Strategic Compensation, 1st Edition Test Bank

Test Bank for Strategic Compensation: A Human Resources Management Approach by Joseph J. Martocchio Carol Ann Samhaber

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Test Bank for Strategic Compensation: A Human Resources Management Approach, First Canadian Edition Chapter 1 Strategic Compensation: A Component of Human Resources Systems Multiple Choice Questions 1) ________ refers to the design and implementation of compensation systems to reinforce the objectives of both HRM strategies and competitive business strategies.

A) Extrinsic compensation B) Strategic compensation C) Strategic analysis D) Intrinsic compensation Answer: B Difficulty: Moderate Skill: Concept LO: 1.1: Define strategic compensation.

2)____ refers to multiple HRM practices to reinforce competitive business strategy.

A) Human resources management industry practices B) Human resources management legislation C) Human resources management strategies D) Human resources management theories Answer: C Difficulty: Moderate Skill: Concept LO: 1.1: Define strategic compensation.

3) Which of the following describes a human resources management or compensation strategic business partner?

A) An HRM practitioner that works within the relevant HRM legislation.

B) An HRM practitioner that works within the relevant HRM best practices.

C) An HRM practitioner that works within the relevant organizational strategies.

D) An HRM practitioner is not a strategic business partner.

Answer: C Difficulty: Moderate Skill: Concept LO: 1.1: Define strategic business compensation.

4) Protection or benefits programs are what type of compensation benefits?

A) external B) non-monetary rewards C) internal D) monetary Answer: B Difficulty: Moderate

Skill: Concept LO: 1.1: Define strategic compensation.

5) Government sponsored benefits ________________.

A) are not applicable in all provinces and territories B) only applies to government employees C) are a form of taxation D) are a form of social insurance Answer: D Difficulty: Moderate Skill: Concept LO: 1.1: Define strategic compensation 6) Job analysis is ________________.

A) an elective process for gathering, documenting, and analyzing information in order to describe jobs.

B) is a systematic process for gathering, documenting, and analyzing information in order to describe jobs.

C) is a systematic process for gathering and analyzing information in order to pay jobs.

D) is a systematic process for analyzing information in order to describe jobs.

Answer: B Difficulty: Moderate Skill: Concept LO: 1.1: Define strategic compensation.

7) Which of the following is an example of a core compensation?

A) medical insurance B) vacations C) day care assistance D) monetary compensation Answer: D Difficulty: Easy Skill: Concept LO: 1.1: Define strategic compensation.

8) This concept describes an company's success when the organization acquires or develops capabilities that facilitate outperforming the competition.

A) differentiation B) capital C) compensation practices D) competitive advantage Answer: D Difficulty: Easy Skill: Concept LO: 1.1: Define strategic compensation.

9) Which of the following refers to the planned use of company resources-financial capital, equipment capital, and human capital to promote and sustain competitive advantage?

A) strategic analysis B) comparative analysis C) 360 degree analysis D) competitive business strategy Answer: D Difficulty: Moderate Skill: Concept LO: 1.1: Define strategic compensation.

10) Which of following enables companies to generate income, higher organization stock prices, economic value, strong positive brand identity, and reputation?

A) capital B) assets C) competency D) human capital Answer: A Difficulty: Moderate Skill: Concept LO: 1.2: Summarize the role of compensation as a strategic business partner.

11) As a strategic business partner, HRM and compensation professionals today need to think most like whom?

A) vice president operations B) chief financial officer (CFO) C) chief executive officer (CEO) D) controller Answer: C Difficulty: Moderate Skill: Concept LO: 1.2: Summarize the role of compensation as a strategic business partner.

12) In General Electric's human resource leadership program (HRLP), successful participants will achieve which of the following?

A) gain an understanding of the depth of specialization for each (HRM) function B) gain an understanding of HRM competencies, global leadership skills, and business acumen C) gain an understanding of the depth of specialization for each HRM function D) gain an understanding of HRM from a generalist's perspective Answer: B Difficulty: Easy Skill: Application of Knowledge

LO: 1.2: Summarize the role of compensation as a strategic business partner.

13) Cash and equipment such as a lab equipment in a research lab are examples of which of the following?

A) non-liquid assets B) organizational structure C) capital D) liquid assets Answer: C Difficulty: Moderate Skill: Application of Knowledge LO: 1.2: Summarize the role of compensation as a strategic business partner.

14) Discerning threats and opportunities is the main focus of which activity?

A) human resource planning B) environmental scanning C) job evaluation D) job analysis Answer: B Difficulty: Moderate Skill: Concept LO: 1.3: Explain strategic compensation decisions.

15) This term suggests that a loss is likely for the organization, and that the individual will be left with little control.

A) reverse opportunity B) negative equity C) threat D) foreclosure Answer: C Difficulty: Easy Skill: Concept LO: 1.3: Explain strategic compensation decisions.

16) Which of the following competitive strategies does Apple Computer use?

A) lowest-cost strategy B) differentiation strategy C) total quality management strategy D) human capital strategy Answer: B Difficulty: Moderate Skill: Application of Knowledge LO: 1.3: Explain strategic compensation decisions.

17) IKEA sources its products to countries where labour is cheaper and provides a low level of service. Which of the following competitive strategies does IKEA use?

A) differentiation strategy B) high quality strategy C) brand notoriety D) lowest-cost strategy Answer: D Difficulty: Moderate Skill: Application of Knowledge LO: 1.3: Explain strategic compensation decisions.

18) 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 Difficulty: Easy Skill: Concept LO: 1.3: Explain strategic compensation decisions.

19) Which of these actions would HRM encourage in attempting to create a lowest-cost competitive strategy?

A) an employee's long-term focus B) unpredictable employee behaviour C) cost minimization D) high concern for the quality of output Answer: C Difficulty: Challenging Skill: Concept LO: 1.3: Explain strategic compensation decisions.

20) This legislation made it illegal to pay women less than men for performing equal work.

A) equal pay for equal work B) human rights C) pay equity D) employment standards Answer: A Difficulty: Moderate Skill: Concept LO: 1.4: Identify and discuss the building blocks and structural elements of strategic compensation systems.

21) Cost-of-living adjustments (COLAs) are typically based on which index?

A) Producer Price Index B) Consumer Price Index C) Employment Cost Index D) Employee Benefit Index Answer: B Difficulty: Moderate Skill: Concept LO: 1.4: Identify and discuss the building blocks and structural elements of strategic compensation systems.

22) What type of pay system rewards employees for partially or completely attaining a predetermined work objective?

A) seniority pay B) merit pay C) incentive pay D) skill-based pay Answer: C Difficulty: Moderate Skill: Concept LO: 1.4: Identify and discuss the building blocks and structural elements of strategic compensation systems.

23) What type of pay system rewards employees for differences in job performance as assessed by supervisors or managers?

A) seniority pay B) merit pay C) incentive pay D) skill-based pay Answer: B Difficulty: Moderate Skill: Concept LO: 1.4: Identify and discuss the building blocks and structural elements of strategic compensation systems.

24) Abdu works at a call center for a media organization, and he has been answering calls regarding cell phones and TV services. Recently, he started to attend a training program about internet services. Upon successful completion of this training program, Jason will be able to handle in-depth internet questions and queries as well. If this organization has a compensation policy that rewards Abdu's completion of this training, then what type of pay system does it employ?

A) incentive pay B) merit pay C) seniority pay D) pay-for-knowledge Answer: D

Difficulty: Moderate Skill: Application of Knowledge LO: 1.4: Identify and discuss the building blocks and structural elements of strategic compensation systems.

25) Tia's position changed from supervisor at the planning department to supervisor at the new projects department. In terms of career development, which of the following describes Tia's situation?

A) maintaining focus with less responsibilities B) making a lateral move across the organization's hierarchy C) moving upward through a organization's hierarchy D) maintaining the focus and assuming greater responsibilities Answer: B Difficulty: Moderate Skill: Application of Knowledge LO: 1.4: Identify and discuss the building blocks and structural elements of strategic compensation systems.

26) What do compensation managers use to recognize differences in the relative worth of jobs and to establish pay differentials based upon management priorities?

A) job evaluation B) internal consistency C) job analysis D) strategic analysis Answer: A Difficulty: Moderate Skill: Concept LO: 1.4: Identify and discuss the building blocks and structural elements of strategic compensation systems.

27) These compensation systems go a long way in attracting and retaining the most qualified employees and are based upon market 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 Difficulty: Moderate Skill: Concept LO: 1.4: Identify and discuss the building blocks and structural elements of strategic compensation systems.

28) Which of the following represents the pay rate differences for jobs and employee contributions of unequal worth to an organization?

A) merit pay B) incentive pay

C) retention pay D) pay structures Answer: D Difficulty: Moderate Skill: Concept LO: 1.4: Identify and discuss the building blocks and structural elements of strategic compensation systems.

29) Compensable factors include which of the following?

A) employee knowledge, skills, and abilities B) employee compensation and benefits C) skill, effort, responsibility, and working conditions D) skill, effort, talent, and working condition Answer: C Difficulty: Challenging Skill: Concept LO: 1.4 Identify and discuss the building blocks and structural elements of strategic compensation systems 30) Human capital theories refers to: A) the total number of employees B) employees’ knowledge and skills add value C) B) total of employees’ knowledge and skills D) cost of human capital Answer: B Difficulty: Easy Skill: Concept LO: 1.4 Identify and discuss the building blocks and structural elements of strategic compensation systems 31) Person focused pay includes: A) rewards employees for specifically learning new curricula B) rewards employees for the tasks completed C) rewards employees for the number of persons they supervise D) rewards employees for their knowledge and skills Answer: B Difficulty: Moderate Skill: Concept LO: 1.4 Identify and discuss the building blocks and structural elements of strategic compensation systems 32) This agreement describes the terms of employment that are set between management and union bargaining representatives.

A) employee relationship agreement

B) collective bargaining agreement C) joint employment agreement D) workplace requisite agreement Answer: B Difficulty: Easy Skill: Concept LO: 1.5: Describe the fit of the compensation function in organizations.

33) Which type of professional is involved in the compensation functions such as building job structures, market competitive pay systems, and merit pay structures?

A) compensation generalist B) HRM specialist C) compensation specialist D) HRM generalist Answer: A Difficulty: Easy Skill: Concept LO: 1.5: Describe the fit of the compensation function in organizations.

34) Oftentimes, companies use this method to trim their payroll responsibilities by encouraging higher-paid workers with more seniority to voluntarily leave the organization earlier than previously planned.

A) resignation plans B) severance plans C) early retirement programs D) employee expenditure plans Answer: C Difficulty: Moderate Skill: Concept LO: 1.5: Describe the fit of the compensation function in organizations.

35) This group is directly involved in producing goods and delivering services for an organization.

A) staff employees B) line employees C) managers D) executives Answer: B Difficulty: Moderate Skill: Concept LO: 1.6: Identify the stakeholders of the compensation function and summarize their stakes in the work compensation professionals perform.

36) The success of HRM departments depends on how well they serve the interests of which of the following stakeholder groups?

A) employees, line managers, executives, unions, broader community, and the Canadian

government B) unions and the Canadian government C) executives and shareholders D) employees and line managers Answer: A Difficulty: Easy Skill: Concept LO: 1.6: Identify the stakeholders of the compensation function and summarize their stakes in the work compensation professionals perform.

37) Which of the following group is a stakeholder within an organization?

A) Human Rights Commission B) Employment and Social Development C) applicants D) line managers Answer: D Difficulty: Easy Skill: Concept LO: 1.6: Identify the stakeholders of the compensation function and summarize their stakes in the work compensation professionals perform.

38) Which stakeholder group turns to compensation professionals for advice about appropriate pay rates for jobs?

A) government leaders B Line managers C) applicants D) employees Answer: B Difficulty: Easy Skill: Concept LO: 1.6: Identify the stakeholders of the compensation function and summarize their stakes in the work compensation professionals perform.

39) What are the main elements of environmental scanning?

A) assessing organizational threats, opportunities, strengths, and weaknesses B) assessing organizational threats, options, strengths, and weaknesses C) assessing employee threats, options, strengths, and weaknesses D) assessing managerial threats, options, strengths, and weaknesses Answer: B Difficulty: Easy Skill: Concept LO: 1.1: Define strategic compensation Fill in the Blank Questions

1) ________ compensation refers to the mental state of employees as a result of their performance on the job.

Answer: Intrinsic Difficulty: Moderate Skill: Concept LO: 1.1: Define strategic compensation.

2) Pay-for-knowledge and ________ programs are key to giving employees the necessary knowledge and skills to use new workplace technology effectively.

Answer: skill-based pay Difficulty: Moderate Skill: Concept LO: 1.2: Summarize the role of compensation as a strategic business partner.

3) Saudi Arabia, which is one of the top oil-producing countries in the world, continues to pump crude oil even as demand for oil decreases. This activity is considered to be a(n) ________ to other oil producing countries such as Canada.

Answer: threat Difficulty: Challenging Skill: Concept LO: 1.3: Explain strategic compensation decisions.

4) Strategic management involves distinguishing between threats and ________ in attempting to achieve organizational goals, thus making strategic management an imprecise process.

Answer: opportunities Difficulty: Challenging Skill: Concept LO: 1.3: Explain strategic compensation decisions.

5) Apple Computer's use of a differentiation strategy promotes both market demand and ________.

Answer: loyalty Difficulty: Challenging Skill: Application of Knowledge LO: 1.3: Explain strategic compensation decisions.

6) The demand for human resources management professionals is ________.

Answer: increasing Difficulty: Challenging Skill: Concept LO: 1.5: Describe the fit of the compensation function in organizations.

7) Companies that implement pay-for-knowledge and ________ plans generally increase the amount of classroom and on-the-job training as these types of plans make training necessary rather than optional.

Answer: person-focused Difficulty: Moderate Skill: Concept LO: 1.5: Describe the fit of the compensation function in organizations.

8) Employment ________ occurs when an employee's agreement to perform work is ended, whether it is voluntarily or involuntarily.

Answer: termination Difficulty: Easy Skill: Concept LO: 1.5: Describe the fit of the compensation function in organizations.

9) Due to the recent economic downturn, Your Brewing Co. decided to shut down one of its breweries in British Columbia, and therefore approximately 100 employees were laid off. Your Brewing Co. has chosen to award laid-off workers 6 months of ________ pay.

Answer: severance Difficulty: Challenging Skill: Application of Knowledge LO: 1.5: Describe the fit of the compensation function in organizations.

10) ________ compensation reflects employees’ psychological mindsets that result from per-forming their jobs while extrinsic compensation includes both monetary and nonmonetary rewards.

Answer: intrinsic Difficulty: Moderate Skill: Application of Knowledge LO: 1.5: Describe the fit of the compensation function in organizations.

11) ________ represent pay rate differences for jobs of unequal worth and the framework for recognizing differences in employee contributions.

Answer: Pay structures Difficulty: Moderate Skill: Application of Knowledge LO: 1.5: Describe the fit of the compensation function in organizations.

12) Pay grades group jobs for pay policy application and ________ build upon these.

Answer: Pay ranges Difficulty: Moderate Skill: Application of Knowledge LO: 1.5: Describe the fit of the compensation function in organizations.

Short Answer Questions 1) What are the three questions that compensation professionals should answer to help determine whether they are making a strategic contribution to the organization?

Answer:

• Does compensation strategy fit well with the objectives of competitive business and HRM strategies?

• Does the choice and design of compensation practices fit well to support compensation strategy?

• Does the implementation of compensation practices effectively direct employee behaviour to enhance job performance that supports the choice of compensation practices?

Difficulty: Challenging Skill: Concept LO: 1.3: Explain strategic compensation decisions.

2) Compensation represents both the intrinsic and extrinsic rewards employees receive for performing their jobs. Together, both intrinsic and extrinsic compensation describe an organization’s total compensation system. Briefly describe both types of rewards and indicate the professionals who are responsible for managing them.

Answer: Intrinsic compensation reflects employees' psychological mind-sets that result from performing their jobs. Extrinsic compensation includes both monetary and nonmonetary rewards. Organizational development professionals promote intrinsic compensation through effective job design. Compensation professionals are responsible for extrinsic compensation. Extrinsic compensation includes both monetary and nonmonetary rewards.

Compensation professionals establish monetary compensation programs to reward employees according to their job performance levels or for learning job-related knowledge or skills. Nonmonetary rewards include protection programs (e.g., medical insurance), paid time off (e.g., vacations), and services (e.g., day care assistance). Most compensation professionals refer to nonmonetary rewards as employee benefits.

Difficulty: Moderate Skill: Concept LO: 1.1: Define strategic compensation.

3) What are the three goals of compensation professionals?

Answer: Compensation professionals promote effective compensation systems by meeting three important goals: internal consistency, market competitiveness, and recognition of individual contributions.

Internally consistent compensation systems clearly define the relative value of each job among all jobs within a organization. This ordered set of jobs represents the job structure or hierarchy. Companies rely on a simple, yet fundamental, principle for building internally consistent compensation systems: Employees in jobs that require greater qualifications, more responsibilities, and more complex job duties should be paid more than employees whose jobs require lesser qualifications, fewer responsibilities, and lesscomplex job duties. Internally consistent job structures formally recognize differences in job characteristics, which therefore enable compensation managers to set pay accordingly.

Market-competitive pay systems play a significant role in attracting and retaining the most qualified employees. Compensation professionals build market-competitive

compensation systems based on the results of market surveys and compensation surveys.

Recognizing Individual Contributions are captured in pay structures, which represent pay rate differences for jobs of unequal worth and the framework for recognizing differences in employee contributions. No two employees possess identical credentials or perform the same job equally well. Companies recognize these differences by paying individuals according to their credentials, knowledge, or job performance. When completed, pay structures should define the boundaries for recognizing employee contributions. Well-designed structures should promote the retention of valued employees.

Difficulty: Challenging Skill: Concept LO: 1.4: Identify and discuss the building blocks and structural elements of strategic compensation systems.

4) What is a constituency? How does it affect the HRM department?

Answer: HRM departments does not exist in isolation. Rather, it must respond to a variety of stakeholders, each with its own interests. In fact, the success of an HRM department may depend on how well it serves various stakeholders. Stakeholders can include employees, line managers, executives, unions, the broader community, the Canadian. government, and customers. Each of these groups expects certain actions by the HRM department, rates these actions according to its own standards, and tries to set up goals or present constraints within their realm of understanding. As a result, the HRM department plays multiple roles, trying to meet often-competing goals presented by multiple stakeholders.

Difficulty: Challenging Skill: Concept LO: 1.6: Identify the stakeholders of the compensation function and summarize their stakes in the work compensation professionals perform.

Essay Question 1) How does compensation impact HRM practices?

Recruitment, and Selection. Job candidates choose to work for particular companies for a number of reasons, including career advancement opportunities, training, the company’s reputation for being a “good” place to work, location, and compensation.

Companies try to spark job candidates’ interest by communicating the positive features of the core compensation and employee benefits programs. Organizations use compensation to compete for the very best candidates. In addition, companies may offer such inducements as one-time signing bonuses to entice high-quality applicants. It is not uncommon for signing bonuses to amount to as much as 20 percent of starting annual salaries. Signing bonuses are useful when the supply of qualified candidates falls short of companies’ needs for these candidates.

Employee Performance Management. Accurate performance appraisals are integral to effective merit pay programs. For merit pay programs to succeed, employees must know that their efforts toward meeting production quotas or quality standards will lead to pay

raises. Job requirements must be realistic, and employees must be prepared to meet job goals with respect to their skills and abilities. Moreover, employees must perceive a strong relationship between attaining performance standards and receiving pay increases.

Merit pay systems require specific performance appraisal approaches. Administering successful merit pay programs depends as much on sound performance appraisal practices as it does on the compensation professional’s skill in designing and implementing such plans.

Training. Successful pay-for-knowledge plans depend on a company’s ability to develop and implement systematic training programs. When training is well designed, employees should be able to learn the skills needed to increase their pay, as well as the skills necessary to teach and coach other employees at lower skill levels. Companies implementing pay-for-knowledge plans typically increase the amount of classroom and on-the-job training. Pay-for-knowledge systems make training necessary rather than optional. Companies that adopt pay-for-knowledge systems must accordingly ensure that all employees have equal access to the training needed to acquire higher-level skills.

Career Development. Most employees expect to experience career development within their present companies. Employees’ careers develop in two different ways. First, some employees change the focus of their work—for example, from supervisor of payroll clerks to supervisor of inventory clerks. This change represents a lateral move across the company’s hierarchy. Second, others maintain their focus and assume greater responsibilities. This change illustrates advancement upward through the company’s hierarchy. Advancing from payroll clerk to manager of payroll administration is an example of moving upward through a company’s hierarchy. Employees’ compensation changes to reflect career development.

Labour–Management Relations. Collective bargaining agreements describe the terms of employment (e.g., pay and work hours) reached between management and a union.

Compensation is a key topic. Unions have fought hard for general pay increases and regular COLAs to promote their members’ standard of living. Unions have traditionally bargained for seniority pay systems in negotiations with management. More recently, unions have been willing to incorporate particular incentive pay systems. For example, unions appear to be receptive to behavioural encouragement plans because improving worker safety and minimizing absenteeism serve the best interests of both employees and employers.

Employment Termination. Employment termination takes place when an employee’s agreement to perform work is terminated. Employment terminations are either involuntary or voluntary. The HRM department plays a central role in managing involuntary employment terminations. Organizations initiate involuntary terminations for a variety of reasons, including poor job performance, insubordination, violation of work rules, reduced business activity due to sluggish economic conditions, and plant closings.

Discharge represents involuntary termination for poor job performance, insubordination, or gross violation of work rules. Involuntary layoff describes termination under sluggish economic conditions or because of plant closings. In the case of involuntary layoffs,

HRM professionals typically provide outplacement counselling to help employees find work elsewhere. Companies may choose to award severance pay which usually amounts to several months’ pay following involuntary termination and, in some cases, continued coverage under the employer’s medical insurance plan. Employees often rely on severance pay to meet financial obligations while they search for employment. In the past, companies commonly offered a year or more of severance pay. Severance benefits today tend to be less generous. Employees initiate voluntary terminations, most often to work for other companies or to retire. In the case of retirement, companies sponsor pension programs. Pension programs provide income to individuals throughout their retirement. Companies sometimes use early retirement programs to reduce workforce size and trim compensation expenditures. Early retirement programs contain incentives designed to encourage highly paid employees with substantial seniority to retire earlier than they had planned. These incentives expedite senior employees’ retirement eligibility and increase their retirement income. Difficulty: Challenging Skill: Concept LO: 1.5: Describe the fit of the compensation function in organizations.

Test Bank for Strategic Compensation: A Human Resource Management Approach, First Canadian Edition Chapter 2 Influences on Compensation Practice Multiple Choice Questions 1) Emilio and Ryan hold equivalent administrative jobs, however Emilio, who makes 20 percent more than Ryan, is employed by a manufacturing organization while Ryan is employed by a department store. Based on this information, which of the following best explains this pay differential?

A) inter-industry wage differentials B) differences in human capital intensity C) knowledge, skills, and abilities D) Emilio's stronger negotiation skills Answer: A Difficulty: Easy Skill: Application of Knowledge LO: 2.1: Discuss the reasons for interindustry wage differentials.

2) Which term best describes the extent to which organizations' operations are based on the use of large-scale equipment?

A) manufacturing capital intensity B) human capital intensity C) capital intensity D) financial capital intensity Answer: C Difficulty: Moderate

Skill: Concept LO: 2.1: Discuss the reasons for interindustry wage differentials.

3) Compared to the duration of most training in capital intensive industries, service industry training tends to be which of the following?

A) the same cost B) shorter C) longer D) higher cost Answer: B Difficulty: Moderate Skill: Concept LO: 2.1: Discuss the reasons for interindustry wage differentials.

4) Which of the following is typically the case for organizations that operate in product markets where there is relatively little competition from other organizations?

A) lower wages and lower profits B) lower wages and higher profits C) higher wages and higher profits D) higher wages and lower profits Answer: C Difficulty: Moderate Skill: Concept LO: 2.1: Discuss the reasons for interindustry wage differentials.

5) Which factors account for considerable variation in pay between occupations?

A) employment laws B) interindustry wage differentials C) relevant labour market D) knowledge, skills, and abilities Answer: D Difficulty: Moderate Skill: Concept LO: 2.2: Explain the factors that contribute to pay differentials based on occupational characteristics.

6) Which factors account for considerable variation in pay within occupations?

A) employment laws B) interindustry wage differentials C) relevant labour market D) knowledge, skills, and abilities Answer: D Difficulty: Easy Skill: Concept LO: 2.2: Explain the factors that contribute to pay differentials based on occupational characteristics.

7) A common, yet frequent mistake is that high demand for employees applies only to which kind of jobs?

A) medical doctors B) low-skilled jobs C) highly skilled jobs D) information security analysts Answer: C Difficulty: Challenging Skill: Concept LO: 2.2: Explain the factors that contribute to pay differentials based on occupational characteristics.

8) What decision did Wal-Mart make due to the difficulty of hiring well-qualified workers, since the unemployment rate has declined?

A) Wal-Mart has increased advertising to inform the public that it is a good place to work.

B) Wal-Mart introduced incentive pay to augment base pay.

C) Wal-Mart decided to offer employees health insurance.

D) Wal-Mart substantially increased its starting pay rate.

Answer: D Difficulty: Easy Skill: Concept LO: 2.2: Explain the factors that contribute to pay differentials based on occupational characteristics.

9) Why do pay rate differentials not fully match relative pay differentials?

A) Pay relative differential measures control for the influence of various variables, and pay rate differentials do not.

B) Pay rate differential measures control for the influence of various variables, and relative pay differentials do not.

C) It is difficult to determine the reason for these measures not fully matching.

D) Provincial and territorial employment standards minimum wage provision influences relative pay differentials.

Answer: A Difficulty: Challenging Skill: Concept LO: 2.3: Summarize the reasons for the occurrence of geographic pay differentials.

10) In Edmonton, the typical pay in the installation, maintenance, and repair occupations exceeded the national average. In Ottawa, the rate was less than the national average.

What do these statistics represent?

A) capital intensity effects B) pay rate differentials C) interindustry wage differentials D) relative pay differentials Answer: D Difficulty: Moderate Skill: Application of Knowledge LO: 2.3: Summarize the reasons for the occurrence of geographic pay differentials.

11) When considering cost-of-living differences between locations, which type of costs stand out?

A) housing B) education C) health care D) food and energy Answer: A Difficulty: Moderate

Skill: Concept LO: 2.3: Summarize the reasons for the occurrence of geographic pay differentials.

12) In which important way are relative pay and pay rate differentials consistent?

A) magnitude B) direction C) absolute value D) direction and absolute value Answer: B Difficulty: Moderate Skill: Concept LO: 2.3: Summarize the reasons for the occurrence of geographic pay differentials.

134) Anti-discrimination legislation have contributed to which of the following?

A) some of the decline in union influence B) all of the decline in union influence C) stronger human capital D) spillover effect Answer: A Difficulty: Challenging Skill: Concept LO: 2.4: Discuss the role of labour unions in setting compensation.

14) Many non-union organizations offer higher compensation than they would if unions were non-existent. What is this phenomenon called?

A) progressive compensation B) the spillover effect C) concessionary bargaining D) interindustry compensation differentials Answer: B Difficulty: Easy Skill: Concept LO: 2.4: Discuss the role of labour unions in setting compensation.

15) The decline in union influence can be explained by which of the following reasons?

A) a greater sense of social responsibility in today's society B) lower educational attainment of the workforce C) the cooperative nature of the union and management relationship in Germany D) foreign automobile manufacturers producing higher quality vehicles Answer: D Difficulty: Challenging Skill: Concept LO: 2.4: Discuss the role of labour unions in setting compensation.

16) Unions seek to secure higher hourly pay rates for employees through the early 1980s.

Union member earned how much more than their non-union counterparts?

A) 10% B) 30% C) 25%

D) 8% Answer: B Difficulty: Moderate Skill: Concept LO: 2.4: Discuss the role of labour unions in setting compensation.

17) Jose has a regular hourly rate equal to $18. According to employment standards, how much should his employer pay for each additional hour worked beyond his regular 40 hours within a period of 7 consecutive days?

A) $12 B) double C) no pay for additional hours in any of the provinces or territories D) this depends on each provincial or territorial employment standards Answer: D Difficulty: Moderate Skill: Application of Knowledge LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

18) Which of the following examples is NOT considered a compensable work activity?

A) A firefighter plays checkers while waiting for an alarm.

B) An employee attends an employer-mandated training.

C) An employee travels from home before the regular workday and returns home at the end of the workday.

D) An employee takes a 15-minute rest during work time.

Answer: C Difficulty: Moderate Skill: Application of Knowledge LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

19) Intentionally treating women less favourably than men based upon their gender would be what form of discrimination?

A) disparate treatment B) disparate impact C) disparate causality D) situational discrimination Answer: A Difficulty: Moderate Skill: Concept LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

20) Until recently, Forever Green Landscaping in Moncton granted every employee one week of paid vacation each year. The organization then switched its policy, offering substantially more weeks of paid vacation to employees with high seniority (more than 5 years, in this case). The average seniority of female employees is 2.5 years and 7.75 years for male employees. Which form of discrimination is this policy at risk of creating?

A) disparate treatment

B) disparate impact C) disparate causality D) situational discrimination Answer: B Difficulty: Moderate Skill: Application of Knowledge LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

21) Priti works as a shipping clerk in a distribution organization. The essential function of her job is preparing packages for shipping. If she develops crippling arthritis that interferes with her ability to prepare packages, what is the term that requires her employer to make reasonable accommodations, such as assigning her to another job?

A) Employment standards B) bona fide occupational requirement C) Human Rights D) Equal Pay for Equal Work Answer: B Difficulty: Easy Skill: Application of Knowledge LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

22) What legislation defines hours worked?

A) hours worked is not defined by legislation B) human rights C) equal pay for equal work D) employment standards Answer: D Difficulty: Easy Skill: Concept LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

23 What is the definition of an occupation?

A) a group of jobs, found at more than one organization with a common set of tasks and employee characteristics B) a group of jobs, in one organization with a common set of tasks and employee characteristics C) one job held by one employee in an organization D) jobs in one particular industry Answer: B Difficulty: Easy Skill: Concept LO: 2.1 Discuss the reasons for interindustry wage differentials.

24) What is the written document that describes the terms of employment approved by management and employees during negotiations?

A) employee handbook

B) employee contract C) collective bargaining agreement D) grievance settlement Answer: C Difficulty: Easy Skill: Concept LO: 2.4 Discuss the role of labour unions in setting compensation.

25) Workers’ compensation programs ________________.

A) grant income to workers who were unable to work because of injuries sustained on the job.

B) grant income to workers who were unable to work because of injuries sustained both on and off the job while employed.

C) pay employers’ payroll during a workplace injury.

D) investigates workplace injuries for private insurance payments.

Answer: A Difficulty: Easy Skill: Concept LO: 2.5 Identify and discuss key employment laws pertinent to compensation practice.

26) Employment Standards Acts address ________________.

A) minimum wage and overtime pay.

B) daily and weekly limits to hours of work or to meal breaks.

C) workplace safety requirements.

D) minimum wage, overtime pay, and daily and weekly limits to hours of work or to meal breaks.

Answer: D Difficulty: Easy Skill: Concept LO: 2.5 Identify and discuss key employment laws pertinent to compensation practice.

27) The Charter of Rights and Freedoms requires employers to ________________.

A) refrain from using certain criteria, such as race or gender to arrive specific employment decisions.

B) pay minimum wages and vacation time to all employees.

C) ensure all employees are free to work in occupations of their choice.

D) ensure the safety rights of all employees.

Answer: A Difficulty: Moderate Skill: Concept LO: 2.5 Identify and discuss key employment laws pertinent to compensation practice.

28) ________________ requires all employers to show that pay disparities are job related rather than sex-based.

A) Employment Standards Act B) Employment Equity Act

C) Canadian Charter of Rights and Freedoms D) Human Rights Commission Answer: A Difficulty: Moderate Skill: Concept LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

29) Which government bodies oversee compensation?

