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1. If rates of pay are high, which creates a large applicant pool, then organizations may choose to raise their selection
standards.
a.
True
b.
False
ANSWER:
True
2. Strategic compensation is the term used for all the processes used to determine the market rates to pay employees.
a.
True
b.
False
ANSWER:
False
3. Raising selection standards and hiring better-qualified employees can reduce training costs.
a.
True
b.
False
ANSWER:
True
4. LennoCorp has introduced a new recognition program in which employees are publicly recognized for outstanding
efforts or contributions to the firm. This is a form of nonfinancial compensation.
a.
True
b.
False
ANSWER:
True
5. Rewarding an employee’s past performance is not a goal of a strategic compensation policy.
a.
True
b.
False
ANSWER:
False
6. LennoCorp is using a form of the OKR system as a way to link compensation to performance. An appropriate objective
for the sales team might be “sales should increase by 7 percent this month.”
a.
True
b.
False
ANSWER:
True
7. LennoCorp is using a form of the OKR system as a way to link compensation to performance. An appropriate objective
for the production unit might be “productivity should increase.”
a.
True
b.
False
ANSWER:
False
8. Pay-for-performance programs have little, if any, effect on employee productivity.
a.
True
b.
False
ANSWER:
False
9. Ari works between 40 and 50 hours every week. How many hours he works in a given week depends on how much
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work he has. He is paid every other Friday, and the amount of his check is always the same. Ari is an hourly employee.
a.
True
b.
False
ANSWER:
False
10. Pay equity is achieved when employees’ compensation is equal to the value of the work they perform.
a.
True
b.
False
ANSWER:
True
11. Debbie works anywhere from 8 to 10 hours a day, five days a week. She is paid every other Friday, and the amount of
his check is always the same. Ari is a nonexempt employee.
a.
True
b.
False
ANSWER:
False
12. The expectancy theory of motivation predicts that one’s level of motivation depends on the attractiveness of the
rewards sought by employees and the probability of obtaining those rewards.
a.
True
b.
False
ANSWER:
True
13. The compensation scorecard creates a comparative tool within the organization that can reinforce desired outcomes
that are unique to the company’s strategy.
a.
True
b.
False
ANSWER:
True
14. Managers in companies with compensation scorecards often struggle to know if the promotions, raises, bonuses, and
pay adjustments they make are in line with the rest of the organization and its strategy.
a.
True
b.
False
ANSWER:
False
15. Pay secrecy is still prevalent in organizations despite its negative effect on motivation and employee trust.
a.
True
b.
False
ANSWER:
True
16. Josef is a nonexempt employee. His regular pay rate is $20 an hour. It was very busy at work this week, and he
worked 46 hours. He earned $180 over his regular pay, so that his gross pay for the week will be $980.
a.
True
b.
False
ANSWER:
True
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17. Aida is an exempt employee. Her regular pay is $1000 a week, which works out to about $25 an hour. It was very
busy at work this week, and she worked 46 hours. She earned $225 over her regular pay, so that her gross pay for the
week will be $1225.
a.
True
b.
False
ANSWER:
False
18. Nonexempt employees are covered by the Fair Labor Standards Act and must be paid at the rate of a rate of one and a
half times their regular pay rate for time worked in excess of forty hours in their workweek.
a.
True
b.
False
ANSWER:
True
19. Production managers at LennoCorp are required to exercise independent judgment in completing their jobs. They
would be classified as exempt employees, which means that they are not covered by the overtime provisions under the
Fair Labor Standards Act.
a.
True
b.
False
ANSWER:
True
20. When the unemployment rate is low, there are fewer qualified workers looking for jobs. This labor market condition
may encourage companies to raise wages in order to recruit or retain employees.
a.
True
b.
False
ANSWER:
True
21. Internal factors that influence wage rates include the worth of a job and the employer’s ability to pay.
a.
True
b.
False
ANSWER:
True
22. The worth of a job is determined formally through the wage and salary survey.
a.
True
b.
False
ANSWER:
False
23. The worth of a job, as it is determined by its comparative worth with jobs in other firms, is an external factor in the
wage mix.
a.
