Compensation and Benefits Administration
Exam Answer Key
Course Introduction
Compensation and Benefits Administration explores the principles, practices, and legal frameworks underpinning employee compensation and benefits management within organizations. The course examines topics such as job evaluation, salary surveys, pay structure design, incentive programs, and employee benefits planning, providing a comprehensive understanding of how effective compensation strategies contribute to organizational success. Students will analyze current trends, compliance issues, and global perspectives in compensation and benefits, developing skills to design, implement, and evaluate competitive and equitable compensation systems aligned with business objectives and employee motivation.
Recommended Textbook
Strategic Compensation A Human Resource Management Approach 9th Edition by Martocchio
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641 Verified Questions
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Page 2
Chapter 1: Strategic Compensation: a Component of Human Resource Systems
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Q1) Ryanair uses one type of aircraft in its fleet and requires their passengers to carry their luggage to the plane.Which of the following competitive strategies does Ryanair use?
A)differentiation strategy
B)high quality strategy
C)brand notoriety
D)lowest-cost strategy
Answer: D
Q2) As a strategic business partner,HR and compensation professionals today need to think most like whom?
A)vice president of human resources
B)chief financial officer (CFO)
C)chief executive officer (CEO)
D)comptroller
Answer: C
Q3) Strategic management involves distinguishing between ________ and ________ in attempting to achieve company goals,thus making strategic management an imprecise process.
Answer: threats,opportunities
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Chapter 2: Contextual Influences on Compensation Practice
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Q1) The decline in union influence can be explained by which of the following reasons?
A)a greater sense of social responsibility in today's society
B)lower educational attainment of the workforce
C)the cooperative nature of the union and management relationship in Germany
D)foreign automobile manufacturers producing higher quality vehicles
Answer: D
Q2) Which factors account for considerable variation in pay within occupations?
A)employment laws
B)interindustry wage differentials
C)relevant labor market
D)knowledge, skills, and abilities
Answer: D
Q3) Which of the following is typically the case for companies that operate in product markets where there is relatively little competition from other companies?
A)lower wages and lower profits
B)lower wages and higher profits
C)higher wages and higher profits
D)higher wages and lower profits
Answer: C
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Chapter 3: Traditional Bases for Pay: Seniority and Merit
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Q1) This appraisal system is the most defensible in court because it is based on observable job performance behaviors.
A)behaviorally anchored rating scales
B)360 degree performance appraisals
C)paired comparison
D)forced distribution
Answer: A
Q2) The concept that employee's knowledge and skills can be used to generate superior productivity is known as ________ theory.
Answer: human capital
Q3) The concept of just-meaningful pay increases applies to ________ pay programs.
Answer: merit
Q4) ________ pay increase refers to the minimum pay increase that employees will consider to be a worthwhile change in compensation.
Answer: Just-meaningful
Q5) ________- by- ________ is used mainly for managerial and professional employees and typically evaluates employees' progress toward strategic planning goals.
Answer: Management,objectives
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Chapter 4: Incentive Pay
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Q1) The sales value of production (SVOP)is the sum of sales ________ plus the value of goods in inventory.
Q2) These profit sharing plans award cash to employees on a quarterly or annual basis as part of their regular compensation.
A)common
B)current
C)deferred
D)anticipated
Q3) This formula for determining the amount available for profit sharing uses a specific percentage of annual profits contingent upon the successful attainment of a specified profit goal.
A)fluctuating first-dollar-of-profits
B)differed first-dollar-of-profits
C)graduated first-dollar-of-profits
D)fixed first-dollar-of-profits
Q4) Companies in such ________ industries as retail sales could benefit by including an incentive component in the core compensation programs they offer to employees.
Q5) The Improshare bonus is based on a ________ ratio formula.
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Chapter 5: Person-focused Pay
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Q1) Which of the following is a characteristic of job-based pay?
A)It compensates employees for the number of jobs in which they possess the skills to perform.
B)It rewards employees on their promise to make positive contributions to the work place.
C)It compensates employees for the jobs they currently perform.
D)A reward is based on the successful acquisition of work-related skills or knowledge.
Q2) A company that designs,manufactures,and sells only Halloween costumes would probably benefit most from this model.
A)cross-departmental
B)skill blocks
C)job-point accrual
D)stair-step
Q3) This type of pay system rewards employees for successfully acquiring new job-related knowledge.
