Fundamentals of Human Resource Management, 5e (Dessler)
Chapter 10 Developing Compensation Plans
1) ________ refers to all forms of pay or rewards going to employees and arising from their
employment.
A) Employee reimbursement
B) Employee compensation
C) Salary
D) Benefits
2) Direct financial payments include all of the following EXCEPT ________.
A) commissions
B) insurance
C) salaries
D) incentives
3) Which of the following terms refers to pay in the form of financial benefits, such as
insurance?
A) merit raises
B) out-of-pocket expenses
C) indirect financial payments
D) direct financial payments
4) Which compensation-related law contains provisions for minimum wage, maximum hours,
overtime pay, equal pay, and child labor?
A) Davis-Bacon Act
B) Fair Wages Act
C) Civil Rights Act
D) Fair Labor Standards Act
5) All of the following issues are addressed by the Fair Labor Standards Act EXCEPT ________.
A) termination
B) overtime pay
C) record-keeping
D) minimum wage
6) Which law makes it illegal to discriminate against any individual with respect to
compensation because of race, color, religion, sex, or national origin?
A) Employer Retirement Income Security Act
B) Title VII of the Civil Rights Act
C) Fair Labor Standards Act
D) Davis-Bacon Act
7) According to the Fair Labor Standards Act, if a worker covered by the act works more than 40
hours, he or she will receive overtime pay at a rate of ________ of normal pay for any hours
worked over 40 in a workweek.
A) 50%
B) 100%
C) 125%
D) 150%
8) Jill works as a cashier at a grocery store. She earns $10 an hour (or $400 for a 40-hour week).
Last week, she worked 46 hours. What is the minimum amount that Jill earned last week?
A) $430
B) $460
C) $490
D) $520
9) Jorge worked 6 hours of overtime this week but has decided to take time off instead of
overtime pay. How many hours will Jorge receive in time off from work?
A) 3 hours
B) 6 hours
C) 9 hours
D) 12 hours
10) Which of the following is TRUE for employers who use independent contractors?
A) Payroll taxes are paid by the employer.
B) Federal income taxes are charged at a reduced rate.
C) Social Security taxes are higher than for regular employees.
D) Fair Labor Standards Act overtime requirements do not apply.
11) The ________ states that employees of one sex may not be paid wages at a rate lower than
that paid to employees of the opposite sex for doing roughly equivalent work.
A) American Disabilities Act
B) Civil Rights Act
C) Employer Retirement Income Security Act
D) Equal Pay Act
12) According to the Family and Medical Leave Act, eligible employees can take up to
________ weeks of unpaid, job-protected leave for the birth of a child or for the care of a child,
spouse, or parent.
A) two
B) four
C) six
D) twelve
13) The ________ gave employees the right to organize, bargain collectively, and engage in
concerted activities for the purpose of collective bargaining.
A) Fair Labor Standards Act
B) Civil Rights Act
C) Employer Retirement Income Security Act
D) National Labor Relations Act
14) Which of the following has historically been the primary issue in collective bargaining?
A) safety
B) wage rates
C) income security
D) health care benefits
15) Unions typically negotiate all of the following issues EXCEPT ________.
A) wage rates
B) income security
C) time off with pay
D) unpaid medical leave
16) Which of the following terms refers to a compensation plan that advances a firm’s strategic
goals?
A) workers’ compensation package
B) aligned reward strategy
C) performance pay plan
D) strategic management
17) Homelife, a national chain of high-end furniture stores, employs nearly 800 workers. In the
past few years, the company’s market share has dropped significantly, and employee turnover has
increased. Upper management is considering the implementation of a new compensation policy
in its efforts to turn the company around. Historically, the company has paid all employees
similarly with some variation for seniority but no distinction between high and low performers.
All of the following questions are relevant to Homelife‘s decision to develop an aligned reward
strategy EXCEPT ________.
A) What compensation programs should Homelife use to reinforce necessary employee
behaviors?
B) How well does Homelife’s current compensation program match the company’s strategic
aims?