True
b.
False
ANSWER:
False
24. Randall is a clerk in the accounting group at LennoCorp. At a recent lunch with colleagues, who are all clerks in
different departments at LennoCorp, Randall discovered that the clerks in the development teams earn higher wages than
he does. In this situation, Randall learned that he does not have internal pay equity.
a.
True
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b.
False
ANSWER:
False
25. A critical concern for a successful pay-for-performance system is the perceived fairness of the pay decision.
a.
True
b.
False
ANSWER:
True
26. Pay levels are limited in part by profitability of the firm and productivity of employees.
a.
True
b.
False
ANSWER:
True
27. The consumer price index tracks the change in price over time of a “market basket” of goods and services.
a.
True
b.
False
ANSWER:
True
28. The consumer price index is available for the nation as a whole and for various U.S. cities.
a.
True
b.
False
ANSWER:
True
29. Real wages represent the difference between wage increases and CPI increases.
a.
True
b.
False
ANSWER:
True
30. Clarissa and her friends are all marketing managers working on different product lines at LennoCorp. When they
compared their salaries, they discovered that they all make about the same amount. In this situation, Clarissa and her
friends have individual pay equity.
a.
True
b.
False
ANSWER:
True
31. Job evaluation is a non-systematic, qualitative process of determining the relative worth of jobs in order to establish a
comparison with the prevailing market and regional value of a job within a job family.
a.
True
b.
False
ANSWER:
False
32. A committee has been formed to evaluate the jobs at LennoCorp. They have written each job title, with a list of its
duties and responsibilities, on a separate index card. Now they are putting those cards in order of importance. This
committee is using a job ranking system to evaluate the jobs.
a.
True
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b.
False
ANSWER:
True
33. Job ranking is a simple method that provides a precise measure of each job’s worth.
a.
True
b.
False
ANSWER:
False
34. The job classification system is a quantitative job evaluation procedure that determines a job’s relative value by
calculating the total points assigned to it.
a.
True
b.
False
ANSWER:
False
35. All of the jobs at LennoCorp are grouped according to predetermined grades based on the level of skill, breadth of
knowledge, and amount of responsibility each job requires. When a new position needs to be created, its specifications
can be compared to the descriptions of each grade to determine the appropriate wage. LennoCorp uses a job ranking
system.
a.
True
b.
False
ANSWER:
False
36. The point system of job evaluation permits jobs to be evaluated quantitatively based on compensable factors.
a.
True
b.
False
ANSWER:
True
37. Compensable factors include skills, efforts, responsibilities, and leadership.
a.
True
b.
False
ANSWER:
True
38. Point manuals contain job descriptions and the number of points assigned to each job type.
a.
True
b.
False
ANSWER:
False
39. A point manual can be used to determine the external equity of a job.
a.
True
b.
False
ANSWER:
False
40. The Hay profile method is useful for evaluating jobs of all types and levels.
a.
True
b.
False
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ANSWER:
True
41. Howard is responsible for performing job evaluations. To do so, he considers the knowledge, mental activity, and
accountability required by the position. Howard is using the Hay profile.
a.
True
b.
False
ANSWER:
True
42. Employers refer to the area from which they obtain certain types of workers as the labor market.
a.
True
b.
False
ANSWER:
True
43. Changes in technology have required LennoCorp to create several new jobs in the company. Because LennoCorp uses
a job classification system, the specifications of each new position can be compared to the descriptions of each grade to
determine the appropriate wage.
a.
True
b.
False
ANSWER:
True
44. The National Compensation Survey published by the Bureau of Labor Statistics can provide compensation statistics
broken down by wages, salary, and benefits.
a.
True
b.
False
ANSWER:
True
45. An advantage of published wage surveys is compatibility with the organization’s jobs.
a.
True
b.
False
ANSWER:
False
46. Sandra is a clerk in a mid-size office. She has two friends who have similar jobs in other offices. All three friends have
been in their jobs for about the same length of time, and their wages are almost identical. Sandra has pay equity.
a.
True
b.
False
ANSWER:
True
47. The wage curve represents the wages paid to jobs after adjustment for cost-of-living.
a.
