1) Indirect compensation in a pay mix consists of:
a. the variety of programs, such as health insurance, time off, etc., the employee receives.
b. incentives that may or may not be paid to an employee, such as bonuses.
c. that part of an employee’s pay designed to motivate good performance.
d. the package of special perks an employee receives based on his/her status in the company.
e. the salary or hourly wage the employee receives on a regular basis.
2) The distributive justice model:
a. encourages open rather than secret pay.
b. ensures that employees will receive above-market compensation.
c. ensures secret pay.
d. is the least common of the two compensation models.
e. encourages employees to examine the companies and employees.
3) According to your text, which of the following questions is key in developing an effective
a. Will the company compensate employees primarily with non-monetary rewards or monetary
b. How many employees are there in the company?
c. What is the company’s market share?
d. What is the average age of employees in the firm?
e. All of the above
4) According to your text, as employees’ base pay increases:
a. their overall compensation is more subject to risk.
b. their overall compensation is more stable.
c. their variable pay decreases.
d. their compensation is more likely to be performance-contingent compensation than
e. their compensation is more likely to be membership-contingent compensation than
5) Job-based pay policies work best in which of the following situations?
a. There are few opportunities for upward mobility within the organization.
b. Employees’ jobs don’t change often.
c. Employee participation and teamwork are encouraged throughout the organization.
d. Employees have many opportunities to learn new skills.
e. The firm’s work force is highly educated.
6) One of the benefits of using skill-based pay is:
a. applicant selection is easier as job qualifications are more vague.
b. the work force becomes more specialized.
c. labor costs increase.
d. the work force becomes more diversified.
e. none of the above
7) Karen, president of a small restaurant chain, would like to centralize compensation decisions.
She asks you about the pitfalls of such a move, and you respond that:
a. it is likely that internal equity would not be maintained.
b. in a centralized system each manager can make compensation decisions, and this can lead
to organizational chaos.
c. external equity is difficult to maintain.
d. it is likely that the company will not be able to defend itself legally.
e. it is only beneficial in times of greater economic prosperity.
8) Kora is reviewing her company’s pay structure and sees, “Grade 3, Able to work independently
and use WordPerfect software, $14.57 hr.” Kora is reviewing a:
a. below-market pay system.
b. skill-based pay structure.
c. decentralized pay system.
d. job-based pay structure.
e. knowledge-based pay system.
9) The head of HR has asked you to gather information about the tasks, duties, and
responsibilities of specific jobs. He wants you to:
a. perform a distributive justice model.
b. perform job analysis.
c. determine job specifications.
d. perform a comparable worth assessment.
e. perform a job evaluation.
10) Job specifications:
a. consist of worker characteristics necessary for successful performance.
b. focus on skill sets necessary to perform a task.
c. list all the compensable factors of a particular job.
d. require the rating of each position described.
e. identify, define, and describe each job in terms of its duties, responsibilities, and working
11) Refer to Case 10.1. The president, VP of HRM, and VP of Finance would all agree on a(n):
a. labor market compensation model.
b. elitist view of compensation.
c. individual-centered pay system.
d. egalitarian view of compensation.
e. external equity compensation system.
12) Solomon is a sale professional for a computer company. His territory, the southern United
States, has recently undergone some of the worst flooding in history, closing many of his
customers’ small businesses and redirecting his large clients’ funds as they fix flood damages.
As a consequence, Solomon’s sales are off significantly and his quarterly bonus is small. This
is an example of the problem of ________ in regard to pay-for-performance compensation.
a. the lack of control
b. the lack of flexibility
c. job dissatisfaction and stress
d. ”doing only what you get paid for”
e. measuring performance
13) Which of the following is true about individual-based incentive programs?
a. They are readily accepted by management while universally mistrusted by labor.
b. Equity is relatively easy to achieve.
c. Awards are more effective than bonuses in motivating performance.
d. They shape individual goals over time.
e. They tend to have immediate positive results which fade over time.
14) Plant-wide incentive programs commonly:
a. lead to less participation by employees in the management of the plant.
b. exclude salaried workers and foster hard feelings.
c. lead to improved labor-management relations.
d. exclude low performers from receiving any incentives.
e. reward the best performing teams 2-3 times as highly as average teams.
15) Kari is the VP of a mid-sized plant. Employees are able to see how their work affects the
plant’s performance. The corporation is relatively flat and the market for the product is quite
stable. Which of the following would be the best choice of a pay-for-performance plan?
a. Individual-based pay
b. A gainsharing plan
c. Merit-based pay
d. A team-based plan
e. A corporate-wide plan
16) Marie’s company wants to give employees incentives while getting the maximum tax advantage
for them and the firm. Flexibility in compensation costs is also important, and while the
company needs to keep fixed compensation low, it still attracts high quality job candidates.
Marie suggests that the company consider a:
a. gainsharing plan.
b. Scanlon plan.
c. Rucker plan.
d. bonus plan for key employees.
e. corporate pay-for-performance plan.
17) Most companies use a ________ when setting up their sales compensation plan.
a. straight commission plan
b. straight salary plan
c. gainsharing plan
d. merit plan
e. combination plan
18) In what way are compensation programs for salespeople different from compensation programs
for other types of employees?
a. There is less performance variation between salespeople than between non-salespeople.
b. The reward system for non-salespeople is more supervisory than it is for salespeople.
c. The spread in earnings between the lowest- and highest-paid salespeople is much smaller
than it is between other types of employees.
d. Perceptions of pay inequity are a lesser concern for salespeople than for non-salespeople.
e. Accurate market data on pay practices are easier to find for salespeople than for other
types of employees.
19) A survey of 1400 employers showed that ________ of them factor customer satisfaction into
their calculation of incentive payments to employees.
20) Kelse’s new employer informs him that he will be allowed a flexible benefits program for the
duration of his employment at Comfortable Furniture. This means that Kelse:
a. will not receive paid time off.
b. is being short-changed and should look for a better place of employment.
c. can choose to take greater direct compensation if he forfeits his employee benefits.
d. will not have to make co-payments for his benefits.
e. will be able to design his own benefits package and choose which benefits he wants.
21) Harvey was born in 1951. When he retires, he will:
a. not need a source of post-retirement income other than Social Security.
b. receive full benefits if he is at least 66 years of age.
c. receive full benefits equaling nearly 20% of his earnings in the final year before his
d. receive benefits equaling only 5% of his earnings in the final year before his retirement if
he retires before the age of 65.
e. receive full benefits if he is at least 67 year of age.
22) An HMO-based health plan:
a. provides comprehensive coverage for a flat annual fee.
b. covers 80% of doctor, but 100% of hospital bills.
c. permits the employee to live anywhere.
d. provides maximum flexibility to the employee.
e. does not cover preventive care like regular insurance.
23) In the United States, severance pay:
a. practices vary widely.
b. is offered by about 30% of all companies.
c. is offered for voluntary terminations only.
d. averages two weeks pay.
e. is common in over 75% of large companies but non-existent in companies with under 100
24) The flexible benefits plan that gives employees the maximum flexibility and requires careful
design by administrators to conform to Section 125 of the Internal Revenue Code regarding
taxable benefits, is:
a. a Keogh plan.
b. a core-plus option plan.
c. a modular plan.
d. an SEP plan.
e. flexible spending accounts.
25) Refer to Case 12.3. To lower their workers’ compensation costs, TSS could do all except:
a. emphasize safe working procedures.
b. audit their claims.
c. design jobs and work assignments so that there are fewer risks of injuries,
d. put injured workers on modified duty.
e. relocate to a state with a lower workers’ compensation tax rate.