Chapter 10—Developing an Approach to Total Compensation
MULTIPLE CHOICE
1. In the chapter opening vignette “Managing Human Resources at Synapse Group Inc.”, the company
has chosen a ____________ policy as its organization pay policy.
a.
lead
b.
match the competition
c.
lag
d.
containment
e.
none of the above
2. Total compensation can facilitate the organization’s achievement of several strategic objectives. These
include:
a.
Attracting, motivating, and retaining the talent required for a sustainable competitive
advantage
b.
Focusing the energy of employees on implementing the organization’s particular
competitive strategy
c.
Improving productivity
d.
Cost containment
e.
all of the above
3. Among the factors affecting worker retention, __________ had the lowest percentage of workers
indicating it as a factor that was “very important.”
a.
benefits
b.
financial compensation
c.
management climate
d.
time and flexibility
e.
supervisor relationship
4. Typical inputs that employees give to organizations include:
a.
time
b.
effort
c.
experience
d.
education
e.
all of the above
5. Employees who perceive their compensation to be lower than that earned by people in similar
positions are most likely to:
a.
feel that what is good for the company is more important than what is good for the
individual
b.
focus on nonmonetary rewards
c.
place greater importance on benefits than pay
d.
feel underrewarded
e.
feel over-rewarded
6. Factors that affect worker retention include all EXCEPT:
a.
financial compensation
b.
benefits
c.
management climate
d.
coworker relationships
e.
supervisor relationship
7. Employee responses to feeling underrewarded include:
a.
leaving the organization
b.
demanding a raise
c.
stealing from the employer
d.
restricting output
e.
all are typical responses
8. Factors that contribute to perceptions of pay unfairness include all EXCEPT:
a.
low pay
b.
pay secrecy
c.
executive compensation practices
d.
internal exchange values
e.
none of these
9. Which of the following statements about pay secrecy is true?
a.
The free open discussion of salaries and wages is the norm in U.S. business.
b.
Perceived inequities may arise due to poor implementation of a well-designed
compensation plan.
c.
Pay secrecy makes life difficult for managers.
d.
Compensation professionals and managers are the only ones who should have
responsibility for designing the compensation system.
e.
Managers typically abhor pay secrecy.
10. Maxine’s supervisor overheard her discussing her dissatisfaction with her pay with an outside vendor
who was stocking the vending machines in the employee break room. The firm has a pay secrecy
policy. What action can her supervisor?
a.
Discharge her for violating the policy
b.
Reprimand her with a written warning
c.
Forbid her from discussing pay with anyone outside the firm
d.
Have her transferred to a lower-paying job in another department
e.
Take no disciplinary action
11. The job market for accounting professors has suddenly strengthened. Newly-graduated accounting
Ph.Ds are being offered over $100,000 per year. Many current accounting professors are making
significantly less and university salary budgets are tight. In addition, many accounting professors are
reaching retirement age. As an HR professional with an understanding of compensation, which of the
following situations will probably NOT occur?
a.
current accounting professors will start looking for new jobs
b.
retiring professors may not be replaced with as many new hires
c.
universities that don’t offer market pay for new hires will not have many qualified
applicants
d.
universities will begin offering more accounting classes on-line
e.
all of the above are likely outcomes
12. Public outcries about CEO pay have prompted government actions that are designed to increase the
transparency and fairness of such pay. Which of the following required actions was not contained in
the Dodd-Frank Act of 2010:
a.
Independence for executive compensation committee members and compensation
consultants.
b.
Disclosure of the pay-for-performance components of executive compensation
c.
Reporting of the ratio of CEO total compensation to the median of non-CEO
total compensation.
d.
Removal of after-the-fact clawback provisions, which require executives to repay any
incentive compensation that was properly awarded based on financial restatements
e.
None of these are contained in the Dodd-Frank Act of 2010
13. Which of the following actions have various CEOs not taken in response to widespread public concern
about unfair CEO pay?
a.
Cutting annual salary to $1
b.
Returning incentive pay to employees in the form of company stock
c.
Converting cash bonus to performance-linked shares
d.
Agreeing to serve on the Sarbanes-Oxley Executive Compensation Board
e.
None of these actions were taken by CEOs
14. In terms of pay mix, high-level executives tend to have proportionately more of their total
compensation in _____ than do lower levels of employees.
a.
benefits
b.
base pay
c.
incentives
d.