True
b.
False
ANSWER:
False
48. Managers group similar jobs into a pay grade in order to help with the setting of wages for all jobs.
a.
True
b.
False
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ANSWER:
True
49. Employees are likely to accept a promotion if succeeding rate ranges are larger in size.
a.
True
b.
False
ANSWER:
True
50. Steps within a rate range allow pay increases based on merit or seniority.
a.
True
b.
False
ANSWER:
True
51. Red circle rates are above the maximum for the pay range and are often frozen until the range shifts upward through
market wage adjustments.
a.
True
b.
False
ANSWER:
True
52. When employees are paid according to the skills and knowledge they have rather than the specific jobs they perform,
they are paid according to competence-based compensation.
a.
True
b.
False
ANSWER:
True
53. One of the major criticisms of job-based compensation systems is that they often fail to reward employees for their
skills or the knowledge they possess.
a.
True
b.
False
ANSWER:
True
54. Marni works for a company that uses a job-based compensation system. The very nature of this system encourages her
to learn new skills, which will expand her career options and also increase her value to the company.
a.
True
b.
False
ANSWER:
False
55. An advantage of competence-based pay from the employee’s perspective is that there is no limit to what they can earn
by learning new skills.
a.
True
b.
False
ANSWER:
False
56. A major criticism of competence-based pay systems is that after achieving the top wage, employees may be reluctant
to continue their educational training.
a.
True
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b.
False
ANSWER:
True
57. Broadbanding refers to collapsing of many traditional salary grades into a few wide salary bands.
a.
True
b.
False
ANSWER:
True
58. Elias works at Lenno Landscaping as a mower. He is paid a set rate for each lawn that he mows. Elias receives
piecework compensation.
a.
True
b.
False
ANSWER:
True
59. Employees at LennoCorp are motivated to work hard because they know that their performance will lead to monetary
rewards that are worth the extra effort. According to the Expectancy theory, this compensation package has
instrumentality.
a.
True
b.
False
ANSWER:
True
60. Strategic compensation is the compensation of employees in ways that enhance motivation and growth while
concurrently aligning their efforts with the goals of the organization.
a.
True
b.
False
ANSWER:
True
61. Because management positions are more difficult to evaluate and involve certain demands not found in jobs at the
lower levels, some organizations do not attempt to include them in their job evaluation programs for hourly employees.
a.
True
b.
False
ANSWER:
True
62. Elaine sometimes checks work-related e-mail from home on the weekend and follow up on it, even when her
supervisor does not specifically ask her to. Under the Fair Labor Standards Act (FLSA), her employer must pay her for
this work.
a.
True
b.
False
ANSWER:
True
63. Indirect compensation includes healthcare benefits and commissions.
a.
True
b.
False
ANSWER:
False
64. Sally is a freelance editor. She is paid by the page for each page that she edits. Sally is an hourly employee.
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a.
True
b.
False
ANSWER:
False
65. Because pay rate compression is an external pay equity issue, employees who face it are more likely to seek
advancement within the firm.
a.
True
b.
False
ANSWER:
False
66. A company that is facing the challenge of pay rate compression might want to increase the size of pay increases for
merit-worthy employees and redesign its pay structure to increase the spread between hourly and supervisory employees.
a.
True
b.
False
ANSWER:
True
67. Because it makes managers responsible for how they spend company money, a compensation scorecard can cloud the
transparency of how people are rewarded.
a.
True
b.
False
ANSWER:
False
68. Which of the following is an example of a nonfinancial compensation?
a.
Bonuses
b.
Commissions
c.
Health insurance
d.
Employee recognition programs
ANSWER:
d
69. __________ encompasses employee wages and salaries, incentives, bonuses, and commissions.
a.
Nonfinancial compensation
b.
Indirect compensation
c.
Direct compensation
d.
Component compensation
ANSWER:
c
70. __________ includes employee recognition programs, rewarding jobs, organizational support, work environment, and
flexible work hours to accommodate personal needs.
a.
Financial compensation
b.
Nonfinancial compensation
c.
