Compensation Management
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Course Introduction
Compensation Management explores the strategies, structures, and processes organizations use to reward employees and align compensation practices with organizational goals. The course examines foundational concepts such as job analysis, market surveys, salary structures, and incentive programs, integrating legal, ethical, and global considerations. Students will learn to design and implement effective compensation systems, balancing internal equity and external competitiveness, and will analyze the impact of compensation on employee motivation, retention, and organizational performance. Through case studies and practical exercises, students will develop skills in evaluating compensation packages and understanding current trends in pay practices and benefits administration.
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Strategic Compensation A Human Resource Management Approach 7th Edition by
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Page 2
Joseph J. Martocchio
Chapter 1: Strategic Compensation: A Component of Human Resource Systems
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Q1) Employment ________ occurs when an employee's agreement to perform work is ended,be it voluntarily or involuntarily.
Answer: termination
Q2) A company using this competitive strategy seeks to offer a product or service that is completely unique from other competitors in their market segment.
A) differentiation strategy
B) defender strategy
C) prospector strategy
D) lowest-cost strategy
Answer: A
Q3) These compensation systems go a long way in attracting and retaining the most qualified employees,and are based upon market surveys and compensation surveys.
A) internally consistent compensation systems
B) market-competitive pay systems
C) job evaluation compensation systems
D) externally consistent compensation systems
Answer: B
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Chapter 2: Contextual Influences on Compensation Practice
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Q1) These programs granted income to workers who were unable to work due to injuries sustained while on the job.
A) sick leave
B) FMLA
C) workforce restitution
D) workers' compensation
Answer: D
Q2) This law makes it illegal to discriminate against people with physical and mental disabilities both within and outside employment settings,including public transportation,public accommodations,and employment.
A) Americans with Disabilities Act of 1990
B) Executive Order 11246
C) The Civil Rights Act of 1991
D) The Older Workers Benefit Protection Act
Answer: A
Q3) The ________ Amendment allows female employees to charge employers with Title VII violations regarding pay only when the employer has violated the Equal Pay Act of 1963.
Answer: Bennett
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Chapter 3: Traditional Bases for Pay: Seniority and Merit
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Q1) With the ________ comparative appraisal technique,supervisors compare each employee to every other employee,selecting the best performer in each dyadic instance.
Answer: paired comparison
Q2) The General Schedule (GS)classifies federal government jobs into ________ classifications based on such factors as skill,education,and experience levels.
Answer: 15 fifteen
Q3) The halo effect and similar-to-me effects are considered examples of which type of rating error?
A) trait system errors
B) contrast errors
C) illegal discrimination errors
D) bias errors
Answer: D
Q4) ________ pay increase refers to the minimum pay increase that employees will as making a worthwhile change in compensation.
Answer: Just-meaningful
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5
Chapter 4: Incentive Pay
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Sample Questions
Q1) These profit sharing plans award cash to employees on a quarterly or annual basis as part of their regular compensation.
A) recent profit sharing plans
B) current profit sharing plans
C) deferred profit sharing plans
D) anticipated profit sharing plans
Q2) XYZ Manufacturing Co.uses a gain sharing plan that gives incentives to employees to finish products rather than to incentivize dollar savings.Therefore,this company measures productivity as the ratio of standard labor hours and actual labor hours.What kind of gain sharing program does XYZ Manufacturing Co.use?
A) Improshare
B) Rucher
C) Scanlon
D) SVOP
Q3) How can incentive pay systems,when properly applied,contribute to companies meeting the goals of lowest cost and differentiation strategies?
Q4) Stock ________ describe an employee's right to purchase company stock.
Q5) The main disadvantage of group incentive compensation is employee ________.
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Chapter 5: Person-Focused Pay
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Q1) Which pay plan generally rewards employees for acquiring job-related competencies,knowledge,or skills rather than for demonstrating successful job performance?
A) knowledge-based
B) incentive
C) merit
D) person-focused
Q2) Jamie earned a raise in pay when he finished the training for the Technician 2 position.He will receive another raise when he finishes the training for the Technician 3 position.The company is probably using which type of pay program?
A) the stair-step model
B) the skill blocks model
C) the job-point accrual model
D) the cross-departmental model
Q3) ________ is the degree which an employee receives clear and direct information about job performance from his or her employer.
