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Chapter 7—Total Rewards and Compensation
MULTIPLE CHOICE
1. Which of the following is a tangible direct reward?
a.
Base pay
b.
Health care benefits
c.
Paid time off
d.
Challenging work
2. Which of the following is a tangible indirect reward?
a.
Base pay
b.
Health care benefits
c.
Challenging work
d.
Variable pay
3. _____ are payments calculated on the basis of the time worked.
a.
Benefits
b.
Commissions
c.
Salaries
d.
Wages
4. If a state’s minimum wage is higher than the federal minimum wage, _____.
a.
employers must pay this higher wage
b.
employers must pay whichever wage is lower
c.
employers are free to choose between either of the two
d.
employers must pay the difference as employee benefits
5. The child labor provisions of the FLSA set the minimum age for hazardous occupations at _____
years.
a.
14
b.
16
c.
18
d.
20
6. The FLSA established overtime pay requirements at _____ times the regular pay rate for all hours
worked over 40 in a week.
a.
two
b.
two and one-half
c.
one and one-half
d.
three
7. The _____ prohibits companies from using different wage scales for men and women performing
substantially the same jobs.
a.
Fair Employment Act
b.
Employment Non-Discrimination Act
c.
Civil Rights Act
d.
Equal Pay Act
8. The _____ essentially treats each paycheck as a new act of discrimination.
a.
Fair Pay Act
b.
Employment Non-Discrimination Act
c.
Civil Rights Act
d.
Equal Pay Act
9. Most federal and state entities rely on the criteria for independent contractor status identified by the
_____.
a.
National Labor Relations Board
b.
Internal Revenue Service
c.
Department of Labor
d.
U.S. Treasury Department
10. _____ occurs when a creditor obtains a court order that directs an employer to set aside a portion of an
employee’s wages to pay a debt owed to the creditor.
a.
Liquidation
b.
Sequestration
c.
Garnishment
d.
Distraint
11. The _____ restricts the right of employers to terminate employees whose pay is subject to a single
garnishment order.
a.
Davis-Bacon Act
b.
Walsh-Healey Public Contracts Act
c.
McNamara-O’Hara Service Contract Act
d.
Consumer Credit Protection Act
12. Which of the following is typical of the entitlement philosophy of compensation?
a.
Pay and raises based on length of service
b.
No raises for poor-performing employees
c.
Market-adjusted pay scales
d.
Industry comparisons of total rewards
13. Which of the following is typical of the performance philosophy of compensation?
a.
Pay and raises based on length of service
b.
No raises for poor-performing employees
c.
Across-the-board raises
d.
Pay scales increased annually
14. Average hourly rate = _____.
a.
total individual hourly rates of pay for all employees divided by the total output produced
b.
total individual hourly rates of pay for all employees divided by the number of employees
c.
total individual hourly rates of pay for all employees divided by the total number of hours
worked
d.
total individual hourly rates of pay for all employees divided by the total output produced
in an hour
15. Number of Full Time Equivalents = _____.
a.
total annual hours paid for all employees divided by the total output of all full-time
employees
b.
total output of all full-time employees divided by the total annual hours paid for all
employees
c.
total annual hours paid for all employees divided by the number of hours a full-time
employee is scheduled to work
d.
number of hours a full-time employee is scheduled to work divided by the total annual
hours paid for all employees
16. Average tenure = _____.
a.
average years of service for all employees divided by the number of full-time equivalents
b.
number of full-time equivalents divided by the average years of service for all employees
c.
number of full-time equivalents divided by the total years of service for all employees
d.
sum of total years of service for all employees divided by the number of Full Time
Equivalents
17. Average comparative ratio = _____.
a.
average of the comparative ratio for each employee divided by the number of employees
b.
sum of the comparative ratio of all employees divided by the number of employees
c.
number of employees divided by the average of the comparative ratio for each employee
d.
number of employees divided by the total of the comparative ratio for each employee
18. Productivity = _____.
a.
total revenue divided by number of Full Time Equivalents
b.
total revenue divided by total output produced
c.
total output produced divided by number of Full Time Equivalents
d.
total output produced divided by total revenue
19. Average annual salary increase = _____.
a.
the average salary increase of all employees divided by the number of full-time
equivalents
b.
the number of full-time equivalents divided by the total salary increase of all employees
c.
the total salary increase of all employees divided by the number of Full-Time Equivalents
d.
the number of full-time equivalents divided by the average salary increase of all
employees
20. Which of the following statements is true of the expectancy theory?
a.
