structure helps an organization achieve goals related to cost control.
3) The laws governing equal employment opportunity guarantee equal pay for all employees of
an organization.
4) If state laws specify minimum wages, in addition to the federal level, employees are entitled to
receive whichever rate is higher.
5) Under the FLSA, children aged 14 and 15 may not be employed outside school hours.
6) Under the Davis-Bacon Act of 1931 and the Walsh-Healy Public Contracts Act of 1936,
employees of federal contractors must receive rates less than the prevailing wages in the area.
7) In a product market, different organizations have exclusive customer bases.
8) The pay offered by an organization is not limited by its presence in a product market.
9) Organizations use pay surveys to benchmark compensation.
10) According to equity theory, employees evaluate job outcomes such as compensation in terms
of outputs.
11) In a two-tier wage system, employees doing the same job are paid two different rates,
depending on their technical background and training.
12) Research suggests that employees in the lower tier of the pay structure in a two-tier wage
system are less satisfied than the top-tier employees.
13) Key jobs are uncommon and have unstable content, making them very difficult to evaluate
using pay surveys.
14) Pay grades allow precise matching of pay for individual jobs to market rates and an
organization’s job structure.
15) The most common approach to pay differentials is to move an employee lower in the pay
structure to compensate for higher living costs.
16) Implementing broad bands increases the opportunities for promoting employees.
17) Skill-based pay systems do not support empowerment of employees.
18) Issues affecting an organization’s pay structure do not affect its reputation in general.
19) Military pay often exceeds what service members would earn in their civilian jobs.
20) The equity of executive pay affects a select few of an organization’s employees.
21) What will most likely be the result of using an unplanned approach, in which each
employee’s pay is independently negotiated?
A) dissatisfied employees
B) equal pay distribution
C) rates that are stable
D) easy employment
E) cost control
22) Karina, a researcher, believes that an organization needs to plan what they will pay
employees in each job. Timmy, her colleague, argues that an employee’s pay should be
independently negotiated. Which statement weakens Timmy’s argument?
A) An unplanned approach will likely result in unfairness and dissatisfaction among the
employees.
B) Most of the employees prefer planned pay because negotiation with the management takes
time.
C) Independently negotiated pay will increase the workload and rivalry among the employees.
D) When the pay is planned by the organization, it creates more employment opportunities.
E) The pay structure is the same for both an entry-level and a manager-level employee if it has
been independently negotiated.
23) Which description best defines an organization’s job structure?
A) It consists of the relative pay for different jobs within the organization.
B) It is the average amount an organization pays for a particular job.
C) It comprises the characteristics of jobs that the organization values and chooses to pay.
D) It comprises regular pay, overtime pay, and bonuses.
E) It refers to the standard amount that employers must pay under federal and state law.
24) Ring Associates, an insurance company, defines the difference in pay between an entry-level
recruiter and an entry-level assembler, as well as the difference between an entry-level recruiter,
an HR manager, and the vice president of the human resource department. What is being
exemplified in this scenario?
A) straight piecework plan
B) job structure
C) merit pay system
D) pay differential
E) balanced scorecard
25) Which element establishes an organization’s pay structure?
A) pay ranges and pay differentials
B) cost control and equity
C) legal requirements and job descriptions
D) individual salaries of its employees
E) job structure and pay level
26) Which statement is true of equal employment opportunity laws?
A) These laws guarantee equal pay for whites and minorities.
B) The goal of these laws is for employers to provide equal pay for equal work.
C) Job descriptions and job structures cannot help organizations demonstrate that they are
upholding these laws.
D) These laws guarantee equal pay for men and women.
E) Under these laws, employers cannot tie differences in pay to business-related considerations.
27) Karen and Ethan execute the same roles and responsibilities at their organization. However,
Ethan earns more than Karen. Under the laws governing equal employment opportunity, which
statement will justify the organization’s decision to pay Ethan more than Karen?
A) Ethan is white, and Karen is black.
B) Ethan has more experience than Karen.
C) Karen has a hearing impairment.
D) Men have more stamina, so they can work longer hours.
E) Karen is an immigrant.
28) Connor and McKenzie hold the same position at Delta Inc. However, Connor earns more
than McKenzie. Which statement justifies the organization’s decision to pay Connor more than
McKenzie?
A) Connor meets higher productivity targets than McKenzie.
B) Connor comes from an economically weaker background.
C) McKenzie is male.
D) McKenzie is younger than Connor.
E) McKenzie is not a U.S. citizen.
29) Techniques., a software company, uses job evaluations to establish the value of its jobs in
terms of criteria such as their difficulty and their importance to the organization. The company
then compares the evaluation points awarded to each job with the pay for each job. If jobs have
the same number of evaluation points but are not paid equally, the pay of the lower-paid job is
raised. Based on the scenario, identify the policy adopted by the company.
A) comparable-worth policy
B) minimum wage policy
C) average pay policy
D) merit pay policy
E) piecework rate policy
30) Which sentence best describes a situation that comparable-worth policies were designed to
address?
A) In a manufacturing company, there are no female managers.
B) A consumer products company has been sued for racial discrimination.
C) An agency works with a supermarket’s HR department to design a job that could be held by
people with mental disabilities.
D) In a city government, positions mostly held by women pay less than positions mostly held by
men.
E) At a utility company, jobs that involve physical strain and danger pay more than office jobs.