Q4) A ________ encourages employees to develop skills and learn to perform jobs from different job families.
Q5) ________ skills refer to similar skills or knowledge.
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Chapter 6: Building Internally Consistent Compensation Systems
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Q1) ________ information describes physical and social factors that influence the nature of work.
Q2) 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
Q3) ________ skills information describes developed capacities that facilitate learning or the more rapid acquisition of knowledge.
Q4) Which job evaluation method entails ordering jobs on the basis of extremes?
A) paired comparison
B) alternation ranking
C) classification
D) factor comparison
Q5) The ________ ranking method orders jobs by extremes,as committee members determine most and least valuable jobs until all jobs have been evaluated.
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Chapter 7: Building Market-Competitive Compensation Systems
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Q1) XYZ Inc.pursues a low-cost strategy in its industry and generally needs lower skilled employees.As a result,their management team decided to establish a compensation policy that pays less than the marketplace.In recent years the company became susceptible to labor shortages and high turnover.What kind of pay level policy does XYZ Inc.follow?
A) market match
B) market lag
C) market lead
D) market pay line
Q2) Suppose that a compensation professional would like to calculate the median salary.He/she orders four salaries as follows: $20,000,$22,000,$24,000,$26,000.What is the median salary for this data set?
A) $21,000
B) $22,000
C) $23,000
D) $24,000
Q3) ________ analyses enable compensation professionals to establish pay rates for a set of jobs that are consistent with typical pay rates for jobs in the external market.
Q4) The ________ is the middle value in an ordered sequence of numerical data.
Page 9
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Chapter 8: Building Pay Structures that Recognize
Individual Contributions
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Q1) This term describes a set of skills necessary to perform a specific job or a group of similar jobs.
A) skill range
B) skill grade
C) skill block
D) skill structure
Q2) What types of companies are most likely to utilize two-tier wage systems?
A) unionized firms
B) sales firms
C) public sector companies
D) private sector companies
Q3) Compare and contrast merit pay systems and sales compensation.
Q4) ________ represent the vertical dimension of pay structures.
Q5) ________ makes sure that employees have at least a minimally acceptable level of skill proficiency upon completion of a training unit.
Q6) These represent the horizontal dimension of pay structures.
A) pay ranges
B) pay grades
C) job evaluation points
D) pay spreads Page 10
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Chapter 9: Discretionary Benefits
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Q1) Which of the following would be considered an act as part of a company's wellness program?
A) putting a soda machine in the break room
B) giving out cigars to expecting fathers
C) offering anti-smoking courses
D) giving employees free pizza at lunch
Q2) XYZ Company tries to influence employee food choices by stocking vending machines with nutritional food.They also offer programs to teach stress reduction techniques.What kind of discretionary benefit program does this company sponsor?
A) family assistance program
B) employee assistance program
C) wellness program
D) employer assistance program
Q3) ________ programs help bring employees to the workplace and back home again by using more energy-efficient forms of transportation.
Q4) Employers sponsor ________ to promote employees' physical and psychological health.
Q5) What kind of discretionary benefits would help companies to have better control over absenteeism?
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Chapter 10: Employer-Sponsored Retirement Plans and Health Insurance Programs
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Q1) ________ are nominal payments an individual makes as a condition of receiving services.
Q2) Which of the following is NOT a benefit covered by fee-for-service plans?
A) hospitalization benefits
B) dentist visits
C) physician visits
D) surgical benefits
Q3) A company uses graduated first-dollar-of-profits formula for their profit-sharing plans.They choose to share 4% of the first $10 million of after-tax profits and 7% of the after-tax profits in excess of that level.Last year if this company's after-tax profit were $15 million,how much of this profit would be distributed to the employees?
A) $1,200,000
B) $1,000,000
C) $750,000
D) $600,000
Q4) ________ plans refer to pension plans that do not meet at least one of the minimum standard provisions.
Q5) Compare and contrast commercial insurance (fee-for-service)and self-funded insurance.
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Chapter 11: Legally Required Benefits
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Q1) If the CEO of a new company asked you how much per employee she will be taxed by FUTA,what would you tell her?
