Human Resource Management, 15e (Martocchio)
Chapter 9 Direct Financial Compensation (Monetary Compensation)
1) Which term refers to both the intrinsic and extrinsic rewards employees receive for
performing their jobs?
A) benefits
B) commissions
C) bonuses
D) compensation
2) Which of the following is an example of indirect financial compensation (employee benefits)?
A) sales commission
B) psychological welfare
C) paid vacation
D) hourly wage
3) As a pediatric nurse, Cary experiences a significant amount of job satisfaction, which is
considered ________.
A) nonfinancial compensation
B) indirect compensation
C) organizational fit
D) personal equity
4) What form of compensation consists of the satisfaction that a person receives from the job
itself or from the psychological and/or physical environment in which the person works?
A) nonfinancial compensation
B) direct financial compensation
C) indirect financial compensation
D) total internal compensation
5) Companies spent $34.90 per hour worked per employee in December 2016. Of this total, how
much did they spend on wages and benefits, respectively?
A) $28.63 and $9.80, respectively per employee per hour worked
B) $23.87 and $11.03, respectively per employee per hour worked
C) $120.93 and $99.21, respectively, per employee per day worked
D) $7.25 and $4.56, respectively, per employee per hour worked
6) Wages, salaries, bonuses, and commissions are referred to as ________.
A) financial benefits
B) direct financial compensation
C) indirect financial compensation
D) discretionary workplace benefits
7) Total compensation represents both the intrinsic and extrinsic rewards employees receive for
performing their jobs.
8) Direct financial compensation consists of the pay that a person receives in the form of wages,
salaries, commissions, and health benefits.
9) Indirect financial compensation refers to extrinsic compensation other than hourly wages or
annual salary.
10) Nonfinancial compensation consists of the satisfaction that a person receives from the
psychological environment in which the person works.
11) What is compensation? Define direct financial, indirect financial and nonfinancial
compensation.
12) Which term refers to the face value of pay?
A) direct compensation
B) nominal compensation
C) real compensation
D) market–competitive pay
13) If a person is to maintain a previous level of nominal wages, then a pay increase must be
roughly equivalent to the ________.
A) cost of living increase
B) industry average
C) national average
D) market rate
14) How can the General Schedule best be described?
A) performance-based pay
B) seniority–based pay
C) person-focused pay
D) state government pay system
15) An escalator clause in a labor agreement that automatically increases wages as the U.S.
Bureau of Labor Statistics’ Consumer Price Index rises is known as a ________.
A) BARS
B) COPE
C) COLA
D) POS
16) Todd, a financial analyst, was recently hired by Maxwell Enterprises. After one year with the
firm, Todd will be eligible to receive a pay increase added to his base pay that is based on his
performance level. Which term best describes this type of compensation?
A) commission
B) merit pay
C) piecework
D) spot bonus
17) Which type of compensation increases an employee’s base pay and contributes to cost
control over time?
A) merit pay
B) incentive pay
C) person–focused pay
D) seniority-based pay
18) What is a limitation of profit-sharing plans?
A) Profit–sharing plans are excessively costly.
B) Employees have a difficult time understanding their particular contributions to company
profits.
C) Profit sharing adds recurring increases to base pay year over year.
D) Profit–sharing plans create unhealthy competition between employees.
19) Which term refers to a one-time annual financial award based on productivity?
A) bonus
B) merit award
C) skill-based pay
D) competency–based pay
20) Ellen received a one-time bonus of $500 from her employer as a reward for her significant
contribution on a project. Which of the following did Ellen most likely receive?
A) a performance incentive
B) an experience bonus
C) a premium payment
D) a spot bonus
21) Claudia works as a seamstress at a clothing company. She receives $10 for each pair of pants
she sews. What type of pay plan is Claudia’s employer most likely using?
A) variable pay
B) piecework
C) lump sum pay
D) skill-based pay
22) John works at a company that uses a variety of heavy machines. John knows how to operate
three of the machines, and if he learns how to use another one, his pay will increase. Which type
of compensation plan is most likely used by John’s employer?
A) variable pay
B) invariable pay
C) lump sum pay
D) skill-based pay
23) Which performance-based pay system assumes that employees who know more are more
valuable to the firm and deserve to be rewarded for their efforts in acquiring new skills?
A) variable pay
B) merit pay
C) lump sum pay
D) skill-based pay
24) Anna, a marketing manager, frequently takes development and training courses to learn new
skills. Anna is financially rewarded by her employer each time she acquires a new capability.
What type of compensation plan is most likely used by Anna’s employer?
A) variable pay
B) skill–based pay
C) lump sum pay
D) competency–based pay
25) Labor unions tend to favor ________ as the basis for compensation changes.
A) performance
B) experience
C) seniority
D) skill
26) The rationale for adopting seniority pay plans is described by which theory?
A) job–based theory
B) pay–for-performance theory
C) human capital theory
D) equity theory
27) Which of the following is a disadvantage associated with team-based incentives?
