Chapter 12 : Employee Compensation
Multiple Choice Questions
1.By rewarding desired results an organisation’s compensation policies and practices b
can:App
M
(a)attract highly skilled applicants to the organisation
(b)reinforce employee behaviour that realises its strategic business objectives
(c)encourage employees to work harder and faster
(d)stimulate the interest of employees in their tasks
3.Some critics argue that collective employee relations and unions can be undermined c
byFac
H
(a)enterprise bargaining
(b)negotiated award rates
(c)pay for performance
(d)bonus incentive schemes
5.A compensation objective for the organisation wouldd
Fac
(a)give the employee equitable treatmentM
(b)measure and reward appropriately the employee’s performance
(c)provide regular salary and performance reviews
(d)attract and keep the desired quality mix of employees
6.An objective for the employee of a compensation program would be tob
Fac
(a)control compensation costsM
(b)provide regular salary and performance reviews
(c)motivate employees to improve their performance
(d)comply with legal requirements
7.Before determining the compensation given to a job incumbent it is necessary toc
Und
(a)access the financial needs of the employeeM
(b)review compensation packages at other organisations
(c)conduct a job analysis and job evaluation
(d)decide how valuable the employee is to the organisation
8.Components of a systematic salary administration program includea
Fac
(a)job evaluation; salary survey; performance evaluation; pay for performanceH
(b)job evaluation; organisational objectives; performance evaluation; pay for performance
(c)job evaluation; job description; performance evaluation; pay for performance
(d)organisational objectives; job description; salary survey; merit pay
9.Gross overpayment or underpayment of employees gives rise to employee d
dissatisfaction due toFac
M
(a)lack of motivation to work harder
(b)above average compensation
(c)the difficulty of achieving intrinsic rewards for performance
(d)the lack of fairness employees perceive
10.A systematic model of determining the worth to the organisation of the job in b
relation to other jobs isFac
L
(a)salary survey
(b)job evaluation
(c)job grading
(d)salary formula
11.The most common systems of job evaluation arec
Fac
(a)job review, job ranking, task classification, job auditM
(b)job classification, job grading, performance review, task analysis
(c)job ranking, job grading, points and factor comparison
(d)job grading, job review, job audit, factor comparison
12.The approach to job evaluation that sizes jobs by placing them in rank order is d
known asFac
L
(a)job grading
(b)job structuring
(c)job factor analysis
(d)job ranking
14.For job grading to be accurateb
App
(a)broad experience and knowledge of the job is required by the graderM
(b)satisfactory job descriptions have to be written for each of the grades
(c)it is necessary to observe and interview the current job holder
(d)it is important to recognise the differences between jobs
15.An approach to job evaluation in which numerical values are assigned to specific jobc
factors and the sum of those values provides a quantitative assessment of a job’s Fac
relative worth isH
(a)job rating
(b)job grading
(c)point system
(d)factor comparison
16.When choosing the weights of each job factor, the gradations within each factor, the b
factors themselves, and the number of factors the point system of job evaluation Und
becomes flawed due toH
(a)objectivity
(b)subjectivity
(c)negativity
(d)reflectivity
17.Factor comparison is a refinement of which job evaluation systemsd
Fac
(a)job grading and job classificationH
(b)job analysis and point system
(c)job structuring and job ranking
(d)job ranking and point system
19.Which of the following is not a commonly used ‘pre-packaged’ job evaluation c
systemFac
L
(a)Hay guide chart profile
(b)Watson Wyatt MULTICOMP
(c)McTavish JEVRE
(d)Weighted job questionnaire
20.The Hay guide chart profile bases its job evaluation on an examination of three b
factors. These areUnd
M
(a)qualifications, experience, working conditions
(b)know-how, problem-solving, accountability
(c)creativity, risk-taking, experience
(d)job tasks, initiative, performance results
22.Role-based evaluation developed by the Hay Group views work in terms ofa
Und
(a)evolving roles that reflect the growing ability of the incumbents to add value to M
an organisation
(b)a collection of continually changing activities
(c)a series of related tasks that have been grouped into a single job simply for the sake of convenience
(d)a few related activities that are grouped together to provide structure and control within the organisation
23.Role-based evaluation combines elements of job evaluation andd
Fac
(a)strategic flexibilityL
(b)skill development
(c)job re-design
(d)people-centred approaches
24.The Mercer Cullen Egan Dell method of job evaluation measuresb
Fac
(a)quantity and quality of effortM
(b)cognition, education and decision accountability
(c)education, experience, and problem-solving skills
(d)initiative, creativity, and risk-taking
