Employee Benefits and Compensation Exam Practice Tests
Course Introduction
This course explores the foundational principles and practices of employee benefits and compensation in organizations. Students will examine how businesses design, administer, and evaluate compensation systems and benefit programs to attract, motivate, and retain employees. Topics covered include job evaluation, pay structures, incentive plans, legal compliance, health and retirement benefits, and the impact of global trends on compensation strategies. The course also emphasizes aligning compensation with organizational goals and the importance of equitable and competitive benefits to maintain workforce satisfaction and productivity.
Recommended Textbook
Compensation 10th Edition by George T. Milkovich
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18 Chapters
1442 Verified Questions
1442 Flashcards
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Page 2
Chapter 1: The Pay Model
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80 Verified Questions
80 Flashcards
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Sample Questions
Q1) Compensation is important to managers' success because it is a major cost and it influences employee behavior.
A)True
B)False
Answer: True
Q2) Describe stockholders perspective on compensation.
Answer: Stockholders are interested in how employees are paid.Using stock to pay employees creates a sense of ownership which improves performance and increase stockholder wealth.However,granting employees too much ownership dilutes stockholder wealth.
Stockholders have a particular interest in executive pay.The interests of executives are aligned with those of shareholders who hope that company performance will be higher.
Q3) Hourly compensation costs for manufacturing workers are higher in _____ than the U.S.
A) Norway
B) Japan
C) Spain
D) Singapore
Answer: A
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Page 3
Chapter 2: Strategy: The Totality of Decisions
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80 Verified Questions
80 Flashcards
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Sample Questions
Q1) Whole Foods' decision to seek and engage employees who are going to help the company make money is an example of which strategic pay decisions?
A) Objectives
B) Employee contributions
C) Internal alignment
D) Management
Answer: A
Q2) "Supporting promotional growth opportunities" is an example of which of the following?
A) Objectives
B) Internal alignment
C) Externally competitive
D) Employee contributions
Answer: B
Q3) Trying to measure an ROI for any compensation strategy implies that A) it is possible to align and differentiate and still fail to add value.
B) people are "human capital," similar to other factors of production.
C) adding value is the most difficulty test.
D) value created as a result of costs is difficult to specify.
Answer: B
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Chapter 3: Defining Internal Alignment
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Sample Questions
Q1) Which of the following are related to greater performance when the work flow depends on individual contributors?
A) Egalitarian
B) Hierarchical
C) Tournament
D) Institutional
Answer: B
Q2) State the theory of marginal productivity.
Answer: The theory of marginal productivity says that employers pay use value.Unless an employee can produce a value equal to the value received in wages,it will not be worthwhile to hire that worker.One job is paid more or less than another because of differences in relative productivity of the job and/or differences in how much a consumer values the output.
Q3) Both external and organizational factors shape internal pay structures.
A)True
B)False
Answer: True
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Chapter 4: Job Analysis
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Sample Questions
Q1) Conventional job analysis methods are being replaced by quantitative methods for all but which of the following reasons? Conventional methods are _____.
A) open to bias and favoritism
B) often subjective
C) not well-suited to small organizations
D) require more time consuming
Q2) Some organizations analyze work content as part of work flow and supply chain analysis.
A)True
B)False
Q3) _____ looks at how an organization does its work: activities pursued to accomplish specific objectives for specific customers.
A) Job analysis
B) Market analysis
C) Job structure
D) Supply chain analysis
Q4) Job evaluation is usually conducted before job analysis.
A)True
B)False
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Chapter 5: Job-Based Structures and Job Evaluation
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80 Flashcards
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Sample Questions
Q1) All the following are true of compensable factors except:
A) reinforce an organization's culture.
B) support the business direction.
C) represent the nature of work.
D) are common within an industry type.
Q2) Effort is one of the generic compensable factors used to define equal work in the Equal Pay Act.
A)True
B)False
Q3) _____ is the process of systematically determining the relative worth of jobs for the purpose of creating an organization's job structure.
A) Performance evaluation
B) Job analysis
C) Job evaluation
D) Point factor evaluation
Q4) Point plans represent a significant change from ranking and classification methods in that they make explicit the criteria for evaluating jobs: compensable factors.
A)True
B)False
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Chapter 6: Person-Based Structures
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Sample Questions
Q1) Information such as quality course,shop floor control,tool setup and plant first aid are examples information that might be used to develop a _____ pay structure.
A) job-based
B) classification
C) competencies
D) skill-based
Q2) Which of the following regarding skill-based pay is false?
