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Chapter 7: Wage and Salary Issues
1. Which of the following terms refers to a doctrine that advocates one standard wage rate for
each job and all employees who perform it?
a. front-end loading
b. profit-sharing
c. pay equity
d. pyramiding
2. Under a piecework system, employees are paid depending on ________.
a. the number of steps required to produce a unit
b. the profits generated by the company in the month
c. the total hours, including overtime, worked
d. the number of units produced
3. Typically, during ________ bargaining, the union leaders choose what they perceive as the
weakest company—the one most susceptible to granting wage increases—and begin
negotiations. Once negotiations are completed, the union insists that other firms in the
industry agree to equal wage and benefit increases.
a. integrative
b. pattern
c. surface
d. arena
4. According to the ________ Act, certain employees must receive overtime pay of one and a
half times the normal rate when they work over 40 hours per week.
a. Selective Training and Service
b. Worker Adjustment and Retraining Notification
c. Fair Labor Standards
d. National Labor Relations
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5. According to the Fair Labor Standards Act, under which of the following circumstances is an
employee most likely to be considered eligible to receive overtime pay?
a. The employee earns over $100,000 per year.
b. The employee has the authority to recommend the hiring or firing, or promotion of others.
c. The employee directs three full-time employees.
d. The employee is paid by the hour.
6. According to the FLSA, in order to be exempt from overtime compensation requirements, an
employee must be paid a minimum salary of ________ per week.
a. $275
b. $365
c. $455
d. $585
7. Which of the following terms refers to the payment of overtime on overtime that occurs if the
same hours of work qualify for both daily and weekly overtime payment?
a. pyramiding
b. pink sheeting
c. featherbedding
d. whistle-blowing
8. The ________ Act regulates employers who hold federal government contracts of $2,000 or
more for federal construction projects. It provides that employees working on these projects
must be paid the prevailing wage (PW) rate.
a. National Labor Relations
b. Taft–Hartley
c. Selective Training and Service
d. Davis-Bacon
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9. The ________ Act covers employees with federal contracts of over $10,000. It requires
employers to pay overtime for any hours worked over eight per day at a rate of one and a half
times the normal hourly rate.
a. National Labor Relations
b. Taft–Hartley
c. Walsh-Healey
d. Davis-Bacon
10. In which of the following wage systems do employees receive a standard rate of pay per unit
of output?
a. profit-sharing system
b. piece-rate system
c. deferred wage system
d. Scanlon system
11. Which of the following refers to a deferred wage increase in which a larger proportion of the
total increase occurs in the first year of a multiyear contract?
a. rising piece rate
b. Scanlon plan
c. falling piece rate
d. front-end loading
12. A 10 percent three-year wage increase is provided as a 2 percent increase in the first year, 3
percent in the second year, and 5 percent in the third year. This is an example of a ________
contract.
a. falling piece rate
b. Scanlon plan
c. back-loaded
d. wage reopener
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13. A ________ contract provides a lower wage adjustment in the first year with higher increases
in later years of a multiyear contract.
a. wage reopener
b. falling piece rate
c. pyramiding
d. back-loaded
14. Which of the following statements is TRUE of back-loaded contracts?
a. A back-loaded contract provides wage increments according to the changes in the consumer
price index (CPI).
b. A company enters into a back-loaded contract only when it is facing a financial crisis.
c. A back-loaded contract provides a lower wage adjustment in the first year with higher
increases in later years of a multiyear contract.
d. A company provides a back-loaded contract only when it cannot provide cost of living
adjustments every year.
15. Which of the following statements is TRUE of cost-of-living adjustments (COLAs)?
a. COLAs are provided to employees only if the company makes a profit.
b. The value of the COLA changes from employee to employee based on performance.
c. The majority of collective bargaining agreements provide for monthly COLA adjustments.
d. The value of the COLA is based on the consumer price index (CPI).