25.MULTICOMP uses which statistical method to evaluate questionnaire responsesc
Fac
(a)factor analysisH
(b)two-factor theory
(c)multiple regression analysis
(d)cluster analysis
26.The Weighted job questionnaire asks questions about five core job factors. This a
includes all of the following exceptFac
M
(a)work attitudes
(b)working conditions
(c)problem solving
(d)skill and knowledge
27.When selecting a job evaluation approach the HR manager should considerd
App
(a)ease of useH
(b)provider support
(c)flexibility
(d)size of organisation
28.Which of the following is not a frequent criticism of job descriptionsc
Fac
(a)incompatibility with the organisation’s strategic business objectives and cultureM
(b)difficulty of comprehension
(c)negative attitudes of employees in supplying accurate information
(d)time spent on writing the description
29.If inaccurate or incomplete job descriptions were used as a guide in HR decision a
making it canUnd
H
(a)cloud employee roles and organisational objectives
(b)help to make objectives and strategies more flexible
(c)ensure the appointment of employees with the right skills and abilities
(d)result in job descriptions being totally ignored
30.The main purpose of a salary survey isb
Und
(a)as the vehicle used by most job evaluation systems to translate words into H
numbers
(b)to relate the organisation’s salaries to those for similar jobs in other organisations
(c)to attract and keep the desired quality mix of employees
(d)to comply with legal requirements
31.The salary survey provides information onc
Fac
(a)compensation packages offered by the competitionL
(b)minimum award rates as determined by the Government
(c)base salaries and benefits
(d)bonus and incentive schemes used to enhance employee motivation
32.The information provided in the salary survey can be used by the HR manager tod
App
(a)determine overall labour costsH
(b)highlight how HR activities have reduced labour costs
(c)assess the contribution of each job holder to the achievement of organisational objectives
(d)calculate the organisation’s competitive position and plan any corrective action required
33.The salary survey helps to ensureb
Und
(a)appropriate compensation is offered to new entrantsM
(b)external equity is achieved and maintained
(c)that a perception of fairness is achieved
(d)employees are not over or underpaid
34.An essential tool in salary administration that presents all salary ranges over the a
whole spectrum of job sizes isFac
M
(a)salary structure
(b)graphic rating scales
(c)effort-reward differentiation
(d)salary review chart
35.The salary rangec
Und
(a)graphically depicts the salaries currently being paid for jobs, related to job sizeH
(b)presents all salary ranges over the whole spectrum of job sizes
(c)sets the minimum and maximum scheduled amounts paid for a job at a particular job size
(d)identifies the standard salary, and how much above or below that figure is being paid for each job
36.The clustering of formerly numerous individual pay grades into a few broad pay d
grades is known asFac
L
(a)salary range
(b)narrow banding
(c)job evaluation
(d)broadbanding
37.Organisations wanting to restructure and flatten, redefine career paths and encourageb
personal growth through lateral job movement may make use of which pay systemApp
H
(a)standard salary range
(b)broadbanding
(c)salary structures
(d)job evaluation
38.Which of the following is not one of the basic market postures that an organisation d
uses to position itself in the pay marketFac
L
(a)pay above market average
(b)pay market average
(c)pay below market average
(d)pay determined by yearly profits
39.A graphical representation of the organisation’s predicted salary midpoints for the a
12-month period ahead is known asFac
L
(a)a salary policy line
(b)a salary structure
(c)a salary range
(d)a salary curve
40.Inequities in compensation can:b
Und
(a)lead to internal competitionM
(b)have a negative impact on morale and motivation
(c)reduce the organisation’s ability to attract high quality employees
(d)promote increased employee performance
41.Pay secrecy cand
Und
(a)generate mistrust of the compensation programM
(b)reduce employee motivation and inhibit the organisation’s effectiveness
(c)increase commitment and loyalty to the organisation
(d)both (a) and (b)
42.When the difference in pay rates between jobs is too small employees may feelc
Fac
(a)unmotivated to improve performanceM
(b)pay secrecy exists
(c)pay compression exists
(d)pay inequities exist
43.Executive remuneration has increased rapidly because of all of the following exceptb
Fac
(a)talent shortagesL
(b)performance
(c)executive salary disclosures
(d)globalisation
44.An organisation that uses length of time on the job to determine pay levels and a
increases is usingFac
L
(a)seniority-based pay
(b)pay-for-performance
(c)merit-based pay
(d)skill-based pay
45.Merit pay aims toa
Und
(a)develop a productive, efficient, effective organisation that enhances employee H
motivation and performance
(b)reward employees for their commitment and loyalty to the organisation
(c)encourage employees to gain additional skills, competencies and knowledge that will increase their personal satisfaction and value to the organisation