“in-kind” payments
e.
the pay mix for the various levels of employees is relatively similar until the CEO level
15. Low unemployment labor market conditions in an industry result in which of the following effects on
compensation practices in that industry:
a.
higher pay that attracts new entrants
b.
a shift to nonlabor alternative
c.
an influx of job seekers
d.
offshoring
e.
All of the above are effects that occur in this market
16. The presence of unions in an industry results in which of the following effects on compensation
practices in that industry EXCEPT:
a.
Unionized organizations pay more
b.
Unionized organizations have less-performance-based pay
c.
Unionized organizations tend to offer better benefits
d.
Unionized and nonunionized organizations pay similar wages
e.
All of the above are union effects
17. The Fair Labor Standards Act:
a.
mandates a minimum wage for all workers
b.
requires that all workers be paid overtime
c.
prohibits minors under the age of 18 from working in hazardous occupations
d.
contains a definition of comparable worth
e.
does all of the above
18. Under what circumstances does the Fair Labor Standards Act permit an employer to pay subminimum
wages?
a.
if the employee is under the age of 18
b.
if the employee is an apprentice in a skilled occupation
c.
if the employee is engaged in job sharing
d.
if the employee is already receiving Social Security payments
e.
if the employee is only working part-time
19. Under the Fair Labor Standards Act, which of the following is most likely a nonexempt worker?
a.
a full-time retail clerk in a liquor store
b.
a manager who supervises fifteen employees
c.
a petroleum engineer working as an independent contractor
d.
a tenured college professor
e.
all of the above
20. Which of the following work-related activities must be counted when determining whether a person
has worked for more than 40 hours?
a.
Getting ready to work
b.
breaking from work
c.
waiting to work
d.
all of the above
e.
a and b only
21. Simon works for a furniture manufacturer. Since he is not eligible to receive overtime pay, you could
assume that Simon:
a.
works on the assembly line
b.
drives one of the company’s delivery trucks
c.
is in management
d.
works as a secretary
e.
works on the company’s loading dock
22. To establish a prima facie case of wage discrimination under the Equal Pay Act, _____.
a.
the plaintiff needs to show that minority employees are paid less for substantially equal
jobs
b.
the plaintiff needs to show that female employees are paid less for substantially equal jobs
c.
the defendant needs to show that white males are paid no more than minority and female
employees doing substantially equal jobs
d.
the defendant needs to show that there are no male-dominated or female-dominated jobs in
the company
e.
the plaintiff needs to show that female-dominated jobs as a category are paid less than
male-dominated jobs as a category
23. The Equal Pay Act allows several exceptions to equal pay for equal work. Which of the following is
not such an exception?
a.
pay based on a valid seniority system
b.
pay based on a valid merit system
c.
pay based on performance quality
d.
pay based on education level
e.
all of these are exceptions to equal pay for equal work
24. The Dukes v. Wal-Mart Stores lawsuit:
a.
contends that Wal-Mart paid male managers less than female managers
b.
contends that Wal-Mart paid younger female managers less than older female managers
c.
demands that Wal-Mart’s centralized pay policies be discontinued
d.
was filed as a class action suit
e.
was filed on behalf of all women who have worked at Wal-Mart to stop widespread
pay-related sexual harassment (quid pro quo) within its stores
25. Molly works as a market researcher for a manufacturer of baby products. She develops surveys,
conducts personal interviews, and tabulates data. Bob is a customer service representative. He spends
his days handling customer complaints and writing up the problems and how he solved them. He earns
$.50 more per hour than Molly does. On the basis of the _____, Molly believes that she should be paid
the same amount as Bob.
a.
the theory of comparable worth
b.
work equality theory
c.
Fair Labor Standards Act
d.
Civil Rights Act
e.
theory of gender-bias
26. The theory of comparable worth states that:
a.
men and women are comparably worth a minimum wage
b.
pay for even dissimilar jobs should be equal if the jobs have a similar overall value to the
organization.
c.
expatriates should be paid comparably with home country employees
d.
all employees are entitled to comparable, if not equal, benefit packages
e.
pay should be commensurate with responsibility
27. Comparable worth laws
a.
have been shown to be effective in reducing the male-female wage gap.
b.
are a way to eliminate race, ethnicity and gender as wage determinants
c.
use a more rigorous standard of fairness than required under the Equal Pay Act
d.
only answers a and b are true
e.
all of the above are true
28. Local legislative attempts to raise minimum wage levels to a level that reflects actual cost of living in a
particular area are called _____ laws.
a.
equal pay
b.
fair and equitable
c.
living wage
d.