C) What were the results of the most recent Homelife customer review ratings?
D) What compensation programs should Homelife use to reinforce desired employee behaviors?
18) Jason is an information systems technician in a town in North Carolina with a population of
100,000. He earns $35,000/year. He recently found out that a nearby town with a similar
population pays people in the same position $40,000/year. Jason is concerned with the ________
form of equity.
A) distributive
B) procedural
C) internal
D) external
19) External equity refers to ________.
A) how a job’s pay rate in one company compares to the job’s pay rate in other companies
B) how fair the job’s pay rate is when compared to other jobs within the same company
C) the fairness of an individual’s pay as compared to what his or her co-workers are earning for
the same or very similar jobs within the company, based on each individual’s performance
D) the perceived fairness of the processes and procedures used to make decisions regarding the
allocation of pay
20) Internal equity refers to ________.
A) how a job’s pay rate in one company compares to the job’s pay rate in other companies
B) how fair the job’s pay rate is when compared to other jobs within the same company
C) the fairness of an individual’s pay as compared to what his or her co-workers are earning for
the same or very similar jobs within the company, based on each individual’s performance
D) the perceived fairness of the processes and procedures used to make decisions regarding the
allocation of pay
21) What type of pay plan is being used when workers are paid a sum for each unit they
produce?
A) base pay
B) competency-based pay
C) job-based pay
D) piecework
22) Which 1931 law allows the secretary of labor to set wage rates for laborers employed by
contractors working for the federal government?
A) Title VII
B) Davis-Bacon Act
C) Fair Labor Standards Act
D) Walsh-Healey Public Contract Act
23) Which law requires time-and-a-half pay for any hours worked over 40 hours per week
involving government contracts amounting to $10,000 or more?
A) Title VII
B) Davis-Bacon Act
C) Fair Labor Standards Act
D) Walsh-Healey Public Contract Act
24) Which of the following professions is most likely categorized as nonexempt?
A) general manager
B) pharmacist
C) paralegal
D) teacher
25) Which term refers to a compensation plan that includes traditional pay, job design, career
development, and recognition?
A) point method
B) total rewards
C) competency-based pay
D) talent-management salaries
26) Which of the following employees would most likely be categorized as nonexempt?
A) Anna, a registered nurse who earns $59,000/year
B) Bob, a teacher who earns $56,000/year
C) Carol, a bookkeeper who earns $23,000/year
D) Dave, a taxi driver who earns $20,000/year
27) All of the following duties most likely indicate that an employee is exempt EXCEPT
________.
A) making sales outside of the office
B) performing manual office work
C) designing computer systems
D) managing subordinates
28) Financial benefits like employer-paid insurance and vacations are not a part of employee
compensation.
29) Indirect payments that contribute to an employee’s compensation include variable pay like
commissions and bonuses.
30) When nonexempt employees work more than 40 hours per week, employers must pay
overtime at a rate of at least one-and-a-half times the normal pay for any hours worked over 40
in a workweek.
31) Because the minimum wage is set by the Fair Labor Standards Act, there is no variation
among states in regarding the minimum wage paid to hourly workers.
32) The Equal Pay Act states that employees of one sex may not be paid wages at a rate lower
than that paid to employees of the opposite sex for doing roughly equivalent work.
33) The provision of the Family and Medical Leave Act that entitles employees to take up to 12
weeks of unpaid, job-protected leave for the birth of a child only applies to women.
34) External equity refers to how fair the job’s pay rate is when compared to other jobs within the
same company.
35) An exempt employee is eligible for overtime pay.
36) Taxi drivers and agricultural workers are always considered exempt employees.
37) As an HR manager, how would you establish pay rates while ensuring external, internal,
individual and procedural equity?
38) What federal laws stipulate how employers compensate employees? How does an employer
determine the monetary value of a job?
39) Lisa is an HR manager who has been assigned the task of establishing pay rates to ensure
external equity. What should Lisa most likely do first?
