Strategic Compensation A Human Resource Management Approach, 9th Edition Test Bank

Strategic Compensation A Human Resource Management Approach, 9th Edition By Joseph Martocchio

Strategic Compensation, 9e (Martocchio) Chapter 1 Strategic Compensation: A Component of Human Resource Systems 1) ________ refers to the design and implementation of compensation systems to reinforce the objectives of both HR strategies and competitive business strategies.

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

2) Protection programs are what type of compensation benefits?

A) external B) non-monetary C) internal D) monetary Answer: B Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 1.1: Define strategic compensation.

3) Which of the following is an example of a monetary reward?

A) medical insurance B) vacations C) day care assistance D) spot bonus Answer: D Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 1.1: Define strategic compensation.

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4) Since the economic recession (2007-2009) ended, fewer companies have offered pay increases and, those that do, are offering lower amounts. Approximately, how much have pay increases been?

A) less than 2 percent B) 2 percent up to 2.9 percent C) 3 percent up to 3.9 percent D) 4 percent or more Answer: A Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 1.1: Define strategic compensation.

5) This concept describes a company's success when the company 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 AACSB: Analytical Thinking LO: 1.1: Define strategic compensation.

6) 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 AACSB: Analytical Thinking LO: 1.1: Define strategic compensation.

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

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

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8) Compensation represents both the intrinsic and extrinsic rewards employees receive for performing their jobs. Together, both intrinsic and extrinsic compensation describe a company'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 AACSB: Analytical Thinking LO: 1.1: Define strategic compensation.

9) Which of following enables companies to generate income, higher company 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 AACSB: Analytical Thinking LO: 1.2: Summarize the role of compensation as a strategic business partner.

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

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

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11) In GE'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 (HR) function B) gain an understanding of HR and the production and service sides of the business and help to determine the strategic capabilities of the company's workforce C) gain an understanding of the depth of specialization for each HR function D) gain an understanding of HR from a generalist's perspective Answer: B Difficulty: Easy Skill: Application of Knowledge AACSB: Application of Knowledge LO: 1.2: Summarize the role of compensation as a strategic business partner.

12) Cash and equipment such as a mass spectrometer 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 AACSB: Application of Knowledge LO: 1.2: Summarize the role of compensation as a strategic business partner.

13) ________ and ________ programs are key to giving employees the necessary knowledge and skills to use new workplace technology effectively.

Answer: Pay-for-knowledge, skill-based pay Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking 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 AACSB: Analytical Thinking LO: 1.3: Explain strategic compensation decisions.

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15) This term suggests that a loss is likely for the firm, 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 AACSB: Analytical Thinking 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 AACSB: Application of Knowledge LO: 1.3: Explain strategic compensation decisions.

17) Ryanair uses one type of aircraft in its fleet and requires their passengers to carry their luggage to the plane. Which of the following competitive strategies does Ryanair use?

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

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

A) an employee's long-term focus B) unpredictable employee behavior C) high concern for the quantity of output D) high concern for the quality of output Answer: C Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 1.3: Explain strategic compensation decisions.

20) 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 the United States.

Answer: threat Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 1.3: Explain strategic compensation decisions.

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

Answer: threats, opportunities Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 1.3: Explain strategic compensation decisions.

22) Apple Computer's use of a differentiation strategy promotes both ________ and ________.

Answer: market demand, brand loyalty Difficulty: Difficult Skill: Application of Knowledge AACSB: Application of Knowledge LO: 1.3: Explain strategic compensation decisions.

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23) What are the three questions that compensation professionals should answer to help determine whether they are making a strategic contribution to the company?

Answer: • Does compensation strategy fit well with the objectives of competitive business and HR strategies?

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

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

Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 1.3: Explain strategic compensation decisions.

24) This law made it illegal to pay women less for performing equal work as men.

A) Equal Pay Act of 1963 B) Civil Rights Act of 1964 C) Davis - Bacon Act of 1931 D) Fair Labor Standards Act of 1938 Answer: A Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 1.4: Identify and discuss the building blocks and structural elements of strategic compensation systems.

25) 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 AACSB: Analytical Thinking LO: 1.4: Identify and discuss the building blocks and structural elements of strategic compensation systems.

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26) 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 AACSB: Analytical Thinking LO: 1.4: Identify and discuss the building blocks and structural elements of strategic compensation systems.

27) Jason works at a call center for an insurance company, and he has been answering calls regarding auto insurance. Recently, he started to attend a training program about home insurance.

Upon successful completion of this training program, Jason will be able to handle home insurance questions and queries as well. If this insurance company has a compensation policy that rewards Jason'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 AACSB: Application of Knowledge LO: 1.4: Identify and discuss the building blocks and structural elements of strategic compensation systems.

