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1. Employee assistance plans are designed to help employees who require urgent medical support for family members in
case of accidents.
a. True
b. False
2. From 2027, individuals will not be able to retire with full benefits of the Social Security program until they reach age
67.
a. True
b. False
3. The Social Security system is aimed at providing a minimum sustenance amount to individuals who are between jobs.
a. True
b. False
4. Bonuses are typically a function of the performance of the organization and are less dependent on the perceived
performance of the executive.
a. True
b. False
5. Pay compression is least 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.
a. True
b. False
6. The basic aim of the Affordable Care Act is to lower the number of uninsured employees.
a. True
b. False
7. The most commonly used method of job evaluation is the point system.
a. True
b. False
8. External equity in compensation refers to comparisons made by employees to other employees performing similar jobs
within the same organization.
a. True
b. False
9. In the context of mandated employee benefits, the government pays the cost of workers’ compensation insurance.
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a. True
b. False
10. Workers’ compensation is a nonmandated employee benefit.
a. True
b. False
11. In the context of nonmandated employee benefits, contributions to private pension plans come solely from the
employer.
a. True
b. False
12. Which of the following statements is true of external inequity?
a. It occurs when lower-level employees in a firm receive less incentives than the top executives.
b. Overpaying individuals for the value of their contributions can effectively solve external equity issues.
c. Problems with external equity may result in dissatisfied and unhappy workers.
d. The most commonly used source of information concerning external equity is job evaluation.
13. Which of the following statements is true of cafeteria-style benefits plans offered by organizations?
a. Cafeteria-style benefits are funded jointly by the employer and the government.
b. They typically take the form of referrals for employees with a disabled parent or one who needs constant care.
c. Some evidence suggests that these programs can lead to increased satisfaction and reduced turnover.
d. They are benefits targeted at different stages in an employee’s life.
14. _____ occurs when individuals with substantially different levels of experience, or performance abilities, or both in an
organization are paid wages or salaries that are relatively equal.
a. Pay compression
b. Wage elasticity
c. Pay inversion
d. External inequity
15. Which of the following is a nonmandated benefit?
a. Unemployment insurance
b. Workers’ compensation
c. Social Security
d. Sick leave
16. Unlike pay for knowledge plans, skill-based pay plans:
a. are more likely to be associated with hourly workers.
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b. reward employees for learning new material.
c. reduce the flexibility of scheduling for management.
d. have the potential to clash with more traditional incentive systems.
17. Which of the following statements is true of the Employee Retirement Income Security Act (ERISA)?
a. It prevents organizations from establishing private pension plans.
b. It specifies which employees are covered by overtime provisions and which are exempt.
c. It allows an employee to carry a portion of his or her benefits to another job.
d. It makes vesting rights operational after 4 years of service at the most.
18. _____ is mostly concerned with establishing internal pay equity.
a. A pay survey
b. Job evaluation
c. Pay inversion
d. A maturity curve
19. Grenstall Inc., a software development firm, has adopted a new job evaluation system in which managers are asked to
objectively quantify the value of eight to ten compensable factors of each job in the organization. These compensable
factors are based on their importance to that particular job and may include skill, physical effort, mental effort, and so
forth. In this system, jobs are compared against a standard of key ratings. Which of the following job evaluation systems
is Grenstall Inc. most likely using in the given scenario?
a. The market-basket analysis method
b. The classification system
c. The factor-comparison method
d. The point system
20. Which of the following statements is true of life-cycle benefits?
a. They can be availed only at the end of an employee’s service with the organization.
b. They refer to fitness workshops that help employees stay healthy.
c. They include child-care and elder-care benefits.
d. They are benefits that an employee’s family receives after the employee’s death.
21. The Employee Retirement Income Security Act (ERISA):
a. prevents organizations from establishing private pension plans.
b. provides protection for the funding underlying pension plans.
c. includes provisions for minimum wages and child labor.
d. makes vesting rights operational after 3 years of service at the most.
22. Which of the following is true of workers’ compensation?
a. It is aimed at helping people who have chronic problems with alcohol or drugs.
b. The exact premium paid for workers’ compensation insurance is a function of each employee’s salary.
