Chapter 9—Compensation and Benefits
MULTIPLE CHOICE
1. ____ refers to all of the pay and benefits provided to employees for the completion of work.
a.
Salary
b.
Pay substructure
c.
Total compensation
d.
Fair labor standards
e.
Incentives
2. Which of the following employee behavioral outcomes is MOST likely under conditions of perceived
internal inequity as compared to external inequity?
a.
Lower morale
b.
Higher conflict
c.
Lower satisfaction
d.
Lower motivation
e.
All of these
3. Jorge, a supervisor for a large luxury hotel, compared his salary to other supervisors in the same
organization. He found that his base pay was about 25 percent less than other individuals in similar
supervisory jobs. Jorge is experiencing
a.
internal inequity.
b.
lateral inequity.
c.
position inequity.
d.
external inequity.
e.
compensation inequity.
4. Information used to assess external equity is likely collected with
a.
pay surveys.
b.
benefits administrators.
c.
compensation calculators.
d.
random telephone interviews.
e.
none of these.
5. ____ occurs when a company indicates to employees the importance of certain behaviors by paying for
such behaviors.
a.
Supporting
b.
Suggesting
c.
Spiraling
d.
Benchmarking
e.
Signaling
6. In general, salaries are paid to
a.
professionals.
b.
executives.
c.
line workers.
d.
all of these.
e.
both professionals and executives.
7. A laborer who is responsible for landscaping a local golf course likely receives
a.
a salary.
b.
a wage.
c.
broad incentive pay.
d.
no overtime.
e.
a pension but no worker’s comp.
8. Which of the following would be considered a DISADVANTAGE of the use of above-market
compensation?
a.
It may encourage voluntary turnover.
b.
It is less costly to the organization.
c.
It may create a culture of competitive superiority.
d.
It may not attract the highest-quality employees.
e.
It may encourage a sense of entitlement among employees.
9. Organizations are MOST likely to be able to pay below-market compensation rates in an area with
a.
high unemployment.
b.
high cost of living.
c.
high wage levels.
d.
high labor costs.
e.
highly skilled workers.
10. Under ERISA, vesting rights become operational after ______ years at the most, and employees with
less service are still usually eligible to receive some portion of their retirement benefits.
a.
2
b.
8
c.
4
d.
10
e.
6
11. ______ are typically a function of the performance of the organization and are less dependent on the
perceived performance of the executive.
a.
Bonuses
b.
Pay levels
c.
Wages
d.
Benefits
e.
Stock options
12. Stock options generally tend to have ______ timelines, so managers may be motivated to make
short-term decisions that are likely to drive up stock prices even though a different decision might have
been better for the firm’s success.
a.
short
b.
long
c.
relatively short
d.
relatively long
e.
really long
13. What is the general method used to determine the relative value or worth of jobs to an organization?
a.
Job analysis
b.
Comparable worth
c.
Job evaluation
d.
Compensable factors
e.
Pay compression
14. The U.S. postal system utilizes different job grades to pay employees, which is part of a
a.
job ranking system
b.
classification system
c.
regression-based system
d.
factor comparison method
e.
No method
15. The job evaluation system that results in a number of job grades is called
a.
job ranking.
b.
the classification system.
c.
the point system.
d.
the factor comparison method.
e.
job analysis.
16. Which job evaluation method identifies a job’s various compensable factors for which the organization is
willing to provide compensation?
a.
Job ranking
b.
Classification system
c.
Point system
d.
Job analysis
e.
Comparable worth
17. An aspect of a job for which an organization is willing to provide compensation is called a
a.
comparable worth issue.
b.
pay grade.
c.
job class.
d.
compensable factor.
e.
job evaluation.
18. The Department of Defense publishes pay charts for enlisted and officer pay. This indicates the level of
______ in the DOD.
a.
pay compression
b.
pay secrecy
c.
pay inversion
d.
wage inflation
e.
the cost of living
19. Credit Suisse offers benefits that are better than a typical US company. It justifies the cost of the
benefits by using which theory?
a.
Equity theory
b.
Motivational theory
c.
Efficiency wage theory
d.
Expectancy theory
e.
Reinforcement theory
20. Money spent on benefits affects
a.
involuntary turnover.
b.
workers’ compensation.
c.
social security.
d.
unemployment insurance.
e.
job satisfaction.
21. How does the United States rank in terms of the cost of benefits relative to that of other countries around
the globe?
a.
Much higher
b.
A little higher
c.
About the same
d.
Lower
e.
Costs cannot be compared across countries.
22. When is pay compression MOST likely to develop?
a.
When employee skill levels increase faster than managerial skill levels
b.
When the market rate for starting salaries increases faster than organizations can give raises
to existing employees
c.
When an organization’s internal resources increase faster than it is able to hire new
employees
d.
When the organization can provide monetary rewards more easily than intangible benefits
e.
When existing employees make more than new entrants in the organization
23. When Piccadilly Cafeterias filed for bankruptcy protection, its pension fund did not have enough assets
to cover expected future payments. Which law ensures that retirees will receive their pensions as
promised?
a.
Tax Reform Act of 1986
b.