A) 3.5% of the first $7,000
B) 6.2% of the first $7,000
C) 6.2% of the first $10,000
D) 3.5% of the first $10,000
Q2) In 2022,how old will Cary have to be to receive full Social Security benefits?
A) 57
B) 62
C) 65
D) 67
Q3) Under the Family and Medical Leave Act,for Pierre to take time off to take care of his wife and new child how many hours would he have had to work in the previous 12 months?
A) 1,000
B) 1,250
C) 1,600
D) 800
Q4) How does a state determine if an individual is eligible for unemployment insurance benefits?
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Chapter 12: Compensating Executives
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Q1) A ________ entails an examination of a company's external market context along with internal factors.
Q2) What does the IRS use the term "key employees" for?
A) for non-discrimination rules in retirement benefits
B) for non-discrimination rules in health insurance benefits
C) to determine the necessity of top-heavy provisions in employer-sponsored qualified retirement plans
D) to determine the necessity of top-heavy provisions in employer-sponsored health insurance plans
Q3) When he became CEO,Duane was given a stock option that does not require him to exercise his options in order to receive income.Which plan is it?
A) stock appreciation rights
B) discount stock
C) restricted stock
D) golden parachute
Q4) Briefly discuss the current core compensation and employee benefits of executive compensation.
Q5) The actions of executives on behalf of their own self-interest are known as the ________ problem.
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Chapter 13: Compensating the Flexible Work Force:
Contingent Employees and Flexible Work Schedules
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Q1) A special kind of part-time employment agreement whereby two or more part-time employees perform a full-time job is better known as ________.
Q2) Since temporary workers are employees of both the temporary employment agency and the client company,the dual employer common law doctrine establishes temporary workers' right to receive which of the following?
A) retirement benefits
B) workers' compensation
C) health insurance
D) employee benefits
Q3) The Bureau of Labor Statistics does not monitor pay levels for which type of temporary workers?
A) part-time employees
B) leased employees
C) temporary employees
D) independent contractors
Q4) ________ have full-time jobs,and plan on having long-term relationships with their employers.
Q5) Discuss flexible work schedules from the perspective of both unions and employees.
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Chapter 14: Compensation Expatriates
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Q1) Your company is sending Sheila on a six-month assignment to Sweden,so you should probably use which method to determine her base pay?
A) headquarters-based
B) host country-based
C) home-country based
D) foreign country-based
Q2) What law mandates that management bargain in good faith with labor unions over terms of employment such as wages?
A) Fair Labor Standards Act of 1938
B) National Labor Relations Act of 1935
C) North American Free Trade Agreement
D) North American Treaty Organization
Q3) U.S.citizens employed in U.S.companies with work assignments outside the United States are better known as ________.
Q4) ________ premiums reward employees for moving from one assignment to another.
Q5) An ________ is the price at which one country's currency can be swapped for another.
Q6) ________ is the increase in prices for consumer goods and services.
Q7) What is the balance sheet approach? When is its use most appropriate?
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Chapter 15: Pay and Benefits Outside the United States
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Q1) In Germany,an employee can request up to how many year(s)of child-rearing leave?
A) 1
B) 2
C) 3
D) 4
Q2) Compare health benefits and paid time off benefits in India and People's Republic of China.
Q3) Which of the following is NOT one of the top three largest economies in Asia as of 2010?
A) Philippines
B) China
C) India
D) Japan
Q4) In China,the minimum wage rates are set by ________.
Q5) ________ has by far the strongest economy out of all the countries in South America.
Q6) 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.
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Q7) The country with the lowest GDP per capita reviewed in the chapter is ________.
Chapter 16: Challenges Facing Compensation Professionals
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Q1) What is the mean hourly wages for all underemployed workers?
A) $11.20
B) $12.80
C) $13.60
D) $14.30
Q2) According to Federal Reserve Bank,what percentage of industries have cut back production since the beginning of Great Recession?
A) 82%
B) 86%
C) 90%
D) 75%
Q3) Jane holds a bachelor's degree in sociology.She works as a part-time taxi driver.This situation is an example of which of the following?
A) malemployment
B) overstaffing
C) discrimination
D) unemployment
Q4) ________ measures the purchasing power of a dollar.
Page 19
Q5) ________ refers to a general slowdown in economic activity.
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