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c. Employers pay the cost of workers’ compensation insurance.
d. It is provided to people who are between jobs.
23. Which of the following statements is true of the classification system as a job evaluation method?
a. It can easily accommodate changes in the value of various individual jobs in an organization.
b. It is difficult to construct.
c. It assumes that a flexible relationship exists between job factors and their value to an organization.
d. It is difficult to communicate to employees.
24. Which of the following statements is true of internal equity?
a. It occurs when lower-level employees in a firm receive the same incentives as the top executives.
b. Overpaying individuals for the value of their contributions can effectively solve internal equity issues.
c. Problems with internal equity can result in conflict, feelings of mistrust, and low morale.
d. Much of the information concerning internal equity comes from a pay survey.
25. Which of the following is the second step in the factor-comparison method for job evaluation in an organization?
a. The comparison factors to be used are selected and defined.
b. Benchmark or key jobs in the organization are identified.
c. A job-comparison chart is developed to display benchmark jobs.
d. The benchmark jobs in the organization are grouped into grades.
26. Barry & Finch, a law firm in Connecticut, performs job evaluation by organizing different sets of jobs in the firm into
clusters called grades. The job evaluator then writes definitions and descriptions of each grade, which serves as a tool for
deciding the compensation for each job. Which of the following job evaluation methods is Barry & Finch using in the
given scenario?
a. The classification system
b. The market-basket analysis method
c. The factor-comparison method
d. The point system
27. _____ is intended to provide a basic subsistence payment to employees who are between jobs—that is, for people who
have stopped working for one organization but who are assumed to be seeking employment with another organization.
a. The Social Security system
b. Unemployment insurance
c. An employee assistance plan
d. Workers’ compensation
28. _____ is a form of mandated benefit.
a. Paid time off
b. Workers’ compensation
c. A wellness program
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d. A perquisite
29. In the context of nonmandated benefits, a _____ is an extra benefit that may or may not have any direct financial value
but is considered an important reward by employees.
a. wage
b. perquisite
c. bursary
d. remuneration
30. The actual funding for Social Security benefits comes from the _____.
a. income of the legal child of a retired employee
b. withholdings of current employees
c. last employer of a retired employee
d. contingency fund of the government
31. In the context of compensations, perquisites are:
a. mandated family health-care benefits.
b. usually made available only to members of top management.
c. benefits targeted at different stages in an employee’s life.
d. paid for solely by the government.
32. Which of the following is a difference between salaries and wages?
a. Performance is the basis for wages, whereas time is the basis for salaries.
b. Wages are paid to permanent employees, whereas salaries are paid to temporary employees.
c. Wages are paid to managerial employees within a firm, whereas salaries are paid to operational and lower-level
employees within a firm.
d. Waged employees are eligible for the overtime provisions of the Fair Labor Standards Act, whereas salaried
employees are exempt from them.
33. Which of the following statements is true of employee assistance plans?
a. They focus on keeping employees from becoming sick rather than simply paying expenses when they do become
sick.
b. They are typically voluntary and referrals are confidential.
c. They provide assistance to employees in learning new skills and material.
d. They are made available only to members of top management or to certain especially valuable professionals
within the firm.
34. Brad, a manager at a new investment firm, is performing job evaluation. He selects twelve benchmark jobs in the firm
and then ranks each of these jobs against compensable job factors such as physical effort, responsibility, skill, and so
forth. This ranking is based on job descriptions created during job analysis. Later, the management meets as a group and
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develops a consensus on the assigned values for each job. In the given scenario, Brad is most likely using the _____ for
job evaluation.
a. point system
b. classification system
c. factor-comparison method
d. market-basket analysis method
35. _____ are private pension plans in which the size of the benefit is precisely known and is usually based on a simple
formula using input such as years of service and salary.
a. Unemployment insurances
b. Cafeteria-style benefits plans
c. Defined benefit plans
d. Workers’ compensations
36. Which of the following statements defines total compensation?
a. It refers to the compensation paid to employees for learning specific material that might be useful to the
organization in the future.
b. It is insurance that covers individuals who suffer a job-related illness or accident.
c. It refers to the overall value of financial compensation plus the value of additional benefits that an organization
provides to its employees.
d. It is the set of benefits that individuals receive at different stages of their life.