This theory emphasizes the importance of finding valued rewards for the employee.
b.
This theory of motivation was first introduced by John Stacey Adams in 1963.
c.
This theory states that individuals judge fairness in compensation by comparing their
inputs and outcomes against the inputs and outcomes of referent others.
d.
This theory is applicable only to flat organizations with little or no formal structure.
21. Which of the following is classified as an input in the equity theory?
a.
Job security
b.
Praise
c.
Loyalty
d.
Recognition
22. Which of the following is classified as an outcome in the equity theory?
a.
Loyalty
b.
Time
c.
Effort
d.
Job security
23. Which of the following is an indicator of external inequity?
a.
Difficulty hiring new employees
b.
Lack of fairness in how rewards are distributed among employees
c.
Lower attrition levels
d.
Reward system based on favoritism
24. Which of the following is true of an employer who uses the first-quartile strategy of compensation?
a.
The employer pays the employees above market levels.
b.
The employers determine the pay independent of the market scenario.
c.
The employer pays the employees below market levels.
d.
The employer pays the employees on par with the market levels.
25. Which of the following is true of an employer who uses the third-quartile strategy of compensation?
a.
The employer pays the employees above market levels.
b.
The employers determine the pay irrespective of the market scenario.
c.
The employer pays the employees below market levels.
d.
The employer pays the employees on par with the market levels.
26. Which of the following is true of an employer who uses the second-quartile strategy of compensation?
a.
The employer pays the employees above market levels.
b.
The employers determine the pay independent of the market scenario.
c.
The employer pays the employees below market levels.
d.
The employer pays the employees on par with the market levels.
27. Which of the following statements is true of the home-country-based approach?
a.
Compensation is adjusted to maintain the expatriate’s standard of living in the country
where the expatriate is sent from the headquarters.
b.
Compensation is adjusted to maintain the expatriate’s standard of living in the country
where the MNE is headquartered.
c.
Compensation is adjusted to maintain the expatriate’s standard of living in the country that
has the lowest cost of living index.
d.
Compensation is adjusted to maintain the expatriate’s standard of living in the third
country.
28. Which of the following statements is true of the host-country-based approach?
a.
Compensation is adjusted to maintain the expatriate’s standard of living in the country
where the expatriate is sent from the headquarters.
b.
Compensation is adjusted to maintain the expatriate’s standard of living in the country
where the MNE is headquartered.
c.
Compensation is adjusted to maintain the expatriate’s standard of living in the country that
has the lowest cost of living index.
d.
Compensation is adjusted to maintain the expatriate’s standard of living in the third
country.
29. Which of the following is true of the ranking method of job evaluation?
a.
In this method, descriptions of each class of jobs are written and then each job is put into a
grade according to the class it best matches.
b.
It is a complex quantitative method that combines the classification and point factor
methods.
c.
It looks at compensable factors in a group of similar jobs and assigns weights, or points, to
them.
d.
It is a simple system that places jobs in order, from highest to lowest, by their value to the
organization.
30. Which of the following is true of the classification method of job evaluation?
a.
In this method, descriptions of each group of jobs are written and then each job is put into
a grade according to the group it best matches.
b.
It is a complex quantitative method that combines the ranking and point factor methods.
c.
It looks at compensable factors in a group of similar jobs and assigns weights, or points, to
them.
d.
It is a simple system that places jobs in order, from highest to lowest, by their value to the
organization.
31. Which of the following is true of the factor-comparison method of job evaluation?
a.
In this method, descriptions of each group of jobs are written and then each job is put into
a grade according to the group it best matches.
b.
It is time-consuming and difficult to use, which accounts for its limited popularity in
organizations.
c.
It uses subjective judgments to develop the class descriptions and to place jobs accurately
in them.
d.
It is a qualitative method that combines the classification and ranking methods.
32. Which of the following is true of the point factor method of job evaluation?
a.
In this method, descriptions of each class of jobs are written and then each job is put into a
grade according to the class it best matches.
b.
It is a complex quantitative method that combines the ranking and classification methods.
c.
It looks at compensable factors in a group of similar jobs and assigns weights to them.
d.