“homeless worker”
e.
comparable worth
29. In the feature Managing with Ethics: Fostering Ethics at Payless Shoesource, Payless adopted a code
of ethics that addresses:
a.
equal opportunity and respect in the workplace
b.
avoiding conflicts of interest
c.
obligations to customers
d.
financial integrity of books and records
e.
all of the above
30. Line managers:
a.
tend to be highly informed about the compensation system
b.
usually receive intensive training on base pay rates
c.
have more information about benefits than about other aspects of compensation
d.
often participate in designing total compensation
e.
all of the above are true
31. Ensuring total compensation is consistent with legal requirements is the responsibility of:
a.
Line managers
b.
HR professional
c.
Employees
d.
All of the above
e.
None of the above
32. Which of the following statements about pay equity as a compensation policy is true?
a.
It is rarely used because the cost of eliminating pay inequities runs about 20 to 25% of
annual payroll.
b.
Eliminating pay inequities requires cutting the pay of some white male employees.
c.
Unions are adamantly opposed to pay equity policies.
d.
If a company has adhered to external market pay levels, it has automatically adjusted for
pay inequities.
e.
Employees should perceive that they are paid fairly compared to others in the same
organization given the contributions that they and others make to the organization.
33. In a job-based pay system,
a.
People are paid according to the job they hold
b.
training is essential to attain job flexibility and pay increases for all employees
c.
pay remains constant unless skill proficiency increases
d.
salary increases are tied to skill acquisition as measured by competency tests
e.
unions control compensation levels
34. The simplest job evaluation method is:
a.
benchmarking
b.
performance appraisals
c.
the point rating method
d.
job ranking
e.
factor analysis
35. Meaghan Scott is the founder and owner of Homewood Farm Jams. Her company has six employees.
For pay purposes, each employee is ranked according to his or her contribution to the firm’s bottom
line. What job evaluation method does Meaghan use?
a.
the benchmarking method
b.
the performance appraisal method
c.
the point rating method
d.
the job ranking method
e.
the factor analysis method
36. The _____ method of job evaluation establishes pay grade categories and then groups job descriptions
within these broad categories.
a.
benchmarking
b.
job classification
c.
point rating
d.
ranking
e.
factor analysis
37. Which of the following statements is not true of the job classification method?
a.
It requires accurate job descriptions.
b.
Several jobs can be collected under one pay grade.
c.
Classification standards reflect mainly employee competencies.
d.
Classification systems can be used in both small and large firms.
e.
All of the above are true.
38. The most widely used method of job evaluation is:
a.
benchmarking
b.
performance appraisals
c.
the point factor rating method
d.
ranking
e.
factor analysis
39. The point factor method may appear to be a very objective approach to valuing jobs, but like other job
evaluation methods, it relies heavily on _____________.
a.
projective values
b.
historical events
c.
standardized scoring
d.
subjective judgments
e.
compensable experts
40. The total points allocated to each job description resulting from the point rating method indicates:
a.
the worth of this job related to the worth of every other rated job in the organization
b.
the worth of this job related to the worth of every other rated job in the economy
c.
the worth of this job related to the worth of every other job in the same occupation
d.
the worth of this individual employee holding this job compared to the worth of
individuals holding other jobs in the organization
e.
none of the above
41. Susan (Ph.D.), Peggy (MA) and Steve (BA) are all first grade teachers in a large urban school. Each of
them teaches the same number of children in a typical classroom setting (not gifted or special needs
children). Each of them have 10 years of classroom experience. All have received excellent
performance evaluations in the past. Each is an organizational good citizen, helping wherever they are
needed. Susan is paid $10,000 a year more than Peggy, who is paid $5,000 a year more than Steve.
What type of pay system does the school probably use?
a.
an illegal one
b.
market-based pay
c.
point rating method
d.
skill-based pay
e.