A) Employees have control over their development.
B) Training is a source of complaints.
C) Less supervision is required.
D) Training costs are low.
Q3) A potential disadvantage of skill-based pay is labor costs can be a source of competitive disadvantage.
A)True
B)False
Q4) Customer orientation is an example of a visionary competency.
A)True
B)False
Q5) How do modern organizations analyze work processes?
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Chapter 7: Defining Competitiveness
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Sample Questions
Q1) The pay-mix component in which benefits is likely to be largest is _____.
A) work-life balance
B) security or commitment
C) performance driven
D) market watch
Q2) The theory that has the most implications for staffing is the _____ theory.
A) compensating differentials
B) efficiency wage
C) signaling
D) marginal productivity
Q3) Graduating students usually find themselves in a quoted-labor market.
A)True
B)False
Q4) Among pay-mix alternatives,base pay is largest in _____.
A) work-life balance
B) security or commitment
C) performance driven
D) market match
Q5) What are the basic assumptions of labor market theories?
Q6) What is the significance of marginal revenue?
Page 9
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Chapter 8: Designing Pay Levels, mix, and Pay Structures
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Sample Questions
Q1) The primary responsibility for conducting a pay survey is _____.
A) top management
B) the facility or plant manager
C) outside consultants
D) the compensation manager
Q2) The most common measure of variation in pay surveys is the standard deviation.
A)True
B)False
Q3) Pay ranges for top-level management positions are commonly larger than those other professional and midlevel managerial positions.
A)True
B)False
Q4) If the purpose of a survey is to price the entire structure,then benchmark jobs can be selected to include the entire job structure.
A)True
B)False
Q5) Explain the concept of pay ranges.
Q6) What is broad banding? What are some of its advantages?
Q7) What is a survey? What purpose does it serve in terms of compensation?
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Chapter 9: Pay-For-Performance: the Evidence
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Sample Questions
Q1) Many employees are not satisfied with compensation at risk plans because they do not understand the process used to determine their pay.
A)True
B)False
Q2) Which of the following theories is least relevant to merit pay?
A) Herzberg's theory
B) Expectancy theory
C) Equity theory
D) Reinforcement theory
Q3) The amount of fairness given to employees refers to _____.
A) total justice
B) quantitative justice
C) procedural justice
D) distributive justice
Q4) Additional authority,control and autonomy are always positively motivating job factors for workers.
A)True
B)False
Q5) Briefly explain the concept of cafeteria-style or flexible compensation.
Q6) What is a cost-of-living-increase?
Page 11
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Chapter 10: Pay-For-Performance Plans
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Sample Questions
Q1) In which of the following incentive pay plans does the wage rate not increase for production above the standard?
A) Standard hour plan
B) Rowan plan
C) Taylor plan
D) Merrick plan
Q2) Which of the following is not an advantage of group incentive pay plans?
A) Performance measures are easier to develop than for individual plans
B) Cooperation within and across groups is encouraged
C) Compensation risk to income stability is reduced
D) Employee participation in decision-making increases
Q3) Why do companies prefer lump-sum pay over merit pay increases?
Q4) Which of the following is not a long-term incentive plan?
A) ESOPs
B) Broad-based option plans (BBOPs)
C) Improshares
D) Performance plans
Q5) Discuss the trends that are leading to the increased interest in variable pay.
Q6) Discuss SVOP.
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Q7) What is the difference between success-sharing plans and risk-sharing plans?
Chapter 11: Performance Appraisals
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80 Flashcards
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Sample Questions
Q1) The major complaint of both managers and employees regarding the appraisal process is that:
A) appraisals were not helpful in guiding improvement.
B) reviews don't differentiate between poor,average and good performance.
C) appraisals are too subjective.
D) rating forms are too complex and time consuming.
Q2) Of the many factors affecting supervisors' ratings of subordinates,the major influence is actual performance.
A)True
B)False
Q3) What are the key suggestions for an effective performance appraisal process?
Q4) The most common form of outcomes-based appraisal is:
A) the essay method.
B) MBO.
C) the performance standards review.
D) the BARS.
Q5) List the areas of errors in the performance appraisal process.
Q6) What are the types of pay systems that do not have high motivational potential,but provide equal increases to all employees regardless of performance?
Page 13
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Chapter 12: The Benefit Determination Process
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Sample Questions
Q1) All of the following are cost containment practices except:
A) probationary periods.
B) physical exams of all new hires.
C) copay.
D) seeking competitive bids for benefit delivery.