37. Which of the following statements is true of the Fair Labor Standards Act?
a. It makes vesting rights operational after 6 years of service at the most.
b. It provides protection for the funding underlying pension plans.
c. It allows an employee to carry a portion of his or her benefits to another job.
d. It includes provisions for the minimum wage and overtime.
38. Which of the following is a problem surrounding executive compensation?
a. Little or no relationship seems to exist between the performance of an organization and the compensation paid to
its senior executives.
b. Most senior executives are exempted from the perquisites provided by an organization to its employees.
c. Executive compensation in the United States is far lower than that paid to senior executives in other countries.
d. Executive compensation only involves incentive pay, which is based on the years of service in an organization
and commission from the clients brought to it.
39. Scott, the chief technical officer of a telecommunications company, is a member in the Golden Scion Country Club,
one of the most exclusive country clubs in the United States. Having a membership in such country clubs is usually an
expensive affair. It is, however, free of cost for Scott as it is paid by his company. In the given scenario, the membership
can be considered as a _____ given to Scott by his company.
a. remittance
b. perquisite
c. life-cycle benefit
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d. hardship premium
40. Which of the following is a disadvantage of the classification system for job evaluation?
a. It assumes that a constant and inflexible relationship exists between job factors and their value to an organization.
b. It is difficult to construct.
c. It provides rigid standards for compensation and cannot accommodate changes in the value of various individual
jobs in an organization.
d. It is difficult to communicate to employees.
41. In the context of the purposes of compensation, compensation serves a(n) _____ function wherein companies indicate
to employees what they feel is important for an employee to focus on by paying for certain kinds of activities or
behaviors.
a. workload reduction
b. equity
c. market benchmarking
d. signaling
42. Tessy, a senior accountant at a private bank in Massachusetts, retired at the age of 62. Upon retirement, she received a
benefit amount from the bank. This benefit amount equaled the total sum of money she had added to her pension plan
each year plus the amount that the bank added to it every year. In this scenario, the sum of money that Tessy received post
retirement comes from the _____.
a. Workers’ Compensation Insurance Program
b. defined contribution plan
c. cafeteria-style benefits plan
d. Social Security program
43. Donald, the CEO of a multinational organization, is given a reward by the organization in the form of a contract that
allows him to purchase 5 percent shares of the company anytime in the future at a predetermined price. Three years later,
Donald purchases those shares at half their market price. Additionally, he gets more motivated to work toward increasing
the performance of the organization. In this scenario, Donald was given a _____.
a. cafeteria-style benefits plan
b. stock-option plan
c. employee assistance plan
d. life-cycle benefit
44. Which of the following is a problem of the Social Security system?
a. Social Security benefits do not directly depend on the withholdings assessed against the employee who is retiring.
b. Individuals can avail full Social Security benefits as early as at the age of 55, which puts undue pressure on a
firm’s resources.
c. The state often lacks sufficient amount of funds needed to cover all retirees.
d. It provides limited income to those retirees who do not have other sources of income, that is, no part-time work or
pension plans.
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45. Which of the following statements is true of pay surveys?
a. Individual employees should not have access to the data collected from these surveys.
b. They are the most commonly used source of information for internal equity.
c. Large firms design their own pay surveys to get the exact data they need.
d. The jobs that are the focus of these surveys should be niche jobs.
46. Jennifer, an account manager in an automobile company, has a previous work experience of six years and has become
one of the best employees of the company in the two years since joining. However, she resigns her job when she finds out
that most of the new employees of the company, who have only two or three years of experience, get the same salary as
her. In the given scenario, Jennifer most likely resigned due to _____.
a. pay compression
b. wage elasticity
c. pay inversion
d. external inequity
47. In the context of cafeteria-style benefits plans, _____ refers to the fact that the employee most likely to select a benefit
is also most likely to use the benefit, which tends to drive up benefit costs.
