CHAPTER 11 - Managing Compensation
CHAPTER 11
MANAGING COMPENSATION
I. Choose the response that best completes each statement. Circle the letter of your response.
1. The overall aims of compensation management are to:
a. pay the lowest salaries possible
b. take care of inflation and maintain standards of living among employees
c. reward loyal employees
d. attract, retain and motivate employees
e. pay employees according to their own valuation of their worth
2. The main aim of trade unions in compensation would be to
a. obtain maximum benefits for members without prejudicing their future security
b. match or exceed market rates
c. pay according to merit
d. provide for higher salaries to those who contribute more
e. ensure fairness through job evaluation
3. The compensation management process begins with:
a. Job evaluation
b. Salary surveys
c. Job analysis
d. Performance appraisal
e. Pricing jobs
4. The following are some areas in which compensation management polices need to be formulated EXCEPT:
a. Pay posture
b. Salary grade for an employee
c. Equity
d. Salary structure
e. Total remuneration
5. An effective job evaluation system must provide the following requirements EXCEPT:
a. a consistent measure of job worth
b. be perceived to be fair by all concerned
c. involve line managers from inception through administration
d. be able to provide correct salaries for all staff
e. protect employees from favouritism and bias
6. The most popular job evaluation technique used by organisations is:
a. Ranking
b. Paired comparison
c. Points
d. Job grading
e. Factor comparison
7. The first step in the Points method of job evaluation is the
a. selection of job factors
b. establishment of factor weights
c. determining the number of degrees for each factor
d. determining the number of points
e. preparation of job evaluation manual
8. The following are the most common variables which can affect salary rates EXCEPT:
a. geographical location
b. type of industry
c. organisation size
d. profitability
e. type of salary structure
9. The information on market rates from a salary survey will enable the organisation to:
a. decide salaries for all employees
b. extract a derived market rate to formulate its own salary scales
c. make sure that all salaries are correct
d. decide on salary maximums
e. decide on salary minimums
10. A salary structure consisting of a series of salary grades or ranges, each of which has a specified minimum and maximum salary is referred to as a:
a. Spot grade structure
b. Minimum-maximum structure
c. Graded salary structure
d. Cluster structure
e. Differential structure
11. The difference between the mid-point of a salary grade to the mid-point of the salary grade just above it, expressed as a percentage of the lower mid-point is referred to as a:
a. Differential
b. Range width
c. Range spread
d. Range overlap
e. Red circle
12. The difference between the mid-point and the minimum, stated as a percentage of the minimum is referred to as:
a. Differential
b. Range width
c. Range spread
d. Range overlap
e. Red circle
13. In designing a salary structure, the most appropriate reference point is the:
a. Minimum
b. Maximum
c. Mid-point
d. Differential
e. Range spread
14. The basic aim of designing a graded salary structure is to obtain a structure that:
a. Is in line with the organisation’s salary policy
b. Is designed to provide for consistent and equitable salary administration procedures
c. Has considered both internal and external equities
d. Is flexible enough to respond to changes
e. Will be accepted by all employees
15. The ratio of the average of all salaries within a grade as compared to the mid-point of the salary scale for that grade is referred to as the:
a. Maximum-ratio
b. Minimum-ratio
c. Budget-ratio
d. Compa-ratio
e. Range spread-ratio
II. Answer T for true and F for false
16. The key role for top management in compensation management is to provide the policies and direction.
17. A job evaluation is a systematic procedure to determine the salaries of employees.
18. Salary and benefit surveys are concerned with internal equity.
19. Pricing jobs is aimed at matching the worth of jobs in the organisation determined through job evaluation with the labour market worth determined through salary and benefit surveys.
20. An organisation needs to decide on its pay position in relation to the market.
21. Total remuneration refers to the mix of the elements of compensation, whether an organisation pays higher salaries with minimal benefits or pays lower salaries with higher benefits.
22. A job evaluation system must measure the performance of the employee doing the job and not the job.
23. The ranking and grading methods of job evaluation are quantitative.
24. The paired-comparison technique is a refinement of the simple ranking method.
25. The process of job evaluation using the grading method measures jobs as as parts of the job broken down into factors.
26. Many organisations that use the Points method of job evaluation develop separate points plans for different groups or clusters of similar jobs.
27. Salary levels and structures can only be developed and maintained if labour market rates are regularly and systematically checked.
28. A salary survey is designed to show that one salary level is the correct market rate for any given job.
29. For survey results to be reliable, the jobs for which the salaries are reported should have the same job titles.
30. With higher level employees, it is appropriate to provide for narrower differentials because at that level salaries are already high.
31. With junior level employees the range width is normally smaller than higher level employees.
32. The mid-point salary should generally not be below the average of the market rates for jobs in the grade.
33. Salary budgets will ensure that the various departments and divisions will not be over-staffed or have excessively high salary costs.
34. A compa-ratio of above 100 could be due possibility that salaries are too low or that there is a large number of new employees with lower salaries.
35. Salary systems need to be monitored to ensure that salary levels are keeping pace with changes in market rates.
36. When a general salary increment is given to all employees, it is logical to make adjustments to the salary structure so that the mid-points of all grades are revised by a proportionate increase.
37. Starting salaries should generally never be above the mid-point even for those with relevant working experience.
38. Green circles are the employees who are paid above the maximum of the salary range.
39. Employees who reach the maximum of their salary scale may become de-motivated if no promotion opportunities are available.
40. When a job evaluation scheme becomes out-of-date, an organisation should replace the system with a completely new and more elaborate scheme.
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