16. Which of the following statements is TRUE of a profit-sharing plan?
a. Under a profit-sharing plan, wage increases provided to the workers are based on the
consumer price index.
b. Under a profit-sharing plan, the wages paid to workers are based on the number of hours they
work over the required time.
c. Profit-sharing plans tend to increase waste and decrease efficiency.
d. Under a profit sharing plan, employees receive a lump-sum payment in addition to their
regular wages based on sales levels.
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17. Which of the following statements is TRUE of a variable wage formula provision?
a. A variable wage formula provision is most commonly found in the private sector.
b. According to the variable wage formula provision, future wage increase is based on the
consumer price index.
c. According to the variable wage formula provision, future wage rate increases depend on the
employer’s future ability to pay.
d. Under the variable wage formula provision, employees receive a share of the employer’s
profits in addition to their regular wages.
18. Which of the following terms refers to a group incentive plan in which accrued savings from
increased efficiency are distributed among the workers and the employer?
a. back-loaded plan
b. Scanlon plan
c. pyramiding
d. piece-rate plan
19. A ________ wage system is a wage system that pays newly hired workers less than current
employees performing the same or similar jobs.
a. piece-rate
b. standard pay
c. back-loaded
d. two-tier
20. Which of the following statements is TRUE of lump-sum payments?
a. It is a pay incentive system in which employees receive a share of the employer’s profits on a
monthly basis as their payment.
b. It is a wage system that pays newly hired workers less than current employees performing the
same or similar jobs.
c. It is a method of providing a general wage increase as a onetime payment rather than adding
the increase to the hourly or annual salary of the employee.
d. It is a method of providing a general wage increase in which a lower wage adjustment is
provided in the first year with higher increases in later years.
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21. Which of the following terms refers to a type of bargaining that involves negotiating
reductions in previously negotiated wages, benefits, or work rules, usually in exchange for
management-guaranteed employment levels during the term of a contract?
a. pattern bargaining
b. arena bargaining
c. distributive bargaining
d. concession bargaining
22. Which of the following terms refers to a bargaining process during which management meets
with representatives of all the bargaining units at one time to discuss difficult economic
issues?
a. distributive bargaining
b. arena bargaining
c. pattern bargaining
d. concession bargaining
23. Contract costs for retiree benefits increases in retirement and health care provided in earlier
contracts are known as _______ costs.
a. legacy
b. sunk
c. historical
d. inflation
24. Payback agreements require an employee ________.
a. to pay a fine to the employer if the employee actively solicits support for the union
b. to contribute a fixed percentage of his/her salary to the employee provident fund
c. to pay the employer the cost of certain benefits if he/she voluntarily quits before a specified
period of time
d. to pay a fine to the employer if his/her output is less than the predefined level of output
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25. Which of the following benefits is most likely to be included in a payback agreement?
a. housing rent allowance
b. conveyance costs
c. health insurance premium
d. relocation costs of new employees
26. ________ agreements require an employee who voluntarily quits before a specified period of
time to pay the employer the cost of certain benefits.
a. Back-loaded
b. Legacy
c. Payback
d. Concessional
27. According to the productivity theory, ________.
a. newly hired workers should be paid less than current employees performing the same or
similar jobs
b. wage increases provided to the workers should be based on the changes in the consumer price
index (CPI)
c. employees should be paid a fixed hourly rate of pay irrespective of their productivity
d. employees should share in increased profits achieved because of their efforts
28. Which of the following terms refers to a systematic method of determining the worth of a job
to an organization?
a. job enrichment
b. job rotation
c. job evaluation
d. job enlargement
29. Which of the following statements is TRUE regarding job evaluation?
a. Job evaluation procedures do not include analyzing employee performance.
b. Job evaluation involves reviewing the tasks of jobs so as to write a description of the jobs.
c. Job evaluation is the process of recruiting and hiring new employees for a job.
d. The process of job evaluation is performed by the management to determine the amount of
wage increase that can be offered to the workers.