A) municipal governments B) provincial and territorial governments C) Canadian federal government D) provincial and territorial and Canadian federal government Answer: D Difficulty: Moderate Skill: Concept LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

30) Which of these tasks should be completed by compensation and HRM specialists?

A) train line mangers, audit compensation practices, and ensure legal compliance B) audit compensation practices and ensure legal compliance C) train line mangers, write compensation policy, audit compensation practices, and ensure legal compliance D) write compensation policy, audit compensation practices, and ensure legal compliance Answer: C Difficulty: Moderate Skill: Concept LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

32) A variety of compensation legislation is in place to ensure ________________.

A) a balance of power between employees and employers B) compliance with government requirements C) protect the employer D) employees know their rights and obligations Answer: A Difficulty: Moderate Skill: Concept LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

33) Compensation management relevant legislation can be categorized as ________________.

A) safety, and work hours; pay discrimination; accommodating disabilities and family needs, and prevailing wage laws B) safety, and work hours; pay discrimination; accommodating disabilities and family needs, and prevailing wage laws

C) income continuity, safety, and work hours; pay discrimination; accommodating disabilities and prevailing wage laws D) income continuity, safety, and work hours; pay discrimination; accommodating disabilities and family needs, and prevailing wage laws Answer: D Difficulty: Moderate Skill: Concept LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

34) During the ________, which took place in the 1930s, a great number of businesses failed, and unemployment soared, forcing the government to institute social welfare programs.

A) Great Recession B) Great Depression C) World War I D) Word War II Answer: B Difficulty: Easy Skill: Concept LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

Fill in the Blank Questions 1) On average, Jie would be more likely to earn ________ money if he were to work as a salesclerk for a department store rather than as an assembly technician in an aircraft engine manufacturing plant.

Answer: less Difficulty: Easy Skill: Concept LO: 2.1: Discuss the reasons for interindustry wage differentials.

2) Employees join unions to influence ________-related decisions, especially when they are dissatisfied with job security, wages, benefits, and supervisory practices.

Answer: employment (or, work) Difficulty: Easy Skill: Concept LO: 2.4: Discuss the role of labour unions in setting compensation.

3) ________ makes it illegal to pay one gender more than the other for equal work performed.

Answer: Equal Pay for Equal Work Difficulty: Moderate Skill: Concept LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

4) The ________ generation was born between roughly 1946 and 1964, and represents a big swell in the Canadian population as the workforce gets progressively older.

Answer: baby boom Difficulty: Moderate Skill: Concept LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

5) Manufacturing is considered to be a(n) ________ intensive industry.

Answer: capital Difficulty: Easy Skill: Application of Knowledge LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

6) Mohamed is considering whether to take a job placement in Toronto or Halifax. Before deciding, he is interested in understanding the cost-of-living differences between both places. Mohamed will consult a(n) ________ comparison calculator to inform his decision.

Answer: cost-of-living Difficulty: Moderate Skill: Concept LO: 2.3: Summarize the reasons for the occurrence of geographic pay differentials.

7) ________ enable workers to maintain their standards of living by adjusting wages for inflation.

Answer: COLAs Difficulty: Easy Skill: Concept LO: 2.3: Summarize the reasons for the occurrence of geographic pay differentials.

8) ________ represent the pattern of pay and benefits associated with characteristics of industries.

Answer: Interindustry wage differentials Difficulty: Moderate Skill: Concept LO: 2.3: Summarize the reasons for the occurrence of geographic pay differentials.

9) Since the passage of the Canada Labour Code and the ________ the government requires private-sector employers to enter into good-faith negotiations with workers over the terms of employment.

Answer: provincial labour laws Difficulty: Moderate Skill: Concept LO: 2.4 Discuss the role of labour unions in setting compensation.

Short Answer Questions 1) Define capital intensity and explain how it relates to compensation outcomes.

Answer: Capital intensity refers to the extent to which organizations' operations are based on the use of large-scale equipment. Capital intensity also explains pay differentials between industries. The amount of average pay varies with the degree of capital intensity.

On average, capital-intensive industries (manufacturing) pay more than industries that are less capital intensive (retail). Capital-intensive businesses require highly capable employees who have the aptitude to learn how to use complex physical equipment such as casting machines and robotics. Employees usually receive on-the-job training, sometimes including employer-sponsored technical instruction. In addition, some employers may require specialized training or a degree for the most skilled assembly and fabrication jobs. Employment settings include automotive assembly, aircraft engine assembly, and ship building. Service industries such as retail are not capital intensive, and often have the reputation of paying low wages. The operation of service industries depends almost exclusively on employees with relatively common skills. Most retail sales employees receive on-the-job training, which usually lasts a few days to a few months.

Difficulty: Challenging Skill: Concept LO: 2.1: Discuss the reasons for interindustry wage differentials.

2) Define what an occupation. Using the example of a pharmacist and a pharmacy technician explain the rationale for differences in pay within these occupations.

Answer: An occupation is a group of jobs, found at more than one organization, in which a common set of tasks is performed or is related in terms of similar objectives, methodologies, materials, products, worker actions, or worker characteristics. File clerk, administrative assistants, administrative officers, and executive assistants are jobs in the office support occupation.

According to the National Occupational Classification, pharmacists possess advanced training to give them the knowledge and skills to safely fill prescriptions, verifying instructions from physicians on the proper amounts of medication to give to patients, check whether the prescription will interact negatively with other drugs that a patient is taking, affect a patient's existing medical conditions, instruct patients on using a prescribed medicine and inform them about potential side effects. Pharmacy technicians support the work of pharmacists while under their supervision. For example, technicians, take the information needed to fill a prescription from customers or health professionals, measure medication for prescriptions, package and label prescriptions, and organize inventory. Pharmacy technicians do not require advanced education; most of their training takes place on the job.

Difficulty: Challenging Skill: Application of Knowledge

LO: 2.2: Explain the factors that contribute to pay differentials based on occupational characteristics.

3) What are the compensation issues that may arise during collective bargaining?

Answer: Union and management negotiations usually centre on pay raises and employee benefits. Unions fought hard for general pay increases and regular COLAs. COLAs, or cost-of-living adjustments, represent automatic pay increases that are based on changes in the consumer price index (CPI). COLAs enable workers to maintain their standards of living by adjusting wages for inflation. Union leaders also fought hard for these improvements to maintain the memberships’ loyalty and support.

Difficulty: Moderate Skill: Application of Knowledge 2.4 Discuss the role of labour unions in setting compensation.

4) What are the factors that influence pay differentials across Canada?

Answer: Interindustry wage differentials are an important factor. Other factors include the union status of the workforce, occupational type, work level, whether organizations operate on a profit or not-for-profit basis, skill-level differences between employees who are performing the same job, and cost of living.

Difficulty: Moderate Skill: Application of Knowledge 2.3 Summarize the reasons for geographic pay differentials.

Test Bank for Strategic Compensation: A Human Resources Management Approach, First Canadian Edition Chapter 3 Traditional Bases for Pay: Seniority and Merit Multiple Choice Questions 1) Which of the following is based on the human capital theory?

A) seniority pay system B) BOS C) merit pay system D) BARS Answer: A Difficulty: Easy Skill: Concept LO: 3.1: Describe seniority and longevity pay practices.

2) The collective bargaining system is governed by which legislation?

A) Canadian Labour Code B) Canadian Charter of Rights and Freedoms C) provincial and territorial employment standards D) Union Labour Relations Act Answer: A Difficulty: Moderate Skill: Concept LO: 3.1: Describe seniority and longevity pay practices.

3) ________ pay is defined as added pay for employees that have reached pay range maximums and are unlikely to move into higher grades.

A) Longevity B) Merit C) Seniority-based D) Incentive Answer: A Difficulty: Moderate Skill: Concept LO: 3.1: Describe seniority and longevity pay practices.

4) Which of the following is an advantage of seniority pay systems?

A) They reward exemplary performance.

B) They encourage employees to continue to increase their skill sets.

C) They help to promote product quality.

D) They reward employees on an objective basis.

Answer: D Difficulty: Challenging Skill: Concept LO: 3.1: Describe seniority and longevity pay practices.

5) What percentage of Canadian employers pay their employees merit increases?

A) 20% B) 54% C) 73% D) 94% Answer: C Difficulty: Moderate Skill: Concept LO: 3.2: Explain the merit pay approach to compensation.

6) Which employers most often use a merit pay system in Canada?

A) municipal government B) provincial government C) federal government D) private sector for profit Answer: D Difficulty: Moderate Skill: Concept LO: 3.2: Explain the merit pay approach to compensation.

7) Which two factors should compensation professionals consider before endorsing the use of merit pay systems?

A) a supervisor's bias and stock price B) job design and a supervisor's bias C) job analysis and stock price D) commitment from senior management and job design Answer: D Difficulty: Challenging Skill: Concept LO: 3.2: Explain the merit pay approach to compensation.

8) This term refers to the minimum pay increase that employees view as a significant change in their compensation amount.

A) halo effect increase B) minimal pay incident C) just-meaningful pay increase D) satisfactory compensation payment Answer: C Difficulty: Easy Skill: Concept LO: 3.2: Explain the merit pay approach to compensation.

9) Ram is rated as outstanding on his leadership ability. He was probably rated based on which appraisal system?

A) trait B) goal-oriented C) comparison D) behavioural Answer: A Difficulty: Moderate Skill: Concept LO: 3.3: Explore a variety of performance appraisal methods.

10) Delicious Home Foods ranks its employees from the best performer to the poorest performer, and the employee with the best performance receives the highest ranking.

What type of performance appraisal method is used by this organization?

A) comparison system B) trait system C) behavioural system D) goal-oriented system Answer: A Difficulty: Easy Skill: Application of Knowledge LO: 3.3: Explore a variety of performance appraisal methods.

11) There are 15 accounting technicians working for IT4U. Their supervisor is required to rate the performance of these employees based on the following criteria: 30% of the accounting technicians will be rated as below-average, 40% of the accounting technicians will be rated as average, and 30% of the accounting technicians will be rated as above average. What type of performance appraisal is used?

A) paired comparison B) forced distribution C) critical incident technique D) behavioural observation scale Answer: B Difficulty: Moderate Skill: Application of Knowledge LO: 3.3: Explore a variety of performance appraisal methods.

12) Which evaluation system requires that supervisors compare each employee to every other employee?

A) forced distribution B) hierarchical C) paired comparison D) critical incident technique Answer: C Difficulty: Easy

Skill: Concept LO: 3.3: Explore a variety of performance appraisal methods.

13) This type of behavioural performance appraisal system requires the review of past performance behaviours and outcomes in order to identify them as either successful or unsuccessful.

A) management by objectives (MBO) B) behavioural observation scales (BOS) C) behaviourally anchored rating scales (BARS) D) critical incident technique (CIT) Answer: D Difficulty: Challenging Skill: Concept LO: 3.3: Explore a variety of performance appraisal methods.

14) This performance appraisal system is based on employees and supervisors identifying on-the-job behaviours and behavioural outcomes that distinguish levels of job performance.

A) behaviourally anchored rating scales B) critical incident technique C) behavioural observation scales D) forced distribution system Answer: B Difficulty: Challenging Skill: Concept LO: 3.3: Explore a variety of performance appraisal methods.

15) This appraisal system is the most defensible in court because it is based on observable job performance behaviours.

A) behaviourally anchored rating scales B) 360 degree performance appraisals C) paired comparison D) forced distribution Answer: A Difficulty: Challenging Skill: Concept LO: 3.3: Explore a variety of performance appraisal methods.

16) Management by objective is part of which type of performance appraisal system?

A) goal-oriented system B) trait system C) behavioural observation scale D) behaviourally anchored rating scale Answer: A Difficulty: Moderate Skill: Concept

LO: 3.3: Explore a variety of performance appraisal methods.

17) Who determines the particular objectives in a management by objectives (MBO) appraisal system?

A) employees B) supervisors C) both employees and supervisors D) board of directors Answer: C Difficulty: Easy Skill: Concept LO: 3.3: Explore a variety of performance appraisal methods.

18) Emad is a sales professional who is employed in an auto dealership. At the beginning of every year, he and his supervisor determine objectives for Emad together, which are tied to organizational objectives. One of the objectives is related to customer satisfaction.

Emad always remains in contact with customers to whom he sold cars even after six months following the sale. His performance appraisal partially depends on the results of a customer satisfaction survey. What kind of performance appraisal system does this auto dealer use?

A) trait B) comparison C) behavioural D) goal-oriented Answer: D Difficulty: Moderate Skill: Application of Knowledge LO: 3.3: Explore a variety of performance appraisal methods.

19) Chris’ Courier, organization asks customers to complete a satisfaction survey regarding their recent delivery. For an employee's performance appraisal, customer satisfaction surveys are also considered in addition to supervisor and team member ratings. Which of the following appraisal methods best describes this situation?

A) paired comparisons B) positive halo effect C) 360-degree performance appraisals D) first-impression effect Answer: C Difficulty: Easy Skill: Application of Knowledge LO: 3.3: Explore a variety of performance appraisal methods.

20) This term refers to a difference between the output of human judgment processes and that of an objective, accurate assessment. This difference could be due to bias, prejudice, or other subjective, extraneous influences.

A) content validity B) rating error C) the performance appraisal process D) a first-impression effect Answer: B Difficulty: Moderate Skill: Concept LO: 3.3: Explore a variety of performance appraisal methods.

21) The halo effect and similar-to-me effects are considered examples of which type of rating error?

A) trait system B) contrast C) illegal discrimination D) bias Answer: D Difficulty: Easy Skill: Concept LO: 3.3: Explore a variety of performance appraisal methods.

22) A manager expects high levels of performance from Ashley, a newly hired employee, because she graduated with a business diploma from an Ontario college. A year later, the manager rates Ashley's job performance more highly than her actual performance based on his initial belief. What kind of rater error was made by the manager?

A) negative halo effect B) first-impression effect C) positive halo effect D) contrast errors Answer: B Difficulty: Easy Skill: Concept LO: 3.3: Explore a variety of performance appraisal methods.

23) Which performance appraisal error reflects the tendency to rate every employee at the low end of the rating scale, regardless of actual performance?

A) error of central tendency B) contrast errors C) negative halo error D) errors of strictness Answer: D Difficulty: Moderate Skill: Concept LO: 3.3: Explore a variety of performance appraisal methods.

24) Which practice enables HRM professionals to develop performance measures?

A) job evaluation B) job analysis C) performance appraisal D) position analysis Answer: B Difficulty: Challenging Skill: Concept LO: 3.4: Discuss how compensation professionals can strengthen the pay-forperformance link.

25) Effective performance appraisals are based on A) hiring experienced managers.

B) effective communication.

C) employees who rate highly in cognitive ability.

D) hiring managers with formal HRM certification.

Answer: B Difficulty: Challenging Skill: Concept LO: 3.4: Discuss how compensation professionals can strengthen the pay-forperformance link.

26) When organizations' merit increases do not clearly reflect differences in actual job performance, they may need to provide which of the following?

A) a promise to allocate more money toward providing merit pay increases B) an apology C) alternative rewards such as a vacation D) justification in a court of law Answer: C Difficulty: Easy Skill: Concept LO: 3.4: Discuss how compensation professionals can strengthen the pay-forperformance link.

27) Poorly designed performance evaluation processes do little to achieve which of the following?

A) discourage employees from referring friends for possible employment in the organization B) influence in any way the perception among employees that pay reflects performance C) encourage employees to refer friends for possible employment in the organization D) create the perception among employees that pay reflects performance Answer: D Difficulty: Challenging Skill: Concept

LO: 3.5: Summarize the possible limitations of merit pay programs.

28) A manager in an organization gives 5 percent merit pay increases each year to employees who perform well. Some of those employees started with substantially lower base pay raises. Over time, which of the following could be a result?

A) negative halo effect B) desire to be promoted C) undesirable social structures D) contrast errors Answer: C Difficulty: Moderate Skill: Application of Knowledge LO: 3.5: Summarize the possible limitations of merit pay programs.

29) Relying on demographic characteristics as the basis for awarding pay increases tells us which of the following?

A) The supervisor is thorough in his determination of pay increases.

B) The supervisor endorses seniority.

C) The supervisor is relying on factors other than merit.

D) The supervisor has adopted a person-focused pay approach.

Answer: C Difficulty: Moderate Skill: Concept LO: 3.5: Summarize the possible limitations of merit pay programs.

30) Employees may differ in their perceptions of what they consider to be large enough pay raises. Which of the following may be a consequence?

A) filing lawsuits on the basis of illegal discrimination B) creating undesirable social structures C) demotivating those employees who do not consider pay raises to be large enough D) none of these Answer: C Difficulty: Challenging Skill: Concept LO: 3.5: Summarize the possible limitations of merit pay programs.

31) Trait systems ask raters to evaluate each employee’s ________________.

A) hours and overtime worked B) seniority with organization C) traits or characteristics D) completed tasks Answer: C Difficulty: Moderate Skill: Concept LO: 3.3 Explore a variety of performance appraisal methods.

32) Comparison systems evaluate a given employee’s performance against ________________.

A) other employees B) job description C) performance data D) traits or characteristics Answer: A Difficulty: Moderate Skill: Concept LO: 3.3 Explore a variety of performance appraisal methods.

33) Forced distribution performance appraisal assigns employees to groups that represent ________________.

A) the number of tasks completed B) each job family C) their years of seniority D) entire range of performance Answer: D Difficulty: Moderate Skill: Concept LO: 3.3 Explore a variety of performance appraisal methods.

34) Critical incident technique requires ________________.

A) job holders and their supervisors to identify successful from unsuccessful performances B) supervisors to measure critical tasks completed C) job holders to self-report critical tasks completed D) job holders and their supervisors to identify the entire range of performance Answer: A Difficulty: Moderate Skill: Concept LO: 3.3 Explore a variety of performance appraisal methods.

Fill in the Blank Questions 1) The concept that employee's knowledge and skills can be used to generate superior productivity is known as ________ theory.

Answer: human capital Difficulty: Easy Skill: Concept LO: 3.1: Describe seniority and longevity pay practices.

2) The Canadian federal government pays employees based on the ________________.

Answer: seniority pay systems Difficulty: Moderate Skill: Concept LO: 3.1: Describe seniority and longevity pay practices.

3) ________ pay practices focus on employees who have achieved the maximum pay rate for their jobs.

Answer: Longevity Difficulty: Moderate Skill: Concept LO: 3.1: Describe seniority and longevity pay practices.

4) ________ pay increase refers to the minimum pay increase that employees will consider to be a worthwhile change in compensation.

Answer: Just-meaningful Difficulty: Challenging Skill: Concept LO: 3.2: Explain the merit pay approach to compensation.

5) Merit pay systems primarily rely on ________ performance measures.

Answer: subjective Difficulty: Challenging Skill: Concept LO: 3.2: Explain the merit pay approach to compensation.

6) Merit pay programs provide ________ increases to base pay.

Answer: permanent Difficulty: Moderate Skill: Concept LO: 3.2: Explain the merit pay approach to compensation.

7) The concept of just-meaningful pay increases applies to ________ pay programs.

Answer: merit Difficulty: Easy Skill: Concept LO: 3.2: Explain the merit pay approach to compensation.

8) ________ systems evaluate a given employee's performance against the performance of other employees.

Answer: Comparison Difficulty: Moderate Skill: Concept LO: 3.3: Explore a variety of performance appraisal methods.

9) Among the various performance appraisal techniques, ________ is the only one based on actual observable job behaviours.

Answer: BARS (behaviourally anchored rating scales) Difficulty: Challenging Skill: Concept LO: 3.3: Explore a variety of performance appraisal methods.

10) Management- by- ________ is used mainly for managerial and professional employees and typically evaluates employees' progress toward strategic planning goals.

Answer: objectives Difficulty: Moderate Skill: Concept LO: 3.3: Explore a variety of performance appraisal methods.

Short Answer Questions 1) List and discuss four possible limitations of merit pay programs.

Answer: An answer should contain any of the following elements: 1) The failure to differentiate among performers: When there is no clear difference in actual job performance, companies may provide alternative rewards such as higher discounts on the organization's product or service to complement merit pay increase.

2) Poor performance measures: Job analysis can be used to create objective performance measures.

3) Supervisors' biased ratings of employee job performance: Major types of rater errors include bias errors, contrast errors, errors of central tendency, and errors of leniency or strictness. HRM departments can help raters to minimize errors by choosing better rating systems and recognizing common errors. For instance, to avoid errors of central tendency, HRM professionals should require justification for rating at every level of the scale, not just the extremes.

4) Lack of open communication between management and employees: An employee develops reasonable expectations when there is open communication between management and employees.

Difficulty: Moderate Skill: Concept LO: 3.5: Summarize the possible limitations of merit pay programs.

2) Summarize the four activities that can help minimize discriminatory performance appraisal practices.

Answer: First, conduct job analysis to ascertain characteristics necessary for successful job performance. Companies must first establish job definitions and then discover what employee behaviours are necessary to perform the jobs. Job analysis is essential for the development of content-valid performance appraisal systems. Content validity displays connections between the measurable factors upon which the employee is being appraised

and the job itself. Human resource and compensation experts must review performance appraisal tools regularly to ensure that the tools adequately reflect the key behaviours necessary for effective job performance. Jobholders, supervisors, and clients can often give the most relevant input to determine whether a performance appraisal system contains dimensions that relate to a particular job.

Second, incorporate these characteristics into a rating instrument. Although the professional literature recommends rating instruments that are tied to specific job behaviours (e.g., behaviourally anchored rating scales), the courts routinely accept lesssophisticated approaches such as simple graphic rating scales and trait ranges. Regardless of the method, HRM departments should provide all supervisors and raters with definitive written standards.

Third, train supervisors to use the rating instrument properly. Raters need to know how to apply performance appraisal standards when they make judgments. The uniform application of standards is extremely important. In addition, evaluators should be aware of common rater errors.

Fourth, several cases demonstrate that formal appeal mechanisms and review of ratings by upper-level personnel help make performance appraisal processes more accurate and effective. Allowing employees to voice their concerns over ratings opens a dialogue between employees and their supervisors that may shed light on the performance appraisal outcomes.

Difficulty: Moderate Skill: Concept LO: 3.3: Explore a variety of performance appraisal methods.

3) How can empowering employees help strengthen the pay-for-performance link?

Answer: Because formal performance appraisals are often conducted only once per year, supervisors must empower employees to make performance self-appraisals between formal sessions. Moreover, supervisors need to take on a coach's role to empower their workers. As coaches, supervisors must ensure that employees have access to the resources necessary to perform their jobs. Supervisors-as-coaches should also help employees interpret and respond to work problems. Empowering employees in this fashion should lead to more self-corrective actions rather than to reactive courses of action.

Difficulty: Challenging Skill: Concept LO: 3.4: Discuss how compensation professionals can strengthen the pay-forperformance link.

4) Explain four of the errors in the employee performance appraisal process.

Answer: Bias Errors happen when the rater evaluates the employee based on a personal negative or positive opinion of the employee rather than on the employee’s actual performance. A manager biased by a first-impression effect might make an initial favourable or unfavourable judgment about an employee and then ignore or distort the employee’s actual performance based on this impression. A positive halo effect or negative halo effect occurs when a rater generalizes an employee’s good or bad behaviour on one aspect of the job to all aspects of the job. A similar-to-me effect refers to the tendency on the part of raters to judge favourably employees whom they perceive as similar to themselves. “Similar-to-me” errors or biases easily can lead to charges of illegal discriminatory bias wherein, a supervisor rates members of his or her race, sex, nationality, or religion more favourably than members of other classes.

Supervisors make contrast errors when they compare an employee with other employees rather than to specific, explicit performance standards. Such comparisons qualify as errors because other employees are required to perform only at minimum acceptable standards. Employees performing at minimally acceptable levels should receive satisfactory ratings, even if every other employee doing the job is performing at outstanding or above-average levels.

When supervisors rate all employees as average or close to average, they commit errors of central tendency. Such errors are most often committed when raters are forced to justify only extreme behaviour (i.e., high or low ratings) with written explanations; therefore, HR professionals should require justification for ratings at every level of the scale and not just at the extremes.

With a leniency error, managers tend to appraise employees’ performance more highly than they really rate compared with objective criteria. Over time, if supervisors commit positive errors, their employees will expect higher-than-deserved pay rates.

Strictness errors occur when a supervisor rates an employee’s performance lower than it would be if compared against objective criteria. If supervisors make this error over time, employees may receive smaller pay raises than deserved, lower their effort, and perform poorly. In effect, this error erodes employees’ beliefs that effort varies positively with performance and that performance influences the amount of pay raises.

Difficulty: Moderate Skill: Concept LO: 3.3: Explore a variety of performance appraisal methods.

Test Bank for Strategic Compensation: A Human Resources Management Approach,

First Canadian Edition Chapter 4 Incentive Pay Multiple Choice Questions 1) Which of the following is true concerning incentive pay?

A) The award is earned only when the predetermined work objective is totally completed.

B) It motivates employees to be more productive, but does little to control payroll costs.

C) Incentive pay awards are granted as one-time payments.

D) Incentive levels are generally subjective in nature.

Answer: C Difficulty: Challenging Skill: Concept LO: 4.1: Explore the incentive pay approach.

2) Which best describes incentive pay?

A) Incentive pay is considered part of an employee's compensation.

B) The criteria for judging an award tend to be objective, such as quantity produced.

C) Award levels are subjective.

D) The amount of the award paid for attainment of goals is not communicated in advance.

Answer: B Difficulty: Moderate Skill: Concept LO: 4.1: Explore the incentive pay approach.

3) Carine's annual salary was $40,000 last year, and she earned a profit-sharing payment of $10,000. Carine's profit-sharing award represents approximately what percentage of her annual salary?

A) 25 percent B) 40 percent C) 45 percent D) 55 percent Answer: A Difficulty: Moderate Skill: Concept LO: 4.1: Explore the incentive pay approach.

4) Organizations can control costs by replacing annual merit or seniority increases or fixed salaries with which type of plans?

A) incentive B) longevity pay C) pay-for-knowledge pay D) base pay Answer: A Difficulty: Easy Skill: Concept

LO: 4.1: Explore the incentive pay approach.

5) Most companies use a mix of which types of pay plans?

A) seniority pay plans and incentive pay plans B) merit pay plans and merit bonus pay plans C) traditional pay plans and incentive pay plans D) traditional pay plans and person-focused pay plans Answer: C Difficulty: Moderate Skill: Concept LO: 4.2: Describe the differences between incentive pay methods and traditional pay methods.

6) Which of the following is NOT a financial measure?

A) operating efficiency B) revenue C) earnings per stock share D) operating income Answer: A Difficulty: Moderate Skill: Concept LO: 4.2: Describe the differences between incentive pay methods and traditional pay methods.

7) Which of the following performance measures corresponds to individual, group, and organization-wide incentive plans, respectively?

A) customer satisfaction, quantity of work, and quality of work B) quantity of work, market share, and customer satisfaction C) quality of work output, customer satisfaction, and revenue D) customer satisfaction, market share, and quality of work Answer: C Difficulty: Moderate Skill: Concept LO: 4.2: Describe the differences between incentive pay methods and traditional pay methods.

8) In addition to the guaranteed hourly pay rate, Raj receives incentives for every item produced over the designated production standard. Which kind of incentive plan is used in this situation?

A) management incentive B) referral C) piecework plans D) behavioural encouragement Answer: C Difficulty: Easy Skill: Application of Knowledge

LO: 4.3: Summarize five types of individual incentive pay plans.

9) Which of the following effects describe the concept that a hard working employee is likely to stay at an incentive pay position?

A) representative B) structural C) sorting D) output Answer: C Difficulty: Moderate Skill: Concept LO: 4.3: Summarize five types of individual incentive pay plans.

10) Which individual incentive plans require the achievement of multiple, complex objectives without compromising the quality and quantity of output?

A) piecework B) referral C) management incentive D) behaviour encouragement Answer: C Difficulty: Challenging Skill: Concept LO: 4.3: Summarize five types of individual incentive pay plans.

11) To have better safety records, the Web Shippers gives monetary incentive awards to its employees for lower accident rates due to improper use of heavy equipment. Which of the following incentive plans describes this example?

A) management incentive B) referral C) piecework D) behavioural encouragement Answer: D Difficulty: Challenging Skill: Application of Knowledge LO: 4.3: Summarize five types of individual incentive pay plans.

12) This type of individual incentive plan rewards employees who recruit new customers or new employees.

A) behaviour encouragement B) referral C) management incentive D) piecework

Answer: B Difficulty: Easy Skill: Concept LO: 4.3: Summarize five types of individual incentive pay plans.

13) Which of the following teams consists of a group of people who are assembled to complete a one-time assignment?

A) project teams B) innovation teams C) process teams D) work teams Answer: A Difficulty: Easy Skill: Concept LO: 4.4: Discuss two types of company-wide incentive plans.

14) Maddie is a design engineer in an auto manufacturer's research and development department. In addition to her normal duties, she is assigned to a team of other engineers developing a highly automated assembly line for the new model of a passenger car. To which type of team is Maddie assigned?

A) incentive B) project C) work (process) D) parallel Answer: D Difficulty: Moderate Skill: Application of Knowledge LO: 4.4: Discuss two types of company-wide incentive plans.

15) Kyle was rewarded for making a suggestion that saved Ewe and Eye Electronics thousands of dollars. Which type of incentive compensation approach might have worked best?

A) group incentive programs B) gainsharing plan C) management incentive plans D) employee stock ownership plan Answer: B Difficulty: Challenging Skill: Concept LO: 4.4: Discuss two types of company-wide incentive plans.

16) What is the main objective of Scanlon plans?

A) to standardize the workforce B) to encourage unionization

C) to increase workforce competitiveness D) to increase employee involvement Answer: D Difficulty: Moderate Skill: Concept LO: 4.4: Discuss two types of company-wide incentive plans.

17) Which gainsharing plan bases incentives on the ratio between labour costs and sales value of production (SVOP)?

A) Rucker Plan B) referral plan C) Scanlon Plan D) Improshare Answer: C Difficulty: Challenging Skill: Concept LO: 4.4: Discuss two types of company-wide incentive plans.

18) The Rucker Plan use a value-added formula to measure ________.

A) productivity B) revenue growth C) earnings per share D) operating income Answer: A Difficulty: Moderate Skill: Concept LO: 4.4: Scanlon Plan 19) The EARbuds Inc. uses a gainsharing plan that gives incentives to employees to finish products rather than to incentivize dollar savings. Therefore, this organization measures productivity as the ratio of standard labour hours and actual labour hours.

Which kind of gainsharing program does EARbuds Inc use?

A) Improshare B) Rucher C) Scanlon D) SVOP Answer: A Difficulty: Challenging Skill: Application of Knowledge LO: 4.4: Summarize the practice of group incentive plans.

20) Which of the following is true regarding group incentive plans?

A) There are more groups in a company than individuals to measure.

B) Individual group members usually work more efficiently alone than in cohesive

groups.

C) It is easier to develop performance measures for individual incentive plans than for group incentive plans.

D) They reinforce teamwork, cultivate loyalty to the company, and increase productivity.

Answer: D Difficulty: Moderate Skill: Concept LO: 4.4: Summarize the practice of group incentive plans.

21) Profit-sharing plans and employee stock option plans are incentives on what level?

A) individual B) group C) organization-wide D) executive Answer: C Difficulty: Moderate Skill: Concept LO: 4.5: Discuss two types of company-wide incentive plans.

22) These profit-sharing plans award cash to employees on a quarterly or annual basis as part of their regular compensation.

A) common B) current C) deferred D) anticipated Answer: B Difficulty: Easy Skill: Concept LO: 4.5: Discuss two types of company-wide incentive plans.

23) The Your Tea pays a portion of organizational profits to its employees. The management offers this incentive plan as one kind of retirement program. Which kind of organization-wide incentive plan does Your Tea offer?

A) employee stock ownership B) deferred profit sharing C) current profit sharing D) employee stock option Answer: B Difficulty: Moderate Skill: Application of Knowledge LO: 4.5: Discuss two types of company-wide incentive plans.

24) This formula for determining the amount available for profit sharing uses a specific percentage of annual profits contingent upon the successful attainment of a specified

profit goal.