a. the Peltzman effect
b. blowback
c. the cobra effect
d. adverse selection
48. An HR manager at a cosmetics company invites its new employees to a meeting to discuss company policies and to
explain the benefit plan used by the company. As part of this benefit plan, he gives each employee a list of benefits and
asks him or her to choose the benefits that he or she really wants. The company aims to increase employee satisfaction by
using this benefit plan. Which of the following benefit plans is the cosmetics company using in the given scenario?
a. A defined contribution plan
b. An employee assistance plan
c. A cafeteria-style benefits plan
d. A defined benefit plan
49. A leading placement consultancy firm gathers and presents information about the average compensation for attorneys
to its clients. This information includes data on the compensation paid by other law firms in a specific geographic region.
The firm uses this information to inform its clients about the companies that have the most external equity. In the given
scenario, the placement consultancy firm has most likely used _____ to gather information about compensation rates at
different firms.
a. job evaluation
b. a pay survey
c. a maturity curve
d. the point system
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50. A laborer who is paid in terms of the hours worked per week is most likely to receive a _____.
a. salary
b. wage
c. remittance
d. hardship duty pay
51. In the context of employment legislation, _____ are guaranteed rights to receive pension benefits.
a. human rights
b. union rights
c. vesting rights
d. access rights
52. A(n) _____ is established to give senior managers of a company the option to buy the company shares in the future at
a predetermined, fixed price.
a. social security system
b. stock-option plan
c. employee assistance plan
d. life-cycle benefit
53. Which of the following is the first step in the factor-comparison method for job evaluation in an organization?
a. The job factors to be used are selected and defined.
b. Benchmark or key jobs in the organization are identified.
c. A job-comparison chart is developed to display benchmark jobs.
d. All jobs in the organization are grouped into grades.
54. The third step in the factor-comparison method for job evaluation is:
a. selecting and defining the comparison factors to be used.
b. identifying benchmark or key jobs in an organization.
c. developing a job-comparison chart to display the benchmark jobs in an organization.
d. ranking the benchmark jobs in an organization on each compensable job factor.
55. Which of the following statements is true of a maturity curve?
a. It is used to identify benchmarks or key jobs in an organization.
b. It is used to express the relationship between pay and job responsibilities.
c. It is used when collecting information on compensation paid to employees by other employers in a particular
geographic area, industry, or occupational group.
d. It is used when the annual increase in pay varies based on the actual number of years of service a person has
accumulated.
56. _____ are designed to assist employees who have chronic problems with alcohol or drugs or who have serious
domestic problems.
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a. Employee assistance plans
b. Cafeteria-style benefits plans
c. Outbound training programs
d. Wellness programs
57. Which of the following is a disadvantage of using an above-market compensation strategy?
a. It encourages voluntary turnover among employees.
b. A firm using this strategy incurs high labor costs.
c. It creates a culture of elitism and competitive superiority.
d. Employees in firms using this strategy experience external inequity.
58. In the context of nonmandated benefits, _____ are targeted at different stages of an employee’s existence.
a. wellness programs
b. defined contribution plans
c. life-cycle benefits
d. employee assistance plans
59. Which of the following is a life-cycle benefit offered by employers?
a. Helping employees cope with chronic drug and alcohol problems
b. Providing company-paid day care facilities to employees
c. Providing fitness and nutrition consultation to employees
d. Helping employees deal with domestic problems
60. _____ are private pension plans in which the size of the benefit depends on how much money is put into the plan.
a. Unemployment insurances
b. Cafeteria-style benefits plans
c. Defined contribution plans
d. Workers’ compensations
61. The _____ is a job evaluation technique that requires managers to quantify, in objective terms, the value of the various
elements of specific jobs.
a. market-basket analysis method
b. classification system
c. factor-comparison method
d. point system
62. Briefly explain pay secrecy, pay compression, and pay inversion in the context of wage and salary administration.
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63. What are private pension plans? Briefly explain the two types of private pension plans.
1974.Under defined contribution plans, the size of the benefit depends on how much money is contributed to the plan.
64. Briefly explain the steps involved in the classification system for job evaluation.
65. Differentiate between pay for knowledge and skill-based pay with examples.
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66. Discuss the various determinants of a firm’s compensation strategy.