It is a simple system that places jobs in order, from highest to lowest, by their value to the
organization.
33. The _____ uses external pay data to identify the relative value of jobs based on what other employers
pay for similar jobs.
a.
factor-comparison method
b.
ranking method
c.
point factor method
d.
market pricing method
34. A _____ is a report based on research of compensation rates for workers performing similar jobs in
other organizations.
a.
pay survey
b.
pay analysis
c.
pay scale
d.
pay grade
35. Benchmark jobs are _____.
a.
all blue-collar jobs that require high skill and application
b.
jobs that are found in many other organizations
c.
all white-collar jobs that require high skill and application
d.
jobs that are not commonly found in many other organizations
36. _____ are used to group individual jobs having approximately the same job worth.
a.
Pay scales
b.
Pay grades
c.
Pay compressions
d.
Pay expansions
37. A _____ shows the relationship between job value as determined by job evaluation points and job
value as determined by pay survey rates.
a.
market grade
b.
market band
c.
market line
d.
market scale
38. _____ groups jobs into pay grades based on similar market survey amounts.
a.
Market scaling
b.
Market pegging
c.
Market lining
d.
Market banding
39. Which of the following is true of red-circled employees?
a.
They are paid above the range set for a job.
b.
They are paid below the range set for a job.
c.
They are paid on par with the range set for the job.
d.
Their pay is not determined by the ranges set for a job.
40. Which of the following is true of green-circled employees?
a.
They are paid above the range set for a job.
b.
They are paid below the range set for a job.
c.
They are paid on par with the range set for the job.
d.
Their pay is not determined by the ranges set for a job.
41. Which of the following is true of pay compression?
a.
It is the process by which all employees’ pays decrease significantly in an economic
downturn.
b.
It occurs when the employer groups employees with different pay grades together.
c.
It is frequently a result of labor market pay levels increasing faster than current
employees’ pay adjustments.
d.
It occurs when pay differences among individuals with different levels of experience and
performance become large.
42. Which of the following is true of a pay adjustment matrix?
a.
It reflects an employee’s horizontal movement in an organization.
b.
It is used to determine the compensation benchmark for a particular industry.
c.
It is used to determine the compensation benchmark for a particular organization.
d.
It reflects an employee’s vertical movement in an organization.
43. The two factors that the pay adjustment matrix considers are _____.
a.
the employee’s performance as rated in an appraisal and the employee’s position in the
pay range
b.
the employee’s total productivity and the employee’s position in the pay range
c.
the employee’s performance as rated in an appraisal and the total number of hours spent at
work
d.
the employee’s total productivity and the total number of hours spent at work
44. Compa-ratio = _____.
a.
total pay divided by the total number of employees
b.
individual’s pay rate divided by the midpoint of the pay range
c.
total pay divided by the midpoint of the pay range
d.
individual’s pay rate divided by the total number of employees
TRUE/FALSE
1. The total rewards package includes all forms of compensation, the monetary and nonmonetary rewards
provided by a company to attract, motivate, and retain employees.
2. Tangible rewards cannot be easily measured or quantified.
3. Intangible rewards can be measured and it is possible to calculate the value of each reward.
4. The most common indirect compensation is employee benefits.
5. Compliance with FLSA provisions on employee compensation is enforced by the National Labor
Relations Board.
6. The child labor provisions of the FLSA set the minimum age for employment with unlimited hours at
19 years.
7. The Equal Pay Act of 1963 prohibits companies from using different wage scales for men and women
performing substantially the same jobs.
8. Not having to pay social security, unemployment, or workers’ compensation costs to independent
contractors offers major advantages to the employer.
9. The entitlement philosophy assumes that compensation decisions reflect performance differences.
10. Across-the-board raises are most common in organizations that follow the pay-for-performance
philosophy.
11. The expectancy theory says that an employee’s motivation is based on several linked concepts.
12. The equity theory states that individuals judge fairness in compensation by comparing their inputs and
outcomes against the inputs and outcomes of referent others.
13. Distributive justice is the perceived fairness of the process and procedures used to make decisions
about employees, including their pay.
14. Procedural justice is the perceived fairness in how rewards are distributed.
15. An employer using the first-quartile strategy chooses to “lag the market.”
16. Match-the-market strategy is also called third-quartile strategy.