A) fluctuating first-dollar-of-profits B) differed first-dollar-of-profits C) graduated first-dollar-of-profits D) fixed first-dollar-of-profits Answer: D Difficulty: Moderate Skill: Concept LO: 4.5: Discuss two types of company-wide incentive plans.

25) This formula for calculating profit-sharing awards gives the employees a higher percentage of the profits as the profits increase.

A) fluctuating first-dollar-of-profits B) differed first-dollar-of-profits C) graduated first-dollar-of-profits D) fixed first-dollar-of-profits Answer: C Difficulty: Moderate Skill: Concept LO: 4.5: Discuss two types of company-wide incentive plans.

26) With which profit-sharing formula does the profit-sharing pool become funded only after profits exceed a predetermined level, but fall below some established maximum level?

A) fixed first-dollar-of-profits B) profitability threshold C) graduated first-dollar-of-profit D) equal payments Answer: B Difficulty: Challenging Skill: Concept LO: 4.5: Discuss two types of company-wide incentive plans.

27) Which arrangement represents a long-term organization-wide incentive plan that provides employees with the option to purchase ownership in the organization?

A) employee stock option plans B) organization equality awards C) profit-sharing plans D) gain sharing plans Answer: A Difficulty: Moderate Skill: Concept LO: 4.5: Discuss two types of company-wide incentive plans.

28) In general, which of the following is an incentive plan design consideration?

A) profitability

B) the outcome of an employee election about willingness to participate in one or more incentive plans C) the level of risk employees will accept in their overall compensation package D) workforce unionization Answer: C Difficulty: Moderate Skill: Concept LO: 4.6: Summarize considerations when designing incentive pay programs.

29) Which of the following is true about the level of risk involved with incentive pay?

A) It decreases as incentive pay represents a greater proportion of total core compensation.

B) It is lower for higher-level employees than for lower-level employees.

C) It depends on the extent to which employees control the attainment of a desired goal.

D) It is dependent on subjective performance appraisals.

Answer: C Difficulty: Moderate Skill: Concept LO: 4.6: Summarize considerations when designing incentive pay programs.

30) The general rule is that short-term organizational goals last less than how long?

A) 1 month B) 6 months C) 1 year D) 5 years Answer: D Difficulty: Easy Skill: Concept LO: 4.6: Summarize considerations when designing incentive pay programs.

31) In gain-sharing programs, which are shared by employees within the group?

A) group improvements in productivity, cost savings, or product quality B) group improvements in productivity and product quality C) group improvements in productivity D) group improvements in cost savings Answer: A Difficulty: Moderate Skill: Concept LO: 4.4 Explain two types of group incentive plans.

32) The incentive effect refers to an employee’s willingness to work ________________.

A) overtime to complete a task B) call out production errors while working C) produce more quality output rather than simply attending work without putting in the effort D) produce more quantity output rather than simply attending work without putting in the

effort Answer: C Difficulty: Moderate Skill: Concept LO: 4.6: Summarize considerations when designing incentive pay programs.

33) With behavioural encouragement plans employees ________________.

A) are encouraged to be members of a team B) payments for specific behavioural accomplishments C) are disciplined for performance errors D) are encouraged to report workplace issues Answer: B Difficulty: Moderate Skill: Concept LO: 4.6: Summarize considerations when designing incentive pay programs.

34) Gain-Sharing Plans are ________________.

A) organizational wide incentive systems that provide participating employees with an incentive payment B) department wide incentive systems that provide participating employees with an incentive payment C) group incentive systems that provide participating employees with an incentive payment D) individual incentive systems that provide participating employees with an incentive payment Answer: C Difficulty: Moderate Skill: Concept LO: 4.6: Summarize considerations when designing incentive pay programs.

Fill in the Blank Questions 1) Another name for incentive pay is ________ pay.

Answer: variable Difficulty: Easy Skill: Concept LO: 4.1: Explore the incentive pay approach.

2) The ________ effect refers to a worker's willingness to work diligently to produce more quality output rather than simply attending work without putting in the effort.

Answer: incentive Difficulty: Moderate Skill: Concept LO: 4.3: Summarize five types of individual incentive pay plans.

3) Individual incentive plans help to promote the relationship between pay and ________.

Answer: performance

Difficulty: Moderate Skill: Concept LO: 4.3: Summarize five types of individual incentive pay plans.

4) ________ teams consist of a group of people assigned to complete a one-time task.

Answer: Project Difficulty: Easy Skill: Concept LO: 4.4: Explain two types of group incentive plans.

5) The sales value of production (SVOP) is the sum of sales ________ plus the value of goods in inventory.

Answer: revenue Difficulty: Moderate Skill: Concept LO: 4.4: Explain two types of group incentive plans.

6) The Improshare bonus is based on a ________ ratio formula.

Answer: labour hour Difficulty: Challenging Skill: Concept LO: 4.4: Explain two types of group incentive plans.

7) The main disadvantage of group incentive compensation is employee ________.

Answer: turnover Difficulty: Moderate Skill: Concept LO: 4.4: Explain two types of group incentive plans.

8) ________ profit-sharing plans place cash awards in trust accounts for employees and are set aside on employees' behalf as a source of retirement income.

Answer: Deferred Difficulty: Easy Skill: Concept LO: 4.5: Discuss two types of company-wide incentive plans.

9) Organizations in such ________ industries as retail sales could benefit by including an incentive component in the core compensation programs, they offer to employees.

Answer: cyclical Difficulty: Moderate Skill: Concept LO: 4.6: Summarize considerations when designing incentive pay programs.

10) Stock ________ describe an employee's right to purchase equity in the organization.

Answer: options Difficulty: Easy

Skill: Concept LO: 4.5: Discuss two types of company-wide incentive plans.

Short Answer Questions 1) How do traditional pay methods differ from incentive pay methods?

Answer: In traditional pay plans, employees receive compensation based on a fixed hourly pay rate or annual salary. Annual raises are linked to such factors as seniority and past performance. Some companies use incentive pay programs that replace all or a portion of base pay in order to control payroll expenditures and to link pay to performance. Organizations use incentive pay programs in varying degrees for different kinds of positions. Some compensation programs consist of both traditional base pay and incentive pay, whereas other programs, usually for sales jobs, offer only incentive pay, in which case all pay is at risk.

Traditional core compensation generally includes an annual salary or hourly wage that is increased periodically on a seniority or merit basis. Companies usually base pay rates on the importance they place on each job within their corporate structure and on the "going rate" that each job commands in similar companies. The five criteria to evaluate jobs are skill, responsibility, mental aptitude, physical application, and working conditions. Next surveys the pay rates of competitors, and it uses these data to set base pay rates.

Employees under traditional pay structures earn raises according to their length of service in the organization and to supervisors' subjective appraisals of their job performance.

Again, both merit pay raises and seniority pay raises are permanent increases to base pay.

Annual merit pay increase amounts usually total no more than a small percentage of base pay (2-6 percent), but the dollar impact represents a significant cost to employers over time.

Organizations use incentive pay to reward individual employees, teams of employees, or whole companies based on their performance. Incentive pay plans are not limited solely to production or nonsupervisory workers. Many incentive plans apply to such categories of employees as sales professionals, managers, and executives. Management typically relies on business objectives to determine incentive pay levels.

Difficulty: Challenging Skill: Concept LO: 4.2: Describe the differences between incentive pay methods and traditional pay methods.

2) Describe and provide one example of each of the three categories of incentive pay plans.

Answer: Incentive pay plans can be broadly classified into three categories: Individual incentive plans. These plans reward employees whose work is performed independently. Some companies have piecework plans, typically for their production employees. Under piecework plans, an employee's compensation depends on the number

of units produced over a given period. Examples include piecework plans, behavioural encouragement plans, and referral plans.

Group incentive plans. These plans promote supportive, collaborative behaviour among employees. Group incentives work well in manufacturing and service delivery environments that rely on interdependent teams. In gain sharing programs, group improvements in productivity, cost savings, or product quality are shared by employees within the group. Examples include gain sharing plans and team incentives.

Organization-wide incentive plans. These plans tie employee compensation to an organization's performance over a short time frame, usually from a 3-month period to a 5year period. Examples include profit sharing plans and stock option plans.

Difficulty: Easy Skill: Concept LO: 4.2: Describe the differences between incentive pay methods and traditional pay methods.

3) Under which three conditions are individual incentive plans most appropriate?

Answer: First, employees' performance can be measured objectively.

Second, individual incentive plans are appropriate when employees have sufficient control over work outcomes. Factors such as frequent equipment breakdowns and delays in receipt of raw materials limit employees' ability to control their performance levels.

Employees are not likely to be diligent when they encounter interference: Chances are good that employees who previously experienced interference will expect to encounter interference in the future. Employees' resistance threatens profits because companies will find it difficult to motivate people to work hard when problem factors are not present.

Third, individual incentive plans are appropriate when they do not create a level of unhealthy competition among workers that ultimately leads to poor quality. For example, an organization- may create unhealthy competition when it limits the number of incentive awards to only 10 percent of the employees who have demonstrated the highest levels of performance. If the organization judges performance according to volume, then employees may sacrifice quality as they compete against each other to outmatch quantity.

In addition, under an incentive plan that rewards quantity of output, those employees who meet or exceed the highest standard established by their employer may be subject to intimidation by workers whose work falls below the standard. Unions may use these intimidation tactics to prevent plan standards from being raised.

Difficulty: Moderate Skill: Concept LO: 4.3: Summarize five types of individual incentive pay plans.

4) In an effort to increase the productivity of its employees, a manufacturing organization is considering adopting an incentive pay program. List and discuss the five factors the HRM professionals should consider in the adoption of an incentive program.

Answer: The first factor to consider is whether the plan should be based on group or individual employee performance. Clearly, this is dependent on the structure of the

organization. If the nature of work performed is interdependent, for example, then group incentives would be appropriate.

A second factor is the level of risk employees would be willing to accept in their overall compensation package. The level of risk increases as incentive pay becomes a greater part of total core compensation. The level of risk is also dependent on the amount of control employees may have toward the attainment of the desired performance goal.

A third factor is whether incentive pay should replace or complement traditional pay.

Some companies may choose to award incentive pay in addition to an employee's base pay and fringe compensation. Other companies may opt to reduce base pay by placing the reduced portion at risk in an incentive plan.

A fourth factor is the criteria by which performance should be judged. Criteria should be quantifiable, accessible, and reflective of an organization's competitive strategy. Further, the organization may want to consider using more than one performance measure, particularly if it is relevant. A weighting scheme could be used to reflect the relative importance of each performance criterion. As with the level of risk, the criteria chosen should be under the control of the employee.

A fifth factor is the time horizon of goals. Typically, incentives for lower-level employees tend to be based on short-term goals that are within the control of such employees. Longer-term incentives are used for professionals because of the length of time it takes for performance to be adequately measured.

Difficulty: Moderate Skill: Concept LO: 4.6: Summarize considerations when designing incentive pay programs.

Test Bank for Strategic Compensation: A Human Resource Management Approach, First Canadian Edition Chapter 5 Person-Focused Pay Multiple Choice Questions 1) Which pay plan generally rewards employees for meeting work objectives?

A) knowledge-based B) seniority C) longevity D) job-based Answer: D Difficulty: Moderate Skill: Concept LO: 5.1: Define person-focused pay.

2) This type of pay system rewards employees for successfully acquiring new job-related knowledge.

A) person-focused pay B) competency-based pay C) merit pay D) incentive pay Answer: A Difficulty: Moderate Skill: Concept LO: 5.1: Define person-focused pay.

3) Which compensation approach refers to three types of person-focused pay programs?

A) competency-based B) innovation-based C) service based D) stair-step Answer: A Difficulty: Moderate Skill: Concept LO: 5.1: Define person-focused pay.

4) This type of pay program rewards employees for successfully learning specific job related knowledge or skills.

A) skill-based B) person-based C) pay-for-knowledge D) incentive Answer: C Difficulty: Easy Skill: Concept LO: 5.1: Define person-focused pay.

5) Which of the following pay systems is used by unions and contractors to reward their carpenters for increasing carpentry abilities?

A) knowledge-based B) incentive C) skill-based D) merit-based Answer: C Difficulty: Easy Skill: Concept LO: 5.1: Define person-focused pay.

6) When an administrative officer is trained to maintain employee attendance data, it is an example of acquiring which type of skills?

A) horizontal B) vertical C) depth D) breadth

Answer: A Difficulty: Easy Skill: Application of Knowledge LO: 5.1: Define person-focused pay.

7) Employees would need to learn these types of skills in order to develop self-managed work teams.

A) horizontal B) vertical C) depth D) breadth Answer: B Difficulty: Moderate Skill: Concept LO: 5.1: Define person-focused pay.

8) In a workplace team, members learn scheduling, coordinating, training, leadership.

Which of the following describes this type of work team?

A) self-regulating B) supervisory C) management D) non-supervised Answer: A Difficulty: Moderate Skill: Concept LO: 5.1: Define person-focused pay.

9) This term refers to the level of specialization or expertise an employee possesses in a particular job.

A) vertical skills B) depth of skills C) breadth of skills D) horizontal skills Answer: B Difficulty: Easy Skill: Concept LO: 5.1: Define person-focused pay.

10) Mauricio, who is an administrative employee of a college, has been trained to perform several kinds of data maintenance tasks. He maintains employee online attendance records, schedules salespeople's work shifts, and monitors the use of office supplies for reordering. Which type of knowledge is necessary to perform all three of these tasks?

A) work-team B) horizontal C) breadth D) depth

Answer: D Difficulty: Moderate Skill: Concept LO: 5.1: Define person-focused pay.

11) Person-focused pay programs that emphasize vertical skills work well at manufacturing companies that organize work flow around which type of organization?

A) departments B) high performance work teams C) task forces D) business units Answer: B Difficulty: Easy Skill: Application of Knowledge LO: 5.2: Describe the usage of person-focused pay.

12) Manufacturing companies that use assembly lines where one employee's job depends on the work of at least one other employee can be described as which of the following settings?

A) ad hoc work team B) semi-autonomous work team C) continuous process D) bureaucratized Answer: C Difficulty: Easy Skill: Application of Knowledge LO: 5.2: Describe the usage of person-focused pay.

13) Which of the following are the two main reasons given for adopting person-focused programs?

A) smaller labour markets and strategic outlines B) market monopolies and lower labour costs C) technological innovations and increased global competition D) market monopolies and organization turnover Answer: C Difficulty: Easy Skill: Concept LO: 5.3: Name and explain the reasons companies adopt person-focused pay programs.

14) Which of the following is a reason many European and Pacific Rim employees are better skilled and able to work more productively than Canadian employees?

A) Both European and Pacific Rim economies provide a higher quality of academic preparation and workplace learning for the non-college portions of their work forces.

B) Partnerships between public educators and employers are much stronger in Canada.

C) Learning is accorded a higher standing in the operations of the Canadian economy than in the European and Pacific Rim economies.

D) Canadians do not have equal access to educational opportunities.

Answer: A Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 5.3: Name and explain the reasons companies adopt person-focused pay programs.

15) This is central to person-focused pay programs.

A) innovation B) management C) training D) data Answer: C Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 5.3: Name and explain the reasons companies adopt person-focused pay programs.

16) Brittany earned a raise in pay when she finished the training for the Technician 2 position. She will receive another raise when she finishes the training for the Technician 3 position. The organization is probably using which type of model?

A) stair-step B) skill blocks C) job-point accrual D) cross-departmental Answer: A Difficulty: Moderate Skill: Application of Knowledge LO: 5.4: Summarize the varieties of person-focused pay programs.

17) Which person-focused model links pay levels to increased knowledge and skills within the same general job category?

A) cross-departmental B) skill blocks C) job-point accrual D) stair-step Answer: B Difficulty: Moderate Skill: Concept LO: 5.4: Summarize the varieties of person-focused pay programs.

18) This type of person-focused pay plan can result in lending an employee from one area in the organization to other areas.

A) stair-step

B) cross-departmental C) job-point accrual D) skill blocks Answer: B Difficulty: Moderate Skill: Concept LO: 5.4: Summarize the varieties of person-focused pay programs.

19) Which one of the following would be correct regarding person-focused pay programs?

A) the skill blocks model only emphasizes horizontal skills B) the stair-step model addresses depth, while the skill blocks model emphasizes both horizontal and vertical skills C) employees do not progress to more complex jobs in the stair-step model D) competency models do not apply to jobs within the same family Answer: B Difficulty: Moderate Skill: Concept LO: 5.4: Summarize the varieties of person-focused pay programs.

20) Which pay model promotes learning and skills development for a wide variety of jobs from different job families?

A) cross-departmental B) job-point accrual C) stair-step D) skill blocks Answer: B Difficulty: Difficult Skill: Concept LO: 5.4: Summarize the varieties of person-focused pay programs.

21) This model is geared to promoting staffing flexibility in an organization by training employees in one area of the organization with some of the critical skills that are needed to perform effectively in another area of the organization.

A) the skill blocks B) the stair-step C) the job-point accrual D) the cross-departmental Answer: D Difficulty: Moderate Skill: Concept LO: 5.4: Summarize the varieties of person-focused pay programs.

22) An organization that designs, manufactures, and sells only Halloween costumes would probably benefit most from which model below?

A) cross-departmental B) skill blocks C) job-point accrual D) stair-step Answer: A Difficulty: Difficult Skill: Application of Knowledge LO: 5.4: Summarize the varieties of person-focused pay programs.

23) Which of the following is a characteristic of job-based pay?

A) It compensates employees for the number of jobs in which they possess the skills to perform.

B) It rewards employees on their promise to make positive contributions to the workplace.

C) It compensates employees for the jobs they currently perform.

D) A reward is based on the successful acquisition of work-related skills or knowledge.

Answer: C Difficulty: Difficult Skill: Concept LO: 5.5: Contrast person-focused pay with job-based pay.

24) Which type of pay program applies to an organization-wide context because employees earn base pay rates for the jobs they perform?

A) person-focused B) competency-based C) organization-based D) job-based Answer: D Difficulty: Easy Skill: Application of Knowledge LO: 5.5: Contrast person-focused pay with job-based pay.

25) This term reflects job design that results in the development of more intrinsically motivating and interesting work.

A) job security B) job enrichment C) job variety D) job identity Answer: B Difficulty: Moderate Skill: Concept LO: 5.6: Explain the advantages and disadvantages of person-focused pay plans.

26) In an Edmonton bakery, line employees are trained to work at different production steps such as assembling ingredients, combining ingredients, mixing ingredients, baking, and packaging the bread. This Edmonton bakery’s strategy of training is an example of which of the following?

A) task identity B) skill variety C) autonomy D) feedback Answer: B Difficulty: Easy Skill: Application of Knowledge LO: 5.6: Explain the advantages and disadvantages of person-focused pay plans.

27) Person-focused pay programs lead to which of the following?

A) diminished employee commitment B) no significant change in employee satisfaction C) increased employee commitment D) higher competitive advantage Answer: C Difficulty: Moderate Skill: Concept LO: 5.6: Explain the advantages and disadvantages of person-focused pay plans.

28) Employees who take advantage of person-focused pay program opportunities may experience which of the following?

A) difficulty in finding employment elsewhere because person-focused pay programs are always firm specific B) higher likelihood of being laid off during periods of business slowdown C) higher likelihood of remaining employed during periods of business slowdown D) feelings of inequity Answer: C Difficulty: Easy Skill: Concept LO: 5.6: Explain the advantages and disadvantages of person-focused pay plans.

29) Which of the following costs is NOT associated with the use of person-focused pay programs?

A) payroll B) overhead C) training D) recruitment Answer: D Difficulty: Easy Skill: Concept LO: 5.6: Explain the advantages and disadvantages of person-focused pay plans.

30) Wei is the HRM Manager of a manufacturing facility that has used the crossdepartmental system and has noticed that absenteeism rates have been significantly lower since implementing this system. As a result, Wei may tell the managers that the organization is able to do which of the following?

A) award pay increases to those whose absenteeism is low B) increase the size of the workforce C) increase the size of the training budget D) reduce the size of the workforce Answer: D Difficulty: Moderate Skill: Application of Knowledge LO: 5.6: Explain the advantages and disadvantages of person-focused pay plans.

Fill in the Blank Questions 1) Both unions and contractors, who employ carpenters, can use ________ pay plans.

Answer: skill-based Difficulty: Difficult Skill: Concept LO: 5.1: Define person-focused pay.

2) ________ skills refer to similar skills or knowledge.

Answer: Horizontal Difficulty: Easy Skill: Concept LO: 5.1: Define person-focused pay.

3) ________ skills are those skills typically considered supervisory.

Answer: Vertical Difficulty: Easy Skill: Concept LO: 5.1: Define person-focused pay.

4) ________ of skills is the level of expertise or specialization an employee brings to a job.

Answer: Depth Difficulty: Moderate Skill: Concept LO: 5.1: Define person-focused pay.

5) A ________ model specifies and defines all the knowledge and skills necessary for success in a group of jobs that are set within an industry context.

Answer: Competency Difficulty: Moderate Skill: Concept LO: 5.2: Describe the usage of person-focused pay.

6) Many of the organizations known to be using person-focused pay systems generally employ no fewer than ________ employees.

Answer: 150 Difficulty: Moderate Skill: Concept LO: 5.2: Describe the usage of person-focused pay.

7) A ________ plan encourages employees to develop skills and learn to perform jobs from different job families.

Answer: job-point accrual Difficulty: Moderate Skill: Concept LO: 5.4: Summarize the varieties of person-focused pay programs.

8) ________ pay compensates employees for the work they currently perform.

Answer: Job-based Difficulty: Easy Skill: Concept LO: 5.5: Contrast person-focused pay with job-based pay.

9) ________ refers to a job design approach that creates more intrinsically motivating and interesting work environments.

Answer: Job enrichment Difficulty: Easy Skill: Concept LO: 5.6: Explain the advantages and disadvantages of person-focused pay plans.

10) Person-focused pay programs depend, in large part, on well-designed ________ programs.

Answer: training Difficulty: Moderate Skill: Concept LO: 5.6: Explain the advantages and disadvantages of person-focused pay plans.

11) _____ plans reward managerial, service, or professional workers for successfully learning specific curricula Answer: Pay-for-knowledge Difficulty: Easy Skill: Concept LO: 5.1 Define person-focused pay.

12) _____ is a term used mostly for employees who do physical work, increases the employees’ pay as they master new skills.

Answer: Skill-based pay Difficulty: Easy Skill: Concept LO: 5.1 Define person-focused pay.

13) _____ refer to similar skills or knowledge.

Answer: Horizontal skills Difficulty: Easy Skill: Concept LO: 5.1 Define person-focused pay.

14) _____ are those skills traditionally considered supervisory such as scheduling, coordinating, training, and leading others.

Answer: Vertical skills Difficulty: Easy Skill: Concept LO: 5.1 Define person-focused pay.

Short Answer Questions 1) Describe the concept of competencies.

Answer: The term competency has become increasingly important in HRM practice because of the changing nature of work. Competencies build upon the use of knowledge, skills, and abilities, which we describe with job analysis. A competency refers to an employee’s capability to orchestrate and apply combinations of knowledge and skills consistently over time and to perform work successfully in required work situations.

Traditionally, work has been described by many dimensions including knowledge, skills, and abilities. Although this is largely still the case, HRM and compensation professionals have embraced the ideas of competencies as the field has increasingly taken on strategic

importance.

Difficulty: Difficult Skill: Concept LO: 5.1: Define person-focused pay.

2) Summarize the findings of studies and industry information concerning the characteristics of employers that use person-focused pay programs as well as the effectiveness of these programs.

Answer: A wide variety of employers have established person-focused pay programs.

Some targeted studies and industry information suggest that organizations of various sizes use person-focused pay programs. Many organizations which use this kind of pay system employ between approximately 150 and 2,000 employees, the majority of whom operate in the manufacturing industry. The average organization age is approximately 10 years. This study also suggests that hundreds of Fortune 1000 firms use skill-based pay for manufacturing or production employees. There is limited evidence regarding the effectiveness of person-focused pay plans. One study found that a skill-based pay plan in a manufacturing setting increased plant productivity by 58 percent, lowered labour cost per part by 16 percent, and showed favourable quality outcomes (82 percent scrap reduction). Another study demonstrated that participants in a skill-based pay program increased their skills, and maintained increased skill levels. A more recent study examined attitudes among participants in a skill-based pay plan. The researchers found that these plans are perceived to produce superior work outcomes.

Difficulty: Difficult Skill: Concept LO: 5.2: Describe the usage of person-focused pay.

3) What are the two most important reasons for adopting person-focused pay?

Answer: Person-focused pay programs represent important innovations in the compensation field. Person-focused pay systems imply that employees must move away from viewing pay as an entitlement. Instead, these systems treat compensation as a reward earned for acquiring and implementing job-relevant knowledge and skills.

Advocates of person-focused pay programs offer two key reasons that firms seeking competitive advantage should adopt this form of compensation: technological innovation and increased global competition.

Difficulty: Easy Skill: Concept LO: 5.3: Name and explain the reasons companies adopt person-focused pay programs.

4) Compare and contrast the concepts of job-based pay and person-focused pay.

Answer: Job-based pay compensates employees for jobs they currently perform, which

include seniority pay, merit pay, and incentive pay. Human resource management professionals establish a minimum and maximum acceptable amount of pay for each job.

Under seniority plans, employees receive automatic increases over time based on the assumption that they further develop their capabilities, which translate into higher job performance. In the case of merit pay, managers evaluate employees based on how well they fulfilled their designated roles as specified by their job descriptions and periodic objectives. Managers then award a permanent merit addition to base pay, based on employee performance.

Person-focused pay compensates employees for developing the flexibility and skills to perform a number of jobs effectively. Moreover, these programs reward employees on their potential to make positive contributions to the workplace based on their successful acquisition of work-related skills or knowledge. Job-based pay plans reward employees for the work they have done as specified in their job descriptions or periodic goals (i.e., how well they have fulfilled their potential to make positive contributions in the workplace).

Finally, job-based pay programs apply to an organization-wide context because employees earn base pay rates for the jobs they perform. Person-focused pay plans apply in more limited contexts because not all jobs require complex skill or knowledge.

Difficulty: Difficult Skill: Concept LO: 5.5: Contrast person-focused pay with job-based pay.

Test Bank for Strategic Compensation: A Human Resource Management Approach, First Canadian Edition Chapter 6 Building Internally Consistent Compensation Systems Multiple Choice Questions 1) This clearly defines the relative value of each job among all jobs within an organization.

A) internally consistent compensation system B) generalized work activities C) intra-organizational job markers D) market comparison standards Answer: A Difficulty: Moderate Skill: Concept LO: 6.1: Explain the concept of internal consistency.

2) Which of the following describes job duties, tasks, and relevant factors needed to perform a job ?

A) job content B) job structure C) job summary

D) job context Answer: A Difficulty: Moderate Skill: Concept LO: 6.1: Explain the concept of internal consistency.

3) This is the systematic process for recognizing differences in the relative worth among a set of jobs and for establishing pay differentials accordingly.

A) job analysis B) job content C) job evaluation D) job-relatedness Answer: C Difficulty: Moderate Skill: Concept LO: 6.1: Explain the concept of internal consistency.

4) Which is the fundamental principle of internally consistent compensation systems?

A) Pay rates should mirror pay rate differences among the competition.

B) Jobs that require higher qualifications should be paid more than jobs that require lower qualifications.

C) All jobs should be valued equally because every job directly contributes to competitive advantage.

D) All jobs should be valued according to need.

Answer: B Difficulty: Moderate Skill: Concept LO: 6.1: Explain the concept of internal consistency.

5) Who leads the process of analyzing jobs?

A) compensation generalists B) HRM specialists C) HRM generalists D) compensation specialists Answer: B Difficulty: Moderate Skill: Concept LO: 6.1: Explain the concept of internal consistency.

6) This is a systematic process for gathering, documenting, and analyzing information in order to describe jobs.

A) job characterization B) job description C) job evaluation D) job analysis Answer: D Difficulty: Difficult Skill: Concept LO: 6.2: Summarize the practice of job analysis.

7) One of the essential skills that software developers must have is the proficiency in at least one of the programming languages, such as Javascript or Python. This is recorded in which part of the job description?

A) working conditions B) job evaluation C) worker requirement D) job content Answer: C Difficulty: Moderate Skill: Concept LO: 6.2: Summarize the practice of job analysis.

8) Which source is generally able to provide the most extensive and detailed information about how job duties are performed?

A) job analysts B) supervisors C) job incumbents D) benchmark jobs Answer: C Difficulty: Moderate Skill: Concept LO: 6.2: Summarize the practice of job analysis.

9) A job analysis method is ________ if it accurately assesses each job's duties.

A) reliable B) complete C) valid D) market-based Answer: C Difficulty: Moderate Skill: Concept LO: 6.2: Summarize the practice of job analysis.

10) These indicate the name of each job within an organization's job structure.

A) job specifications B) job summaries C) position headings D) job titles Answer: D Difficulty: Moderate Skill: Concept LO: 6.2: Summarize the practice of job analysis.

11) This section concisely lists the job with two to four descriptive statements.

A) job summary B) job duties C) job titles D) job preview Answer: A Difficulty: Moderate Skill: Concept LO: 6.2: Summarize the practice of job analysis.

12) Which of the statements below best describes the Canadian job analysis legal landscape?

A) Job analysis is legally required within each provincial or territorial employment standards.

B) There is no Canadian legislation requiring organizations to complete job analysis.

C) Job analysis is not legally required yet once complete it affords organizational legal protection.

D) Job analysis is legally required within the Canadian Charter of Rights and Freedoms.

Answer: B Difficulty: Moderate Skill: Concept LO: 6.2: Summarize the practice of job analysis.

13) NOC is the ________________.

A) operational guidelines for HRM using the internet B) American job database C) Ontario job database D) Canadian job database Answer: D Difficulty: Moderate Skill: Concept LO: 6.2: Summarize the practice of job analysis 14) O*NET is the ________________ A) operational guidelines for HRM using the internet B) American job database C) Ontario job database D) Canadian job database Answer: B Difficulty: Moderate Skill: Concept LO: 6.2: Summarize the practice of job analysis 15) Generalized work activities, organizational context, and work context are requirements under which NOC category?

A) employment requirements B) main duties C) additional information D) skill level Answer: B Difficulty: Moderate Skill: Concept LO: 6.2: Summarize the practice of job analysis.

16) Which of the following two are considered job evaluation techniques?

A) market-based and appeals-based B) compensable content and job-based C) market-based and job content D) compensable content and job content Answer: C Difficulty: Moderate Skill: Concept LO: 6.3: Describe the practice of job evaluation.

17) Valid and reliable job evaluations result from which two conditions?

A) consistent results; using multiple collection methods B) consistent results; data obtained under similar conditions C) data from multiple sources; using multiple collection methods D) data from multiple sources; data obtained under similar conditions Answer: C Difficulty: Difficult Skill: Concept LO: 6.3: Describe the practice of job evaluation.

18) These are the main job characteristics that are the general basis for job evaluations and are used to establish relative pay rates.

A) job descriptions B) compensable factors C) occupation descriptions D) ranking plans Answer: B Difficulty: Moderate Skill: Concept LO: 6.3: Describe the practice of job evaluation.

19) Which of the following is one of the four universal compensable factors?

A) cognitive ability B) personality C) effort D) motivation Answer: C Difficulty: Moderate Skill: Concept LO: 6.3: Describe the practice of job evaluation.

20) Market-based job evaluation uses which approach to collect data to determine prevailing pay rates?

A) behavioural observation B) interviews C) self-assessment

D) surveys Answer: D Difficulty: Moderate Skill: Concept LO: 6.4: Summarize various job evaluation techniques.

21) An HRM manager decides to change the current job-content valuation technique by using a quantitative method. He thinks that the old approach fails to balance internal and external considerations while evaluating jobs. Which type of job evaluation technique do you suggest for this HRM manager?

A) job-content evaluation B) market-based evaluation C) point method D) simple ranking plan Answer: C Difficulty: Moderate Skill: Concept LO: 6.4: Summarize various job evaluation techniques.

22) Which type of jobs provides reference points to judge against other jobs within an organization?