A)person-focused pay
B)competency-based pay
C)merit pay
D)incentive pay
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Page 7
Chapter 6: Building Internally Consistent Compensation Systems
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Q1) ________ describe preferences for work environments and outcomes.
Q2) In an auto manufacturing company,installing a windshield on the assembly line represents a ________.
Q3) Which is the fundamental principle of internally consistent compensation systems?
A)Pay rates should mirror pay rate differences among the competition.
B)Jobs that require higher qualifications should be paid more than jobs that require lower qualifications.
C)All jobs should be valued equally because every job directly contributes to competitive advantage.
D)All jobs should be valued according to need.
Q4) One of the essential skills that software development engineers must have is the proficiency in at least one of the modern computer programming languages,such as Java or C++.This must be indicated in which part of the job analysis description?
A)working conditions
B)job evaluation
C)worker requirement
D)job content
Q5) Summarize the five main activities of job analysis work.
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Chapter 7: Building Market-competitive Compensation Systems
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Q1) The R<sup>2</sup> statistic tells us how well the variation in the company's valuation of jobs based on job evaluation points explains the variation in market pay rates from the compensation survey.What does it mean when the R<sup>2</sup> = 1?
A)All of the variation in market pay can be explained by the company's job structure. B)None of the variation in market pay can be explained by the company's job structure. C)All of the variation in market pay can be explained by the company's external pay rates.
D)All of the variation in market pay can be explained by the benchmark rates.
Q2) Which process can companies use to make corrections for differences between their jobs and external benchmark jobs?
A)job evaluation
B)job leveling
C)job analysis
D)compensation surveys
Q3) The market ________ policy distinguishes a company from competition by compensating employees less than most competitors.
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Chapter 8: Building Pay Structures That Recognize
Individual Contributions
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Q1) ________ assign different pay rates for jobs of unequal worth and provide the basic framework for recognizing differences in individual contributions.
Q2) ________ describe the allocation of monetary resources to fund pay structures.
Q3) ________ represent the vertical dimension of pay structures.
Q4) The ________ pay value is the centrally located mark between the range minimum and maximum rates.
Q5) How are compa-ratios calculated?
A)the green circle rates midpoint divided by the normal pay range
B)the pay rate divided by the market line rate
C)the pay rate divided by the pay range midpoint
D)the red circle rates divided by the normal pay range
Q6) Wherever proprietary information is the subject of training,a company most often relies on which of the following sources of expertise?
A)expertise in university professors
B)expertise within the company
C)both expertise within and outside the company to provide training
D)expertise in competitor companies
Q7) What are the differences between pay grades and pay ranges?
Q8) What is pay compression and how can companies minimize the occurrence of it? Page 10
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Chapter 9: Discretionary Benefits
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Q1) These represent a series of payments for the life of the participant and beneficiary.
A)collateral payments
B)periodic payments
C)lump sum distributions
D)annuities
Q2) The ________ is the U.S.tax code.
Q3) ________ rights refer to nonforfeitable rights to retirement benefits.
Q4) The XYZ Company provides a program for its employees who need help dealing with the effects of domestic violence.The XYZ Company can offer this kind of service through which of the following programs?
A)family assistance program
B)employee assistance program
C)wellness program
D)employer assistance program
Q5) How are integrated paid time off policies different than holiday,vacation,sick leave,and personal leave policies?
Q6) Define three types of life insurance.
Q7) 401(k)and 403(b)plans are examples of ________ plans.
Q8) Distinguish between qualified and nonqualified retirement plans.
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Chapter 10: Legally Required Benefits
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Sample Questions
Q1) Which of the following refers to payments an individual makes as a condition of receiving medical services?
A)coinsurance
B)premium
C)deductible
D)copayments
Q2) Describe five ways that an employer-sponsored health plan could lose its grandfathered status.
Q3) ________ accounts allow employees to pay for specified health care costs not covered by an employer's insurance plan.
Q4) Under the Family and Medical Leave Act,how many hours would Pierre have had to work in the previous 12 months in order for him to take time off to care for his wife and new child?
A)1,000
B)1,250
C)1,600
D)800
Q5) Approximately ________ percent of Americans experience some form of mental illness at least once during their lifetime.
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Chapter 11: Compensating Executives
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Q1) Executives receive ________ as the difference between the stock price at the time of purchase and the lower stock price at the time an executive receives the stock option.