Q2) The first issue in setting up a benefits package is:
A) who should be protected or benefited.
B) how much choice should employees have among benefits.
C) how should benefits be financed.
D) are benefits legally defensible.
Q3) The average per hour cost of benefits is higher in state and local governments than in the private sector.
A)True
B)False
Q4) Surveys show that the most highly valued benefit is:
A) dental plans.
B) a pension.
C) paid vacation and holidays.
D) medical insurance.
Q5) What can administrators do to control the increasing benefits costs?
Page 14
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Chapter 13: Benefit Options
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Sample Questions
Q1) Workers' compensation disability payments are tied directly to the nature of the loss and not factors such as the employee's earnings or number of dependents.
A)True
B)False
Q2) An IRA is retirement savings plan that is not managed by an employer.
A)True
B)False
Q3) Vesting is the amount of time an employee must work for an employer to be entitled to their employer's contributions to a pension.
A)True
B)False
Q4) Which of the following acts has caused HR and information technology staff considerable difficulty regarding compliance and privacy?
A) COBRA
B) HIPPA
C) FMLA
D) ERISA
Q5) What is a cash-balance plan?
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Chapter 14: Compensation of Special Groups
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Sample Questions
Q1) The best predictor of CEO pay is performance of the company.
A)True
B)False
Q2) Organizations rely very heavily on the market when pricing scientists' and engineers' base pay.
A)True
B)False
Q3) The proportion of outside-to-inside the company members of the board of directors in two-thirds of companies is _____.
A) more insiders than outsiders
B) approximately the same of each
C) more outsiders than insiders
D) there is no clear trend
Q4) What is a tally sheet and what is it used for?
Q5) Stockholder anger about executive compensation has led to a higher proportion of outside members on boards of directors.
A)True
B)False
Q6) Describe the types of long-term incentives for executives.
Page 16
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Chapter 15: Union Role in Wage and Salary Administration
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Sample Questions
Q1) Most unions would agree that profit-sharing plans benefit employees.
A)True
B)False
Q2) Unions respond relatively rapidly to wage increases during inflationary periods.
A)True
B)False
Q3) Profit-sharing plans are designed to align workers and management in efforts to streamline operations and cut costs.
A)True
B)False
Q4) During periods of higher unemployment,the impact of unions is _____.
A) unknown
B) the same as periods of low unemployment
C) smaller
D) larger
Q5) Introduction of a profit-sharing plan is particularly effective when union members participate in plan development.
A)True
B)False
Q6) Briefly summarize the impact of unions on general wages levels.
Page 17
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Chapter 16: International Pay Systems
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Sample Questions
Q1) Managing employee compensation in any country involves understanding the social contract of that country.
A)True
B)False
Q2) The four factors of the global compensation guide are more important than understanding the range of individuals within a country.
A)True
B)False
Q3) The salary for expatriates is usually determined by _____.
A) job evaluation
B) market pay
C) competitors' pay level in the host country
D) international pay schedules
Q4) Explain the three general compensation strategies used by companies with worldwide operations.
Q5) A study of both U.S.and Slovenian MBAs found that risk taking was higher among Slovenians.
A)True
B)False
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Chapter 17: Government and Legal Issues in Compensation
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Sample Questions
Q1) The gender wage gap is moderate for recent college graduates and decreases as the cohort ages.
A)True
B)False
Q2) Legislation does not always achieve what it intends nor achieves what it achieves.
A)True
B)False
Q3) A "living wage" provides for a minimum wage tailored to living costs in a city or geographic area.
A)True
B)False
Q4) Under Title VII,pay differences between dissimilar jobs will not be prohibited if the differences are based upon all of the following except _____.
A) content of the work
B) traditional pay patterns
C) value to the organization's objectives
D) the ability to attract employees in the external market
Q5) How can a proactive compensation manager influence the nature of regulations?
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Page 19
Chapter 18: Management: Making It Work
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Sample Questions
Q1) The _____ often comes into play if organizations target reductions among higher paid employees because higher paid employees also tend to be older employees.
A) ADA
B) FMLA
C) FLSA
D) ADEA
Q2) If a pay system is not based upon work-related or business-related logic,it is best to not conduct a formal compensation communication program.
A)True
B)False
Q3) What is the consumer price index (CPI)? Explain with an example.
Q4) The most important components of a pay communication program are the business- and work-related rationales on which the system is based.
A)True
B)False
Q5) Distinguish the concepts of the cost of living,changes in prices in the product and service markets,and changes in wages in labor markets.
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Page 20