A) standardized jobs B) high-value jobs C) benchmark jobs D) hierarchical jobs Answer: C Difficulty: Easy Skill: Concept LO: 6.4: Summarize various job evaluation techniques.

23) Miloslava owns a small public relations firm and customer courtesy is considered to be the most important factor in all of the jobs. Which job-content evaluation approach is Miloslava likely to use?

A) alternation ranking B) simple ranking plans C) paired comparison D) classification plans Answer: B Difficulty: Easy Skill: Concept LO: 6.4: Summarize various job evaluation techniques.

24) Which job evaluation method entails ordering jobs on the basis of extremes?

A) paired comparison B) alternation ranking C) classification D) factor comparison Answer: B Difficulty: Moderate Skill: Concept LO: 6.4: Summarize various job evaluation techniques.

25) Which type of organizations use classification plans most prevalently?

A) private sector organizations B) non-profit organizations C) multi-national organizations D) public sector organizations Answer: D Difficulty: Difficult Skill: Concept LO: 6.4: Summarize various job evaluation techniques.

26) Sarah works at a Canadian federal government agency. Her pay rate is determined by her level and work seniority. Which type of job-content evaluation approach was used to categorize her job?

A) alternation ranking B) simple ranking plans C) paired comparison D) classification plans Answer: D Difficulty: Moderate Skill: Concept LO: 6.4: Summarize various job evaluation techniques.

27) Which of the following type of job evaluation plans is used when the organization chooses to assign job pay rates that are neither too low nor too high relative to the market?

A) market-based B) internally consistent C) job-based D) hybrid Answer: A Difficulty: Easy Skill: Concept LO: 6.4: Summarize various job evaluation techniques.

28) Narrowly defined jobs can create which type of problem?

A) bureaucracy B) excessive flexibility C) extremely small pay differentials based on job worth differences D) difficulty in conducting a job evaluation.

Answer: A Difficulty: Moderate Skill: Concept LO: 6.5: Explain how internally consistent compensation systems and competitive strategy relate to each other.

29) Developing internally consistent job structures affects the competitive strategy of an organization. Which of the following is a potential constraint on competitive strategy?

A) reducing an organization's rigidity to respond to moves by the competition B) potentially causing the definition of jobs to become less fluid C) leading to less routinization D) potentially creating far more bureaucratization within an organization Answer: D Difficulty: Difficult Skill: Concept LO: 6.5: Explain how internally consistent compensation systems and competitive strategy relate to each other.

30) Which of the following is NOT true for internally consistent compensation systems?

A) Jobs that require higher qualifications and more responsibilities should be paid more than jobs that require lower qualifications and fewer responsibilities.

B) Internally consistent compensation systems are created through job analysis and job evaluation.

C) Internally consistent compensation systems may increase an organization's flexibility to respond to changes in competitor's pay practices.

D) Internally consistent compensation structures result in bureaucracy.

Answer: B Difficulty: Moderate Skill: Concept LO: 6.5: Explain how internally consistent compensation systems and competitive strategy relate to each other.

31) What are factor degrees within job evaluation?

A) the degree of challenge of a job B) the level of a factor present in each job C) the numbers of tasks completely in a time period D) the number of errors allowed in each job Answer: B Difficulty: Moderate Skill: Concept

LO: 6.4: Summarize various job evaluation techniques.

32) The alternate ranking method requires the HRM professional to: A) rank employees by seniority B) judge the relative value of jobs according to a single C) rank employee by current compensation D) judge the employee succession possibility Answer: B Difficulty: Moderate Skill: Concept LO: 6.4 Summarize various job evaluation techniques.

Fill in the Blank Questions 1) ________ is a descriptive process.

Answer: Job analysis Difficulty: Easy Skill: Concept LO: 6.1: Explain the concept of internal consistency.

2) ________ are the social context or physical environment where work will be performed.

Answer: Working conditions Difficulty: Moderate Skill: Concept LO: 6.2: Summarize the practice of job analysis.

3) In an auto manufacturing organization, installing a windshield on the assembly line represents a ________.

Answer: job task Difficulty: Difficult Skill: Concept LO: 6.2: Summarize the practice of job analysis.

4) A ________ is a collection of tasks constituting the total work assignment of a single worker.

Answer: position Difficulty: Easy Skill: Concept LO: 6.2: Summarize the practice of job analysis.

5) A reliable ________ yields consistent results under similar conditions, when multiple analysts reach the same conclusion about the major duties that comprise a position.

Answer: job analysis Difficulty: Difficult Skill: Concept LO: 6.2: Summarize the practice of job analysis.

6) ________ refers to a present competence to perform an observable behaviour.

Answer: Ability Difficulty: Easy Skill: Concept LO: 6.2: Summarize the practice of job analysis.

7) ________ information describes physical and social factors that influence the nature of work.

Answer: Work context Difficulty: Difficult Skill: Concept LO: 6.2: Summarize the practice of job analysis.

8) ________ describe preferences for work environments and outcomes.

Answer: Interests Difficulty: Moderate Skill: Concept LO: 6.2: Summarize the practice of job analysis.

9) ________ skills information describes developed capacities that facilitate learning or the more rapid acquisition of knowledge.

Answer: Basic Difficulty: Easy Skill: Concept LO: 6.2: Summarize the practice of job analysis.

10) The National Occupational Classification (NOC) system is Canada’s national system for describing Answer: occupations or jobs Difficulty: Easy Skill: Concept LO: 6.2: Summarize the practice of job analysis.

11) The ________ ranking method orders jobs by extremes as committee members determine most and least valuable jobs until all jobs have been evaluated.

Answer: alternation Difficulty: Moderate Skill: Concept LO: 6.4: Summarize various job evaluation techniques.

12) Classification plans place jobs into categories based on ________.

Answer: compensable factors Difficulty: Moderate Skill: Concept LO: 6.4: Summarize various job evaluation techniques.

13) ________ are generally able to provide the most reliable job information about how jobs are performed.

Answer: Job incumbents Difficulty: Moderate Skill: Concept LO: 6.2: Summarize the practice of job analysis.

Short Answer Questions 1) Compare and contrast job analysis and job evaluation.

Answer: Job analysis is a systematic process for gathering, documenting, and analyzing information in order to describe jobs. Job analysis describes job content, worker requirements, and working conditions. Job evaluation is used to systematically recognize differences in the relative worth among a set of jobs and establish pay differentials accordingly. HRM professionals create internally consistent job structures through job analysis and job evaluation. Job analysis is a descriptive procedure however, job evaluation reflects value judgments. Through job analysis HRM specialists write job descriptions that describe job duties and minimum qualifications required of individuals to perform their jobs. Job evaluation reflects the values and priorities that management places on various positions.

Difficulty: Moderate Skill: Concept LO: 6.1: Explain the concept of internal consistency.

2) Explain two possible limitations associated with establishing internally consistent compensation systems.

Answer: There may be limitations; however, that hamper agility for companies that strive to differentiate themselves from their competition. For example, internally consistent pay systems may reduce an organization's flexibility to respond to changes in competitors' pay practices because job analysis leads to structured job descriptions and job structures. In addition, job evaluation establishes the relative worth of jobs within the organization. Responding to the competition may require employees to engage in duties that extend beyond what's written in their job descriptions whenever competitive pressures demand. In the process, the definitions of jobs become more fluid, which makes equity assessments more difficult.

Another potential limitation of internally consistent compensation structures is the resultant bureaucracy. Companies that establish job hierarchies tend to create narrowly defined jobs that lead to greater numbers of jobs and staffing levels. Such structures promote heavy compensation burdens. Employees' core compensation depends on the

jobs they perform, how well they perform their jobs, or the skills they possess. Employee benefits, however, represent fixed costs that typically do not vary with employees' job performance or their skills. Employing a larger number of workers to staff a multitude of narrowly defined jobs contributes substantially to exorbitant fixed costs for employee benefits.

Difficulty: Difficult Skill: Concept LO: 6.1: Explain the concept of internal consistency.

3) What are the considerations for choosing between a single versus multiple job evaluation methods?

Answer: Compensation professionals must determine whether a single job evaluation technique is sufficiently broad to assess a diverse set of jobs. In particular, the decision is prompted by such questions as, "Can we use the same compensable factors to evaluate a forklift operator's job and the plant manager's job?" If the answer is yes, then a single job evaluation technique is appropriate. If not, then more than one job evaluation approach should be employed. It is not reasonable to expect that a single job evaluation technique, based on one set of compensable factors, can adequately assess diverse sets of jobs (i.e., operative, clerical, administrative, managerial, professional, technical, and executive). A carpenter's job is clearly distinct from a certified public accountant's position because manual dexterity is an important compensable factor that describes carpentry work and is not nearly as central to an accounting position.

Difficulty: Difficult Skill: Concept LO: 6.4: Summarize various job evaluation techniques.

Essay Question 1) Summarize the five steps to complete a job analysis.

Answer: First, determine a job analysis method. An organization must decide between using an established system and developing its own system tailored to specific requirements. Both established and custom job analysis programs vary in the method of gathering data. The most typical methods for collecting job analysis information are questionnaires, interviews, observation, and participation. Administrative costs often represent a major consideration in selecting a job analysis method.

Second, select and train analysts. Job analysts generally must be able to collect jobrelated information through various methods, relate to a wide variety of employees, analyze the information, and write clearly and succinctly. A task force of representatives from throughout the organization ideally conducts the analysis, and HRM professional coordinates it. Although some companies rely on HRM professionals to coordinate and conduct job analysis, many use teams to represent varying perspectives on work because virtually all employees interact with employees and supervisors.

Third, direct job analyst orientation. Before analysts start specific job analysis techniques, they must analyze the context in which employees perform their work to better understand influencing factors. In addition, analysts should obtain and review such internal information as organizational charts, listings of job titles, classifications of each position to be analyzed, job incumbent names and pay rates, and any instructional booklets or handbooks for operating equipment. Job analysts may also find pertinent job information in such external sources as The National Occupational Classification System, trade associations, professional societies, and trade unions.

Fourth, conduct the study, focusing on data collection and sources of data. Once analysts have gathered and made sense of these preliminary data, they can begin gathering and recording information for each job in the organization. Analysts should carefully choose the method of data collection and the sources of data. The most common methods are questionnaires and observation.

Fifth, summarize the results by writing job descriptions. Job descriptions summarize a job's purpose and list its tasks, duties, and responsibilities, as well as the skills, knowledge, and abilities necessary to perform the job at a minimum level. Effective job descriptions generally explain: • • • • • • •

What the employee must do to perform the job How the employee performs the job Why the employee performs the job in terms of its contribution to the functioning of the organization Supervisory responsibilities, if any Contacts (and purpose of these contacts) with other employees inside or outside the organization The skills, knowledge, and abilities the employee should have or must have to perform the job duties The physical and social conditions under which the employee must perform the job

Job descriptions usually contain four sections: • Job title • Job summary • Job duties • Worker specifications Difficulty: Moderate Skill: Concept LO: 6.2: Summarize the practice of job analysis

Test Bank for Strategic Compensation: A Human Resource Management Approach,

First Canadian Edition Chapter 7 Building Market-Competitive Compensation Systems Multiple Choice Questions 1) ________ is defined as an in-depth examination of the external and internal environmental factors that are likely to have the greatest impact on the future of the organization.

A) Market-competitive pay structure B) Regression analysis C) Competitive strategy D) Strategic analysis Answer: D Difficulty: Difficult Skill: Concept LO: 7.1: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems.

2) Compensation surveys are typically focused on which two factors?

A) competitors' promotion and advancement opportunities B) internal promotion and advancement opportunities C) competitors' wage and salary practices D) internal wage and salary practices Answer: C Difficulty: Moderate Skill: Concept LO: 7.1: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems.

3) In which type of document do compensation professionals represent the selection and implementation of pay level and pay mix policies over a specified time period, usually one year?

A) compensation plan B) job structure reports C) strategic compensation plan D) pay structure reports Answer: A Difficulty: Difficult Skill: Concept LO: 7.1: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems.

4) Which of the following entails an examination of an organization's external market context and internal factors?

A) compensation survey B) strategic analysis C) regression analysis D) compensation plan Answer: B Difficulty: Easy Skill: Concept LO: 7.1: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems.

5) Compensation professionals integrate the internal job structure with the external market pay rates identified through compensation surveys, and this integration reveals which of the following?

A) pay rates that reflect both the organization's and the external market's valuations of jobs B) changes in wages and salaries over time C) changes in employee benefits over time D) changes in labour costs between geographic locations Answer: A Difficulty: Moderate Skill: Concept LO: 7.1: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems.

6) Which of the following surveys are tools used by employers to determine the pay levels needed to recruit highly qualified employees?

A) strategic B) external market C) compensation D) internal market Answer: C Difficulty: Difficult Skill: Concept LO: 7.1: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems.

7) Which process can organizations use to make corrections for differences between their jobs and external benchmark jobs?

A) job evaluation B) job leveling C) job analysis D) compensation surveys

Answer: B Difficulty: Difficult Skill: Concept LO: 7.2: Discuss compensation survey practices.

8) Which of the following are reference points against which jobs within the organization are judged?

A) benchmark jobs B) relevant labour markets C) internal labour markets D) human resource capabilities Answer: A Difficulty: Moderate Skill: Concept LO: 7.2: Discuss compensation survey practices.

9) These are used as reference points for setting pay levels.

A) mean pay B) median pay C) market-competitive pay D) benchmark jobs Answer: D Difficulty: Easy Skill: Concept LO: 7.2: Discuss compensation survey practices.

10) This causes compensation survey data to become obsolete fairly quickly.

A) changes in the cost of living B) pay compression C) changes in the unemployment rate D) changes in the organization's geographic location Answer: A Difficulty: Moderate Skill: Concept LO: 7.2: Discuss compensation survey practices.

11) If the means salary for Mountain Coffee is $30,000 and the median salary is $32,000, what would Yolanda's salary of $165,000 be considered?

A) overlie B) outsider C) outlier D) over layer Answer: C Difficulty: Easy Skill: Application of Knowledge LO: 7.2: Discuss compensation survey practices.

12) In statistical analysis, which of the following is used to signify extreme observations?

A) deviations B) extremities C) outliers D) variants Answer: C Difficulty: Easy Skill: Concept LO: 7.2: Discuss compensation survey practices.

13) Which of the following are the two types of central tendency measures that are pertinent to compensation?

A) mode and arithmetic mean B) median and mode C) mode and quartile D) arithmetic mean and median Answer: D Difficulty: Moderate Skill: Concept LO: 7.2: Discuss compensation survey practices.

14) Which of the following are the three measures of dispersion?

A) percentile standard, deviation, arithmetic mean B) standard deviation, quartile, percentile C) quartile, arithmetic mean, standard deviation D) arithmetic mean, percentile, quartile Answer: B Difficulty: Easy Skill: Concept LO: 7.2: Discuss compensation survey practices.

15) Suppose that a compensation professional would like to calculate the median salary.

He 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 Answer: C Difficulty: Moderate Skill: Application of Knowledge LO: 7.2: Discuss compensation survey practices.

16) This term refers to the distance of each salary figure from the mean.

A) standard deviation B) quartile C) percentile

D) deviated mean Answer: A Difficulty: Moderate Skill: Concept LO: 7.2: Discuss compensation survey practices.

17) Jose conducts a survey of salaries at Regina Lawn Care Professionals and finds that 50% of the employees fall below the market pay average of $32,000. In which quartile do the employees at ERL Enterprises fall?

A) first B) second C) third D) fourth Answer: B Difficulty: Easy Skill: Application of Knowledge LO: 7.2: Discuss compensation survey practices.

18) What does Quartile 3 represent?

A) figures that are above 25% B) figures that fall below 25% C) figures that are above 75% D) figures that fall below 75% Answer: D Difficulty: Moderate Skill: Concept LO: 7.2: Discuss compensation survey practices.

19) What does it mean when the distribution of data is skewed to the right?

A) a lower frequency of larger values and the median is greater than the mean B) a higher frequency of larger values and the median is greater than the mean C) a lower frequency of larger values and the mean is greater than the median D) a higher frequency of larger values and the mean is greater than the median Answer: C Difficulty: Difficult Skill: Concept LO: 7.2: Discuss compensation survey practices.

20) How often is the Consumer Price Index calculated for Canada?

A) daily B) weekly C) monthly D) twice a year Answer: C Difficulty: Easy Skill: Concept LO: 7.2: Discuss compensation survey practices.

21) The Consumer Price Index represents the average price changes for the price of goods and services in how many baskets?

A) 2 B) 4 C) 6 D) 8 Answer: D Difficulty: Moderate Skill: Concept LO: 7.2: Discuss compensation survey practices.

22) When using compensation survey data, statistical analyses are used to integrate this with the external market, in order to determine pay rates.

A) internal pay scales B) nominal pay rates C) internal pay benchmarks D) internal job structures Answer: D Difficulty: Difficult Skill: Concept LO: 7.3: Describe how compensation professionals integrate internal job structures with external market pay rates.

23) In the regression analysis formula, what does the X represent?

A) predicted salary B) job evaluation points C) the slope D) the Y intercept Answer: B Difficulty: Moderate Skill: Concept LO: 7.3: Describe how compensation professionals integrate internal job structures with external market pay rates.

24) The R2 statistic tells us how well the variation in the organization's valuation of jobs based on job evaluation points explains the variation in market pay rates from the compensation survey. What does it mean when the R2 = 1?

A) All of the variation in market pay can be explained by the organization's job structure.

B) None of the variation in market pay can be explained by the organization's job structure.

C) All of the variation in market pay can be explained by the organization's external pay

rates.

D) All of the variation in market pay can be explained by the benchmark rates.

Answer: A Difficulty: Difficult Skill: Concept LO: 7.3: Describe how compensation professionals integrate internal job structures with external market pay rates.

25) Compensation professionals in Streaming4U use regression analysis to determine the pay rates of its marketing professionals. There are 4 different marketing job titles at Streaming4U. Compensation professionals use job evaluation points assigned to each marketing job title and a salary survey data. In other words, they regress job evaluation points on the salary data to indicate the amount of variation in market pay rates that can be explained by an organization's job structure. Which of the following best describes this amount of variation when the R2 value turns out to be 0.85?

A) All of the variation in market pay B) None of the variation in market pay C) A large amount of the variation in market pay D) A small amount of the variation in market pay Answer: C Difficulty: Difficult Skill: Application of Knowledge LO: 7.3: Describe how compensation professionals integrate internal job structures with external market pay rates.

26) Aubin Medical Equipment is a world leader in medical device manufacturing.

Aiming to continue its market position in this industry, Aubin Medical Equipment pursues a differentiation strategy. As a result, this organization compensates its employees higher than competitors in order to attract and retain the best employees. What kind of pay level policy does Aubin Medical Equipment follow?

A) market follow B) market lag C) market lead D) market pay line Answer: C Difficulty: Easy Skill: Application of Knowledge LO: 7.4: Explain the basic concepts of compensation policies and strategic mandates: pay mix and pay level.

27) Winnipeg Snow Prospursues a low-cost strategy in the snow removal 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 organization became susceptible to labour shortages and high turnover. Which kind of pay level policy does Winnipeg Snow Pros follow?

A) market follow

B) market lag C) market lead D) market pay line Answer: B Difficulty: Easy Skill: Application of Knowledge LO: 7.4: Explain the basic concepts of compensation policies and strategic mandates: pay mix and pay level.

28) Market follow policies are generally set to which quartile in the salary survey?

A) 1st B) 2nd C) 3rd D) 4th Answer: B Difficulty: Moderate Skill: Concept LO: 7.4: Explain the basic concepts of compensation policies and strategic mandates: pay mix and pay level.

29) Market lag policies are generally set to which quartile in the salary survey?

A) 1st B) 2nd C) 3rd D) 4th Answer: A Difficulty: Difficult Skill: Concept LO: 7.4: Explain the basic concepts of compensation policies and strategic mandates: pay mix and pay level.

30) Organizations pursuing a differentiation strategy are most likely to use which pay level policy?

A) market lead B) market average C) market lag D) market follow Answer: A Difficulty: Moderate Skill: Concept LO: 7.4: Explain the basic concepts of compensation policies and strategic mandates: pay mix and pay level.

Fill in the Blank Questions 1) ________ represent the fields of potentially qualified candidates for particular jobs.

Answer: Relevant labour markets Difficulty: Difficult Skill: Concept LO: 7.2: Discuss compensation survey practices.

2) ________ refers to a group of two or more jobs that are based on similar work characteristics, duties, and responsibilities.

Answer: Occupational classification Difficulty: Difficult

Skill: Concept LO: 7.2: Discuss compensation survey practices.

3) HRM professionals rely on ________ jobs as reference points for setting pay levels.

Answer: benchmark Difficulty: Easy Skill: Concept LO: 7.2: Discuss compensation survey practices.

4) The ________ is the middle value in an ordered sequence of numerical data.

Answer: median Difficulty: Easy Skill: Concept LO: 7.2: Discuss compensation survey practices.

5) ________ represents the amount of spread or dispersion in a set of data.

Answer: Variation Difficulty: Moderate Skill: Concept LO: 7.2: Discuss compensation survey practices.

6) ________ allow compensation professionals to describe the distribution of data based on four groupings.

Answer: Quartiles Difficulty: Easy Skill: Concept LO: 7.2: Discuss compensation survey practices.

7) The ________ is the most commonly used method for tracking cost changes in Canada.

Answer: Consumer Price Index (CPI) Difficulty: Moderate Skill: Concept LO: 7.2: Discuss compensation survey practices.

8) ________ 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.

Answer: Regression Difficulty: Moderate Skill: Concept LO: 7.3: Describe how compensation professionals integrate internal job structures with external market pay rates.

9) The market ________ policy distinguishes an organization from competition by compensating employees less than most competitors.

Answer: lag

Difficulty: Easy Skill: Concept LO: 7.4: Explain the basic concepts of compensation policies and strategic mandates: pay mix and pay level.

10) The market ________ policy most closely follows the typical market pay rates because companies pay according to the market pay line.

Answer: match Difficulty: Easy Skill: Concept LO: 7.4: Explain the basic concepts of compensation policies and strategic mandates: pay mix and pay level.

Short Answer Questions 1) What is an appropriate pay policy mix?

Answer: For policy purposes, it makes sense to consider guidelines for jobs within a particular structure (for example, managerial, administrative, or sales) because of the common job content and employee requirements of jobs within a particular structure. For example, in a technology organization, a greater portion of bonus compensation might be allocated to engineers than to administrative staff. Engineers possess crucial skills relating to the organization's ability to develop innovative applications of technology, and bonus incentives throughout the year may promote innovation initiatives. On the other hand, the administrative staff, though important to the organization, may not play as important a role in determining the organization's profitability or objectives. Therefore, less of their total compensation would likely be devoted to bonus funds. Also, some job structures, such as sales, employees may receive the majority of their compensation in the form of bonuses. In order to motivate a sales force to continually exceed quarterly targets, quarterly bonuses equal to or exceeding their annual base salaries might be used.

Difficulty: Moderate Skill: Concept LO: 7.4: Explain the basic concepts of compensation policies and strategic mandates: pay mix and pay level.

2) Elaborate on the link between an organization's pay level policy and its strategic mandate.

Answer: An organization can choose from three pay level policies: 1) market lead, 2) market lag, or 3) market follow. The market lead policy will compensate employees more highly than its competitors. Conversely, a market lag policy will compensate employees less than competitors do. The market follow policy follows typical market rates.

Organizations pursuing a differentiation strategy will opt for a market lead or market follow policy. The market lead policy can be used to attract the very best employees to promote its competitive strategy. For less labour-intensive industries, a market follow policy will suffice because funds can be used for capital needs. Organizations pursuing a lowest cost strategy would more likely adopt a market lag policy. Organizations can

realize cost savings by paying less than the market pay line. However, these organizations may have difficulty attracting and retaining highly qualified employees. Typically, Organizations will use more than one pay policy simultaneously.

Difficulty: Moderate Skill: Concept LO: 7.4: Explain the basic concepts of compensation policies and strategic mandates: pay mix and pay level.

3) Identify and describe the four steps for establishing market competitive pay systems.

Answer: Compensation professionals create market-competitive pay systems based on four activities: • • • •

Conducting strategic analyses Assessing competitors' pay practices with compensation surveys Integrating the internal job structure with external market pay rates Determining compensation policies

First, a strategic analysis entails an examination of an organization's external market context and internal factors. Examples of external market factors include industry profile, information about competitors, and long-term growth prospects. Internal factors encompass financial condition and functional capabilities (e.g., marketing and human resources).

Second, compensation surveys involve the collection and subsequent analysis of competitors' compensation data. Compensation surveys are important because they enable compensation professionals to obtain realistic views of competitors' pay practices.

In the absence of compensation survey data, compensation professionals would have to use guesswork to try to build market-competitive compensation systems.

Third, compensation professionals integrate the internal job structure with the external market pay rates identified through compensation surveys. This integration results in pay rates that reflect both the organization's and the external market's valuation of jobs. Most often, compensation professionals rely on regression analysis, a statistical method, to achieve this integration.

Finally, compensation professionals recommend pay policies that fit with their organizations' standing and competitive strategies. Compensation professionals must strike a balance between managing costs and attracting and retaining the best-qualified employees. Senior management ultimately makes compensation policy decisions after careful consideration of compensation professionals' interpretation of the data.

Difficulty: Moderate Skill: Concept LO: 7.1: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems.

30) Explain the three reasons why organizations often choose not to develop their own compensation surveys.

Answer: Managers must decide whether to develop their own survey instruments and administer them or rely on the results of surveys conducted by others. In theory, customized surveys are preferable because the survey taker can tailor the questions and select respondents to provide useful and informative data. Custom survey development should enable employers to monitor the quality of the survey methodologies.

In practice, companies choose not to develop and implement their own surveys for three reasons. First, most companies lack employees qualified to undertake this task.

Developing and implementing valid surveys require specialized knowledge and expertise in sound questionnaire design, sampling methods, and statistical methods.

Second, rival organizations are understandably reluctant to surrender information about their compensation packages to competitors because compensation systems are instrumental to competitive advantage if organizations are willing to cooperate, the information may be incomplete or inaccurate. For example, rival organizations may choose to report the salaries for their lowest-paid accountants instead of the typical salary levels. Such information may lead the surveying organization to set accountants' salaries much lower than if they had accurate, complete information. Setting accountants' salaries too low may hinder recruitment efforts. Thus, custom development is potentially risky.

Third, custom survey development can be costly. Although cost figures are not readily available, it is reasonable to conclude that most organizations use published survey data to minimize costs such as employee salaries and benefits, telephone and mail charges, and computers for data analyses.

Difficulty: Difficult Skill: Concept LO: 7.2: Discuss compensation survey practices.

Test Bank for Strategic Compensation: A Human Resource Management Approach, First Canadian Edition Chapter 8 Building Pay Structures that Recognize Employee Contributions Multiple Choice Questions 1) Pay compression occurs whenever an organization’s: A) employees’ salaries are frozen B) pay spread between newly hired or less qualified employees and more qualified job employees is frozen C) pay spread between newly hired or less qualified employees, and more qualified job employees is small D) employees’ salaries are rolled back Answer: C

Difficulty: Moderate Skill: Concept LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures 2) Which of the following represents the relationship between an organization's valuation of jobs based on job evaluation and the valuation of jobs within the external market as assessed by compensation surveys?

A) market-competitive pay structure B) pay grade C) pay range D) market pay rate Answer: D Difficulty: Moderate Skill: Concept LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures.

3) For the purpose of applying pay policies, this term refers to the groupings of jobs based on compensable factors and value.

A) market lines B) market-competitive pay structures C) pay grades D) pay ranges Answer: C Difficulty: Easy Skill: Concept LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures.

4) When ________ spreads are used to develop pay grade widths, the grades are based on a set number of job evaluation points for each grade that increases as an employee moves up the pay structure.

A) pay rate B) percentage-based job evaluation point C) pay range D) absolute job evaluation point Answer: D Difficulty: Moderate Skill: Concept LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures.

5) Which of the following represents the horizontal dimension of pay structures?

A) pay ranges B) pay grades C) job evaluation points D) pay spreads Answer: B Difficulty: Moderate Skill: Concept LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures.

6) Midpoint, minimum, and maximum are values used to define which of the following?

A) pay grades B) pay ranges C) pay structures D) pay levels Answer: B Difficulty: Easy Skill: Concept LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures.

7) If the organization wants to lead the market, how will that organization's pay range midpoint compare to the market average?

A) The midpoint will be the same as the market average.

B) The midpoint will be higher than the market average.

C) The midpoint will be lower than the market average.

D) There is not enough information to make this determination.

Answer: B Difficulty: Easy Skill: Application of Knowledge LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures.

8) Which term is used to describe the situation where the pay spread between newly hired employees and more qualified job incumbents is small?

A) pay structures B) pay compression C) red circle pay rates D) green circle pay rates Answer: B Difficulty: Easy Skill: Concept LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures.

9) Aziz is just hired by a software organization as a programmer. He is also a part-time college student and has to complete his final courses to graduate. A college diploma is required in order to work as a programmer in this software organization. Therefore, Aziz receives below-minimum pay rate until he graduates from college. Which type of pay rate does Aziz receive?

A) green circle B) red circle C) midpoint pay D) two-tier pay Answer: A Difficulty: Moderate Skill: Application of Knowledge LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures.

10) This type of pay rate applies to an employee who is demoted but is paid more than the maximum rate for the pay grade he is now in.

A) graduated B) green circle C) red circle D) multi-tier Answer: C Difficulty: Easy Skill: Concept LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures.

11) How are compa-ratios calculated?

A) the green circle rates midpoint divided by the normal pay range B) the pay rate divided by the market line rate C) the pay rate divided by the pay range midpoint D) the red circle rates divided by the normal pay range Answer: C

Difficulty: Moderate Skill: Application of Knowledge LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures.

12) Jun's job has a compa-ratio of 0.85. What does this ratio tell about Jun's pay rate?

A) It is highly competitive with the market.

B) It is not competitive with the market.

C) There is no way to judge its competitiveness.

D) You need more information to judge it.

Answer: B Difficulty: Easy Skill: Application of Knowledge LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures.

13) Which of the following theories suggests that an employee must regard his own ratio of merit increase pay to performance as similar to the ratio for other comparably performing people in the organization?

A) comparable ratio theory B) comparable pay theory C) equality theory D) equity theory Answer: D Difficulty: Moderate Skill: Concept LO: 8.2: Discuss the components of merit pay systems.

14) A 10 percent merit pay increase budget tells us which of the following?

A) The minimum pay increase amounts to 10 percent.

B) The maximum pay increase amounts to 10 percent.

C) The average pay increase amounts to 10 percent.

D) The standard deviation of any pay increase cannot be more than 10 percent below or above the average.

Answer: C Difficulty: Moderate Skill: Concept LO: 8.2: Discuss the components of merit pay systems.

15) Common review dates provide which of the following advantages?

A) The organization can equate all employees' job performance at the same time.

B) The organization minimizes the administrative burden of the plan.

C) The organization trains supervisors about the most effective way to conduct performance reviews.

D) Common review dates ensure that some employees' reviews will be overlooked.

Answer: B

Difficulty: Moderate Skill: Concept LO: 8.2: Discuss the components of merit pay systems.

16) With which sales compensation plan does the level of pay NOT vary when sales volume does vary?

A) commission-only B) salary-only C) salary -plus-bonus D) salary-plus-commission Answer: B Difficulty: Moderate Skill: Concept LO: 8.3: Summarize the features of sales compensation plan design.

17) Which scenario would be appropriate for using a salary-only plan?

A) The salesperson is selling high-priced products B) The salesperson has substantial influence over sales C) The organization wants to save money due to budget constraints D) The organization wants to create competition among its sales staff Answer: A Difficulty: Moderate Skill: Application of Knowledge LO: 8.3: Summarize the features of sales compensation plan design.

18) This type of sales incentive compensation plan offers the salesperson a salary and further compensation for achievement of specific, exceptional sales goals.

A) salary-plus-bonus B) salary-plus-commission C) salary-plus-draw D) salary-plus-graduated commission Answer: A Difficulty: Moderate Skill: Concept LO: 8.3: Summarize the features of sales compensation plan design.

