Employee Benefits and Compensation Practice Questions
Course Introduction
This course provides a comprehensive overview of employee benefits and compensation systems within organizations. Students will explore the principles and practices used to develop equitable and competitive compensation structures, including wage determination, salary administration, incentive programs, and pay-for-performance systems. The course also examines various employee benefits, such as health insurance, retirement plans, paid time off, and other non-wage compensations. Legal, regulatory, and ethical considerations in compensation and benefits management are discussed, alongside contemporary challenges such as executive compensation, global benefits, and the impact of technology on rewards systems. Through case studies and practical projects, students will develop the skills required to design and manage effective compensation and benefits programs that attract, motivate, and retain talent.
Recommended Textbook
Compensation 11th Edition by George Milkovich
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Page 2
Chapter 1: The Pay Model
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Sample Questions
Q1) According to the text,which of the following decisions should be made jointly?
A) Internal alignment and Management.
B) External competitiveness and Employee contribution
C) Employee contribution and Internal alignment
D) Management and External competitiveness
Answer: B
Q2) 33 (p.22)Which of the following policy choices has the greatest effect on employees' decisions to stay with the organization and to seek additional training and responsibilities?
A)External competitiveness
B)Employee contributions
C)Internal alignment
D)Job evaluation
Answer: C
Q3) The primary reason compensation is important to managers is because:
A) employees regard it as a reward.
B) it influences employee behavior.
C) it is a larger cost than benefits.
D) stock holders dislike high compensation costs.
Answer: B
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Chapter 2: Strategy: The Totality of Decisions
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Sample Questions
Q1) The social,competitive and regulatory environment factors are most important for which type of strategy?
A) Corporate
B) Business unit
C) HR
D) Strategic compensation
Answer: D
Q2) The issue of how much and what forms of pay are our competitors using is part of which objective of total compensation strategy?
A) Objectives
B) Internal alignment
C) External competitiveness
D) Management
Answer: C
Q3) In the proper sequence of strategic decisions,HR strategies are made before business unit strategies.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Defining Internal Alignment
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Sample Questions
Q1) Experienced workers judge the fairness of their pay by developing an intuitive sense of what is fair pay.
A)True
B)False
Answer: False
Q2) If a manager wants employees to accept the organization's pay structure,the best strategy is to
A) pay everyone the same
B) show them what competitors pay
C) explain to them how pay was determined
D) tell them the pay level is the most the company can pay
Answer: C
Q3) Write a short note on institutional model.
Answer: The institutional model predicts that very few firms are "first movers"; in this model,firms copy innovative practices after innovators have learned how to make the practices work.The copiers have little concern for alignment and even less for innovative pay practices.
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Page 5
Chapter 4: Job Analysis
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Sample Questions
Q1) Job evaluation is usually conducted before job analysis.
A)True
B)False
Q2) Reliability examines the convergence of results among sources of data and methods.
A)True
B)False
Q3) A group of tasks performed by one person is a(n)_____.
A) position
B) job
C) family
D) incumbent
Q4) Employers are more likely to collect task-level job information when jobs are flexible and fast-changing.
A)True
B)False
Q5) Most organizations do not regularly (annual or semi-annual)update their job analyses.
A)True
B)False
Page 6
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Chapter 5: Job-Based Structures and Job Evaluation
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Sample Questions
Q1) Each compensable factor degree should be equidistant from the adjacent degrees.
A)True
B)False
Q2) The U.S.federal government's pay structure is based upon _____ job evaluation system.
A) a ranking
B) a classification
C) the point
D) the Hay plan
Q3) For managers,the most important issue regarding job evaluation is the statistical validity of job evaluation.
A)True
B)False
Q4) Which of the following is not true of usage of multiple plans versus single job evaluation plans?
A) Employers rarely evaluate all jobs in the organization at one time.
B) Many employers design different evaluation plans for different types of work.
C) Typically, a related group of jobs is used for evaluation.
D) A single universal plan is acceptable to employees if the work covered is highly diverse.
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Chapter 6: Person-Based Structures
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Sample Questions
Q1) _____ is the most important factor affecting perception of fairness of a skill-based plan.
A) The design of the certification process
B) The rate of movement through the skill blocks
C) Extent of alignment with the organization's strategy
D) The time and effort required to learn skill blocks
Q2) Which of the following is not a method used to apply the job-evaluation plan in a bias-free manner?