Q2) The IRS considers Sylvia to be a highly compensated employee for Beautiful Pictures,Inc.,which means that she met which one of the following criteria (assume that the previous year was 2015)?
A)either a current annual salary of more than $170,000; and, in the previous year, a 5% owner or a 1% owner of the employer's business whose annual pay was greater than $150,000
B)either an annual salary of more than $170,000; or, in the previous year, a 5% owner or a 1% owner of the employer's business whose annual pay was greater than $150,000
C)an annual salary exceeding $50,000
D)an annual salary less than $170,000
Q3) Are CEOs compensated commensurately with their companies' performance?
Q4) The concept that individuals evaluate their accomplishments by comparing themselves to similar individuals is based on ________ theory.
Q5) The actions of executives on behalf of their own self-interest are known as the ________ problem.
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Page 14
Chapter 12: Compensating the Flexible Work Force:
Contingent Employees and Flexible Work Schedules
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Q1) James works at home 3 days a week and works at his office 2 days a week.His employer provides a computer,modem,and printer for him to use at home.The equipment for his off-site use is an example of ________.
Q2) How many months in a year must seasonal employees work to qualify for protection under the FLSA overtime and minimum wage provisions?
A)4
B)7
C)11
D)12
Q3) Which type of contingent worker would work for a company on a long-term basis,presumably on an indefinite basis?
A)part-time employees
B)temporary employees
C)leased employees
D)independent contractors
Q4) Explain the reasons why employers hire temporary workers.
Q5) The ________ common law doctrine establishes temporary workers' rights to receive workers' compensation.
Q6) What are three advantages to using flextime schedules?
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Chapter 13: Compensation Expatriates
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Q1) Employers usually rely on which source to determine housing and utilities support?
A)U.S. Department of State's quarters allowances
B)Consumer Price Index
C)Indexes of international labor costs
D)U.S. Department of State's International Consumer Price Index
Q2) U.S.citizens employed in U.S.companies with work assignments outside the United States are better known as ________.
Q3) Andre is going to be stationed overseas for about 18 months.Andre's foreign service premium will increase his base pay by about how much?
A)5 - 10 %
B)10 - 30 %
C)40 - 60 %
D)50 - 75 %
Q4) What is the balance sheet approach? When is its use most appropriate?
Q5) ________ is the increase in prices for consumer goods and services.
Q6) ________ nationals are foreign citizens that work in U.S.companies' branch offices or manufacturing plants in their home countries.
Q7) How does globalization affect HR departments?
Page 16
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Chapter 14: Pay and Benefits Outside the United States
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Q1) In Germany,the minimum wage rate is established by the ________ process.
Q2) In ________,employees are entitled to 6 vacation days after 1 year of employment and to 2 more days for each subsequent year up to a maximum of 12 days.
Q3) The GDP per capita describes which of the following?
A)a measure of earnings
B)the standard of living in a country's capitol city
C)a country's standard of living
D)the total value of a country's economy
Q4) The ________ is a unique international organization that aims at becoming an economic superpower,while still retaining such practices as high levels of employment,social welfare protection,and strong trade unions.
Q5) What is gross domestic product (GDP)?
A)GDP describes the amount a country spends on health care.
B)GDP describes the amount of a country's debt.
C)GDP describes the size of a capitol city.
D)GDP describes the size of a country's economy.
Q6) Identify the countries that are part of NAFTA and NAFTA's main provisions.
Q7) Canada has two state-run pension plans: one for ________ provincial residents only and one for the rest of Canada.
Page 17
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Chapter 15: Challenges Facing Compensation Professionals
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Q1) Which of the following is NOT one of the direct or indirect reasons of rising wages in China?
A)Chinese policy makers' support of increased wages
B)one-child policy
C)labor shortages
D)increasing cost of exports
Q2) Companies promote profits,in part,by holding down employees' ________.
Q3) ________ is a situation in which a worker is forced to work part-time due to economic situations although she/he is willing to work full-time.
Q4) What are some of the issues associated with rising wages in China?
Q5) Robert prefers to work full-time as a business analyst,but he is forced to work part-time for economic reasons because he is unable to find a full-time job.Which of the following best describes this situation?
A)underemployment
B)malemployment
C)underutilization
D)discrimination
Q6) ________ refers to a general slowdown in economic activity.
Page 18
Q7) Since the 1970s,________ has lagged behind labor productivity growth.
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