19) Jasmine believes that the organization should share part of the risk for her sales position. Which sales compensation plan should she pursue?

A) salary-plus-bonus B) salary-plus-commission C) commission-plus-draw D) commission-only Answer: B Difficulty: Moderate Skill: Application of Knowledge

LO: 8.3: Summarize the features of sales compensation plan design.

20) A car dealership uses an incentive compensation plan for its salespeople. The dealer provides money to its salespeople to cover basic living expenses and then shares a fixed percentage of the selling price of each car sold. However, the salesperson should repay the subsistence pay component within a year; otherwise they cannot continue in the employment of this dealer. Which type of sales compensation plan does this dealer adopt?

A) salary-plus-bonus B) salary-plus-commission C) commission-plus-draw D) commission only Answer: C Difficulty: Challenging Skill: Application of Knowledge LO: 8.3: Summarize the features of sales compensation plan design.

21) Wherever proprietary information is the subject of training, an organization most often relies on which of the following sources of expertise?

A) expertise in university professors B) expertise within the organization C) both expertise within and outside the organization to provide training D) expertise in competitor companies Answer: B Difficulty: Moderate Skill: Concept LO: 8.3: Summarize the features of sales compensation plan design.

22) With which type of sales commission plan does an employee earn a higher rate for all sales made in a given period if the sales level exceeds a predetermined level?

A) commission-plus-draw B) straight C) multiple-tiered D) graduated Answer: C Difficulty: Moderate Skill: Concept LO: 8.3: Summarize the features of sales compensation plan design.

23) An organization adopting a commissions-oriented sales compensation plan would most likely pursue which type of competitive strategy?

A) highest quality B) lowest-cost C) differentiation

D) fairest-price Answer: B Difficulty: Moderate Skill: Application of Knowledge LO: 8.3: Summarize the features of sales compensation plan design.

24) Typically, what is the number of skill blocks used in skill-based pay programs?

A) 1 B) 1 to 2 C) 1 to 3 D) 2 or more Answer: D Difficulty: Easy Skill: Concept LO: 8.4: Describe the essentials of person-focused pay program design.

25) Which of the following is a major challenge in setting up skill-based pay programs?

A) determining the number of skill blocks B) convincing shareholders that this type of pay system can facilitate competitive advantage C) demonstrating that the benefits of adopting a pay-for-knowledge program outweighs the costs D) pricing individual skill blocks Answer: D Difficulty: Challenging Skill: Application of Knowledge LO: 8.4: Describe the essentials of person-focused pay program design.

26) 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 Answer: C Difficulty: Easy Skill: Concept LO: 8.4: Describe the essentials of person-focused pay program design.

27) The HRM manager of an organization thinks that they have too many narrow pay grades within the organization. The manager decided to consolidate existing pay grades and ranges into fewer pay grades and broader pay ranges in order to create a flatter organization in terms of compensation. This is an example of which pay structure variation?

A) broadbanding B) two-tier pay system

C) pay compression D) multiple-tier pay system Answer: A Difficulty: Moderate Skill: Application of Knowledge LO: 8.5: Summarize pay structure variations.

28) Which of the following would be considered as an advantage of broadbanding?

A) Creation of broadbands lessens employees' job duties and responsibilities.

B) Reduced organizational hierarchies support flexibility.

C) Creation of management layers promotes quicker decision making.

D) Increased responsibility requires supervisors to more closely, administer pay.

Answer: B Difficulty: Moderate Skill: Concept LO: 8.5: Summarize pay structure variations.

29) Alejandro is responsible for setting up the pay structure for his organization. He believes that newly hired employees should not be paid as much as established employees. Which type of pay structure should Alejandro use?

A) broadbanding B) sales incentives C) two-tiered D) merit pay Answer: C Difficulty: Moderate Skill: Application of Knowledge LO: 8.5: Summarize pay structure variations.

30) Which 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 Answer: A Difficulty: Moderate Skill: Concept LO: 8.5: Summarize pay structure variations.

Fill in the Blank Questions 1) ________ assign different pay rates for jobs of unequal worth and provide the basic framework for recognizing differences in individual contributions.

Answer: Pay structures Difficulty: Moderate Skill: Concept LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct

pay structures.

2) ________ describe the allocation of monetary resources to fund pay structures.

Answer: Compensation budgets Difficulty: Moderate Skill: Concept AACSB: Reflective Thinking LO: 8.2: Discuss the components of merit pay systems.

3) ________, or lump sum bonuses, lend themselves well to cost containment since these bonuses are not permanent percentage increases.

Answer: Nonrecurring merit increases Difficulty: Challenging Skill: Concept LO: 8.2: Discuss the components of merit pay systems.

4) ________ represent the vertical dimension of pay structures.

Answer: Pay ranges Difficulty: Easy Skill: Concept LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures.

5) The ________ pay value is the centrally located mark between the range minimum and maximum rates.

Answer: midpoint Difficulty: Easy Skill: Concept LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures.

6) A(n) ________ is the difference between the maximum and minimum pay rates of a given pay grade.

Answer: range spread Difficulty: Moderate Skill: Concept LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures.

7) _____ occurs whenever a company’s pay spread between newly hired or less qualified employees, and more qualified job incumbents is small.

Answer: Pay compression Difficulty: Moderate Skill: Concept

LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures.

8) ________ rates pay wages higher than the maximum listed in order to help retain valued employees fielding big job offers elsewhere.

Answer: Red circle Difficulty: Easy Skill: Concept LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures.

9) ________ is a form of compensation based upon a percentage of the selling price of a product or service.

Answer: Commission Difficulty: Easy Skill: Concept LO: 8.3: Summarize the features of sales compensation plan design.

10) Money that covers the basic living expenses of sales professionals is better known as a(n) ________.

Answer: draw Difficulty: Moderate Skill: Concept LO: 8.3: Summarize the features of sales compensation plan design.

11) ________ makes sure that employees have at least a minimally acceptable level of skill proficiency upon completion of a training unit.

Answer: Certification Difficulty: Easy Skill: Concept LO: 8.4: Describe the essentials of person-focused pay program design.

12) ________ are pay rates of employees whose pay should be brought within the normal pay range as quickly as possible.

Answer: Green circle rates Difficulty: Moderate Skill: Concept LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures.

13) ________ suggests that an employee must regard their own ratio of merit increase pay to performance as similar to the ratio for other comparably performing people in the organization.

Answer: Equity theory

Difficulty: Moderate Skill: Concept LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures.

14) ________ are blueprints that describe the allocation of monetary resources to fund pay structures.

Answer: Compensation budgets Answer: Equity theory Difficulty: Moderate Skill: Concept LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures Short Answer Questions 1) What are the differences between pay grades and pay ranges?

Answer: Pay grades group jobs for pay policy application. Compensation professionals group jobs into pay grades based on similar compensable factors and job value. Pay grades represent the horizontal dimension of pay structures. Pay ranges build upon pay grades by denoting the acceptable lower and upper bounds of pay for the jobs within particular pay grades. Pay ranges represent the vertical dimension of pay structures.

Difficulty: Moderate Skill: Concept LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures.

2) What is pay compression and how can companies minimize the occurrence of it?

Answer: Pay compression occurs whenever an organization's pay spread between less qualified employees and more qualified job incumbents is small. Organizations can work to minimize the occurrence of pay compression by setting maximum pay rates close to possible to competitors' maximum pay rates for similar jobs. Setting competitive maximum rates enables an organization to raise pay rates for high-quality employees who may consider employment opportunities with a competitor.

Difficulty: Moderate Skill: Concept LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures.

3) What is broadbanding? What are its limitations?

Answer: Broadbanding is used to consolidate existing pay grades and ranges into fewer, wider pay grades. This form of pay structure reflects the increasing trend toward flatter, less-hierarchical corporate structures that emphasize teamwork over individual

contributions Broadbanding uses only a few, large salary ranges spanning levels within the organization previously covered by several pay grades. Some organizations establish broadbands for distinct employee groups within the organizational hierarchy. Other organizations may choose to create broadbands on the basis of job families. Others may set broadbands according to functional areas, collapsing across job families. Because broadbands include a wider range of jobs from prior narrowly defined pay grades, supervisors have greater latitude in setting employees' pay based on the tasks and duties they perform.

There are a number of limitations associated with broadbanding. First, broadbanding changes how compensation dollars are allocated, but not how much is allocated.

Although one may think that a flatter organizational structure may reduce cost, it may instead increase costs given that supervisors have greater flexibility in awarding pay to their employees. Second, there exists a trade-off between the flexibility to reward employees and promotional opportunities.

Difficulty: Moderate Skill: Concept LO: 8.5: Summarize pay structure variations.

4) What are the three considerations used in determining fixed pay and the compensation mix in sales compensation plans?

Answer: Influence of the Salesperson on the Buying Decision. For the most part, the more influence sales professionals have on "buying" decisions, the more the compensation mix will emphasize incentive pay. Salespeople's influence varies greatly with the specific product or service marketed and the way these are sold. Many sales professionals assume an order-taker role, with little influence over purchase decisions. For example, salespeople in such large department stores as Sears and Best Buy have little influence over the merchandise for sale. These stores send their buyers to manufacturers to purchase lines of products that will be sold throughout the United States and abroad.

Product display and promotional efforts such as television or newspaper ad campaigns are determined by store management.

Conversely, some employees serve as consultants to the client. For instance, when an organization decides to invest in computerizing its worldwide operations, it may approach a computer manufacturer such as Dell to purchase the necessary equipment.

Given the technical complexity involved the client would depend on Dell to translate its networking needs into the appropriate hardware and software. These Dell sales professionals ultimately influence the purchase decision.

Competitive Pay Standards within the Industry. An organization's compensation mix must be competitive if the organization wants to recruit high-quality sales professionals.

Industry norms and the selling situation are among the key determinants of compensation mix. Competitive standards may dictate that the organization must give greater weight to either incentive or fixed pay. Incentive or commission pay weighs heavily in highly competitive retail industries, including furniture, home electronics, and auto sales. Salary

represents a significant pay component in such high entry-barrier industries as pharmaceuticals. For pharmaceuticals, barriers to entry include Health Canada regulations on testing new products. This step extends the time from product conception through testing to marketing products. Salary is an appropriate compensation choice because pharmaceutical companies face little risk of new competition.

Amount of Non-sales Activities Required. In general, the more non-sales duties salespeople have, the more their compensation package should tend toward fixed pay.

Some companies and products, for instance, require extensive technical training or customer service activities. In the pharmaceuticals industry, sales professionals employed by such companies as Bayer, Phizer, Lilly, and Thermo Fisher Scientific must maintain a comprehensive understanding of their products' chemical compositions, clinical uses, and contraindications.

Difficulty: Challenging Skill: Concept LO: 8.3: Summarize the features of sales compensation plan design.

Test Bank for Strategic Compensation: A Human Resource Management Approach, First Canadian Edition Chapter 9 Employer-Sponsored Benefits 1) Which type of plan appeared as one of the first employer-sponsored benefits practices?

A) wellness plans B) employee discounts C) educational assistance D) retirement plans Answer: D Difficulty: Moderate Skill: Concept LO: 9.1: Discuss the origins of employer-sponsored benefits.

2) Which of the following contributed to the use of flexible benefits plans?

A) greater workforce diversity B) cost savings initiatives C) unions D) global competition Answer: A Difficulty: Moderate Skill: Concept LO: 9.1: Discuss the origins of employer-sponsored benefits.

3) Which of the following is a commonly used employer-sponsored retirement plan design?

A) defined benefit plan B) defined contribution C) CPP D) Old Age Security

Answer: A Difficulty: Easy Skill: Concept LO: 9.2: Explain the three categories of employer-sponsored benefits.

4) These represent NOT paying a series of payments for the life of the participant and beneficiary.

A) collateral payments B) periodic payments C) lump sum distributions D) annuities Answer: C Difficulty: Easy Skill: Concept LO: 9.2: Explain the three categories of employer-sponsored benefits.

5) A RRSP is which of the following types of retirement plans?

A) defined contribution B) defined benefit C) qualified benefit D) nonqualified benefit Answer: A Difficulty: Moderate Skill: Concept LO: 9.2: Explain the three categories of employer-sponsored benefits.

6) What type of pension plan commonly includes profit-sharing plans, stock bonus plans, and employee stock ownership plans?

A) defined benefit B) defined contribution C) deferred contribution D) deferred benefit Answer: B Difficulty: Moderate Skill: Concept LO: 9.2: Explain the three categories of employer-sponsored benefits.

7) Which of the following is the most common type of life insurance policy offered by organizations?

A) group life B) term life C) whole life D) universal Answer: B

Difficulty: Easy Skill: Concept LO: 9.2: Explain the three categories of employer-sponsored benefits.

8) Which of the following is associated with RRSPs? A) Employees pay taxes on their contribution.

B) Employees do not pay taxes on their contributions.

C) Investment gains are taxed.

D) Employees can deduct their contributions from post taxable income.

Answer: D Difficulty: Moderate Skill: Concept LO: 9.2: Explain the three categories of employer-sponsored benefits.

9) Unscheduled absenteeism has increased to its highest levels in the New Brunswick Outfitters this past year. In order to reduce costs, HRM professionals in the New Brunswick Outfitters changed their paid time off policy. This organization used to grant each employee 10 vacation days, 5 paid days for sick leave, and 4 days for personal leave. With the new policy, this organization combines vacation, sick leave, and personal leave policies into one paid time off policy with more total days away from work). The management kept funeral leave as a stand-alone policy. What is the New Brunswick Outfitters’ new policy called?

A) integrated paid time off B) combined paid time off C) sabbatical leave D) volunteer leave Answer: A Difficulty: Moderate Skill: Application of Knowledge LO: 9.2: Explain the three categories of employer-sponsored benefits.

10) Hikewithus provides a program for its employees who need help dealing with the work-life balance. Hikewithus offers this service through which of the following programs?

A) family assistance program B) employee assistance program C) wellness program D) employer assistance program Answer: B Difficulty: Easy Skill: Concept LO: 9.2: Explain the three categories of employer-sponsored benefits.

11) In 2017, approximately what percentages of private-sector employees and government employees, respectively, had access to an EAP? A) 24 percent, 94 percent B) 39 percent, 54 percent C) 51 percent, 78 percent D) 74 percent, 39 percent Answer: C Difficulty: Challenging Skill: Concept LO: 9.2: Explain the three categories of employer-sponsored benefits.

12) Due to a recent merger with another major airline, FlyingFar Airlines decided to lay off some of its employees. FlyingFar Airlines Airlines offers training sessions to teach job search and interviewing techniques to those laid off employees. Which kind of service was provided by this airline?

A) employee assistance program B) tuition reimbursement

C) wellness program D) outplacement assistance Answer: D Difficulty: Easy Skill: Application of Knowledge LO: 9.2: Explain the three categories of employer-sponsored benefits.

13) Outplacement assistance programs are well suited for which condition?

A) new plant openings B) mergers and acquisitions C) workforce increases D) global operations Answer: B Difficulty: Moderate Skill: Concept LO: 9.2: Explain the three categories of employer-sponsored benefits.

14) Pluto Software tries to influence employee food choices by selling healthy food in their cafeteria. They also offer programs to teach stress reduction techniques. Which kind of employer-sponsored benefit program does this organization sponsor?

A) family assistance program B) employee assistance program C) wellness program D) employer assistance program Answer: C Difficulty: Easy Skill: Application of Knowledge LO: 9.2: Explain the three categories of employer-sponsored benefits.

15) Which of the following would be considered part of an organization'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 Answer: C Difficulty: Easy Skill: Application of Knowledge LO: 9.2: Explain the three categories of employer-sponsored benefits.

16) Under a cliff vesting arrangement, after how many years must full vesting rights be granted?

A) 1 B) 3 C) 5 D) 7

Answer: B Difficulty: Moderate Skill: Concept LO: 9.3: Summarize legislation that pertains to employer-sponsored benefits.

17) Effective employee benefits communications programs can help reduce which of the following?

A) an appreciation of benefits B) increased flexibility C) costs D) an entitlement mentality Answer: D Difficulty: Easy Skill: Concept LO: 9.4: Discuss the fundamentals of designing and planning the benefits program.

18) Natasha works at a pharmaceutical organization as a customer service representative.

Her employer allows her to choose the set of benefits she will receive on top of preestablished sets of benefits, such as medical insurance and term life insurance. The organization gave her credits equal to 6% of her salary with which she decided to purchase dental and vision insurance. This pharmaceutical organization uses what kind of benefits plan?

A) cafeteria B) flexible benefits C) employee-financed D) core plus option Answer: D Difficulty: Challenging Skill: Application of Knowledge LO: 9.4: Discuss the fundamentals of designing and planning the benefits program.

19) Since the costs of benefits has risen so dramatically in recent years, the majority of the organizations decided to finance employer-sponsored benefits using which of the following methods?

A) noncontributory financing B) contributory financing C) employee-financed benefits D) employer-financed benefits Answer: B Difficulty: Moderate Skill: Concept LO: 9.4: Discuss the fundamentals of designing and planning the benefits program.

20) Under which type of plan may employees exercise the option of trading extra benefits credits for cash?

A) cafeteria benefits plans B) core plus option plans C) flexible spending accounts D) defined contribution plans Answer: B Difficulty: Moderate

Skill: Concept LO: 9.4: Discuss the fundamentals of designing and planning the benefits program.

21) Which of the following is rationale to apply a probationary period prior to permitting participation in an employee benefits plan?

A) organizations view such periods as an opportunity to ensure that they have made sound hiring decisions.

B) organizations enable new employees to decide whether they wish to remain employed on a long-term basis before completing extensive paperwork.

C) organizations attempt to reduce employee entitlement.

D) organizations attempt to discourage long-term employment.

Answer: A Difficulty: Challenging Skill: Concept LO: 9.4: Discuss the fundamentals of designing and planning the benefits program.

22) Which of the following could undermine competitive advantage?

A) basing employee benefits awards based on performance B) offering flexible benefits plans C) offering employee benefits as an entitlement D) offering employee benefits following the completion of a lengthy probationary period Answer: C Difficulty: Challenging Skill: Concept LO: 9.5: Explain the benefits and costs of employer-sponsored benefits.

23) A(n) ________ refers to the minimum amount of time that an employee must wait after becoming disabled before disability insurance payments begin.

Answer: elimination period Difficulty: Moderate Skill: Concept LO: 9.2: Explain the three categories of employer-sponsored benefits.

24. Canadian employee total benefits account for nearly what percent of employers’ total payroll costs?

A) 10% B) 25% C) 35% D) 45% Answer: 35 Difficulty: Moderate Skill: Concept LO: 9.5: Explain the benefits and costs of employer-sponsored benefits.

25. Employer-sponsored benefits fall into the three broad categories including: A) protection programs, paid time off, and services.

B) retirement programs, paid time off, and services C) paid time off, and services D) protection and retirement programs Answer: A Difficulty: Moderate Skill: Concept LO: 9.5: Explain the benefits and costs of employer-sponsored benefits.

26. Protection programs provide employees which of the following: A) employee benefits, promote wellness, and guard against income loss B) family benefits, promote wellness, and guard against income loss C) family benefits and guard against income loss D) employee benefits and guard against income loss Answer: B Difficulty: Moderate Skill: Concept LO: 9.5: Explain the benefits and costs of employer-sponsored benefits.

27. Organizations offer employee benefits to meet: A) regulatory requirements, attract and retain employees, and improve employee job satisfaction B) improve employee job satisfaction and support employee wellness C) regulatory requirements, attract and retain employees, improve employee job satisfaction, and support employee wellness D) attract and retain employees, improve employee job satisfaction, and support employee wellness Answer: C Difficulty: Moderate Skill: Concept LO: 9.5: Explain the benefits and costs of employer-sponsored benefits.

28. How many Canadians expect to fully retire by age 66?

A) 15% B) 35% C) 50% D) 66% Answer: D Difficulty: Moderate Skill: Concept LO: 9-1: Discuss the origins of employer-sponsored benefits.

29. With the legalization of marijuana, what percentage of Canadian employers cover the costs of medical marijuana?

A) 0% B) 6% C) 15%

D) 85 Answer: B Difficulty: Moderate Skill: Concept LO 9-1: Discuss the origins of employer-sponsored benefits.

30. What percentage of Canadian employees have employer-sponsored health

insurance?

A) 10% B) 35% C) 55% D) 79% Answer: D Difficulty: Moderate Skill: Concept LO 9-2: Explain the three categories of employer-sponsored benefits.

31. Short-term disability insurance provides benefits to employees for: A) 1-5 days B) 2 weeks C) up to 1 month D) 1-52 weeks Answer: D Difficulty: Moderate Skill: Concept LO 9-2: Explain the three categories of employer-sponsored benefits.

32. Long-term disability insurance provides benefits to employees for: A) 1-3 months B) 3-6 months C) 6 months to life.

D) for life Answer: C Difficulty: Moderate Skill: Concept LO 9-2: Explain the three categories of employer-sponsored benefits.

Fill in the Blank Questions 1) Retirement programs, or ________, provide income in the form of an annuity to employees and their beneficiaries during some or all of their retirement.

Answer: defined benefits Difficulty: Moderate Skill: Concept LO: 9.2: Explain the three categories of employer-sponsored benefits.

2) ________ help bring employees to the workplace and back home again.

Answer: Transportation services Difficulty: Easy Skill: Concept LO: 9.2: Explain the three categories of employer-sponsored benefits.

3) ________ is/are career and personal programs designed to develop the job search skills and strategies of employees laid off or terminated.

Answer: Outplacement assistance Difficulty: Easy Skill: Concept LO: 9.2: Explain the three categories of employer-sponsored benefits.

4) plans are examples of ________ plans.

Answer: Defined contribution Difficulty: Easy Skill: Concept LO: 9.2: Explain the three categories of employer-sponsored benefits.

5) The ________ oversees Canadian taxes.

Answer: Canada Revenue Agency Difficulty: Moderate Skill: Concept LO: 9.3: Summarize legislation that pertains to employer-sponsored benefits.

6) ________ rights refer to non-forfeitable rights to retirement benefits.

Answer: Vesting Difficulty: Moderate Skill: Concept LO: 9.3: Summarize legislation that pertains to employer-sponsored benefits.

7) When employees take advantage of ________ benefits, they are more likely to contribute to the strategic imperatives of product or service differentiation or cost reduction.

Answer: tuition reimbursement Difficulty: Moderate Skill: Concept LO: 9.5: Explain the benefits and costs of employer-sponsored benefits.

8) Canadian health benefits are expected to continue to _____.

Answer: rise Difficulty: Moderate Skill: Concept LO: 9.5: Explain the benefits and costs of employer-sponsored benefits.

9) The _____ spans from the initial date of hire to the time of eligibility for coverage in a disability insurance program.

Answer: Pre-eligibility period Difficulty: Moderate Skill: Concept LO: 9-2: Explain the three categories of employer-sponsored benefits.

10. _____ guarantee retirement benefits specified in the plan document.

Answer: Defined benefit plans Difficulty: Moderate Skill: Concept LO: 9-2: Explain the three categories of employer-sponsored benefits.

11. With _____, employees have the option to make regular contributions to separate accounts in their names, based on a formula contained in the plan document.

Answer: defined contribution plans Difficulty: Moderate Skill: Concept LO: 9-2: Explain the three categories of employer-sponsored benefits.

12._____ allow employees to choose from among a set of benefits, as opposed to all employees receiving the same set of benefits.

Answer: Flexible benefits plan or cafeteria plan Difficulty: Moderate Skill: Concept LO: 9-4: Discuss the fundamentals of designing and planning the benefits program.

Short Answer Questions 1) Define three types of life insurance.

Answer: Term life insurance, the most common type offered by companies, provides protection to employees' beneficiaries only during a limited period based on a specified number of years such as 5 years subject to a maximum age (65 or 70). After that, the insurance automatically expires. Neither the employee nor beneficiary receives any benefit upon expiration. In order to continue coverage under a term life plan, an employee must renew the policy and make premium payments while younger than the maximum allowed age for coverage.

Whole life insurance pays an amount to the designated beneficiaries, but unlike term policies, whole life plans do not terminate until payment is made to beneficiaries. As a result, whole life insurance policies are substantially more expensive than term life policies, making the whole life insurance approach an uncommon feature of employersponsored insurance programs. From the employee's or beneficiary's perspective, whole life insurance policies combine insurance protection with a savings (or cash accumulation

plan) because a portion of the money paid to meet the policy's premium will be available in the future with a low fixed annual interest rate of usually no more than 2 or 3 percent.

Universal life insurance provides protection to employees' beneficiaries based on the insurance feature of term life insurance and a more flexible savings or cash accumulation plan than found in whole life insurance plans. The insured may shift money between the insurance and savings components of the policy.

Difficulty: Challenging Skill: Concept LO: 9.2: Explain the three categories of employer-sponsored benefits.

2) How are integrated paid time off policies different than holiday, vacation, sick leave, and personal leave policies?

Answer: Integrated paid time off policies or paid time off banks combine holiday, vacation, sick leave, and personal leave policies into a single paid time off policy. Such policies do not distinguish among reasons for absence. The idea is to provide individuals the freedom to schedule time off without justifying the reasons. This freedom should presumably reduce unscheduled absences that can be disruptive to the workplace because these policies require advance notice except in case of illness. Integrated paid time off policies have become an increasingly popular alternative to separate holiday, vacation, sick leave, and personal leave plans because they are more effective in controlling unscheduled absenteeism. Integrated policies also relieve the administrative burden of managing separate plans and the necessity to process medical certifications in the case of sick leave policies.

Difficulty: Moderate Skill: Concept LO: 9.2: Explain the three categories of employer-sponsored benefits.

3) What are the elements to consider when designing a successful benefits program?

Answer: Employee input is essential to developing a successful program. Such input helps organizations target the limited resources they have available for employee benefits to those areas that best meet employees’ needs. For example, if an organization’s workforce includes mostly married couples who are raising young children, family assistance programs would probably be a priority. By involving employees in program development, they are most likely to accept and appreciate the benefits they receive.

Companies can involve employees in the benefits determination process in such ways as online surveys, interviews, and focus groups.

Fundamental design elements include: • Who receives coverage • Financing of benefits • Employee choice • Cost containment • Communication

Employers can ascertain key information from employees that can be useful in designing these programs. The areas of input emphasize employees’ beliefs about other employers’ benefits offerings and employees’ thoughts about the value of the benefits they receive.

Difficulty: Moderate Skill: Concept LO: 9-4: Discuss the fundamentals of designing and planning the benefits program.

4) What are the implications of employer-sponsored benefits for strategic compensation?

Answer: Employer-spponsored benefits, like core compensation, can contribute to an organization's competitive advantage.

Management can use employer-sponsored benefit offerings to promote particular employee behaviors that have strategic value.

An organization can use employer-sponsored benefits to distinguish itself from the competition.

Employer-sponsored benefits also serve a strategic purpose by accommodating the needs of a diverse workforce.

The tax advantage afforded companies from offering particular employer-sponsored benefits has strategic value.

Difficulty: Moderate Skill: Concept LO: 9.1: Discuss the origins of employer-sponsored benefits.

Test Bank for Strategic Compensation: A Human Resource Management Approach, First Canadian Edition Chapter 10 Employee Benefits Multiple Choice Questions 1) Ensuring the financial solvency of individuals during periods of temporary unemployment and following work-related injuries helps to do which of the following?

A) promote tax revenue B) promote the well-being of the economy C) provide competitive advantage to some employers, but not to others D) enhance organizational commitment Answer: B Difficulty: Moderate Skill: Concept LO: 10.1: Discuss the origins of and summarize the six main categories of government-mandated benefits.

2) Which of the following is the fundamental purpose of legally required benefits?

A) employee benefits B) paid time off C) social insurance D) tax revenue source for the government Answer: C Difficulty: Challenging Skill: Concept LO: 10.1: Discuss the origins of and summarize the six main categories of government-mandated benefits.

3) During the early-twentieth century, high incidences of industrial accidents and occupational illnesses prompted which of the following benefits?

A) disability insurance B) employment insurance C) survivor insurance D) workers' compensation Answer: D Difficulty: Moderate Skill: Concept LO: 10.1: Discuss the origins of and summarize the six main categories of government-mandated benefits.

4) What is co-insurance?

A) Both parents have employer-sponsored insurance coverage for their children.

B) Two insurance companies combine to offer group insurance coverage.

C) An employee pays all out-of-pocket expenses before the insurance takes effect.

D) The insured pays a percentage of covered expenses.

Answer: D Difficulty: Easy Skill: Concept LO: 10.2: Discuss the main benefits and costs of government-mandated benefits.

5) Which approach to providing health care makes the most sense when an organization’s financial burden of covering employee medical expenses is less than the cost to subscribe to an insurance company for coverage?

A) managed care B) consumer-driven health care C) commercial insurance D) self-funding Answer: D Difficulty: Challenging Skill: Application of Knowledge LO: 10.2: Discuss the main benefits and costs of government-mandated benefits.

6) What percentage of her income will Courtney receive while claiming employment insurance?

A) 40% B) 55% C) 75% D) 90% Answer: B Difficulty: Easy Skill: Concept LO: 10.2: Discuss the main benefits and costs of government-mandated benefits.

7) In order for Courtney to receive an employment insurance she ________________.

A) was a full time employee B) has relocated C) worked the required number of weeks D) earned an income below a set minimum Answer: C Difficulty: Easy Skill: Concept LO: 10.2: Discuss the main benefits and costs of government-mandated benefits.

8) Which of the following type of program can help reduce workers' compensation claims?

A) short term disability B) wellness C) workplace safety D) employee assistance Answer: C Difficulty: Easy Skill: Concept LO: 10.2: Discuss the main benefits and costs of government-mandated benefits.

9) Managing staffing levels to avoid layoffs due to poor business conditions can help control which type of benefits cost?

A) employment insurance B) health care continuation coverage C) pension D disability coverage Answer: A Difficulty: Moderate Skill: Concept LO: 10.2: Discuss the main benefits and costs of government-mandated benefits.

10) Which strategy could help contain workers' compensation costs?

A) implementing health promotion programs B) raising employees' share of health insurance costs C) eliminating probationary waiting periods D) requiring that employees purchase and appropriately use safety gear Answer: A Difficulty: Moderate Skill: Application of Knowledge LO: 10.2: Discuss the main benefits and costs of government-mandated benefits.

11) CPP is designed to provide Canadians with which percentage of the employees’ gross annual earnings?

A) 25% B) 30% C) 35% D) 40% Answer: A Difficulty: Moderate Skill: Application of Knowledge LO: 10.2: Discuss the main benefits and costs of government-mandated benefits.

12) Workers’ Compensation is designed to: A) protect employers from medical costs B) protect an employee’s income, cover medical costs from a workplace injury, and rehabilitate an employee to be able to return to work.

C) protect an employee’s income and rehabilitate an employee to be able to return to work.

D) cover medical costs from a workplace injury and rehabilitate an employee to be able to return to work.

Answer: B Difficulty: Moderate Skill: Application of Knowledge LO: 10.2: Discuss the main benefits and costs of government-mandated benefits.

13) How is Workers’ Compensation paid?

A) employers pay a premium for Workers’ Compensation depending on the industry they operate in--this program is not government funded.

B) employees pay a premium for Workers’ Compensation depending on the industry they operate in--this program is not government funded.

C) this program is government funded D) employers and government funding Answer: A Difficulty: Moderate Skill: Application of Knowledge LO: 10.2: Discuss the main benefits and costs of government-mandated benefits.

14) How is provincial and territorial health insurance paid for residents?

A) employers pay for health insurance premiums in all provinces and territories except Ontario B) employees pay for health insurance premiums in all provinces and territories except Ontario.

C) employees pay for health insurance premiums in all provinces and territories D) employees pay for health insurance premiums in all provinces and territories except Manitoba Answer: B Difficulty: Moderate Skill: Application of Knowledge LO: 10.2: Discuss the main benefits and costs of government-mandated benefits.

15) Non-cash employee benefits include: A) Canada Pension Plan and employment insurance contributions B) health, dental, and life insurance C) health, dental, life insurance, and cost of statutory holidays and sick days D) health, dental, life insurance, Canada Pension Plan and employment insurance contributions, cost of statutory holidays and sick days Answer: D Difficulty: Moderate Skill: Application of Knowledge LO: 10.2: Discuss the main benefits and costs of government-mandated benefits.