28) Sandra'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 Sandra's situation?

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

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29) 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 AACSB: Analytical Thinking LO: 1.4: Identify and discuss the building blocks and structural elements of strategic compensation systems.

30) 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 AACSB: Analytical Thinking LO: 1.4: Identify and discuss the building blocks and structural elements of strategic compensation systems.

31) Which of the following represents the pay rate differences for jobs and employee contributions of unequal worth to a company?

A) merit pay B) incentive pay C) retention pay D) pay structures Answer: D Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 1.4: Identify and discuss the building blocks and structural elements of strategic compensation systems.

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32) 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 company. 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 less-complex 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: Difficult Skill: Concept AACSB: Analytical Thinking LO: 1.4: Identify and discuss the building blocks and structural elements of strategic compensation systems.

33) 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 AACSB: Analytical Thinking LO: 1.5: Describe the fit of the compensation function in organizations.

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34) 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) HR specialist C) compensation specialist D) HR generalist Answer: A Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 1.5: Describe the fit of the compensation function in organizations.

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

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

36) The demand for human resource professionals is ________.

Answer: increasing Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 1.5: Describe the fit of the compensation function in organizations.

37) Companies that implement ________ 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: pay-for-knowledge, person-focused Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 1.5: Describe the fit of the compensation function in organizations.

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

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

39) Due to the recent economic downturn, XYZ Co. decided to shut down one of its appliance manufacturing plants in the United States, and therefore around 300 workers were laid off. XYZ Co. has chosen to award laid-off workers 6 months of ________ pay.

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

40) This group is directly involved in producing goods and delivering services for a company.

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

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

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

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42) Which of the following group is a stakeholder within a company?

A) Equal Employment Opportunity Commission B) Department of Labor C) prospective employees D) line managers Answer: D Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 1.6: Identify the stakeholders of the compensation function and summarize their stakes in the work compensation professionals perform.

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

Answer: Line managers Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 1.6: Identify the stakeholders of the compensation function and summarize their stakes in the work compensation professionals perform.

44) What is a constituency? How does it affect the HR department?

Answer: The HR department does not exist in isolation. Rather, it must respond to a variety of parties, each with its own interests. In fact, the success of an HR department may depend on how well it serves various constituencies. Constituencies can include employees, line managers, executives, unions, the U.S. government, and customers. Each of these groups expects certain actions by the HR 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 HR department plays the role of a juggler, trying to meet often-competing goals presented by multiple constituencies.

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

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Strategic Compensation, 9e (Martocchio) Chapter 2 Contextual Influences on Compensation Practice 1) John and Mark hold equivalent secretarial jobs, but John, who makes 20 percent more than Mark, is employed by a manufacturing firm while Mark is employed by a department store.

Based on this information, which of the following best explains this pay differential?

A) interindustry wage differentials B) differences in human capital intensity C) merit exception of the Equal Pay Act of 1963 D) John's stronger negotiation skills Answer: A Difficulty: Easy Skill: Application of Knowledge AACSB: Application of Knowledge LO: 2.1: Discuss the reasons for interindustry wage differentials.

2) Which term best describes the extent to which companies' 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 AACSB: Analytical Thinking 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 AACSB: Analytical Thinking LO: 2.1: Discuss the reasons for interindustry wage differentials.

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

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 AACSB: Analytical Thinking LO: 2.1: Discuss the reasons for interindustry wage differentials.

5) On average, Gina would be more likely to earn ________ money if she were to work as a sales clerk for a department store rather than as an assembly technician in an aircraft engine manufacturing plant.

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

6) Define capital intensity and explain how it relates to compensation outcomes.

Answer: Capital intensity refers to the extent to which companies' 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, capitalintensive industries (e.g., manufacturing) pay more than industries that are less capital intensive (e.g., 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.

Workers usually receive on-the-job training, sometimes including employer-sponsored technical instruction. In addition, some employers may require specialized training or an associate's 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 most have the reputation of paying low wages. The operation of service industries depends almost exclusively on employees with relatively common skills. Most retail sales workers receive on-the-job training, which usually lasts a few days to a few months.

Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 2.1: Discuss the reasons for interindustry wage differentials.

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

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

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

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

9) A common, but mistaken assumption, is that high demand for workers 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: Difficult Skill: Concept AACSB: Analytical Thinking LO: 2.2: Explain the factors that contribute to pay differentials based on occupational characteristics.

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10) 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 AACSB: Analytical Thinking LO: 2.2: Explain the factors that contribute to pay differentials based on occupational characteristics.