A) Include legal advisors while developing a plan.
B) Ensure that the job descriptions are bias-free.
C) Exclude incumbent names from the job evaluation process.
D) Train diverse evaluators.
Q3) Reliability of job evaluations may be measured by:
A)determining if different evaluators produce similar results.
B)asking the question: "What does the evaluation measure?"
C)determining "hit rates."
D)surveying employee attitudes about the evaluation.
Q4) Complex work is likely best supported by person-based pay systems.
A)True
B)False
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Chapter 7: Defining Competitiveness
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Sample Questions
Q1) The first assumption of labor market theories is that employers always seek to maximize penetration.
A)True
B)False
Q2) Output associated with hiring an additional person,holding constant other production factors,is referred to as:
A) productivity.
B) the marginal product of labor.
C) incremental productivity.
D) the marginal revenue product of labor.
Q3) A pay policy most likely to reduce pay dissatisfaction is _____.
A) lead
B) employer of choice
C) hybrid
D) match
Q4) 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
Page 9
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Chapter 8: Designing Pay Levels, mix, and Pay Structures
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Sample Questions
Q1) The process of multiplying survey data by some factor judged to reflect the difference between a survey benchmark job and a company job is called _____.
A) updating
B) point factor adjustment
C) lead/lag policy adjustment
D) survey leveling
Q2) Setting your company's base pay to competitors' total compensation risks high fixed costs.
A)True
B)False
Q3) Market lines may be constructed by either freehand drawing or linear regression.
A)True
B)False
Q4) A common practice is to use the 10<sup>th</sup> and 90<sup>th</sup> percentiles from pay survey data to set minimums and maximums of pay grades.
A)True
B)False
Q5) What is broad banding? What are some of its advantages?
Q6) What is a market line?
10
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Chapter 9: Pay-For-Performance: the Evidence
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Sample Questions
Q1) What predictions can be made about performance-based pay based on Maslow's theory?
Q2) Risk-sharing plans include a provision for cuts in base pay that are only recaptured in years when the organization meets performance objectives.
A)True
B)False
Q3) The point of the behavior = f (M,A,E)model is that,though very important,compensation alone cannot change employee behavior.
A)True
B)False
Q4) Company X pays for performance.Allan,an employee of the company,is not in favor of this reward system and,therefore,leaves Company X in search of another company with different rules for getting rewards.This is an example of the:
A) design effect.
B) compensation effect.
C) sorting effect.
D) incentive effect.
Q5) Briefly explain the concept of cafeteria-style or flexible compensation.
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Chapter 10: Pay-For-Performance Plans
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Sample Questions
Q1) Firms high on business risk and those with uncertain outcomes,have higher corporate performance without incentive plans than with them.
A)True
B)False
Q2) 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
Q3) The focus of team incentive plans is work groups or teams and does not include divisions or an entire company.
A)True
B)False
Q4) Advantages of the balanced scorecard are that it is easily understood by employees and has low administrative costs.
A)True
B)False
Q5) How can merit pay systems be better managed?
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Chapter 11: Performance Appraisals
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Sample Questions
Q1) Subordinate ratings ___________
A) tend to be inflated if they are not anonymous.
B) are more reliable than peer ratings.
C) are more valid than self ratings.
D) are used by 70% of team-style organizations.
Q2) When tasks are highly uncertain and it is not clear how to define successful performance,the most appropriate rating format is:
A) BARS.
B) MBO.
C) standard rating scales.
D) ranking.
Q3) The question,"Does the instrument lend itself well to validating employment tests?" applies to which criterion of appraisal formats?
A) Validity
B) Administrative
C) Cost
D) Personnel research
Q4) Why is it pertinent to define behavioral expectations for highly routine tasks?
Q5) What is the significance of promotions as a pay-for-performance tool?
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Chapter 12: The Benefit Determination Process
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Sample Questions
Q1) All of the following are advantages of flexible benefits except:
A) costs of benefits are contained.
B) employee understanding of benefits increases.
C) introduction of new benefits is less costly.
D) administrative expenses increase.
Q2) There is good evidence that a sound benefits program reduces turnover.
A)True
B)False
Q3) A primary benefits objective of most employers is to:
A) obtain employee cooperation in controlling benefit costs.