Tax Reform Act of 1997
c.
ERISA
d.
FMLA
e.
Economic Recovery Tax Act
24. Which mandated employee benefit is designed to provide a basic subsistence payment to employees
between jobs?
a.
Unemployment insurance
b.
Social security
c.
Workers’ compensation
d.
Medical insurance
e.
Accidental death and dismemberment insurance
25. Which mandated type of insurance covers individuals who suffer a job-related illness or accident?
a.
Unemployment insurance
b.
Social security
c.
Workers’ compensation
d.
Health insurance
e.
Accidental death and dismemberment insurance
26. Which of the following is NOT a mandated benefit?
a.
workers’ compensation
b.
social security
c.
unemployment insurance
d.
private pension plan
e.
all of these benefits are mandated
27. All of the following are nonmandated benefits EXCEPT?
a.
paid time off
b.
workers’ compensation
c.
health insurance
d.
defined benefit plan
e.
defined contribution plan
28. A special program that helps prevent employee sickness is called a(n)
a.
defined contribution plan
b.
employee assistance plan
c.
wellness program
d.
defined benefit plan
e.
workers’ compensation
29. A special program that helps employees with drug or alcohol problems is called a(n)
a.
cafeteria-style benefits plan
b.
employee assistance plan
c.
wellness program
d.
defined benefit plan
e.
workers’ compensation
30. A program that allows employees to select the benefits they want is called a(n)
a.
cafeteria-style benefits plan
b.
employee assistance plan
c.
wellness program
d.
defined benefit plan
e.
workers’ compensation
Scenario 9.1
Chocolatta University, an institute of higher learning that educates future confectionary chefs, offers a
very attractive benefits package. Costs associated with benefits are about double those of rival
institutions, Jellibelli Tech and Truffle State. However, Chocolatta U. administrators feel that the
extensive benefits attract the most talented faculty and staff in the world. Due to recent societal trends in
fitness and health, Chocolatta U. has experienced a downturn in its funding support from global
confectionary corporations seeing lower profits. The university’s budget has therefore been reduced. Joy
Almond, human resource benefits manager, has been asked to find ways to reduce expenditures on
benefits, so that important university programs do not suffer.
31. Refer to Scenario 9.1. Chocolatta University administrators justify the high costs of its benefits
programs by espousing which particular theory?
a.
Equity theory
b.
Efficiency wage theory
c.
Motivational theory
d.
Expectancy theory
e.
Reinforcement theory
32. Refer to Scenario 9.1. Which of the following is a benefit that Ms. Almond may NOT legally drop from
Chocolatta’s benefits package?
a.
Health insurance
b.
Employee assistance program
c.
Unemployment insurance
d.
Life insurance
e.
Vacation pay
33. Refer to Scenario 9.1. In the midst of all this activity, Professor Nestlé severely burned himself while
demonstrating in class the art of the flaming dessert. He will therefore be away from work and
recuperating for three to six months. What benefit will help Professor Nestlé pay his bills while he is out
of commission?
a.
Unemployment insurance
b.
Health maintenance organization
c.
Social security
d.
Elder care
e.
Workers’ compensation
34. Refer to Scenario 9.1. Ms. Almond is considering one cost-cutting option, in which employees are asked
to make a small co-payment for each doctor’s or dentist’s visit. What is this called?
a.
Cafeteria-style benefits
b.
Coordination of benefits
c.
Defined benefits
d.
Sharing costs
e.
Health maintenance organization
35. Refer to Scenario 9.1. Regardless of benefit reductions due to budget setbacks, Ms. Almond feels
strongly that Chocolatta should continue to provide help for faculty and staff with recurring chocolate
cravings. Otherwise, classroom materials tend to disappear, and employees get severe sugar headaches.
Which type of benefit would this be classified as?
a.
Employee assistance plan
b.
Life-cycle plan
c.
Workers’ compensation
d.
Health maintenance plan
e.
Employee wellness plan
TRUE/FALSE
36. Internal equity involves comparisons to employees working in similar jobs in other companies.
37. Job classification is a method for determining the relative value or worth of a job to the organization so
that individuals who perform that job can be compensated adequately and appropriately.
38. Pay compression is most likely to develop when the market rate for starting salaries increases at a rate
faster than an organization can raise pay for individuals who are already on the payroll.
39. An organization is not legally required to offer any vacation time.
40. Everyone is covered by unemployment insurance.
41. Unemployment insurance is insurance that covers individuals who suffer a job-related illness or
accident.
42. Most new pension plans are defined benefit plans, and there are legal restrictions concerning how the
money is invested.
43. Most full time US employees receive about ten paid holidays per year.
44. The Fair Labor Standards Act includes provisions for the minimum wage, overtime, and child labor.
45. Executive compensation is usually based on salary and incentive pay.
SHORT ANSWER
46. Discuss the various factors that may influence an organization’s compensation strategy.
47. Compare and contrast US and German benefits.
48. Discuss the concept of job evaluation, including the most common methods used by organizations.
49. What is pay compression? Discuss the possible consequences of pay compression.
50. Compare employee wellness programs and employee assistance programs.