11) Define what an occupation is. Using the example of pharmacists and a pharmacy technician in Chapter 2, explain the rationale for differences in pay within this occupation.

Answer: An occupation is a group of jobs, found at more than one company, 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, clerk typist, administrative clerk, staff secretary, and administrative secretary are jobs in the office support occupation.

According to the Occupational Outlook Handbook, 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. Average annual pay reflects these differences. In 2013, pharmacists earned $116,500 while pharmacy technicians earned $30,840.

Difficulty: Difficult Skill: Application of Knowledge AACSB: Application of Knowledge LO: 2.2: Explain the factors that contribute to pay differentials based on occupational characteristics.

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12) 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) The Fair Labor Standards Act of 1938 (FLSA) minimum wage provision influences relative pay differentials.

Answer: A Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 2.3: Summarize the reasons for the occurrence of geographic pay differentials.

13) In San Francisco, the typical pay in the installation, maintenance, and repair occupation exceeded the national average by 44 percent. In Johnstown, Pennsylvania, the rate was 9 percent 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 AACSB: Application of Knowledge LO: 2.3: Summarize the reasons for the occurrence of geographic pay differentials.

14) 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 AACSB: Analytical Thinking LO: 2.3: Summarize the reasons for the occurrence of geographic pay differentials.

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15) 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 AACSB: Analytical Thinking LO: 2.3: Summarize the reasons for the occurrence of geographic pay differentials.

16) Jing is considering whether to take a job placement in Los Angeles, California or Mobile, Alabama. Before deciding, she is interested in understanding the cost-of-living differences between both places. Jing will consult a ________ comparison calculator to inform her decision.

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

17) Antidiscrimination laws 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: Difficult Skill: Concept AACSB: Analytical Thinking LO: 2.4: Discuss the role of labor unions in setting compensation.

18) Many nonunion companies offer higher compensation than they would if unions were nonexistent. What is this phenomenon called?

A) progressive compensation B) the spillover effect C) concessionary bargaining D) inter-industry compensation differentials Answer: B Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 2.4: Discuss the role of labor unions in setting compensation.

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19) 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: Difficult Skill: Concept AACSB: Analytical Thinking LO: 2.4: Discuss the role of labor unions in setting compensation.

20) Chrysler, General Motors, and Ford have departed from which of the following bargaining patterns as they seek to secure higher hourly pay rates for automobile workers?

A) guarded B) concessionary C) heightened D) compensationary Answer: B Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 2.4: Discuss the role of labor unions in setting compensation.

21) Workers 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 AACSB: Analytical Thinking LO: 2.4: Discuss the role of labor unions in setting compensation.

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22) Briefly summarize right-to-work laws as well as the impact on unionization and compensation.

Answer: Right-to-work laws prohibit management and unions from entering into agreements requiring union membership as a condition of employment. The prevalence of unions' influence on wages varies tremendously by state based on whether there are right-to-work laws in place. In right-to-work states, union influence is less potent than in other states. Currently, about half of the states have right-to-work laws in place. Historically, most were found in southern states.

Increasingly, northern states are adopting these laws. Michigan, which has a substantial population of union employees, recently adopted right-to-work laws. Private sector employees in right-to-work states earned an average of $738 in 2012, which is about 10 percent less than elsewhere. These differences have been one contributing factor that has led many manufacturing businesses to relocate in right-to-work states where employment costs are lower, further weakening unions' influence.

Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 2.4: Discuss the role of labor unions in setting compensation.

23) Which amendment to the U.S. Constitution gives Congress the power to regulate commerce with foreign nations, individual states, and Indian Tribes?

A) First Amendment B) Fourteenth Amendment, Section 1 C) Fifth Amendment D) Article I, Section 8 Answer: D Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

24) Which amendment to the U.S. Constitution made it illegal to restrict the freedom of religion, speech, and press, as well as protect the right of people to peacefully assemble?

A) Article 1, Section 8 B) First Amendment C) Fifth Amendment D) Fourteenth Amendment, Section 1 Answer: B Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

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25) An employee has a regular hourly rate equal to $12. According to FLSA, how much should her/his employer pay this employee for each additional hour worked beyond the regular 40 hours within a period of 7 consecutive days?

A) $12 B) $14 C) $16 D) $18 Answer: D Difficulty: Moderate Skill: Application of Knowledge AACSB: Application of Knowledge LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

26) An employee has a regular hourly rate equal to $10 and works 45 hours within a period of 7 consecutive days. What is the total amount the employer should pay this employee for 45 work hours?