31) Ergo Co. is a manufacturing company based in Texas. In the year after Ergo Co.
implemented a comparable-worth policy, its expenses increased, and as a result, profits declined.
What difficulty of comparable-worth policies does this example illustrate?
A) The employer is at an economic disadvantage because of increased pay for some jobs.
B) The policy overlooks the undervalued work performed by women.
C) The policy uses job enrichment to establish a pay structure based on market rates.
D) The employer ignores the evaluation points for each job.
E) Employees in lower-paid jobs are encouraged to meet the goal of comparable worth.
32) What is a drawback of a comparable-worth policy?
A) A free-market economy assumes people will not take differences in pay into account when
they choose a career.
B) Employees may conclude that pay rates are unfair.
C) The courts prohibit organizations from defending themselves against claims of discrimination
by showing that they pay the going market rate.
D) Grouping jobs will result in rates of pay for individual jobs that do not precisely match the
levels specified by the market and the organization’s job structure.
E) Raising pay for some jobs places the employer at a disadvantage relative to employers that
pay the market rate.
33) Which federal law establishes a minimum wage and requirements for overtime pay and child
labor?
A) Fair Labor Standards Act
B) Americans with Disabilities Act
C) Family and Medical Leave Act
D) Employee Retirement Income Security Act
E) Equal Pay Act
34) Willow Producers is a manufacturing company based in Iowa. The employees of Willow
Products are paid the lowest amount under federal or state law, which is stated as an amount of
pay per hour. Which law is the organization abiding by in this scenario?
A) laws governing equal employment opportunity
B) Fair Labor Standards Act (FLSA) of minimum wage
C) Fair Labor Standards Act (FLSA) of overtime
D) laws governing prevailing wages
E) product market laws
35) Mercia, a healthcare company, provides a lower training rate to its employees belonging to
the age group of 18 to 19 years. The rate is applicable for a period of 90 days. In this case, which
law justifies the organization’s decision to pay the lower pay?
A) laws governing equal employment opportunity
B) Fair Labor Standards Act (FLSA) provisions for minimum wage
C) Fair Labor Standards Act (FLSA) provisions for overtime
D) laws governing prevailing wages
E) Fair Labor Standards Act (FLSA) provisions for child labor
36) Which provision is included in the Fair Labor Standards Act (FLSA)?
A) personal finance
B) minimum wage
C) wage discrimination
D) environmental hazards
E) retirement plans
37) What is a drawback of a minimum wage in terms of social policy?
A) It assumes people will take differences in pay into account when they choose a career.
B) It is one and a half times the employee’s usual hourly rate.
C) It applies only to the hours worked beyond 40 in one week.
D) It places the employer at an economic disadvantage relative to employers that pay the living
wage.
E) It tends to be lower than the earnings required for a full-time worker to rise above the poverty
level.
38) Ty earns a base rate of $12 an hour and receives a weekly attendance award of $20. He
works 40 hours this week. What would be his total compensation for the week?
A) $480
B) $600
C) $500
D) $520
E) $250
39) Showery Drugs is a pharmaceutical company based in Detroit. Showery Drugs expects its
employees to work long hours and achieve increased production rates. Employees earn one and a
half times the usual hourly rate for working more than 40 hours in one week. Which law is
Showery Drugs abiding by in this scenario?
A) laws governing equal employment opportunity
B) Fair Labor Standards Act (FLSA) of minimum wage
C) Fair Labor Standards Act (FLSA) of overtime
D) laws governing prevailing wages
E) product market laws
40) Which statement is true of the FLSA requirements for overtime pay?
A) The overtime rate is one and a half times the employee’s hourly rate, excluding any bonuses
or piece-rate payments.
B) Time worked includes hours spent on production or sales, but not on activities such as
attending required classes, cleaning up the work site, and so on.
C) Overtime must be paid whether or not the employer specifically asked or expected the
employee to work the extra hours.
D) Everyone is eligible for overtime pay.
E) Most workers paid on an hourly basis are exempt and therefore not subject to the laws
governing overtime pay.
41) Roger is the head of the insurance claims department. Roger works for longer hours than his
subordinates, however, he is not paid overtime for working more than 40 hours per week. Under
the FLSA, which statement justifies the organization’s decision not to give Roger’s overtime pay?
A) Roger is not a U.S. citizen.
B) Roger comes from an economically strong background.
C) Roger is unmarried.
D) Roger is considered as an exempt employee.
E) Roger has lower educational qualifications than his subordinates.
42) Under the FLSA, exempt status of employees depends on their
A) job responsibilities and salary.
B) organizational commitment.
C) job title.
D) work experience.
E) job qualifications.
43) ________ means that an employee is paid a given amount regardless of the number of hours
worked or quality of the work.
A) Pay level
B) Nonexemption
C) Pay policy line
D) Piecework rate
E) Salary basis
44) According to the FLSA, which individual is most likely a nonexempt employee?
A) the CEO
B) a senior administrative employee
C) an hourly paid production line employee
D) an HR manager
E) the director of marketing
45) Which statement is true about the Fair Labor Standards Act (FLSA)?
A) The overtime rate under the FLSA is two and a half times the employee’s hourly rate.
B) The FLSA permits federal contractors to pay less than the prevailing wage rate.
C) The FLSA permits a subminimum training wage equal to 95 percent of the minimum wage.
D) Nonexempt employees are covered by FLSA and include most hourly workers.
E) Under the FLSA, executive, professional, and administrative employees are considered
nonexempt employees.