Hays Guide Chart system
42. In a skill-based pay system,
a.
pay ranges are variable, depending on the type of job and pay grade width
b.
pay administration is contingent upon the complexity of job evaluation and the pay
allocation plan
c.
pay is tied to personal competency levels
d.
training is necessitated by need rather than employee desire for training
e.
all of the above are true
43. To conduct a compensation survey, a job evaluator must:
a.
hire a consulting firm to do the actual survey
b.
define the relevant labor market
c.
create a totally objective survey
d.
ignore geographic boundaries in order to accurately benchmark all jobs
e.
do all of the above
44. Pay differentials
a.
occur when a compensation system is poorly designed
b.
are questionable under the Equal Pay Act
c.
are used on a long term basis to accommodate differences between market rates and
internal job evaluation pay rates
d.
can result from geographic location differences
e.
none of the above are true
45. Benchmark jobs:
a.
are used to establish market pay policy
b.
are jobs that are common across a number of different employers
c.
have relatively similar job descriptions across employers
d.
are necessary for interpreting pay survey data
e.
are accurately described by all of the above
46. After establishing a policy line for pay in the external market a company must decide on its own pay
policy. Which of the following will affect the company’s pay policy?
a.
the role of performance-based pay in the organization
b.
the stage of the firm’s development
c.
the strength of union demands
d.
the organizational culture
e.
all of the above
47. An organizational pay policy that pays above the market rate is known as a _____ policy.
a.
lag
b.
discriminatory
c.
match
d.
lead
e.
advance
48. Why would a company pay less than the market rate?
a.
It has excellent benefits.
b.
It is located in a highly-desirable part of the country, to which people are anxious to move.
c.
It provides good job security.
d.
The content of its job are very satisfying.
e.
All of these are reasons to pay less than the market rate.
49. Jolene is at the midpoint of her pay grade. Her firm has a pay policy of matching the market. If Jolene
decided to look for a similar job in another company, she would find that her pay:
a.
is higher than the market average
b.
is lower than the market average
c.
is about the same as the market average
d.
will be higher than the market in companies using broadbanding rather than traditional pay
grades
e.
will be higher than the market in companies using traditional pay grades
50. Joe has been promoted from a pay grade three job making $3300 a month to a pay grade four job
making $3300 a month. Why would Joe accept a promotion with no simultaneous increase in pay?
a.
Pay grade four jobs are easier.
b.
He will have greater opportunity for higher pay in the future.
c.
He was underpaid in his pay grade three job.
d.
He will be overpaid in his pay grade four job.
e.
None of these can be the reason.
51. An employee who is being paid below the minimum,
a.
is usually green-circled
b.
is usually red-circled
c.
is blue-circled
d.
is black-circled
e.
none of the above
52. Pete Miller is from Texas. He has been asked by his American-owned employer to manage a bank
branch office in Hong Kong for three years. Miller will be paid:
a.
what a manager at the same pay grade in Hong Kong would be paid without regard to
nationality
b.
what he was paid to perform the same job in the U.S.
c.
a standard rate that is paid to all the expatriate employees of this company
d.
a pay level comparable to his colleagues plus compensation for the cost of international
service
e.
what a manager in the banking industry at the same pay grade in Hong Kong would be
paid
TRUE/FALSE
1. Total compensation refers to the monetary and nonmonetary rewards offered to employees.
2. Total compensation can facilitate—or interfere with—achieving many different strategic objectives.
3. Although it is illegal for employers to forbid employee discussions of pay, keeping pay secret is the
norm in many U.S. organizations.
4. Employees who focus only on the base salary will perceive the pay to be unfairly low.
5. Monetary compensation includes direct payments such as salary, wages, and bonuses, and indirect
payments such as payments to cover benefits and services
6. A company can defend itself from claims of wage discrimination if pay differences are the result of a
seniority system.
7. The design of a total compensation system is shaped by the organizational environment.
8. An organization’s strategic objectives often have important implications for the design and
implementation of its compensation system.
9. Employers can maximize satisfaction with pay by involving employees in pay system design.
10. Job evaluations are typically done when a new job is created, when an existing job is significantly
changed, and when requested by management.
SHORT ANSWER
1. What conditions would led employees to this believe pay inequities existed in their organization?
2. __________________________ includes direct payments such as salary, wages, and bonuses, and
indirect payments such as payments to cover benefits and services.
3. What is the simplest job evaluation method?
4. What is the most widely used method for job evaluations?
5. What is the most common level of market pay policy?
ESSAY
1. Comment on the following statement: “Job evaluation and job analysis are actually synonyms?”
2. How can an employer be sure that its employees are being paid at market level?
3. What are benchmark jobs and how are they used for placing a specific job into a pay grade?