16) How is employment insurance calculated?

A) employers deduct Employment Insurance (EI) premiums from employees B) employers pay 1.4 percent of the employee income C) employers deduct Employment Insurance (EI) premiums from employees and also contribute 1.4 percent of the employee premiums D) employers deduct Employment Insurance (EI) premiums from employees and provinces and territories contribute 1.4 percent of the employee premiums Answer: D Difficulty: Moderate Skill: Application of Knowledge LO: 10.2: Discuss the main benefits and costs of government-mandated benefits.

17) How is the Canada Pension Plan calculated?

A) employer and employee contribute to CPP B) employees contribute to CPP C) employers contribute to CPP D) employers and the Canadian federal government contribute to CPP Answer: A Difficulty: Moderate Skill: Application of Knowledge LO: 10.2: Discuss the main benefits and costs of government-mandated benefits.

Fill in the Blank Questions 1) Employees who are then unemployed through _____ can file a claim for EI. Answer: no cause of their own or did not resign or were terminated Difficulty: Easy Skill: Concept LO: 10.1: Discuss the origins of and summarize the six main categories of government-mandated benefits.

2) Both employer and _____ contribute to CPP. Answer: employee Difficulty: Easy Skill: Concept LO: 10.1: Discuss the origins of and summarize the six main categories of government-mandated benefits.

3) People can begin claiming CPP when they are _____ years old.

Answer: at least 60 Difficulty: Easy Skill: Concept LO: 10.1: Discuss the origins of and summarize the six main categories of government-mandated benefits.

4) CPP includes disability pension and _____.

Answer: survivor benefits Difficulty: Easy

Skill: Concept LO: 10.1: Discuss the origins of and summarize the six main categories of government-mandated benefits.

5) Workers’ Compensation is _____ insurance.

Answer: no fault Difficulty: Easy Skill: Concept LO: 10.1: Discuss the origins of and summarize the six main categories of government-mandated benefits.

6) Government-mandated benefits historically provided a form of _____.

Answer: social insurance Difficulty: Easy Skill: Concept LO: 10.1: Discuss the origins of and summarize the six main categories of government-mandated benefits.

7) Early social insurance programs were designed to enable retirees to maintain _____.

Answer: income levels.

Difficulty: Moderate Skill: Concept LO: 10.1: Discuss the origins of and summarize the six main categories of government-mandated benefits.

8) On a broader societal level, stable household income during challenging economic times offers economic stimulus or activity as _____ remains active.

Answer: purchasing Difficulty: Moderate Skill: Concept LO: 10.1: Discuss the origins of and summarize the six main categories of government-mandated benefits.

Short Answer Questions 1) Explain the differences between Canadian and US employee benefits.

Answer: The main differences revolve around government-sponsored benefits. In Canada, employees are offered universal health care, while in the US these benefits are privately paid by the employee or employer sponsored. The US health care model often leaves employees paying considerable health care expenses out of their own pocket.

A further significant Canadian government-sponsored benefit is maternity and paternity leave for a childbirth or adoption. These benefits allow the Canadian employee to be off work to care for their child for 50 weeks--15 weeks of maternity leave and 35 weeks of parental leave. As well, Canadian employers may top up this plan in both time and payment with their own parental leave program, aiming to build the parents’ leave income comparable to their salary. Pew Research reports US parents do not receive government sponsored paid leave, this is a voluntary employer benefit. However, the states of California, New Jersey, New York, Rhode Island, the District of Columbia, and Washington state all have state-mandated paid maternity/paternity leave plans in place.

Both Canadians and Americans enjoy the benefits of pension plans. This plan is paid for by both the employee and employer and offers payment once an employee retires after the age of 65. For the Canadian human resources practitioners, it is important to factor these differences into the compensation strategy of organizations with employees on both sides of the border.

Difficulty: Moderate Skill: Concept LO: 10.1: Discuss the origins of and summarize the six main categories of government-mandated benefits.

2) Briefly discuss the components of government-mandated required benefits.

Answer: Government-mandated benefits include employment insurance. Employers who are then unemployment through no cause of their own such as resignation or termination for cause, can file a claim for EI. Also, to be eligible, claimants must have worked a minimum number of hours and weeks to claim EI. Most often eligible employees receive 55% of their average income in the past 14-45 weeks to a maximum of 45 weeks. Each of these elements are dependent on the local unemployment rate. Claimants must demonstrate they are actively looking for employment while receiving EI. Canada Pension Plan. Both employer and employee contribute to CPP as employers are required to match employees’ contribution to this plan. Employees and self-employed individuals participate in CPP. Specifically, employees and employers contribute 5.1% of the gross annual income to a ceiling of $2,798.40 and $ 5,497.80 for self-employed individuals in 2019. Employers then stop deducting CPP contributions when the employee’s annual earnings reach the maximum pensionable earnings or the maximum employee contribution for the year.

It is important to note that CPP is portable, meaning if an employee changes employers or geographical location, the CPP contributions to date follow that employee. CPP has come to form a substantial portion of many Canadians retirement financial plan-it is designed to provide 25% of the employees’ gross annual earnings. People can begin claiming CPP between 65-70 years old. CPP also includes disability pension and survivor benefits.

Disability benefits provide a disabled person with 75% of their pension. Survivor benefits are paid out as one lump sum payment.5 Quebec Pension Plan. Employers and employees in Quebec contribute to the Quebec Pension Plan (QPP) and not CPP. Similar to CPP, QPP is deducted from all Quebec employment income, with an annual basic exemption of $3,500. The QPP contribution rate is 11.10%, which corresponds to a contribution rate of 5.55% for both the employee and employer. The maximum annual contribution withheld for an employee is $2,991.45.

Workers’ compensation insurance. This came into existence during the early decades of the twentieth century, when industrial accidents were very common, and workers suffered from occupational illnesses at alarming rates.i The first constitutionally acceptable workers’ compensation law was enacted in Ontario in 1910. Now, all provinces and territories have workers’ compensation with Nunavut and the Northwest Territories have one shared plan. Federal government employees are covered under the Federal Government Employees Compensation Act (GECA). Workers’ Compensation is designed to protect an employee’s income and cover medical costs from a workplace injury. The aim is to rehabilitate an employee to be able to return to work. Importantly, Workers’ Compensation is a no-fault insurance, meaning the employee is not able to sue the employer for the injury. Employers pay a premium for Workers’ Compensation depending on the industry they operate in--this program is not government funded.

Health insurance. Employees pay for health insurance premiums in all provinces and territories except Ontario. In Ontario, employers contribute to the provincial health care costs in the form of a tax payment. Additionally, employers can elect to pay for employees’ health care premiums as a taxable benefit.

Paid time off. Employers in all provinces and territories are required to provide employees with paid time off. Time off includes maternity and paternity leave and vacation leave. Provinces and territories provide paid maternity and paternity leave payment by way of employment insurance. Employers can elect to top of this leave payment to return the leave payment to the employee’s net income for that period.

Provinces and territories also require employers to provide their employees with vacation pay. This requirement is outlined in the various employment standards of each province or territory. Employers may elect to offer employees more vacation time or payment than legally required Difficulty: Moderate Skill: Concept LO: 10.2: Discuss the main benefits and costs of government-mandated benefits.

3) Discuss the main benefits and costs of government-mandated benefits.

Answer: Employee benefits are unlike most bases for monetary compensation (merit, pay-for-knowledge, and incentives). Under these programs, the amount of compensation employees receive varies with their level of contributions to the organization. Instead,

benefits tend to emphasize social adequacy. Under the principle of social adequacy, benefits are designed to provide subsistence income to all beneficiaries regardless of their performance in the workplace. Thus, although humanitarian, government-mandated benefits do not directly meet the imperatives of competitive strategy. Governmentmandated benefits, however, may contribute indirectly to competitive advantage by enabling individuals to remain participants in the economy.

Government-mandated benefits may be a hindrance to companies in the short term because these offerings require substantial employer expenditures (contributions mandated by Employment Insurance and various state workers’ compensation laws).

Without these mandated expenditures on compensation, companies could choose to invest these funds in direct compensation programs designed to boost productivity and product or service quality.

Difficulty: Moderate Skill: Concept LO: 10.2: Discuss the main benefits and costs of government-mandated benefits.

4) How can HRM professionals minimize the cost burden associated with governmentmandated benefits?

Answer: In the case of workers’ compensation, employers can respond in two ways. The first response is to reduce the likelihood of workers’ compensation claims. The implementation of workplace safety programs is one strategy for reducing workers’ compensation claims. Effective safety programs include teaching safe work procedures and safety awareness to employees and supervisors. Another strategy for reducing workers’ compensation claims is health promotion programs that include inspections of the workplace to identify health risks such as high levels of exposure to toxic substances and then to eliminate those risks.

Difficulty: Moderate Skill: Concept LO: 10.2: Discuss the main benefits and costs of government-mandated benefits.

Test Bank for Strategic Compensation: A Human Resource Management Approach, First Canadian Edition Chapter 11 Compensating Executives Multiple Choice Questions 1) If a CEO hires a consultant to perform an objective analysis of the organization's executive pay package to make recommendations the consultant feels are appropriate, what could occur?

A) Shareholders' interests are often placed secondary to the interests of the CEO. B) This relationship generally leads to a compensation package that is higher than expected.

C) This relationship generally leads to a compensation package that is lower than expected.

D) This relationship has the potential to promote a conflict of interest.

Answer: D Difficulty: Moderate Skill: Concept LO: 11.1: Explain the difference between executive pay and pay for non-executives.

2) Which of the following describes CEO compensation that is deemed ineffective?

A) pay-for-status B) pay-for-non-performance C) seniority-based pay D) person-focused pay Answer: B Difficulty: Moderate Skill: Concept LO: 11.1: Explain the difference between executive pay and pay for non-executives.

3) Pertaining to CEO compensation, under classic economic theory, which of the following is true?

A) The price is obtained through negotiations that are at arm's length.

B) The CEO names her price.

C) Compensation is based on a market survey and job evaluation.

D) The board of directors set CEO compensation.

Answer: A Difficulty: Challenging Skill: Concept LO: 11.1: Explain the difference between executive pay and pay for non-executives.

4) Which of the following represent formal criteria for defining executive status?

A) board of directors and key employees B) key employees and highly paid employees C) CEO and highly compensated employees D) key employees and highly compensated employees Answer: D Difficulty: Moderate Skill: Concept LO: 11.2: Define executive status.

5) Which of the following are the two main components of current core compensation?

A) base pay and bonuses B) base pay and legally required benefits C) bonuses and legally required benefits D) base pay and discretionary benefits Answer: A Difficulty: Easy Skill: Concept LO: 11.3: List the components of executive compensation packages.

6) Which type of plans provide an executive with ownership stakes in the organization through a variety of mechanisms, including stock option plans and stock purchase plans?

A) equality plans B) equity plans C) golden parachutes D) profit sharing plans Answer: B Difficulty: Moderate Skill: Concept LO: 11.3: List the components of executive compensation packages.

7) These rights provide employees with an opportunity to purchase stock shares at a designated price or whenever the stock price increases, usually, within a specified period of time.

A) stock option B) stock grant C) disposition D) exercise of one's grant Answer: A Difficulty: Moderate Skill: Concept LO: 11.3: List the components of executive compensation packages.

8) Which of the following is the term used when an organization offers stock to its employees?

A) stock allocation B) stock option C) stock grant D) stock disposition Answer: C Difficulty: Easy Skill: Concept LO: 11.3: List the components of executive compensation packages.

9) Which of the following refers to the sale of stock by the stockholder?

A) stock option B) stock grant C) disposition D) exercise of one's grant Answer: C Difficulty: Moderate Skill: Concept LO: 11.3: List the components of executive compensation packages.

10) Which of the following is the difference between the stock price at the time of purchase and the lower stock price at the time an executive receives the stock option?

A) disposition value B) discounted value C) fair market value D) capital gains Answer: D Difficulty: Moderate Skill: Concept LO: 11.3: List the components of executive compensation packages.

11) Which of the following are shares of organization stock that are awarded to executives at the end of the mandatory stipulation period?

A) deferred stock shares B) deferred stock units C) restricted stock options D) restricted stock units Answer: D Difficulty: Challenging Skill: Concept LO: 11.3: List the components of executive compensation packages.

12) As CEO, Lucia was granted stock options that do not require her to exercise them to receive income. Which of the following plans is it?

A) stock appreciation rights B) discount stock C) restricted stock D) golden parachute Answer: A Difficulty: Moderate Skill: Application of Knowledge LO: 11.3: List the components of executive compensation packages.

13) After the recent merger of two airlines, the former CFO of one of the airlines, Guylaine, lost her employment in the newly merged airline. Which executive compensation agreement is customary in such circumstances?

A) stock buyout plans B) clawback provisions C) platinum parachutes D) golden parachutes Answer: D Difficulty: Easy Skill: Application of Knowledge LO: 11.3: List the components of executive compensation packages.

14) The Travellers’ Co. organization took back performance-based compensation of $1.2 million from their CEO because of her decision of the buyout of another organization that eventually lowered the overall value of Travellers’ Co. Which of the following compensation agreements allowed the board of directors to take back this $1.2 million?

A) platinum parachutes B) clawback provisions C) phantom stock D) golden parachute Answer: B Difficulty: Moderate Skill: Application of Knowledge LO: 11.3: List the components of executive compensation packages.

15) The recently appointed CEO of HomeFoodsForYou. uses a luxury summerhouse owned by the organization for rest and relaxation with his family as well as a place to invite important clients before a lucrative business deal. HomeFoodsForYou also provides a membership to an exclusive country club to its CEO. These kinds of benefits offered to CEOs are known as which of the following?

A) discretionary bonuses B) perquisites C) golden parachutes D) clawback provisions Answer: B Difficulty: Moderate Skill: Application of Knowledge

LO: 11.3: List the components of executive compensation packages.

16) Using this executive compensation theory, shareholders delegate control to senior executives to represent their ownership interest.

A) agency B) tournament C) social comparison D) strategic Answer: A Difficulty: Easy Skill: Concept LO: 11.4: Discuss the principles and processes of setting executive compensation.

17) In the end, Yolanda beat Tristen and Michel in a series of competitions among toplevel managers to become CEO of National LemGlass. Which compensation theory did the organization probably use?

A) tournament B) competition C) comparison D) agency Answer: A Difficulty: Easy Skill: Application of Knowledge LO: 11.4: Discuss the principles and processes of setting executive compensation.

18) Which of the following arguments do labour unions use regarding the substantial pay discrepancies between CEOs and employees?

A) Discrepancies are socially unjust and promote economic inequality.

B) Discrepancies contribute to labour strikes.

C) Discrepancies undermine global competitiveness.

D) Discrepancies decrease which promotes effective companies seek to recruitment and retention.

Answer: A Difficulty: Moderate Skill: Concept LO: 11.5: Briefly explain the executive compensation controversy as it relates to whether Canadian executives are paid too much.

19) When organizations hire new CEOs from other organizations, how do they compensate them?

A) approximately the same as individuals who are promoted to CEO from within the organization

B) substantially more than individuals who are promoted to CEO from within the organization C) substantially less than individuals who are promoted to CEO from within the organization D) at least 50 times the average median employee salary within the organization Answer: B Difficulty: Moderate Skill: Concept LO: 11.5: Briefly explain the executive compensation controversy as it relates to whether Canadian executives are paid too much.

20) CAR Pharmaceuticals recently announced that the clinical trials for a cancer drug failed to cure the illness. This announcement led to a dramatic decrease in the stock value of the organization. The organization hired a new CEO two years ago when the clinical trials for this drug had already initiated. Which one of the following is true about the compensation of the CEO of CAR Pharmaceuticals?

A) The CEO should receive lower compensation since shareholder returns have been declining.

B) The CEO was not involved in the decision of the failed initiative; therefore he/she should not receive lower compensation.

C) Each organization handles this situation differently.

D) The compensation of this CEO depends only on pretax profit margins.

Answer: C Difficulty: Challenging Skill: Concept LO: 11.5: Briefly explain the executive compensation controversy as it relates to whether Canadian executives are paid too much.

21) Organizations that use formal salary structures have specific pay grades and pay ranges for: A) employees, supervisors, managers, professionals, and executives, with the exception of the CEO B) employees, supervisors, management, executives, and the CEO C) employees, supervisors, management, professionals, and executives, and the CEO D) employees, supervisors, management, and professionals Answer: A Difficulty: Moderate Skill: Concept LO: 11.1: Explain the difference between executive pay and pay for non-executives.

22)

The four types of bonuses common in executive compensation are

________________.

A) discretionary, performance-contingent, predetermined allocation, and target plan bonuses

B) discretionary, performance-contingent, determined allocation, and target plan bonuses C) discretionary, performance-contingent, predetermined allocation, and spot bonuses D) non-discretionary, performance-contingent, predetermined allocation, and target plan bonuses Answer: A Difficulty: Moderate Skill: Concept LO: 11.3: List the components of executive compensation packages.

23) Discretionary bonuses to executives weigh which four factors in determining the amount of discretionary bonus ________________.

A) organization profits, financial condition of the organization, and prospects for the future B) organization profits, financial condition of the organization, business conditions, and prospects for the future C) organization profits, financial condition of the organization, and business conditions D) organization profits, financial condition of the organization, business conditions, and prospects for growth Answer: B Difficulty: Moderate Skill: Concept LO: 11.3: List the components of executive compensation packages.

24) Incentive stock options entitle executives to ________________.

A) purchase their organizations’ stock in the future at a pre-determined price B) be awarded by their organizations’ stock in the future at a pre-determined price C) purchase their organizations’ stock in the future at the current price D) be awarded by their organizations’ stock in the future at the current price Answer: B Difficulty: Moderate Skill: Concept LO: 11.3: List the components of executive compensation packages.

25) Capital gains are the ________________.

A) stock price at the time of purchase B) lower stock price at the time an executive received the stock option C) difference between the stock price at the time of purchase and the lower stock price at the time an executive received the stock option D) difference between the stock price at the time of purchase and the lower stock price at the time an executive purchased the stock option Answer: C Difficulty: Moderate Skill: Concept LO: 11.3: List the components of executive compensation packages.

26) Restricted stock units are shares of company stock that are ________________.

A) purchased by executives at the end of the restriction period B) awarded to executives at the start of the restriction period C) awarded to executives at the end of the restriction period D) awarded to executives at the start of the restriction period Answer: C Difficulty: Moderate Skill: Concept LO: 11.3: List the components of executive compensation packages.

27) In Canada, Bill 198 requires organizations to ________________.

A) establish revenue disclosure controls and procedures and internal controls over reports B) establish managerial disclosure controls and procedures and internal controls over strategic reports C) establish cost disclosure controls and procedures and internal controls over financial reports D) establish managerial disclosure controls and procedures and internal controls over financial reports Answer: D Difficulty: Moderate Skill: Concept LO: 11.5 Briefly explain the executive compensation controversy as it relates to whether Canadian executives are paid too much.

Fill in the Blank Questions 1) ________ bonuses are awarded to executives by boards of directors on an elective basis.

Answer: Discretionary Difficulty: Easy Skill: Concept LO: 11.3: List the components of executive compensation packages.

2) Organization stocks are the main form of executives' ________ compensation.

Answer: deferred Difficulty: Challenging Skill: Concept LO: 11.3: List the components of executive compensation packages.

3) Executives receive ________ as the difference between the stock price at the time of purchase and the lower stock price at the time an executive receives the stock option.

Answer: capital gains Difficulty: Challenging Skill: Concept LO: 11.3: List the components of executive compensation packages.

4) A(n) ________ stock plan is an arrangement whereby executives receive a bonus that

is equivalent to either the value of organization shares or the increase in that value over time.

Answer: phantom Difficulty: Easy Skill: Concept LO: 11.3: List the components of executive compensation packages.

5) ________ provide pay and benefits to executives after a termination that results from a change in ownership or merger.

Answer: Golden parachutes Difficulty: Moderate Skill: Concept LO: 11.3: List the components of executive compensation packages.

6) Shareholders' interests are represented by a(n) ________, who weigh the pros and cons of senior executives' decisions.

Answer: board of directors Difficulty: Easy Skill: Concept LO: 11.4: Discuss the principles and processes of setting executive compensation.

7) The actions of executives on behalf of their own self-interest are known as the ________ problem.

Answer: agency Difficulty: Moderate Skill: Concept LO: 11.4: Discuss the principles and processes of setting executive compensation.

8) The concept that individuals evaluate their accomplishments by comparing themselves to similar individuals is based on ________ theory.

Answer: social comparison Difficulty: Easy Skill: Concept LO: 11.4: Discuss the principles and processes of setting executive compensation.

9) _____ to executives on an elective basis.

Answer: discretionary bonuses Difficulty: Easy Skill: Concept LO: 11.3: List the components of executive compensation packages.

10) Executives receive _____ based on the attainment of specific performance criteria.

Answer: performance-contingent bonuses Difficulty: Easy Skill: Concept

LO: 11.3: List the components of executive compensation packages.

11) The _____ ties bonuses to executives’ performance as the bonus amount increases commensurately with performance.

Answer: target plan bonus Difficulty: Easy Skill: Concept LO: 11.3: List the components of executive compensation packages.

12) _____ provide an executive with ownership stakes in the organization through a variety of mechanisms, including various stock option plans, and stock purchase plans.

Answer: Equity plans Difficulty: Easy Skill: Concept LO: 11.3: List the components of executive compensation packages.

13) _____ shareholders delegate control to top executives to represent their ownership interests Answer: Agency theory Difficulty: Easy Skill: Concept LO: 11.5: Briefly explain the executive compensation controversy as it relates to whether Canadian executives are paid too much.

14) In response to corporate accounting scandals, the United States Securities and Exchange Commission (SEC) administered the _____ Answer: Sarbanes-Oxley Act of 2002 (C-SOX).

Difficulty: Easy Skill: Concept LO: 11.5: Briefly explain the executive compensation controversy as it relates to whether Canadian executives are paid too much.

15) Canadian adopted _____, which is essentially the Canadian equivalent of the C-SOX. Answer: Bill 198 Difficulty: Easy Skill: Concept LO: 11.5: Briefly explain the executive compensation controversy as it relates to whether Canadian executives are paid too much.

16) Virtually all the components of executive compensation plans provide favourable _____ treatment for both the executive and the organization.

Answer: tax Difficulty: Easy Skill: Concept LO: 11.2: Define executive status.

17) _____ include supplemental life insurance and executive retirement plans distinguish protection programs for executive employees from protection programs for other employees.

Answer: Enhanced protection program benefits Difficulty: Moderate Skill: Concept LO: 11.-1: Explain the difference between executive pay and pay for non-executives.

Short Answer Questions 1) Describe golden parachute and platinum parachute practices. How are they similar to each other? How are these different from each other?

Answer: Most executives' employment agreements contain a golden parachute clause.

Golden parachutes provide pay and benefits to executives after a termination that results

from a change in ownership or corporate takeover, that is, the merger or combining of two separate organizations. Golden parachutes extend pay and benefits from 1 to 5 years, depending on the agreement. Boards of directors often include golden parachute clauses for at least three reasons. First, golden parachutes limit executives' risks in the event of these unforeseen events. Second, golden parachutes promote recruitment and retention of talented executives. Third, in the event that a takeover bid would benefit the organization, it is possible that a CEO would work against it in order to save his or her job.

Organizations benefit from golden parachute payments because they can treat these payments as business expenses. This means that organizations can reduce their tax liability by increasing the parachute amount. The total value of golden parachutes came to exceed executives' annual income levels by far. Public outcry led to governmentimposed intervention that limited tax benefits to companies.

Platinum parachutes are lucrative awards that compensate departing executives with severance pay, continuation of organization benefits, and even stock options. Ideally, CEOs would perform on an exemplary basis, making decisions to drive up organization profits. However, CEOs do not always perform their jobs well and companies lose out on profit opportunities. After a period of unsatisfactory performance as determined by shareholders and other organization executives, CEOs may be terminated even before the expiration of their employment contracts. Many organizations reach agreements with CEOs to terminate employment, awarding a platinum parachute as an incentive.

Companies use platinum parachutes to avoid long legal battles or critical reports in the press essentially by paying off a CEO to leave.

Difficulty: Moderate Skill: Concept LO: 11.3: List the components of executive compensation packages.

2) Are CEOs compensated commensurately with their organization' performance?

Answer: There are several measures of corporate performance such as sales, profits, and market value. It is difficult to answer just yes or no because the evidence is mixed based on decades of academic research and the compensation of executives relative to organization performance. Therefore, a simple statement cannot be made about the relationship between CEO pay and organization performance. Shareholder returns most often describe organization performance, but there are complex forces beyond the control of CEOs that may influence shareholder returns. For example, in the pharmaceutical industry, substantial investments in research to identify promising medicines require trial and error before a promising outcome occurs in the laboratory. Then lengthy clinical trials that span years may show that the new medication does not cure an illness for which it was created. Such public failures often result in lower confidence in the organization, which often translates into lower shareholder returns. In the intervening time, the organization hires a new CEO who was not involved in the decision to pursue the failed initiative, raising the question whether the CEO should receive lower compensation following a decline in shareholder returns. Nevertheless, some companies do reduce CEO pay when organization performance does not meet a pre-established

standard.

Difficulty: Challenging Skill: Concept LO: 11-5: Briefly explain the executive compensation controversy as it relates to whether Canadian executives are paid too much.

3) Who are the key players in setting executive compensation? Detail their different roles.

How does the SEC affect their roles?

Answer: Executive compensation consultants make recommendations about what and how much to include in executive compensation packages based on strategic analyses.

However, consultants often find themselves in a precarious position in that they must recommend lucrative compensation packages so that they will make a favourable impression on the CEO who hired them.

Boards of directors represent the interests of the shareholders by measuring executive decisions. A conflict of interest may arise in that CEOs often nominate candidates for board membership, and it is the board of directors who makes the final approval of the compensation package.

A compensation committee is comprised of board of directors' members within and outside the organization. The committee members perform three duties. First, they review various consultant recommendations for compensation packages. Second, they discuss the assets and liabilities of the recommendations. Third, they forward the best proposal to the board of directors for consideration.

Difficulty: Challenging Skill: Concept LO: 11.4: Discuss the principles and processes of setting executive compensation.

4) Explain the difference between executive pay and pay for non-executives.

Answer: From an economic standpoint, the chief executive officer (CEO) is the seller of their services, and the compensation committee is the buyer of these services. Under classic economic theory, a reasonable price is obtained through negotiations that are at arm’s length between an informed seller and an informed buyer. An awkward situation can result when the CEO hires a professional compensation director or compensation consultant. In this case, the compensation consultant who makes the recommendation to the compensation committee works for the CEO. In theory, the CEO hires the consultant to perform an objective analysis of the organization’s executive pay package and to make whatever recommendations the consultant feels are appropriate. This relationship has the potential to promote a conflict of interest because of the perceived pressure for the consultant to protect the CEO’s financial interests. The irony is that the consultant is often viewed as representing the shareholders’ interests. In a sense, the buyers of the

CEO’s services are the shareholders and their representatives, the compensation committee of the board of directors. They tend to act upon the compensation consultant’s recommendation.

Successful performance triggers merit and incentive awards and the degree of success determines the amount of award. After all, pay-for-performance applies to many nonexecutive employees in Canadian organizations. In some instances, executives are rewarded even after they have not performed well, with multimillion-dollar awards contingent on their leaving the company. It is not surprising that those instances, which have become increasingly common events in the world of executive compensation, are often referred to as pay-for-non-performance or, more harshly, pay-for-failure.

Difficulty: Challenging Skill: Concept LO: 11.1: Explain the difference between executive pay and pay for non-executives.

Test Bank for Strategic Compensation: A Human Resource Management Approach, First Canadian Edition Chapter 12 Compensating the Flexible Workforce: Contingent Employees and Flexible Work Schedules Multiple Choice Questions 1) A part-time employee, works less than how many hours per week?

A) 30 B) 35 C) 39 D) 25 Answer: B Difficulty: Moderate Skill: Concept LO: 12.1: Describe the four groups of contingent workers.

2) Which of the following is the arrangement where Tanesha and Juanita both work parttime to complete the duties of one full-time position?

A) job sharing B) freelancing C) dual staffing D) safe harboring Answer: A Difficulty: Easy Skill: Application of Knowledge LO: 12.1: Describe the four groups of contingent workers.

3) Who is most likely to be involved in a job-sharing arrangement?

A) part-time employees B) temporary employees

C) leased employees D) independent contractors Answer: A Difficulty: Easy Skill: Concept LO: 12.1: Describe the four groups of contingent workers.

4) If an organization wanted to hire contingent workers, which type of worker would the organization likely employ?

A) consultants B) temporary C) freelance D) leased Answer: B Difficulty: Easy Skill: Concept LO: 12.1: Describe the four groups of contingent workers.

5) Which type of contingent worker would work for an organization on a long-term often indefinite basis?

A) part-time employees B) temporary employees C) leased employees D) independent contractors Answer: C Difficulty: Easy Skill: Concept LO: 12.1: Describe the four groups of contingent workers.

6) ARAMARK, an organization which provides cafeteria service employees to a client organization, is an example of the use of which type of employees?

A) part-time employees B) leased employees C) temporary employees D) independent contractors Answer: B Difficulty: Moderate Skill: Application of Knowledge LO: 12.1: Describe the four groups of contingent workers.

7) Abdu has agreed to teach a statistics course on part-time basis while the professor who regularly teaches the course is on sabbatical. This example represents which of the following?

A) part-time employee B) on-call arrangement C) job sharing D) leased employee Answer: A Difficulty: Moderate Skill: Application of Knowledge LO: 12.1: Describe the four groups of contingent workers.

8) Who is responsible for compensating on-call employees?

A) independent contractor B) hiring organization C) temporary agency D) government Answer: B Difficulty: Challenging Skill: Concept LO: 12.2: Discuss pay and benefits issues for contingent workers.

9) Temporary employment agencies are responsible for complying with all employment legislation when placing employees, except?

A) Employee standards B) Charter of Human Rights and Freedoms C) workers' compensation D) equal pay for equal work Answer: C Difficulty: Challenging Skill: Concept LO: 12.2: Discuss pay and benefits issues for contingent workers.

10) When an employee works from a remote location from the employer's office, that employee is said to be working at what type of work?

A) remote work B) nomadic work C) hoteling work D) satellite work Answer: A Difficulty: Easy Skill: Concept LO: 12.3: Summarize the three categories of flexible work schedules.

11) This type of work involves executives travelling extensively and maintaining control over projects through the use of technology.

A) neighbourhood work center B) satellite work center C) nomadic executive office D) electronic remote work center Answer: C Difficulty: Easy Skill: Concept LO: 12.3: Summarize the three categories of flexible work schedules.

12) After working a regular 40-hour workweek in the office, Jamal takes his organization’s laptop home and generally spends an hour or two responding to work emails. This is an example of which of the following?

A) working condition fringe benefit B) employee choice C) on call time D) employer mandate Answer: B Difficulty: Challenging Skill: Application of Knowledge LO: 12.4: Discuss the pay and employee benefits issues for flexible work schedules, compressed workweeks, and telecommuting arrangements.

13) Most union leaders generally do not support alternative work arrangements based on which of the following two reasons?

A) fewer promotional opportunities and the likelihood of pay reductions B) threats to job security and fewer promotional opportunities C) threats to job security and unfair treatment D) unfair treatment and the likelihood of pay reductions Answer: C Difficulty: Challenging Skill: Concept LO: 12.5: Describe unions' reactions to contingent work and flexible work schedule arrangements.

14) In which sector are some unions more likely to support the use of contingent workers?

A) private B) public C) profit-oriented D) nonprofit organizations Answer: B Difficulty: Moderate Skill: Concept LO: 12.5: Describe unions' reactions to contingent work and flexible work schedule arrangements.

15) Which of the following is a reason why unions tend to NOT to support remote work?