B) increase employee knowledge of benefit costs.
C) encourage employee responsibility for their own financial security.
D) increase employee understanding of plan objectives.
Q4) When future cost containment of a benefit may be a problem,the benefit should be offered on a noncontributory basis.
A)True
B)False
Q5) Flexible benefits allow organizations to control benefit costs.
A)True
B)False
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Chapter 13: Benefit Options
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Sample Questions
Q1) A McKinsey survey of CEOs found nearly 90 percent believe benefits are very important for attracting and retaining employees,but almost 60 percent have not examined if they help meet the organization's strategic goals.
A)True
B)False
Q2) Which of the following is not a defined contribution plan?
A) 401 K
B) ESOP
C) Cash-back
D) Profit sharing
Q3) Employees are required to make contributions to cash balance plans.
A)True
B)False
Q4) A 401K is an example of a defined benefit plan.
A)True
B)False
Q5) Small private employers have recently begun reducing the number of paid holidays.
A)True
B)False
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Chapter 14: Compensation of Special Groups
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Sample Questions
Q1) Which of the following is an example of a popular perk offered to executives?
A) Loans at low or no interest
B) Office space at a company business location
C) An executive dining room
D) Additional secretarial services devoted to company matters
Q2) Independent contractors generally are less expensive for employers since they receive no benefits.
A)True
B)False
Q3) Gross margin on sales or price per unit would be the appropriate measurement if the goal is _____.
A) increased sales growth
B) improved account retention
C) profit improvement
D) greater emphasis on quality
Q4) Describe how executives ensure themselves high compensation.
Q5) (p.478)Engineers in almost all companies are treated as special compensation cases due to their education and training.
A)True
B)False
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Chapter 15: Union Role in Wage and Salary Administration
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Sample Questions
Q1) Tiers can be used as a cost control strategy to allow _____.
A) deflation
B) economic survival
C) expansion
D) divestiture
Q2) A deferred wage increase is negotiated at the time of initial contract negotiations.
A)True
B)False
Q3) With gain-sharing plans,the most common union strategy is to _____.
A) delay taking a stand
B) be very enthusiastic
C) have direct opposition to the plans
D) have no concern for the plans
Q4) Which of the following is not one of the main dimensions of structuring wage packages?
A) Union versus nonunion members' preferences
B) The division between direct wages and employee benefits
C) Use of two-tier pay plans
D) The relationships between worker wages and their managers' pay
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Chapter 16: International Pay Systems
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Sample Questions
Q1) According to Hofstede's cultural dimensions,in Malaysia and Mexico where there is high power distance,_____ pay structures are appropriate.
A) equitable
B) hierarchical
C) egalitarian
D) parallel
Q2) The degree of discretion managers have to make total compensation a strategic tool is _____.
A) managerial accountability
B) democratic accountability
C) managerial autonomy
D) managerial efficiency
Q3) Explain the three general compensation strategies used by companies with worldwide operations.
Q4) In Germany,an employee's pay is affected by their age.
A)True
B)False
Q5) Briefly explain the tariff agreements used in the traditional German pay systems.
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Chapter 17: Government and Legal Issues in Compensation
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Sample Questions
Q1) If federal and state minimum wage laws cover the same job,workers should be paid at or above the higher rate.
A)True
B)False
Q2) _______ require(s)companies set policies to take back executive compensation if it was based on financial information that did not comply with accounting standards.
A) The Executive Compensation Disclosure
B) TARP
C) The financial Accounting Standards Board Statement 123R
D) Clawbacks
Q3) Court decisions suggest 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
Q4) What does the Securities Exchange Act of 1934 do?
Q5) Compare and contrast disparate treatment and disparate impact.
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Chapter 18: Management: Making It Work
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Sample Questions
Q1) Rather than define employment as hours of work,number of employees is often used.
A)True
B)False
Q2) A compa-ratio greater than 1 typically means that _____ .
A) the intended policy line has been violated
B) employees are overpaid
C) most employees are new entrants
D) turnover is high
Q3) What are some of the software packages that help in making information useful?
Q4) An area that presents an ethical dilemma for compensation managers is the manipulation of measures on which variable pay is based.
A)True
B)False
Q5) 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
Q6) What is the top-down method of budgeting?
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