Direct compensation
d.
Indirect compensation
ANSWER:
b
71. Steve has to submit a timecard every week and his compensation is based upon the amount of time he works, rather
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than what he accomplishes. Steve is compensated based on
a.
piecework.
b.
competence.
c.
skilled labor.
d.
hourly work.
ANSWER:
d
72. Pay-for-performance programs
a.
tie rewards to firm profitability.
b.
are easy to implement and measure.
c.
tie rewards to employee effort.
d.
result in negligible increases in output.
ANSWER:
c
73. The term pay-for-performance can encompass all of the following EXCEPT
a.
merit pay.
b.
base salary.
c.
cash bonuses.
d.
gainsharing plans.
ANSWER:
b
74. Which of the following compensation options would not qualify under the term pay-for-performance?
a.
Seniority-based pay
b.
Group incentive
c.
Pay banding
d.
Gainsharing plans
ANSWER:
a
75. Which of the following is NOT a common goal of a strategic compensation policy?
a.
To reward employees’ past performance
b.
To mesh employees’ past performance with organizational goals
c.
To remain competitive in the labor market
d.
To attract new employees
ANSWER:
b
76. The fact that people make comparisons to others is central to
a.
expectancy theory.
b.
the need for pay secrecy.
c.
pay-for-performance programs.
d.
equity theory.
ANSWER:
d
77. When the organization pays wages that are relatively equal to that of other employers for similar work, it is the basis
of
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a.
comparable worth.
b.
external equity.
c.
compensable factors.
d.
equal pay.
ANSWER:
b
78. The concept that employees should exert greater work effort if they have reason to expect it will result in a valued
reward forms the basis of
a.
expectancy theory.
b.
equity theory.
c.
instrumentality.
d.
internal equity.
ANSWER:
a
79. Instrumentality refers to
a.
wage rates of acceptable level.
b.
development of both internal and external pay equity.
c.
wage rates above the pay range maximum.
d.
rewards that are valued and motivate employees.
ANSWER:
d
80. There is reason to believe that pay secrecy can do all of the following EXCEPT
a.
generate distrust in the compensation system.
b.
reduce employee motivation.
c.
inhibit organizational effectiveness.
d.
generate feelings of commitment.
ANSWER:
d
81. Employees whose compensation is calculated on the basis of weekly, biweekly, or monthly periods are classified as
a.
salaried employees.
b.
hourly employees.
c.
management employees.
d.
white-collar employees.
ANSWER:
a
82. In __________, employees are paid according to the number of units they produce.
a.
hourly work
b.
piecework
c.
commission
d.
production work
ANSWER:
b
83. Employees covered by the overtime provisions of the Fair Labor Standards Act are labeled
a.
protected workers.
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b.
nonexempt employees.
c.
salaried workers.
d.
exempt employees.
ANSWER:
b
84. Under the Fair Labor Standards Act, exempt employees
a.
are required to be paid at the rate of one and a half times their regular pay rate for hours worked in excess of
40 hours in a week.
b.
must be paid at the rate of one and a half times their regular hourly wage for time worked in excess of eight
hours in a day.
c.
are those employees not covered by the overtime provisions of the Act.
d.
include most hourly personnel employed in interstate commerce.
ANSWER:
c
85. The exempt or nonexempt status of employees is determined by
a.
the National Labor Relations Board.
b.
the Secretary of Labor.
c.
the Office of Programs and Budgets.
d.
the U.S. Department of Labor.
ANSWER:
d
86. Which of the following is an internal factor that can influence the rates at which employees are paid?
a.
Labor market conditions
b.
Collective bargaining
c.
The employer’s ability to pay
d.
Cost of living
ANSWER:
c
87. Which of the following is an external factor that can influence the rates at which employees are paid?
a.
The worth of the job
b.
The employees’ relative worth
c.
The employer’s ability to pay
d.
Cost of living
ANSWER:
d
88. Equity theory is also known as
a.
procedural justice.
b.
distributive fairness.
c.
administrative justice.
d.
moral justice.
ANSWER:
b
89. An employee’s relative worth can be determined by
a.
job analysis.