A) difficulty monitoring workers while at home B) accusing workers of not performing their jobs while at home C) lower travel costs than for workers in attendance at the work facility every day D) likelihood of telecommuters not receiving merit pay increases Answer: A Difficulty: Moderate Skill: Concept LO: 12.5: Describe unions' reactions to contingent work and flexible work schedule arrangements.

16) Which stakeholder group most strongly opposes the engagement of contingent workers?

A) Canadian government B) line employees C) unions D) executives Answer: C Difficulty: Moderate Skill: Concept LO: 12.5: Describe unions' reactions to contingent work and flexible work schedule arrangements.

17) Which of the following is a reason for employers to choose to engage contingent workers?

A) to differentiate the value, they place between contingent workers and regular full-time workers B) to avoid hiring regular, full-time workers C) to withhold all employee benefits D) to reduce employment costs per hour Answer: D Difficulty: Moderate Skill: Concept LO: 12.6: Identify strategic issues and choices companies face regarding the use of contingent workers.

18) Which of the following factors contributes to the short-term costs of engaging contingent workers?

A) employee standards act minimum wage provision B) downtime while employees are participating in training C) equal pay for equal work overtime pay provision D) employee benefits costs Answer: B Difficulty: Challenging Skill: Concept LO: 12.6: Identify strategic issues and choices companies face regarding the use of contingent workers.

19) Which of the following is a limitation of engaging contingent workers?

A) Contingent workers' productivity, if not employed long enough, rates low.

B) Regular, full-time employees may reduce their productivity.

C) Contingent workers' productivity probably exceeds regular employees' productivity.

D) Productivity differences between contingent workers and regular employees are not evident.

Answer: A Difficulty: Moderate Skill: Concept LO: 12.6: Identify strategic issues and choices companies face regarding the use of contingent workers.

20) Part-time employees work less than how many hours per week?

A) 45 B) 44 C) 35 D) 30 Answer: C Difficulty: Moderate Skill: Concept LO: 12.1: Describe the four groups of contingent workers.

21) Contractors ________________.

A) receive benefits and do not pay their own Canada Pension Plan and Employment Insurance contributions B) do not receive benefits and pay their own Canada Pension Plan and Employment Insurance contributions C) receive benefits and pay their own Canada Pension Plan and Employment Insurance contributions D) do not receive benefits and do not pay their own Canada Pension Plan and Employment Insurance contributions Answer: B Difficulty: Moderate Skill: Concept

LO: 12.1: Describe the four groups of contingent workers.

22) Which of the following is a Canada Revenue Agency test to determine if a worker is an independent contractor or employee?

A) control over hours and days worked B) control over work completed C) control over location D) control over work product Answer: B Difficulty: Moderate Skill: Concept LO: 12.1: Describe the four groups of contingent workers.

23) Which of the following is a Canada Revenue Agency test to determine if a worker is an independent contractor or employee?

A) ownership of location B) ownership of internet provider account C) ownership of work product D) ownership of tools Answer: D Difficulty: Moderate Skill: Concept LO: 12.1: Describe the four groups of contingent workers.

24) Which of the following is a Canada Revenue Agency test to determine if a worker is an independent contractor or employee?

A) gains profits and owns operating expenses B) gains profits or losses and organization owns operating expenses C) gains profits or losses and owns operating expenses D) gains profits or losses Answer: C Difficulty: Moderate Skill: Concept LO: 12.1: Describe the four groups of contingent workers.

25) Which of the following is a Canada Revenue Agency test to determine if a worker is an independent contractor or employee?

A) this is the only client of the worker B) there are two but no more than three clients of the worker C) there are three or more clients of the worker D) there are no limits to the number of clients of the worker Answer: A Difficulty: Moderate Skill: Concept LO: 12.1: Describe the four groups of contingent workers.

26) Organizations are not obligated to pay which of the following on behalf of independent contractors, freelancers, and consultants?

A) federal income tax withholding, overtime wages required under the various employment acts, and insurance premiums required under provincial and territorial workers’ compensation laws based on payroll B) overtime and minimum wages required under the various employment acts, and insurance premiums required under provincial and territorial workers’ compensation laws based on payroll C) federal income tax withholding, overtime and minimum wages required under the various employment acts, and insurance premiums required under provincial and territorial workers’ compensation laws based on payroll D) federal income tax withholding, overtime and minimum wages required under the various employment acts Answer: C Difficulty: Moderate Skill: Concept LO: 12.2: Discuss pay and benefits issues for contingent workers.

27) HRM should ________________.

A) identify part-time employees and temporary workers B) identify part-time employees that may be employed to meet business needs.

C) identify temporary workers and contractors that may be employed to meet business needs.

D) identify part-time employees, temporary workers, and contractors, that may be employed to meet business needs.

Answer: D Difficulty: Moderate Skill: Concept LO: 12.2: Discuss pay and benefits issues for contingent workers.

28) The four categories of contingent workers include: A) part-time employees, temporary workers, leased employees, independent contractors, freelancers, and consultants B) part-time employees, temporary workers, independent contractors, freelancers, and consultants C) part-time employees, temporary workers, leased employees, and independent contractors D) part-time employees, temporary workers, leased employees, and independent contractors, freelancers, and consultants Answer: D Difficulty: Moderate Skill: Concept LO: 12.2: Discuss pay and benefits issues for contingent workers.

29) The categories of flexible work schedules include ________________.

A) flex-time schedules, compressed workweek schedules, and telecommuting B) flex-time schedules and telecommuting C) flex-time schedules and compressed workweek schedules D) compressed workweek schedules and telecommuting Answer: A Difficulty: Moderate Skill: Concept LO: 12.2: Discuss pay and benefits issues for contingent workers.

Fill in the Blank Questions 1) Changing business conditions and _____ for work–life balance have led to an increase in contingent workers and the use of flexible work schedules in Canada.

Answer: personal preferences Difficulty: Moderate Skill: Concept LO: 12.1: Describe the four groups of contingent workers.

2) ________ have full-time jobs and plan on having long-term relationships with their employers.

Answer: Core employees Difficulty: Moderate Skill: Concept LO: 12.1: Describe the four groups of contingent workers.

3) ________ part-time employees work less than full-time employment.

Answer: Involuntary Difficulty: Easy Skill: Concept LO: 12.1: Describe the four groups of contingent workers.

4) A special kind of part-time employment agreement, whereby two or more part-time employees perform a full-time job, is better known as ________.

Answer: job sharing Difficulty: Moderate Skill: Concept LO: 12.1: Describe the four groups of contingent workers.

5) With ________ arrangements, temporary employees generally do not work for more than one year, and the hiring organizations are the temporary employees' legal employer.

Answer: direct hire Difficulty: Moderate Skill: Concept LO: 12.1: Describe the four groups of contingent workers

6) ________ allows for an alternative work arrangement in which employees are able to work at home or at an alternate location outside of the office.

Answer: Telecommuting or remote working Difficulty: Easy Skill: Concept LO: 12.3: Summarize the three categories of flexible work schedules.

7) Carlos works at Research Innovations Inc. as a computer scientist. ________ schedule enable Carlos to work four 10-hour days.

Answer: Compressed workweek Difficulty: Moderate Skill: Application of Knowledge LO: 12.3: Summarize the three categories of flexible work schedules.

8) ________ occurs when all members of a group agree on mistaken conclusions due to conformity in sharing the same mind-set.

Answer: Groupthink Difficulty: Easy Skill: Concept LO: 12.6: Identify strategic issues and choices companies face regarding the use of contingent workers.

9) _____ work fewer than 35 hours per week because they are unable to find full-time employment.

Answer: Involuntary part-time employees Difficulty: Moderate Skill: Concept LO: 12.1: Describe the four groups of contingent workers.

10) _____ establish working relationships with more than one organization.

Answer: Independent contractors Difficulty: Easy Skill: Concept LO: 12.1: Describe the four groups of contingent workers 11) Organizations generally _____ provide employer-sponsored benefits to part-time employees.

Answer: do not Difficulty: Easy Skill: Concept LO: 12.2: Discuss pay and benefits issues for contingent workers.

12) _____ feature that enables employees to vary the number of work hours daily as long as they maintain the regular number of work hours on a weekly basis.

Answer: Banking hours Difficulty: Easy Skill: Concept LO: 12.2: Discuss pay and benefits issues for contingent workers 13) HRM should survey _____ to gain insight on the value placed on flexible work arrangements.

Answer: current employees Difficulty: Easy Skill: Concept LO: 12.5: Describe unions’ reactions to contingent work and flexible work schedule arrangements.

14) _____ are those who do not have an implicit or explicit contract for ongoing employment.

Answer: Contingent workers Difficulty: Moderate Skill: Concept LO: 12.2: Discuss pay and benefits issues for contingent workers.

15) Unions generally _____ favour contingent or flexible work arrangements.

Answer: do not Difficulty: Easy Skill: Concept LO: 12.5: Describe unions’ reactions to contingent work and flexible work schedule arrangements.

Short Answer Questions 1) Explain the reasons why employers hire temporary workers.

Answer: Organizations traditionally hire temporary employees for two reasons. First, temporary workers fill in for core employees who are on approved leaves of absence, including sick leave, vacation, bereavement leave, or jury duty. Second, temporary workers offer extra sets of hands when organizations' business activities peak, during such times as the holiday season for retail businesses or summer for amusement parks.

Temporary employees perform jobs on a short-term basis usually measured in days, weeks, or months.

Organizations have been hiring temporary workers for three additional reasons. First, temporary employment arrangements provide employers the opportunity to evaluate whether legitimate needs exist for creating additional jobs. Second, temporary employment arrangements give employers the opportunity to decide whether to retain

particular workers on an indefinite basis. Temporary arrangements provide workers the chance to decide whether to accept employment on a full-time basis after they have had time to check things out the organization. Third, employing temporary workers is often less costly than employing core workers because temporary workers are less likely to receive costly discretionary benefits such as benefits.

Difficulty: Moderate Skill: Concept LO: 12.1: Describe the four groups of contingent workers.

2) What are the strategic issues involved with contingent and flexible workers for an organization pursuing a lowest cost strategy?

Answer: Because of the reduction in employee benefits that are given to contingent workers, such employment seems to work well with a lowest-cost imperative. Flexible schedules can also work to reduce costs by decreasing absenteeism. Training is also a factor in the ability of organizations to pursue this strategy. Although well-trained contingent workers may reduce organization training costs, organization-specific training may be needed, and an organization may not be able to realize productivity benefits if these workers leave the organization. Such an argument is moot if organizations establish a track record of high productivity, quality, and exemplary customer service.

Difficulty: Moderate Skill: Concept LO: 12.6: Identify strategic issues and choices companies face regarding the use of contingent workers.

3) What are three advantages to using flextime schedules?

Answer: Employers can expect three possible benefits from using flextime schedules.

First, flextime schedules lead to less tardiness and absenteeism. Flexibly defining the workweek better enables employees to schedule medical and other appointments outside work hours. As a result, workers are less likely to be late or miss work.

Second, flexible work schedules lead to higher work productivity. Employees have more choice about when to work during the day. Employees who work best during the morning hours may schedule morning hours, and employees who work best during the afternoons or evenings can choose these times. In addition, possessing the flexibility to attend to personal matters outside work should help employees become more efficient and effective.

Third, flexible work schedules benefit employers by creating longer business hours and better service. Staggering employees' schedules enable businesses to stay open longer hours without incurring overtime pay expenses. In addition, customers should perceive better service because of expanded business hours. Organizations that conduct business by telephone or virtually with clients or other offices located in different time zones are more likely to be open during customers' operating hours in other time zones.

Difficulty: Moderate Skill: Concept

LO: 12.3: Summarize the three categories of flexible work schedules.

4) Describe unions’ reactions to contingent work and flexible work schedule arrangements.

Answer: Unions generally do not support organizations’ use of contingent workers and flexible work schedules. Most union leaders believe that alternative work arrangements threaten members’ job security and are prone to unfair and inequitable treatment. The most common concerns include: • Employers exploit contingent workers by paying them lower wages and benefits than core employees.

• Employers’ efforts to get cheap labour will lead to a poorly trained and less skilled workforce that will hamper competitiveness.

• Part-time employees are difficult to organize because their interests are centred on activities outside the workplace. Part-time workers are therefore probably not good union members.

• Part-time employment erodes labour standards: Part-time workers are often denied employee benefits, job security, and promotion opportunities. Increasing part-time employment would promote inequitable treatment.

• Temporary employees generally have little concern about improving the productivity of a company for which they will work for only a brief period.

• Unions’ bargaining power becomes weak when companies demonstrate their ability to perform effectively with temporary workers.

• The long days of compressed workweeks or flex-time could endanger workers’ safety and health, even if the workers choose these long days themselves.

• Concerns about employee isolation and company monitoring in the home are among the reasons unions have been reluctant to permit telecommuting by their members.

Difficulty: Moderate Skill: Concept LO: 12.3: Summarize the three categories of flexible work schedules.

Test Bank for Strategic Compensation: A Human Resource Management Approach, First Canadian Edition Chapter 13 Compensating Expatriates Multiple Choice Questions 1) Successful business endeavors rely on whom?

A) host country nationals B) the right people C) third country nationals D) expatriates Answer: B Difficulty: Challenging Skill: Concept LO: 13.1: Discuss competitive advantage and how international activities fit in.

2) Repatriation refers to which of the following?

A) sending an expatriate's family to the foreign country with him B) an expatriate going back to an overseas assignment she had been to before C) an expatriate returning home to work after completing an overseas assignment D) teaching an expatriate about the customs and culture of a foreign country Answer: C Difficulty: Easy Skill: Concept LO: 13.1: Discuss competitive advantage and how international activities fit in.

3) Which type of skills is an expatriate's credibility likely to be undermined?

A) accounting B) mathematical C) language D) marketing Answer: C Difficulty: Challenging Skill: Concept LO: 13.1: Discuss competitive advantage and how international activities fit in.\ 4) In the Italian language, "la" refers to the word "the" for feminine nouns, and "il" refers to the word "the" for masculine nouns. Mastering this knowledge is an example of which of the following?

A) language proficiency B) historical sensitivity C) cultural sensitivity D) gender respect Answer: A

Difficulty: Challenging Skill: Application of Knowledge LO: 13.1: Discuss competitive advantage and how international activities fit in.

5) Which of the following factors has contributed to the expansion of global markets?

A) stricter labour laws outside of Canada B) onshoring outside of Canada C) reduced labour costs outside of Canada D) unification of the European markets Answer: D Difficulty: Moderate Skill: Concept LO: 13.1: Discuss competitive advantage and how international activities fit in.

6) Which of the following questions should HRM professionals consider when selecting employees for expatriate assignments?

A) Are candidates willing to sacrifice job promotions in their home countries?

B) Are candidates able to fluently speak the language in multiple countries?

C) Are candidates' families willing to adjust to foreign lifestyles?

D) Are candidates willing to sacrifice some of their compensation?

Answer: C Difficulty: Easy Skill: Concept LO: 13.1: Discuss competitive advantage and how international activities fit in.

7) An international assignment is considered long-term when it lasts at least how long?

A) 3 months B) 6 months C) 2 years D) 5 years Answer: D Difficulty: Challenging Skill: Concept LO: 13.1: Discuss competitive advantage and how international activities fit in.

8) Which of the following describe categories of international employees?

A) expatriates, third country national, headquarter national B) host country national, third country national, expatriates C) repatriates, host country national, third country nationals D) headquarter national, expatriates, home country nationals Answer: B Difficulty: Easy Skill: Concept LO: 13.2: Describe and explain preliminary considerations compensation professionals should take under advisement before designing international compensation programs.

9) If your French-owned organization, headquartered in Paris, hired a Canadian manager to work in your plant in Taiwan, she would be considered which type of international employee?

A) foreign country national B) third country national C) host country national D) non-host country national Answer: B Difficulty: Challenging Skill: Application of Knowledge LO: 13.2: Describe and explain preliminary considerations compensation professionals should take under advisement before designing international compensation programs.

10) Which group of employees could Canadian organizations rely as a pay referent when developing international compensation packages?

A) domestic B) host country national C) third country national D) employees who work in Toronto Ontario Answer: A Difficulty: Challenging Skill: Concept LO: 13.2: Describe and explain preliminary considerations compensation professionals should take under advisement before designing international compensation programs.

11) Since Canadian citizen Nadim became an employee of American Eyeful Pictures, Inc., headquartered in Los Angeles, he has worked in Japan, China, and Thailand. The organization would calculate his base pay using which method?

A) host country B) home country C) headquarters D) third country Answer: C Difficulty: Moderate Skill: Application of Knowledge LO: 13.3: List the main components of international compensation programs.

12) Canadian citizen Roy is an employee of GE, with offices in Canada. His job responsibilities require him to work in Belgium for at least three years. Which method of pay is most appropriate?

A) expatriate-based B) host-country-based C) home-country-based D) headquarters-based Answer: C Difficulty: Challenging

Skill: Application of Knowledge LO: 13.3: List the main components of international compensation programs.

13) About how often do organizations pay hardship allowances to expatriates?

A) paid over a two-year period B) added to monthly salary amount C) added in several small payments D) paid in a single lump sum Answer: B Difficulty: Challenging Skill: Concept LO: 13.3: List the main components of international compensation programs.

14) Benoit is going on his first expatriate assignment to a country considered a hardship location. About how much will he have his base pay increased?

A) 50% - 70% B) 5% - 35% C) 20% - 40% D) 40% - 50% Answer: B Difficulty: Challenging Skill: Concept LO: 13.3: List the main components of international compensation programs.

15) What is the maximum percentage the Canadian government offers as a hardship allowance?

A) 15 B) 35 C) 50 D) none Answer: B Difficulty: Challenging Skill: Concept LO: 13.3: List the main components of international compensation programs.

16) Which of the following would be considered a hardship location due to dangerous conditions?

A) Kabul Afghanistan B) Basel, Switzerland C) Oslo, Norway D) Brisbane, Australia Answer: A Difficulty: Moderate Skill: Concept LO: 13.3: List the main components of international compensation programs.

17) Stephan will receive a mobility premium for undertaking an assignment in Saudi

Arabia. How will he receive it?

A) upon return to his home country B) over the length of his assignment C) in 3 installments D) single lump-sum payment Answer: D Difficulty: Moderate Skill: Concept LO: 13.3: List the main components of international compensation programs.

18) Tuition reimbursement and daycare assistance fall under which of the following categories?

A) boosted enhancements B) protection programs C) paid time off D) service practices Answer: D Difficulty: Moderate Skill: Concept LO: 13.3: List the main components of international compensation programs.

19) Which of the following is considered an enhanced benefit for expatriates?

A) emergency leave B) education reimbursement for expatriates' children C) host country holiday pay D) pay for host country vacation days Answer: B Difficulty: Challenging Skill: Concept LO: 13.3: List the main components of international compensation programs.

20) When determining Emily’s relocation assistance amount, what will you need to consider?

A) her seniority B) her level of education C) her ability to speak a relevant foreign language D) her length of assignment Answer: D Difficulty: Easy Skill: Concept LO: 13.3: List the main components of international compensation programs.

21) Which of the following represent additional paid time off for employees working in hardship locations?

A) rest and relaxation leave benefits B) permissible premiums

C) foreign service premiums D) vacation Answer: A Difficulty: Moderate Skill: Concept LO: 13.3: List the main components of international compensation programs.

22) Prior to Jie's first overseas assignment, he was told that he would receive a foreign service premium. Jie will be on assignment for at least how long?

A) 12 months B) 6 months C) 3 months D) 24 months Answer: A Difficulty: Moderate Skill: Application of Knowledge LO: 13.4: Discuss the balance sheet approach for Canadian expatriates’ compensation packages.

23) Which of the following are used by the National Joint Council under Treasury Canada to determine per diem schedules?

A) length of stay, family size B) location, family size C) cost of living, family size D) length of stay, location Answer: B Difficulty: Moderate Skill: Concept LO: 13.4: Discuss the balance sheet approach for Canadian expatriates’ compensation packages.

24) Marcia is a Canadian expatriate who is assigned to work in Brazil. In order to avoid double income taxation and maintaining residences in Canada and in Brazil, which approach will NOT place her at a financial disadvantage?

A) the balance sheet approach B) the cost comparison approach C) the weights and measurements approach D) the retrospective approach Answer: A Difficulty: Easy Skill: Application of Knowledge LO: 13.4: Discuss the balance sheet approach for Canadian expatriates’ compensation packages.

25) Shelter allowance is the National Joint Council under Treasury Canada term for which expatriate cost provision?

A) cost-of-living allowance B) inflation provision C) housing and utilities allowance D) assimilation allowance Answer: C Difficulty: Moderate Skill: Concept LO: 13.4: Discuss the balance sheet approach for Canadian expatriates’ compensation packages.

26) What do the indexes of living costs abroad enable expatriates to do?

A) The indexes are between-location cost comparisons at future times and currency exchange rates.

B) The indexes are place-to-place cost comparisons at future times and currency exchange rates.

C) The indexes are between-location cost comparisons at specific times and currency exchange rates.

D) The indexes are place-to-place cost comparisons at specific times and currency exchange rates.

Answer: D Difficulty: Challenging Skill: Concept LO: 13.4: Discuss the balance sheet approach for Canadian expatriates’ compensation packages.

27) Employers usually rely on which source to determine housing and utilities support?

A) the National Joint Council under Treasury Canada shelter allowance B) Consumer Price Index C) Indexes of international labour costs D) International Consumer Price Index Answer: A Difficulty: Easy Skill: Concept LO: 13.4: Discuss the balance sheet approach for Canadian expatriates’ compensation packages.

28) Which of the following occurs tax implications for Canadians working abroad?

A) Canadians pay both foreign and Canadian taxes B) The employee pays the foreign income tax, but not the Canadian government tax.

C) Employers reimburse expatriates for the difference between the hypothetical tax and the actual income tax.

D) The employer takes the responsibility for paying the income tax on behalf of the

expatriates.

Answer: B Difficulty: Moderate Skill: Concept LO: 13.4: Discuss the balance sheet approach for Canadian expatriates’ compensation packages.

29) Megan works at a Canadian construction organization as a civil engineer. She has been working overseas for the last three years. The hypothetical tax calculated by her organization turned out to be less than her actual income tax. In this situation, A) Megan pays the taxes.

B) the employer reimburses Megan.

C) under tax equalization, neither Megan nor his employer receives a reimbursement.

D) the foreign government reimburses Megan.

Answer: A Difficulty: Challenging Skill: Application of Knowledge LO: 13.4: Discuss the balance sheet approach for Canadian expatriates’ compensation packages.

30) Relocation Assistance Payments provides employees with money for ________________.

A) transportation to the foreign post for employees and their families, moving and storing B) temporary quarters prior to departure, while waiting for delivery of household goods or while looking for suitable housing, C) temporary quarters prior to departure, while waiting for delivery of household goods or while looking for suitable housing, transportation to the foreign post for employees and their families, moving and storing D) temporary quarters prior to departure, while waiting for delivery of household goods or while looking for suitable housing, transportation to the foreign post for employees and their families Answer: C Difficulty: Moderate Skill: Concept LO: 13.3: List the main components of international compensation programs.

Fill in the Blank Questions 1) ________ nationals are foreign citizens that work in Canada organizations' branch offices or manufacturing plants in their home countries.

Answer: Host country Difficulty: Moderate Skill: Concept LO: 13.2: Describe and explain preliminary considerations compensation professionals should take under advisement before designing international compensation programs.

2) ________ nationals are foreign national citizens who work in Canada organizations' branch offices or manufacturing plants in countries other than the Canada or their own home countries.

Answer: Third country Difficulty: Moderate Skill: Concept LO: 13.2: Describe and explain preliminary considerations compensation professionals should take under advisement before designing international compensation programs.

3) Canadian citizens employed in Canadian organizations with work assignments outside the Canada are known as ________.

Answer: expatriates Difficulty: Easy Skill: Concept LO: 13.2: Describe and explain preliminary considerations compensation professionals should take under advisement before designing international compensation programs.

4) A(n) ________ is the price at which one country's currency can be exchanged for another.

Answer: exchange rate Difficulty: Easy Skill: Concept LO: 13.3: List the main components of international compensation programs.

5) ________ is the increase in prices for consumer goods and services.

Answer: Inflation Difficulty: Easy Skill: Concept LO: 13.3: List the main components of international compensation programs.

6) The ________ allowance compensates expatriates for their sacrifices while on assignment.

Answer: hardship Difficulty: Moderate Skill: Concept LO: 13.3: List the main components of international compensation programs.

7) ________ premiums reward employees for moving from one assignment to another.

Answer: Mobility Difficulty: Moderate Skill: Concept LO: 13.3: List the main components of international compensation programs.

8) ________ benefits allow for expatriates to take paid time off back in the Canada.

Answer: Home leave

Difficulty: Challenging Skill: Concept LO: 13.3: List the main components of international compensation programs.

9) Expatriates receive ________ allowances when the cost of living is higher where they work than in the home country.

Answer: goods and services Difficulty: Challenging Skill: Concept LO: 13.4: Discuss the balance sheet approach for Canadian expatriates’ compensation packages.

10) _____ are Canadian citizens employed in Canadian companies with work assignments outside Canada.

Answer: Expatriates Difficulty: Moderate Skill: Concept LO: 13.3: List the main components of international compensation programs.

11) The _____ compensates expatriates the amount they would receive if they were performing similar work in Canada.

Answer: Home Country–Based Method Difficulty: Moderate Skill: Concept LO: 13.3: List the main components of international compensation programs.

12) The _____ compensates expatriates based on the host countries’ pay scales.

Answer: Host Country–Based Method Difficulty: Moderate Skill: Concept LO: 13.3: List the main components of international compensation programs.

13) The _____ compensates all employees according to the pay scales used at the headquarters.

Answer: Headquarters-Based Method Difficulty: Moderate Skill: Concept LO: 13.3: List the main components of international compensation programs.

14) Inflation is the increase in prices for consumer goods and services. Inflation _____the purchasing power of currency.

Answer: erodes or reduces Difficulty: Moderate Skill: Concept

LO: 13.3: List the main components of international compensation programs.\\ 10) ________ is the transition process of working in a domestic assignment in a worker's home country after having worked on an international assignment abroad.

Answer: Repatriation Difficulty: Moderate Skill: Concept LO: 13.5: Describe repatriation issues.

Short Answer Questions 1) How does globalization affect HRM departments?

Answer: The globalization of business requires that organizations send employees overseas to establish and operate satellite plants and offices. Organizations must invest in the development of appropriate human resources management (HRM) practices.

International business operations are destined to fail without employees with the necessary knowledge and skills. HRM professionals must be certain to identify the selection criteria that are most related to successful international work assignments. For example, do candidates possess adequate cultural sensitivity? Do they believe that Canadian customs are the only appropriate way to approach problems? Are candidates' families willing to adjust to foreign lifestyles?

Another key HRM function is training. Expatriates must understand the cultural values and language that predominate in foreign countries; otherwise, they risk hindering business. Not using foreign language words appropriately could undermine an expatriate's credibility and ability to get work done. Many other topics include differences in negotiation style and interpersonal exchanges such as gestures for greetings such as hand shaking versus bowing The use of international assignments is an important issue addressed by organizations located in countries across the world. A multitude of large consulting organizations conduct extensive research for client organizations to ensure the most effective deployment of expatriates globally. Such consulting organizations focus on pay and benefits issues for expatriates, labour law, and useful information to help expatriates select and train local country nationals.

Difficulty: Challenging Skill: Concept LO: 13.2: Describe and explain preliminary considerations compensation professionals should take under advisement before designing international compensation programs.

2) What are three challenges employers face when using foreign service premiums?

Answer: Employers that use foreign service premiums should consider the possible drawbacks. First, employees may misunderstand this premium as a regular permanent increase to base pay, and resentment toward the employer may develop following the last installment. Second, foreign service premiums may not have incentive value when

employers make several small installments rather than fewer large installments. Third, employees may feel as if their standard of living has declined when they return to Canada because they no longer receive this extra money.

Difficulty: Moderate Skill: Concept LO: 13.3: List the main components of international compensation programs.

3) What is the balance sheet approach? When is its use most appropriate?

Answer: The balance sheet approach provides expatriates with a standard of living similar to that in Canada. Its purpose is to protect expatriates' standard of living as well as control company costs. Employees receive an allowance whenever the costs in the foreign country exceed the costs in Canada.

The use of the balance sheet approach is most appropriate when: 1) the home country is a desirable reference point for economic comparisons, 2) expatriates are likely to maintain psychological and cultural ties with the home or base country, 3) expatriates prefer not to assimilate into the local foreign culture, 4) the assignment is of limited duration, 5) the assignment following the international assignment will be in the home country, and 6) the organization promises employees that they will not lose financially while on foreign assignment.

Difficulty: Easy Skill: Concept LO: 13.4: Discuss the balance sheet approach for Canadian expatriates’ compensation packages.

4) What are some of the issues organizations should consider to increase the likelihood of successful repatriation?

Answer: Special compensation considerations should not end with the completion of international assignments. Effective expatriate compensation programs promote employees' integration into their organizations' domestic workforces. Returnees may initially view their domestic assignments as punishment because their total compensation decreases. Upon return, former expatriates forfeit special pay incentives and extended leave allowances. Although most former expatriates understand the purpose of these incentives and allowances, it often takes time for them to adjust to domestic compensation practices. Many expatriates may not adjust very well to compensation-asusual because they feel their international experiences have made them substantially more valuable to their employers. Their heightened sense of value may intensify when former expatriates compare themselves with colleagues who have never taken international assignments. Two consequences are likely. First, former expatriates may find it difficult to work collaboratively with colleagues, which can undermine differentiation objectives.

Second, strong resentments may lead former expatriates to find employment with competitors. Adding insult to injury, competitors stand to benefit from former expatriates' international experiences.

Organizations can actively prevent many of these problems by the following two measures. First, organizations should invest in former expatriates' career development.

Career development programs signal that organizations value returnees. In addition, former expatriates may view their employers' investments in career development as a form of compensation, reducing the equity problems described earlier. Second, organizations should capitalize on expatriates' experiences to gain a better understanding of foreign business environments. In addition, former expatriates can contribute to the quality of international assignments by conveying what did and did not work well during their assignments.

Difficulty: Challenging Skill: Concept LO: 13.5: Describe repatriation issues.

Test Bank for Strategic Compensation: A Human Resource Management Approach, First Canadian Edition Chapter 14 International Compensation Multiple Choice Questions 1) What is gross domestic product (GDP)?

A) GDP describes the amount a country spends on healthcare.

B) GDP describes the amount of a country's debt.

C) GDP describes the size of a capitol city.

D) GDP describes the size of a country's economy.

Answer: D Difficulty: Challenging Skill: Concept LO: 14.1: Explain the pertinent concepts for quantifying important economic elements in the discussion of pay and benefits outside Canada.

2) The GDP per capita describes which of the following?

A) a measure of earnings B) the standard of living in a country's capitol city C) a country's standard of living D) the total value of a country's economy Answer: C Difficulty: Challenging Skill: Concept LO: 14.1: Explain the pertinent concepts for quantifying important economic elements in

the discussion of pay and benefits outside Canada.

3) Which of the following describes the worth of all goods and services produced in a foreign country valued at prices prevailing in Canada?

A) real gross domestic product B) purchasing power parity exchange rates C) wholesale exchange rates D) nominal gross domestic product Answer: B Difficulty: Moderate Skill: Concept LO: 14.1: Explain the pertinent concepts for quantifying important economic elements in the discussion of pay and benefits outside Canada.

4) Which measure helps compensation professionals understand the standard of health care in the United States and elsewhere?

A) per capita expenditure on legally required benefits B) per company expenditure on health care C) per country expenditure on health care D) per capita expenditure on health care Answer: D Difficulty: Easy Skill: Concept LO: 14.1: Explain the pertinent concepts for quantifying important economic elements in the discussion of pay and benefits outside Canada.

5) Which of the following countries has the highest per capita GDP? A) United States B) Brazil C) Germany D) Canada Answer: A Difficulty: Easy Skill: Application of Knowledge LO: 14.1: Explain the pertinent concepts for quantifying important economic elements in the discussion of pay and benefits outside Canada.

6) Employment costs were highest in which two countries?