A) Exemplary performers become disgruntled and quit.
B) Performance standards are difficult to develop.
C) Output is difficult to categorize and assess.
D) Members lack the time to assist others.
28) A compensation plan that results in the distribution of a predetermined percentage of the
firm’s profits to employees is referred to as ________.
A) team sharing
B) piecework
C) profit sharing
D) broadbanding
29) Which type of profit-sharing plan provides payment to employees in cash or stock as soon as
profits have been determined?
A) deferred plan
B) current plan
C) performance plan
D) gainsharing plan
30) Which type of profit-sharing plan places company contributions in an irrevocable trust and
credits individual employees’ accounts?
A) deferred plan
B) current plan
C) stock plan
D) defined plan
31) Companies granting employees the right to purchase shares of stock is known as ________.
A) profit sharing
B) employee stock
C) gainsharing
D) stock options
32) Which of the following is an incentive pay plan designed to bind employees to the firm’s
performance by providing payment based on improved company performance or other outcomes
such as attaining cost efficiency?
A) deferred
B) job sharing
C) compression
D) gainsharing
33) Which of the following is a gainsharing plan that provides a financial reward to employees
for labor cost savings resulting from their suggestions?
A) deferred plan
B) Scanlon plan
C) current plan
D) Rucker plan
34) What gainsharing plan embodies management-labor cooperation, collaborative problem
solving, teamwork, trust, open-book management and servant leadership?
A) deferred plan
B) Scanlon plan
C) Roth plan
D) current plan
35) Individuals performing in professional jobs are compensated initially for their ________.
A) productivity
B) goal achievement
C) knowledge
D) extensive experience
36) The objective of ________ is to improve productivity by rewarding those who best assist in
achieving this goal.
A) performance-based pay
B) cost–of–living allowances
C) skill-based pay
D) salary compression
37) PetFair, a national chain of pet supply stores, employs nearly 1,000 workers. In the past two
years, the firm’s market share has dropped and employee turnover has increased. The vice
president of human resources at PetFair suggests implementing a new compensation policy to
improve the firm‘s performance and retain quality workers. Currently, PetFair employees receive
compensation primarily based on years with the firm and job level. Which of the following, if
TRUE, best supports the argument that PetFair should implement a competency-based pay
system?
A) PetFair uses the classification method to price management jobs.
B) PetFair sales representatives earn straight commissions.
C) PetFair managers experience variable work assignments.
D) PetFair offers a profit-sharing plan to top executives.
38) PetFair, a national chain of pet supply stores, employs nearly 1,000 workers. In the past two
years, the firm’s market share has dropped and employee turnover has increased. The vice
president of human resources at PetFair suggests implementing a new compensation policy to
improve the firm’s performance and retain quality workers. Currently, PetFair employees receive
compensation primarily based on years with the firm and job level. Which of the following, if
TRUE, best supports the idea of offering a Scanlon plan to employees at PetFair?
A) The environment at PetFair lacks teamwork, trust, and collaboration among employees.
B) Perquisites for key executives at PetFair were eliminated during the 2008 recession.
C) PetFair uses broadbanding to price jobs at all levels of the organization.
D) The Hay plan is already utilized successfully at PetFair.
39) In most cases, which of the following is NOT a contextual influence on direct financial
compensation?
A) labor unions
B) indirect financial compensation
C) labor market
D) legislation
40) What is the most important standard for determining pay?
A) pay leaders
B) market rates
C) geographic areas
D) organizational levels
41) When the United Auto Workers negotiate with GM and Ford for higher wages, which
legislation supports the union’s right to engage in collective bargaining?
A) Title VII of the Civil Rights Act
B) Equal Pay Act
C) Davis–Bacon Act
D) National Labor Relations Act
42) The following describes the possible effect of wages in union settings on wages in nonunion
settings.
A) market match policy
B) mimicking effect
C) spillover effect
D) pay following effect
43) Which Act was the first national law to deal with minimum wages?
A) Davis–Bacon Act
B) Railway Labor Act
C) Norris–LaGuardia Act
D) Fair Labor Standards Act
44) Which Act requires federal construction contractors with projects valued in excess of $2,000
to pay at least the prevailing wages in the area?
A) Railway Labor Act
B) Davis–Bacon Act
C) Norris–LaGuardia Act
D) Fair Labor Standards Act
45) Which Act requires companies with federal supply contracts exceeding $10,000 to pay
prevailing wages?
A) Davis–Bacon Act
B) Walsh–Healy Act
C) Norris–LaGuardia Act
D) Fair Labor Standards Act
46) Which Act establishes a minimum wage, requires overtime pay and recordkeeping, and
provides standards for child labor?
A) Davis–Bacon Act
B) Walsh–Healy
C) Norris–LaGuardia Act
D) Fair Labor Standards Act (FLSA)
47) The Fair Labor Standards Act (as amended) provides for all of the following EXCEPT
________.
A) minimum wage
B) overtime pay
C) age discrimination
D) child labor standards