A) conduct a salary survey
B) compare performance appraisals
C) analyze a scatter plot of employee pay
D) use wage curves to price each pay grade
40) Homelife, a national chain of high-end furniture stores, employs nearly 800 workers. In the
past few years, the company’s market share has dropped significantly, and employee turnover has
increased. Upper management is considering the implementation of a new compensation policy
in its efforts to turn the company around. Historically, the company has paid all employees
similarly with some variation for seniority but no distinction between high and low performers.
Which of the following, if TRUE, best supports the argument that Homelife executives should
primarily address internal equity issues when developing a new compensation plan?
A) Most of Homelife’s former employees are now employed at competitors’ stores in similar
positions.
B) Homelife employees receive annual performance appraisals at which time they set career
goals.
C) Salary surveys indicate dissatisfaction among the Homelife managers in different
departments.
D) Homelife pays its sales managers commissions in addition to base salaries and health
benefits.
41) Homelife, a national chain of high-end furniture stores, employs nearly 800 workers. In the
past few years, the company’s market share has dropped significantly, and employee turnover has
increased. Upper management is considering the implementation of a new compensation policy
in its efforts to turn the company around. Historically, the company has paid all employees
similarly with some variation for seniority but no distinction between high and low performers.
Which of the following, if TRUE, supports the argument that Homelife should distribute salary
surveys before establishing new pay rates?
A) Homelife executives want to identify benchmark jobs before determining the worth of other
jobs.
B) Computerized job evaluation systems will be used by Homelife to generate questionnaires.
C) Homelife executives plan to use the compensable factors emphasized by the Equal Pay Act.
D) A wage curve needs to be established by Homelife for the purpose of federal compliance.
42) ________ is a formal and systematic comparison of jobs to determine the worth of one job
relative to another.
A) Job analysis
B) Job evaluation
C) Job description
D) Job classification
43) Which of the following is NOT one of the compensable factors emphasized in the Equal Pay
Act?
A) skills
B) effort
C) accountability
D) responsibility
44) Which of the following is used to anchor the employer’s pay scale?
A) grades
B) job aid
C) benchmark jobs
D) human resource metric
45) Basic factors that establish how several jobs compare to one another and that determine the
pay for each job are called ________.
A) compensable factors
B) job evaluation factors
C) ranking factors
D) analysis factors
46) When using the job classification method of job evaluation, raters categorize jobs into groups
of similar jobs called ________.
A) classes
B) grades
C) sections
D) cohorts
47) Which of the following best describes the point method of job evaluation?
A) comparing the importance of each compensable factor
B) ranking each job relative to all other jobs based on pay grade
C) identifying and quantifying the compensable factors present in a job
D) deciding which jobs have a higher number of compensable factors
48) Which job evaluation method is a quantitative technique involving the identification of
several compensable factors and the degree to which each of these factors is present in the job?
A) ranking method
B) point method
C) factor comparison
D) job classification method
49) A ________ is comprised of jobs of approximately equal difficulty or importance as
established by job evaluation.
A) pay group
B) benchmark
C) pay grade
D) class
50) Which of the following shows the relationship between the value and average pay of a job?
A) pay group
B) pay grade
C) benchmark
D) wage curve
51) What is the purpose of the wage curve?
A) to show the relationship between the value of the job and the current average pay rates
B) to equate jobs of similar difficulty or importance as established by job evaluation
C) to cluster jobs into logical groupings for pay purposes
D) to choose benchmark jobs within each pay grade
52) Which of the following most likely indicates the need for job evaluation?
A) work stoppages
B) low turnover rates
C) vertical promotions
D) part-time employees
53) HR managers and supervisors at Coffman Enterprises have identified a need for job
evaluation and have gained the cooperation of employees. What is the next step in preparing for
the job evaluation process?
A) separating exempt and nonexempt jobs
B) selecting a job evaluation committee
C) identifying benchmark jobs
D) ranking jobs by grade
54) Which job evaluation method is considered the simplest and least expensive?
A) job classification method
B) comparison method
C) ranking method
D) point method