A) Germany and the United States B) Mexico and the United States C) Brazil and the United States D) Canada and the United States Answer: A Difficulty: Moderate Skill: Application of Knowledge LO: 14.1: Explain the pertinent concepts for quantifying important economic elements in the discussion of pay and benefits outside Canada.

7) Canada can best be defined as which of the following?

A) autocracy B) federal republic C) constitutional monarchy D) communist state Answer: C Difficulty: Easy Skill: Concept LO: 14.2: For North America (United States and Mexico), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

8) The Brew Co. plans to open a new facility in Canada to be able to reach its Canadian customers more quickly. Which of the following is true regarding labour-related considerations of the new facility?

A) Canada does not possess a statuary minimum wage law.

B) Federal legislation in Canada can override provincial laws.

C) Both individual and collective employment relationships are controlled at the province and territorial level.

D) There is one common law governing individual employment contracts for all provinces and territories Answer: C Difficulty: Moderate Skill: Application of Knowledge LO:14.2: For North America (United States and Mexico), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

9) The origins of the common law governing individual employment contracts in Canada were based on the laws of which country?

A) Italy B) Spain C) Sweden D) England Answer: D Difficulty: Moderate Skill: Concept LO: 14.2: For North America (United States and Mexico), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

10) Chris has been working in Vancouver, Canada at an accounting organization for the last 10 years. Which of the following is false regarding his paid time-off benefits?

A) He is entitled to 8 weeks of paid leave to care for a seriously ill family member.

B) His paternity leave provisions are coordinated under the Federal Employment Insurance Act. C) He is entitled to 8 or 9 annual paid holidays.

D) He is entitled to 3 weeks of paid vacation time and a sum of money as vacation pay.

Answer: A Difficulty: Challenging Skill: Application of Knowledge LO: 14.2: For North America (United States and Mexico), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

11) In Canada, Maria earns an annual salary of $50,000. The amount of Maria's vacation pay is equal to 4% based upon the 2 weeks she is qualified for. This vacation pay is equal to what amount?

A) $1,000 B) $1,500

C) $1,750 D) $2,000 Answer: D Difficulty: Challenging Skill: Application of Knowledge LO: 14.2: For North America (United States and Mexico), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

12) Canadian retirement plans are most similar to retirement plans in which of the following countries?

A) Brazil B) Italy C) U.S. D) Germany Answer: C Difficulty: Easy Skill: Concept LO: 14.2: For North America (United States and Mexico), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

13) Mexico can be defined as which of the following?

A) constitutional monarchy B) federal republic C) parliamentary democracy D) autocracy Answer: B Difficulty: Moderate Skill: Concept LO: 14.2: For North America (United States and Mexico), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

14) Nora has been working at a manufacturing plant in Mexico for the last 18 months.

Which of the following regarding her paid time-off benefits is false?

A) She is entitled to paid time-off during public holidays.

B) She is entitled 6 weeks' leave prior to giving birth and 6 weeks' leave after birth on half salary.

C) She is entitled to 6 vacation days.

D) If she works during a public holiday, she is entitled to double pay.

Answer: B Difficulty: Challenging Skill: Application of Knowledge LO: 14.2: For North America (United States and Mexico), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

15) What is the status of employee benefits in Brazil?

A) Benefits that are not stated in collective bargaining agreements are subject to possible

cancellation.

B) Only health care protection cannot be eliminated.

C) Any and all benefits habitually granted by the employer cannot be eliminated.

D) Employee benefits are not protected by Brazilian law.

Answer: C Difficulty: Moderate Skill: Application of Knowledge LO: 14.3: For South America (Brazil), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

16) Which of the following is one of the largest trade blocs in South America?

A) South American Free Trade Agreement B) South American Union C) South American Community of Nations D) Latin Free Trade Association Answer: C Difficulty: Easy Skill: Concept LO: 14.3: For South America (Brazil), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

17) Brazil's workforce has approximately how many million people?

A) 95 B) 104 C) 120 D) 125 Answer: B Difficulty: Moderate Skill: Application of Knowledge LO: 14.3: For South America (Brazil), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

18) What percentage of gross earnings do Brazilian employees put towards social insurance?

A) 8% B) 11% C) 8% to 11% regardless of earnings D) 8% to 11% based on earnings level Answer: D Difficulty: Moderate Skill: Concept LO: 14.3: For South America (Brazil), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

19) According to the ________ in Brazil, the minimum wage rate is nationally uniform and set by law.

Answer: Federal Constitution Difficulty: Moderate Skill: Concept LO: 14.3: For South America (Brazil), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

20) Franz is employed as a blue-collar worker in the metalworking industry in Germany.

His pay is based on minimum wage. Which of the following is probably true regarding his minimum wage?

A) The Minimum Wage Council determines his hourly pay.

B) Germany uniformly does not have a minimum wage.

C) His wage is established through a collective bargaining process.

D) His wage is calculated based on the national minimum wage rate set by the government.

Answer: C Difficulty: Moderate Skill: Application of Knowledge LO: 14.4: For Europe (Germany), summarize key facts about wage and salary, paid timeoff benefits, and protection programs.

21) In Germany, how long must an employee work before becoming eligible for paid vacation?

A) 4 weeks B) 6 months C) 6 weeks D) 4 months Answer: B Difficulty: Moderate Skill: Concept LO: 14.4: For Europe (Germany), summarize key facts about wage and salary, paid timeoff benefits, and protection programs.

22) In Germany, an employee can request up to how many year(s) of child-rearing leave?

A) 1 B) 2 C) 3 D) 4 Answer: C Difficulty: Moderate Skill: Concept LO: 14.4: For Europe (Germany), summarize key facts about wage and salary, paid timeoff benefits, and protection programs.

23) Claudia works for a pharmaceutical company in Germany as a blue-collar worker.

She used to opt out of the state insurance plan and purchased private insurance. Due to increasing health insurance premiums this year, she decided to get the state insurance

plan. Which of the following is true regarding her state health insurance?

A) Claudia bears the entire cost of the health insurance.

B) Her company bears the entire cost of the health insurance.

C) 50% of health insurance costs are borne by the company, and the other 50% of the costs are borne by the insured.

D) 75% of health insurance costs are borne by the company, and the remaining 25% of the costs are borne by the insured.

Answer: C Difficulty: Moderate Skill: Application of Knowledge LO: 14.4: For Europe (Germany), summarize key facts about wage and salary, paid timeoff benefits, and protection programs.

24) Which of the following is NOT one of the top three largest economies in Asia as of 2017?

A) Philippines B) China C) India D) Japan Answer: A Difficulty: Easy Skill: Concept LO: 14.5: For Asia (India and the People's Republic of China), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

25) India's labour force has approximately how many million people?

A) 350 B) 400 C) 450 D) 521 Answer: D Difficulty: Moderate Skill: Concept LO: 14.5: For Asia (India and the People's Republic of China), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

26) In India, the Minimum Wages Act of 1948 generally applies to which of the following?

A) occupations that are largely nonunionized or have little bargaining power B) occupations that are largely unionized or have little bargaining power C) employees who work in the private sector D) employees who work in the public sector Answer: A Difficulty: Moderate Skill: Concept LO: 14.5: For Asia (India and the People's Republic of China), summarize key facts

about wage and salary, paid time-off benefits, and protection programs.

27) The People's Republic of China Labor Law of 1995 resulted in which of the following?

A) shift to state-owned enterprises B) collective contracts C) state-controlled benefits D) break from "iron rice bowl" employment Answer: D Difficulty: Challenging Skill: Concept LO: 14.5: For Asia (India and the People's Republic of China), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

28) Xue has been working at an electronics manufacturing plant located in Beijing, China for the last 3 years. Her parents live in Shanghai. Which of the following is true regarding her paid time-off benefits?

A) Xue is entitled to "home leave" because her parents live in another city in China and she has met the minimum service requirement.

B) Xue is not entitled to "home leave" because she has not met the five-year service requirement.

C) Xue is not entitled to "home leave" because there is no such government policy in China.

D) "Home leave" is granted at the discretion of the employer.

Answer: A Difficulty: Moderate Skill: Application of Knowledge LO: 14.5: For Asia (India and the People's Republic of China), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

29) Hui has worked for one month in Guangxi province where the monthly minimum wage is 1000 yuan. What is the minimum allowable wage that Hui can earn in that period?

A) 1000 yuan B) 664 yuan C) 415 yuan D) 500 yuan Answer: A Difficulty: Challenging Skill: Application of Knowledge LO: 14.5: For Asia (India and the People's Republic of China), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

30) Which of the following is a consideration regarding higher minimum wages in China?

A) positive impact on foreign companies' interest in relocating to China B) negative impact on companies because of slower economic growth

C) positive impact on export activity D) negative impact on labour-management relations Answer: B Difficulty: Challenging Skill: Application of Knowledge LO: 14.5: For Asia (India and the People's Republic of China), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

31) In China, how much was the expenditure on health as a percentage of GDP in 2014?

A) 5.5% B) 7% C) 10% D) 12.5% Answer: A Difficulty: Moderate Skill: Application of Knowledge LO: 14.5: For Asia (India and the People's Republic of China), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

32) Which of the following should HRM professionals complete when working with international HRM? A) Be familiar with the laws of all countries wherein there are client group operations, read reports on these countries, deal with employment experts specializing in these areas, talk with other HRM professionals who are native to the location, educate line managers about the pertinent high-level particulars of these laws B) Be familiar with the laws and norms of all countries wherein there are client group operations; read reports on these countries, deal with employment experts specializing in these areas, and talk with other HRM professionals who are native to the location.

C) Be familiar with the laws and norms of all countries wherein there are client group operations; read reports on these countries, deal with employment experts specializing in these areas, and talk with other HR professionals who are native to the location. Educate line managers about the pertinent high-level particulars of these laws D) Be familiar with the laws and norms of all countries wherein there are client group operations; read reports on these countries, deal with employment experts specializing in these areas, educate line managers about the pertinent high-level particulars of these laws.

Answer: C Difficulty: Moderate Skill: Application of Knowledge LO: 14.1: Explain the pertinent concepts for quantifying important economic elements in the discussion of pay and benefits outside Canada.

Fill in the Blank Questions 1) The United States, Canada, and Mexico are part of a trade bloc better known as ________.

Answer: Canada United States Mexico Agreement Difficulty: Easy Skill: Concept LO: 14.2: For North America (United States and Mexico), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

2) The country with the lowest GDP per capita is ________.

Answer: India Difficulty: Moderate Skill: Concept LO: 14.1: Explain the pertinent concepts for quantifying important economic elements in the discussion of pay and benefits outside the United States.

3) Canada has two government run pension plans: one for ________ provincial residents only and one for the rest of Canada.

Answer: Quebec Difficulty: Moderate Skill: Concept LO: 14.1: Explain the pertinent concepts for quantifying important economic elements in the discussion of pay and benefits outside the United States.

4) In ________, employees are entitled to 6 vacation days after 1 year of employment and to 2 more days for each subsequent year up to a maximum of 12 days.

Answer: Mexico Difficulty: Moderate Skill: Concept LO: 14.1: Explain the pertinent concepts for quantifying important economic elements in the discussion of pay and benefits outside the United States.

5) ________ is one measure of a country's standard of living.

Answer: Per capita GDP Difficulty: Challenging Skill: Concept LO: 14.1: Explain the pertinent concepts for quantifying important economic elements in the discussion of pay and benefits outside the United States.

6) Of the countries studied in Chapter 14, ________ has the lowest hourly compensation costs.

Answer: India Difficulty: Easy Skill: Concept LO: 14.1: Explain the pertinent concepts for quantifying important economic elements in the discussion of pay and benefits outside the United States.

7) 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.

Answer: European Union (EU) Difficulty: Moderate Skill: Concept LO: 14.4: For Europe (Germany), summarize key facts about wage and salary, paid timeoff benefits, and protection programs.

8) In Germany, the minimum wage rate is established by the ________ process.

Answer: collective bargaining Difficulty: Moderate Skill: Concept LO: 14.4: For Europe (Germany), summarize key facts about wage and salary, paid timeoff benefits, and protection programs.

9) In China, the minimum wage rates are set for each ________.

Answer: region Difficulty: Moderate Skill: Concept LO: 14.5: For Asia (India and the People's Republic of China), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

10) _____ is the sum of public and private expenditure on health.

Answer: per capita expenditure on healthcare Difficulty: Moderate Skill: Concept LO: 14.1: Explain the pertinent concepts for quantifying important economic elements in the discussion of pay and benefits outside Canada.

11) The Obama administration introduced the _____ to allow Americans access to affordable health insurance.

Answer: Affordable Care Act (ACA) Difficulty: Moderate Skill: Concept LO: 14.1: Explain the pertinent concepts for quantifying important economic elements in the discussion of pay and benefits outside Canada.

12) Brazil, Argentina, Colombia, and _____ are the largest economies in South America.

Answer: Chile Difficulty: Moderate Skill: Concept LO: 14.1: Explain the pertinent concepts for quantifying important economic elements in the discussion of pay and benefits outside Canada.

Short Answer Questions 1) Briefly define and discuss the importance of considering gross domestic product (GDP), per capita GDP, and per capital expenditure on health care when considering wages and benefits in multiple countries. What role do purchasing power parity (PPP) exchange rates play?

Answer: When discussing compensation in other countries, it is important to note some of the important concepts and measures. First, the gross domestic product (GDP) describes the size of a country's economy. Size is expressed as the market value of all final goods and services produced within the country over a specified period. Per capita GDP generally indicates the standard of living within a country: The larger the per capita GDP, presumably the better the standard of living. For easy comparison, GDP statistics are converted to a single currency based on the purchasing power parity (PPP) exchange rates. That is, these figures indicate the worth of all goods and services produced in the country valued at prices prevailing in Canada. This is the measure most economists prefer when looking at per capita welfare and when comparing living conditions or use of

resources across countries.

Difficulty: Moderate Skill: Concept LO: 14.1: Explain the pertinent concepts for quantifying important economic elements in the discussion of pay and benefits outside the United States.

2) Identify the countries that are part of CUSMA and CUSMA's main provisions.

Answer: Canada, Mexico, and the United States are part of a trade bloc known as CUSMA–the Canada United States Mexico Agreement.

In 2018, the three member nations negotiated NAFTA 2.0, or the Canada–United States– Mexico Agreement (CUSMA). The changes to NAFTA include changes in trade for agricultural products, automobiles and automotive parts, and textiles; increased thresholds for low-value (de minimis) shipments subject to informal entry procedures; and enhanced data protection for biologic drugs. CUSMA has 34 chapters compared to NAFTA’s 22. CUSMA includes changes to labour, the environment, anti-corruption, and regulatory policies. This agreement has been ratified by all three countries.

Difficulty: Challenging Skill: Concept LO: 14.2: For North America (United States and Mexico), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

3) Discuss the employment context in the European Union.

Answer: The European Union (EU) is a unique international organization that aims at becoming an economic superpower, while still retaining such quintessential European practices as high levels of employment, social welfare protection, and strong trade unions. Even though the EU has its own legal powers and performs executive, legislative, and judicial functions like any other governing body, it has limited authority in the area of labour and employment laws. Although the EU does not attempt to harmonize the employment laws of member states, under the laws of all member states, employers must provide employees with a written document about the terms of the employment contract.

The concept of "employment at will" does not exist in the EU as it does in the United States. The EU makes use of Directives and Community Legislations to ensure that some minimum standards are adopted by member states. All member states either have specific legislation or unfair dismissal or general civil code provisions that apply to termination of employment contracts. They all provide employers with a substantive basis for challenging employment dismissal and procedural mechanisms for adjudicating claims.

The EU website reports that community labour law was designed with the aim of ensuring that the creation of the single market did not result in a lowering of labour standards or distortions in competition. It has also been increasingly called upon, however, to play a key role in making it easier for the EU to adapt to evolving forms of work organization. On the basis of article 137 of the treaty, the Community shall support

and complement the activities of the member states in the area of social policy. In particular, it defines minimum requirements at the EU level in the fields of working and employment conditions and with regard to the information and consultation of workers.

Improving living and working conditions in member states depends on national legislation, but also to a large extent on agreements concluded by the social partners at all levels (i.e., country, sector, and company).

Difficulty: Moderate Skill: Concept LO: 14.4: For Europe (Germany), summarize key facts about wage and salary, paid timeoff benefits, and protection programs.

4) Compare health benefits and paid time-off benefits in India and People's Republic of China.

Answer: Answer should include following main points about each country: India (paid time-off) Leave is calculated for each year based on the number of days worked in the previous year. Unused days can rollover to the succeeding year up to a maximum of 30 days.

There is no statutory provision for paternity leave. There is maternity leave in the form of paid time-off.

China (paid time-off) Employees who worked for one year or more can get paid annual leave, but there is no binding law regarding this. Employees who worked for more than a year can get home leave if they don't live in the place with their spouse or parents. Women can get no less than 90 days of maternity leave.

India (health benefits) State governments arrange for the provision of medical care and some of the benefits include outpatient treatment, specialist consultations, hospitalization, surgery, imaging and laboratory services, free supply of medications, and etc.

People's Republic of China (health benefits) There is a unified medical insurance system. Employers contribute 6% of payroll and employees contribute 2% of their salary. Covered workers get medical services at a chosen accredited hospital or clinic with a fee-for-service. The social insurance fund reimburses medical benefit cost from 10 to 400 percent of the local average annual wage.

Contract workers receive the same benefits as permanent workers.

Difficulty: Moderate Skill: Concept LO: 14.5: For Asia (India and the People's Republic of China), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

Test Bank for Strategic Compensation: A Human Resource Management Approach, First Canadian Edition Chapter 15 Challenges Facing Compensation Professionals

Multiple Choice Questions 1) Human resources professionals are most concerned about ________________.

A) reducing the costs of short-term disability, long-term disability, workers’ compensation, and incidental employee work absence B) reducing the costs of short-term disability, workers’ compensation, and incidental employee work absence C) reducing the costs of short-term disability, long-term disability, and incidental employee work absence D) reducing the costs of short-term disability, long-term disability, and workers’ compensation Answer: A Difficulty: Easy Skill: Application of Knowledge LO:15.1: Explain the issues surrounding reducing employee benefits costs for employers.

2) Many people are concerned that raising the minimum wage rate will do which of the following?

A) increase employee turnover B) lead to higher unemployment C) negatively influence service quality D) result in greater onshoring activities Answer: B Difficulty: Difficult Skill: Concept LO: 15.1: Explain the issues surrounding reducing employee benefits costs for employers.

3) Which of the following Asian country has the highest average pay rate?

A) Vietnam B) China C) Indonesia D) Bangladesh Answer: B Difficulty: Moderate Skill: Concept LO: 15.4: Discuss the issue of rising wages in China.

4) Which of the following is NOT one of the direct or indirect reasons of rising wages in China?

A) Chinese policy makers' support of increased wages B) one-child policy C) labour shortages D) increasing cost of exports Answer: D Difficulty: Difficult

Skill: Concept LO: 15.4: Discuss the issue of rising wages in China .

5) The Chinese central government is creating pressure throughout the wage structure because A) it is trying to increase Chinese citizens' ability to purchase imported products B) it has raised minimum wage rates multiple times C) it has frozen minimum wage rates D) it has relaxed the one-child policy Answer: B Difficulty: Difficult Skill: Concept LO:15.4: Discuss the issue of rising wages in China.

6) Which one of the following factors has contributed to China's labour shortage?

A) approximately 30 years of the one-child policy B) mass emigration of Chinese citizens to various other countries C) increases to minimum wage rates D) imposed limit on the number of individuals who can work per family Answer: A Difficulty: Difficult Skill: Concept LO:15.4: Discuss the issue of rising wages in China.

7) During which period did the Great Recession occur?

A) February 2005 to July 2008 B) December 2008 to January 2010 C) April 2007 to December 2009 D) December 2007 to June 2009 Answer: D Difficulty: Moderate Skill: Concept LO: 15.2: Describe the issue of underemployment and the compensation–productivity gap.

8) Sebastien prefers to work full-time as a business analyst, but he is forced to work parttime for economic reasons because he is unable to find a full-time job. Which of the following best describes this situation?

A) underemployment B) underemployment C) underutilization D) discrimination Answer: A Difficulty: Moderate Skill: Application of Knowledge LO: 15.2: Describe the issue of underemployment and the compensation–productivity gap.

9) Anthony holds a doctoral degree in sociology and works as a taxi driver. Which of the following best describes this situation?

A) underemployment B) overstaffing C) discrimination D) unemployment Answer: A Difficulty: Easy Skill: Application of Knowledge LO: 15.2: Describe the issue of underemployment and the compensation–productivity gap.

10) Which one of the following is NOT considered a long-term implication of underemployment?

A) a slowdown in the economic recovery from recession B) higher spending by companies C) reduced consumption of goods and services D) reduced business production Answer: B Difficulty: Moderate Skill: Concept LO:15.2: Describe the issue of underemployment and the compensation–productivity gap.

11) The gap between productivity and real hourly compensation was the highest during which of the following periods?

A) 1947-1973 B) 1979-1990 C) 1990-2000 D) 2000-2011 Answer: D Difficulty: Easy Skill: Concept LO:15.2: Describe the issue of underemployment and the compensation–productivity gap.

12) Which benefit might part-time workers be less likely to need?

A) life insurance B) day care C) health insurance D) paid vacation Answer: B Difficulty: Moderate Skill: Application of Knowledge

LO: 15.3: Explain the influence of changing workforce demographics on employee benefits practices.

13) Which one of the following racial groups is expected to have the slowest labour force participation growth rate through the year 2022?

A) mixed races B) Asian C) Black Canadians D) Caucasian Answer: D Difficulty: Easy Skill: Concept LO: 15.3: Explain the influence of changing workforce demographics on employee benefits practices.

14) Offering relevant employee benefits can lead to which of the following outcomes?

A) higher return on investment B) overutilization of employee benefits C) lower workforce diversity D) lower hourly wage rates Answer: A Difficulty: Moderate Skill: Concept LO: 15.3: Explain the influence of changing workforce demographics on employee benefits practices.

15) Differences in employee preferences and needs based on life stage and life circumstances call for which of the following?

A) comprehensive health insurance plans B) generous paid vacation allowances C) flexible benefits D) childcare benefits Answer: C Difficulty: Easy Skill: Concept LO: 15.3: Explain the influence of changing workforce demographics on employee benefits practices.

16) Underemployment leads to earning losses because the underemployed work: A) more hours and take jobs within lower-paying occupations B) jobs within lower-paying occupations C) fewer hours and take jobs within lower-paying occupations D) fewer hours Answer: C Difficulty: Easy Skill: Concept LO: 15.2: Describe the issue of underemployment and the compensation–productivity gap.

17) Which explains the compensation–productivity gap?

A) unemployment following recessions and most organizations experience profit losses during economic recessions B) high unemployment following recessions and all organizations experience profit losses during economic recessions C) high unemployment following recessions D) unemployment following recessions Answer: B Difficulty: Easy Skill: Concept LO: 15.2: Describe the issue of underemployment and the compensation–productivity gap.

18) Why have some Canadian organizations relocated manufacturing facilities from Canada to other countries, such as China?

A) lower costs of production to maintain competitive prices and to preserve profits B) lower costs of production to access competitive markets C) lower costs of production to lower taxes paid D) maintain competitive prices and to preserve profits Answer: A Difficulty: Easy Skill: Concept LO: 15.1: Explain the issues surrounding reducing employee benefits costs for employers.

19) Workforce diversity requires that employers to consider the ________________.

A) needs and preferences of employees when selecting options to include in the benefits program B) costs of the benefits program when selecting options to include in the benefits program C) employee access to the benefits program when selecting options to include in the benefits program D) needs and preferences of employers when selecting options to include in the benefits program Answer: A Difficulty: Easy Skill: Concept LO: 15.1: Explain the issues surrounding reducing employee benefits costs for employers 20) Human resources management professionals indicate organizations managers and employees as having ________________.

A) sufficient knowledge concerning mental health issues and the stigma of mental health issues

B) insufficient knowledge concerning mental health issues and the stigma of mental health issues C) insufficient knowledge concerning mental health issues D) insufficient knowledge concerning mental health issues and the stigma of employees’ time away from work Answer: B Difficulty: Easy Skill: Concept LO: 15.1: Explain the issues surrounding reducing employee benefits costs for employers 21) When a person holding a Bachelor’s degree in psychology and is employed as a parttime grocery store clerk this is considered to be: A) employment B) a tight labour market C) underemployment D) individual choice Answer: C Difficulty: Easy Skill: Concept LO: 15.2: Describe the issue of underemployment and the compensation–productivity gap 22) According to Statistics Canada, labour force diversity will continue to increase based on ________________.

A) age, gender, and ethnicity B) immigration and ethnicity C) declining birth rate and age D) labour demand Answer: A Difficulty: Easy Skill: Concept LO: 15.3: Explain the influence of changing workforce demographics on employee benefits practices.

23) Compensation professionals use surveys to collect information about ________________.

A) employee demographics, needs, preferences, recent or anticipated life changes, and the extent to which they find particular benefits useful B) labour market demographics, needs, preferences, recent or anticipated life changes, and the extent to which they find particular benefits useful C) employee demographics, needs, preferences, and the extent to which they find particular benefits useful D) employee demographics, needs, preferences, recent or anticipated life changes, and the extent to which they find particular benefits useful Answer: D Difficulty: Easy

Skill: Concept LO: 15.3: Explain the influence of changing workforce demographics on employee benefits practices.

Fill in the Blank Questions 1) ________ refers to a general slowdown in economic activity.

Answer: Economic recession Difficulty: Easy Skill: Concept LO: 15.1: Explain the issues surrounding reducing employee benefits costs for employers.

2) ________ is a situation in which a worker is forced to work part-time due to economic situations although they are willing to work full-time.

Answer: Underemployment Difficulty: Easy Skill: Concept LO: 15.2: Describe the issue of underemployment and the compensation–productivity gap.

3) ________ is a situation in which a worker possesses more qualifications, skill, and education than is required by his/her existing job.

Answer: Underemployment Difficulty: Easy Skill: Concept LO: 15.2: Describe the issue of underemployment and the compensation–productivity gap.

4) Organizations can increase profits, in part, by holding down employees' ________.

Answer: pay (or compensation) Difficulty: Difficult Skill: Concept LO: 15.2: Describe the issue of underemployment and the compensation–productivity gap.

5) Since the 1970s, ________ has lagged behind labour productivity growth.

Answer: real hourly compensation Difficulty: Challenging Skill: Concept LO: 15.2: Describe the issue of underemployment and the compensation–productivity gap.

6) Human resources management professionals indicate there are increasing compensation costs of _____ impacting organizational long-term disability costs.

Answer: employees' complex mental health issues

Difficulty: Moderate Skill: Concept LO: 15.1:Explain the issues surrounding reducing employee benefits costs for employers.

7) Statistics Canada’s Work Absence Statistics of Full-Time Employees reported that employees’ workplace absences have increased, costing employers in terms of _________.

Answer: reduced productivity Difficulty: Moderate Skill: Concept LO: 15.1: Explain the issues surrounding reducing employee benefits costs for employers.

8) ______ refers to a general slowdown in economic activity.

Answer: Economic recession Difficulty: Moderate Skill: Concept LO: 15.1: Explain the issues surrounding reducing employee benefits costs for employers.

9) _____ refers to employees who wish to work full-time and are working part-time or have completed education higher than their current job requires.

Answer: Underemployment Difficulty: Moderate Skill: Concept LO:15.2: Describe the issue of underemployment and the compensation–productivity gap 10) The Conference Board of Canada reported that Canada ranked _____ in the world in terms of labour productivity growth.

Answer: fifth Difficulty: Moderate Skill: Concept LO:15.1: Explain the issues surrounding reducing employee benefits costs for employers.

11) The __________ is the difference between real hourly compensation and labour productivity indicating whether workers’ pay is keeping up with productivity.

Answer: Compensation–Productivity Gap Difficulty: Moderate Skill: Concept LO:15.2: Describe the issue of underemployment and the compensation–productivity gap 12) Among developing Asian economies, China’s average pay rate is _____ compared Indonesia, Philippines, Vietnam, and Bangladesh.

Answer: higher Difficulty: Moderate Skill: Concept

LO:15.4: Discuss the issue of rising wages in China.

13) China is experiencing labour _____ due to the rapidly aging Chinese population after 30 years of its one-child policy.

Answer: shortages Difficulty: Moderate Skill: Concept LO:15.4: Discuss the issue of rising wages in China.

14) A consequence of increased minimum wage rates and strengthening overtime protections across the provinces and territories, organizations’ _____ increase and staffing levels.

Answer: compensation costs Difficulty: Moderate Skill: Concept LO:15.1: Explain the issues surrounding reducing employee benefits costs for employers.

15) Increased wages in China are largely due to the Chinese governments’ attempts to _____ domestic consumption.

Answer: increase Difficulty: Moderate Skill: Concept LO:15.4: Discuss the issue of rising wages in China.

16) Compensation concerns include the ability of employees to secure the appropriate care and the return to work challenges in relation to _____.

Answer: mental health concerns.

Difficulty: Moderate Skill: Concept LO:15.1: Explain the issues surrounding reducing employee benefits costs for employers.

Short Answers Questions

1) Explain the influence of changing workforce demographics on employee benefits practice.

Answer: Labour force diversity is on the rise. We expect that demographic diversity will influence employee benefits, a key component of total compensation. According to Statistics Canada, labour force diversity will continue to increase based on age, gender, and ethnicity. This increase is the result of changes both in the composition of the population and in labour force participation rates across demographic groups.

The projected growth of the labour force will be affected by the aging of the baby boom generation—persons born between 1946 and 1964. In 2022, baby boomers will be 58 to 76 years old. Statistics Canada reports on the workforce by occupation and age. The occupation with the most over-65-year-old workers is managerial, while the greatest number of full-time employees aged 25 to 54 years were in business, finance, and administration occupations.

Difficulty: Moderate Skill: Concept LO: 15.3: Explain the influence of changing workforce demographics on employee benefits practices.

2) What are some of the issues associated with rising wages in China?

Answer: In recent years, the Chinese central government has been substantially raising minimum wage rates, creating pressure throughout the wage structure. Minimum wage rates increased an average of 24 percent across the country's 31 provinces, and the government is planning an annual increase in minimum wages through 2015. Average monthly income for migrant workers increased 13 percent (approximately $257).

Chinese policy makers are supportive of increased wages for the following reason. In recent history, the growth in the Chinese economy was based in large part on its trade surplus. A trade surplus occurs when the value of goods and services being shipped for sale outside the country, in this case, China, exceeds the value of goods and services shipped from other countries to China. Encouraging higher wages promotes domestic consumption, that is, the purchase and use of goods and services within its national borders. Increased domestic consumption will decrease the country's reliance on exports to sustain growth. Reduced reliance on exports is particularly necessary as labour costs within China increase rapidly. As China's labour costs rise, so would the cost of its exports, making the country less competitive in the global economy.

Labour shortages have also contributed to wage increases in China. These shortages are due, in part, to the rapidly aging Chinese population after 30 years of its one-child policy.

The Chinese government implemented the policy to curb population growth in large cities.

Economic growth is creating the need for new jobs; however, the one-child policy has slowed population growth, vastly reducing the number of young workforce entrants. As a result, this policy has inadvertently contributed to an aging population. The largest segment of the Chinese population is currently in the 35-44 age range.

Difficulty: Difficult Skill: Concept LO: 15.4: Discuss the issue of rising wages in China.

3) Discuss two possible unintended consequences of raising the salary threshold to qualify for overtime pay.

Answer: It is possible that making more employees eligible for overtime pay may have an unintended consequence. Raising the threshold does not necessarily equate with an increase in total earnings. Moving millions to qualify for overtime pay may place these workers at a disadvantage. For example, it is possible that employers would require managers to schedule workers more cautiously, to avoid higher payroll costs.

Another unintended consequence pertains to workplace culture. Higher overtime pay thresholds may undermine a culture of trust. Employers may require that managers and supervisors increase monitoring of nonexempt employees through greater observation and review. The idea is that management would ensure that employees are performing at optimal levels, and providing sufficient value added in the face of higher compensation costs. Ultimately, management is accountable to the company's shareholders.

Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 15.1: Explain the issues surrounding reducing employee benefits costs for employers.