(d)ensure that salary packages offered by the organisation are competitive
46.An effective pay-for-performance system shouldc
Fac
(a)be competitiveM
(b)eliminate the need for performance appraisals
(c)create a link between reward and performance
(d)encourage initiative and creativity
47.An advantage of skill-based pay is claimed to be thatd
Und
(a)if too many skills are permitted the plan may become too complex and thus H
difficult to administer and for employees to understand
(b)employees trained in several different jobs may not be able to perform all of them better than a group of workers trained only in one job
(c)some employees may not have the ability or the desire to acquire new skills or knowledge and therefore may resist skill based pay
(d)multiskilling reinforces a high involvement management style, in which employees are given responsibility
48.To determine the appropriate salary increases for an employee’s performance the a
organisation matchesUnd
M
(a)the salary index and performance index
(b)effort and performance ratings
(c)merit based index and performance evaluation
(d)performance increases and work attitude
49.Which of the following is not one of the main types of salary reviewc
Fac
(a)flexible-date reviewsL
(b)fixed-date reviews
(c)job specialisation reviews
(d)anniversary reviews
50.Which of the following does not have to be considered when determining d
promotional increasesApp
H
(a)the probability of future promotions
(b)the employee’s age and length of service
(c)the salaries of other employees at the new job level
(d)the average salary for equivalent positions in other organisations within the same industry
True/False Questions
1.For many organisations employee compensation is the biggest single cost of doing T
business.Fac
L
2.A formal compensation policy is an asset to the organisation, but does not have to beF
communicated to all employees.Und
M
4.Inadequate compensation planning leads to lack of compliance with applicable state T
and federal laws and awards.Und
M
5.Job ranking is a job evaluation method that sizes jobs using a series of written F
classifications and then ranks them in order of the perceived value of their App
contribution to the achievement of organisational objectives.H
6.If you were using a point system to evaluate jobs you would assign numerical valuesT
to specific job factors, and the sum of those values provides a quantitative App
assessment of a job’s relative worth.H
8.The Hay guide chart profile can be used to evaluate all jobs because all jobs require T
some degree of know-how, problem solving and accountability.Und
M
10.Cognition, education and decision accountability are the key factors examined T
within the Mercer Cullen Egan Dell method of job evaluation.Fac
M
11.Watson Wyatt has successfully promoted two job evaluation systems: F
FACTORCOMP and SKABCOMP.Fac
L
13.A job description provides an ideal blueprint of what the job is expected to look like F
in five to ten years.Fac
L
14.Salary surveys can either be based on matching similar jobs on their content or T
matching jobs according to their job size.Fac
H
15.The problem with salary surveys is that they mainly include low-paying F
organisations, inaccurate information, and narrow job descriptions.Und
M
16.A salary line is a graphic representation of the salary structure within an F
organisation, and what the employee’s next step-up is likely to be.Fac
M
17.A salary range normally depicts what an employee is currently earning and what F
they can reasonably expect to be earning in five years time if they remain with the Und
organisation.H
18.Broadbanding should be compatible with an organisation’s culture, vision and T
business strategy.Und
M
19.Pay secrecy is the norm in most private sector organisations.T
Fac
L
21.Senior executive pay levels often appear to have little to do with responsibility or T
performance.Fac
L
22.Seniority-based pay recognises the correlation between experience and performance.T
Fac
M
23.Research into merit pay suggests that a merit increase must be at least 15% of baseF
pay to produce the desired effects on employee attitudes and behaviour.Fac
H
24.Organisations that adopt skill-based pay are likely to encourage employee T
involvement.Und
M
25.Salary increases that occur automatically each year on a specified date, irrespective F
of performance are known as promotional increases.Und
M
Essay Questions
1.Critically discuss the importance of linking an organisation’s compensation approach to its strategic business objectives.
2.An effective compensation program has a number of objectives. Examine the objectives of the organisation and the employee and how these can be used to maximise performance and motivation.
3.Job evaluation is undertaken to determine the relative worth of jobs within an organisation. Explain the importance of up-to-date, accurate, well-written job descriptions for effective job evaluation.
4.Critically discuss the difference between pay-for-performance, and skill-based pay; and provide examples of when they might be used.