A) $425 B) $450 C) $475 D) $500 Answer: C Difficulty: Difficult Skill: Application of Knowledge AACSB: Application of Knowledge LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

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

A) A fireman 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 AACSB: Application of Knowledge LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

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28) Based upon the FLSA child labor provisions, what is the minimum age that a child must be in order to be legally employed?

A) 10 B) 12 C) 14 D) 19 Answer: C Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

29) Which of the following is NOT a protected characteristic by Title VII of the Civil Rights Act of 1964?

A) sexual orientation B) race C) national origin D) religion Answer: A Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

30) Intentionally treating women less favorably 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 AACSB: Analytical Thinking LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

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31) Until recently, ACME Manufacturing granted every employee one week of paid vacation each year. The company 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 at ACME 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 AACSB: Application of Knowledge LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

32) This act strengthened the Equal Pay Act of 1963 by requiring employers to show that pay disparities are job related rather than sex-based. This act also prohibits employers from retaliating against employees who share their salary information.

A) The Paycheck Fairness Act B) The Civil Rights Act of 1964 C) The Age Discrimination in Employment Act of 1967 D) The Pension Protection Act of 2006 Answer: A Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

33) As a result of this law enacted by Congress, employers must now show that employment practices that create disparate impact are a business necessity. This law also made it legal for U.S. citizens working abroad for U.S. companies to file suit.

A) Americans with Disabilities Act of 1990 B) Executive Order 11246 C) The Civil Rights Act of 1991 D) The Older Workers Benefit Protection Act Answer: C Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

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34) Jennifer works as a clerk in a company. The essential function of her job is typing on a keyboard. If she develops crippling arthritis that interferes with her ability to type, which act requires her employer to make reasonable accommodations, such as providing a voicerecognition input device?

A) Family and Medical Leave Act of 1993 B) Americans with Disabilities Act of 1990 C) Davis-Bacon Act of 1931 D) Occupational Safety and Health Act of 1970 Answer: B Difficulty: Easy Skill: Application of Knowledge AACSB: Application of Knowledge LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

35) Construction contractors, working on government contracts valued at more than $2,000, must pay their laborers and mechanics what type of local area-based wage to be in compliance with the Davis-Bacon Act of 1931?

A) minimum wage B) prevailing wage C) prevalent wage D) discretionary wage Answer: B Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

36) Which law defines hours worked?

A) National Labor Relations Act B) Davis-Bacon Act C) Equal Pay Act D) Portal-to-Portal Act Answer: D Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

37) 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.

Answer: Great Depression Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

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38) In general, the FLSA requires that overtime be paid on all hours worked in excess of ________ hours within a period of 7 consecutive days.

Answer: 40 Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

39) The ________ of 1963 makes it illegal to pay one sex more than the other for equal work performed.

Answer: Equal Pay Act Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

40) The ________ Amendment allows female employees to charge employers with Title VII violations regarding pay only when the employer has violated the Equal Pay Act of 1963.

Answer: Bennett Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

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

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

42) Manufacturing is considered to be a ________ intensive industry.

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

43) The ________ of 1993 sought to provide employees with job protection in case of a medical emergency.

Answer: Family and Medical Leave Act (FMLA) Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

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44) Congress enacted the Civil Rights Act of 1991 to overturn several U.S. Supreme Court rulings. Identify three cases and discuss their relevance to compensation practice.

Answer: The reversal of the Atonio v. Wards Cove Packing Co. court decision is perhaps the most noteworthy. The Supreme Court ruled that plaintiffs (employees) must indicate which employment practice created disparate impact and demonstrate how the employment practice created disparate impact. Since the passage of the Civil Rights Act of 1991, employers must show that the challenged employment practice is a business necessity. Thus, the Civil Rights Act of 1991 shifted the burden of proof from employees to employers.

Two additional sections of the Civil Rights Act of 1991 apply to compensation practice. The first feature pertains to seniority systems. The Civil Rights Act of 1991 overturned the Supreme Court's decision in Lorance v. AT&T Technologies, which allowed employees to challenge the use of seniority systems only within 180 days from the system's implementation date. Employees may now file suits claiming discrimination either when the system is implemented or whenever the system negatively affects them.

A second development addresses the geographic scope of federal job discrimination. Prior to the Civil Rights Act of 1991, the U.S. Supreme Court (Boureslan v. Aramco) ruled that federal job discrimination laws do not apply to U.S. citizens working for U.S. companies in foreign countries. Since the act's passage, U.S. citizens working overseas may file suit against U.S. businesses for discriminatory employment practices.

Difficulty: Difficult Skill: Application of Knowledge AACSB: Application of Knowledge LO: 2.5: Identify and discuss key employment laws pertinent to compensation practice.