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30. Which of the following is usually the largest single cost incurred by most corporations?
a. cost of raw material
b. labor cost
c. cost of transporting finished goods
d. overhead cost
31. The primary goal for most management negotiators in bargaining is to ________.
a. decrease the number of work hours
b. maximize the health insurance benefits provided to the employees
c. increase the value of the cost-of-living adjustments
d. minimize the cents-per-hour direct wage increase
32. The first step in determining compensation costs is to determine the value of the ________.
a. overtime
b. pension benefits
c. base compensation
d. bonus
33. Which of the following factors is considered when calculating base compensation?
a. bonus
b. rate of pay per unit
c. pension benefits
d. overtime pay
34. The direct increase in benefits caused by a negotiated wage increase is referred to as the
________.
a. legacy cost
b. front-end load
c. sunk cost
d. roll-up
35. Roll-up is also known as ________.
a. yield
b. legacy cost
c. creep
d. rising piece rate
True/False
36. Unions generally bargain for pay systems based on output, such as a merit or piece-rate
systems or merit evaluations by supervisors, rather than wages based on time.
37. Union workers must receive more pay compared to nonunion workers on similar jobs.
38. Organizations in highly labor-intensive industries are usually more able to provide wage
increases than organizations that are in more capital-intensive industries.
39. Arena bargaining is a collective bargaining practice in which a national industry or union
strives to establish equal wages and benefits from several unions or employers in the same
industry.
40. As per the Fair Labor Standards Act, an employee who is paid by the hour or who makes a
salary of less than $455 per week is nonexempt from receiving overtime compensation
regardless of the type of work performed.
41. The amendments to the Fair Labor Standards Act provide for a training wage for employees
less than 20 years of age set at 85 percent of the minimum wage.
42. Employees earning over $100,000 per year do not receive overtime if their duties are
executive, administrative, or professional.
43. The FLSA stipulates that employees must receive overtime pay of one and a half times the
normal rate when they work over 30 hours per week.
44. A job title is not a sufficient basis for exemption from the overtime provisions of the FLSA.
45. If an employee is paid $455 per week and his/her primary duty is management of the
organization, then the employee will be exempt from overtime provisions of the FLSA.
46. The “pyramiding” of overtime pay is accepted in most of the contract agreements.
47. The Davis-Bacon Act of 1931 regulates employers who hold federal government contracts of
$2,000 or more for federal construction projects. It provides that employees working on these
projects must be paid the prevailing wage (PW) rate.
48. A three-year total wage increase package that provides 8 percent wage increase in the first
year, 5 percent in the second year, and 2 percent in the third year is known as a back-end
contract.
49. Union negotiators often prefer back-loaded contracts so that their members receive additional
wages and realize a large increase in pay in the first year itself.
50. A collective bargaining provision, effective for the term of the contract, which provides for
contract talks to be reopened only for the renegotiation of wage rates, is known as a
severability provision.
51. A back-loaded contract provides a lower wage adjustment in the first year with higher
increases in later years of a multiyear contract.
52. COLAs are considered to be necessary because the real wage is eroded by inflation.
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53. The variable wage formula provision is most commonly found in the private sector.
54. A two-tier wage system is a wage system in which the wages received by the employees are
directly proportional to their performance.
55. A piece-rate system is a wage system that pays newly hired workers less than current
employees performing the same or similar jobs.
56. Surface bargaining is a process of bargaining during which management meets with
representatives of all the bargaining units at one time to discuss difficult economic issues.
57. Contract costs for retiree benefits increases in retirement and health care provided in earlier
contracts are known as legacy costs.
58. According to productivity theory, employees should share in increased profits gained by the
greater productivity achieved because of their efforts.
59. According to the value-added concept, wages paid to the employees should be equal to their
contribution of labor to the final product.
60. Job evaluation is a systematic method of determining the worth of a job to an organization.
61. Wage surveys are used to determine the average salary for specified positions in the job
market.
62. The base compensation includes overtime, pension benefits, and bonuses.
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63. Base compensation is an employee’s general rate of pay per unit or hour, disregarding
payments for items such as overtime, pension benefits, and bonuses.
64. The direct increase in benefits caused by a negotiated wage increase is referred to as the roll-
up.
65. Add-on refers to the other costs that rise when wage rates are increased.