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Strategic Compensation, 9e (Martocchio) Chapter 3 Traditional Bases for Pay: Seniority and Merit 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 AACSB: Analytical Thinking LO: 3.1: Describe seniority and longevity pay practices.

2) The collective bargaining system was established by passage of which federal act?

A) National Labor Regulations Act B) National Labor Relations Act C) Union Labor Regulations Act D) Union Labor Relations Act Answer: B Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking 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 AACSB: Analytical Thinking 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: Difficult Skill: Concept AACSB: Analytical Thinking LO: 3.1: Describe seniority and longevity pay practices.

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5) 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 AACSB: Analytical Thinking LO: 3.1: Describe seniority and longevity pay practices.

6) The General Schedule (GS) classifies federal government jobs into ________ classifications based on such factors as skill, education, and experience levels.

Answer: 15 Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 3.1: Describe seniority and longevity pay practices.

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

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

8) Describe the within-step increase structure in the General Schedule (GS).

Answer: Employees are eligible for 10 within-grade step pay increases, each increase amounts to about 3 percent of the employee's salary. At present, it takes employees 18 years to progress from Step 1 to Step 10 if they were to remain within a single General grade. Progression through the steps is based on an assumption that their job performance is acceptable. The increase from step to step equals the within-grade increase amount. The waiting periods within steps are: • Steps 1—3: 1 year • Steps 4—6: 2 years • Steps 7—9: 3 years Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 3.1: Describe seniority and longevity pay practices.

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9) In 2015, employees were expected to earn average merit increases of what percent?

A) 1.3% B) 3.1% C) 5.2% D) 8.3% Answer: B Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 3.2: Explain the merit pay approach to compensation.

10) Which pay system is most commonly used in America today?

A) skill based pay B) longevity pay C) merit pay D) seniority pay Answer: C Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 3.2: Explain the merit pay approach to compensation.

11) 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 top management and job design Answer: D Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 3.2: Explain the merit pay approach to compensation.

12) 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 AACSB: Analytical Thinking LO: 3.2: Explain the merit pay approach to compensation.

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

Answer: Just-meaningful Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 3.2: Explain the merit pay approach to compensation.

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

Answer: subjective Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 3.2: Explain the merit pay approach to compensation.

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

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

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

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

17) If an employee is rated as outstanding on her leadership ability, she was probably rated based on which appraisal system?

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

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18) The XYZ Company 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 company?

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

19) There are 15 animal keepers working for the XYZ Zoo. Their supervisor is required to rate the performance of these workers based on the following criteria: 30% of the animal keepers will be rated as below-average, 40% of the animal keepers will be rated as average, and 30% of the animal keepers will be rated as above average. What type of performance appraisal is used?

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

20) 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 AACSB: Analytical Thinking LO: 3.3: Explore a variety of performance appraisal methods.

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

A) management by objectives (MBO) B) behavioral observation scales (BOS) C) behaviorally anchored rating scales (BARS) D) critical incident technique (CIT) Answer: D Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 3.3: Explore a variety of performance appraisal methods.

22) This performance appraisal system is based on employees and supervisors identifying onthe-job behaviors and behavioral outcomes that distinguish levels of job performance.

A) behaviorally anchored rating scales B) critical incident technique C) behavioral observation scales D) forced distribution system Answer: B Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 3.3: Explore a variety of performance appraisal methods.

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

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

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

A) goal-oriented system B) trait system C) behavioral observation scale D) behaviorally anchored rating scale Answer: A Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 3.3: Explore a variety of performance appraisal methods.

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25) 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 AACSB: Analytical Thinking LO: 3.3: Explore a variety of performance appraisal methods.

26) Jack is a sales professional who is employed in an auto dealership. At the beginning of every year, he and his supervisor determine objectives for Jack together, which are tied to corporate objectives. One of the objectives is related to customer satisfaction. Jack 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) behavioral D) goal-oriented Answer: D Difficulty: Moderate Skill: Application of Knowledge AACSB: Application of Knowledge LO: 3.3: Explore a variety of performance appraisal methods.

27) XYZ Movers, a professional relocation company, has 3-person teams for their moving services. The company asks customers to complete a satisfaction survey regarding their recent move. 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 AACSB: Application of Knowledge LO: 3.3: Explore a variety of performance appraisal methods.

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28) 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 AACSB: Analytical Thinking LO: 3.3: Explore a variety of performance appraisal methods.

29) 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 AACSB: Analytical Thinking LO: 3.3: Explore a variety of performance appraisal methods.

30) A manager expects high levels of performance from Ashley, a newly hired employee, because she graduated from a prestigious Ivy League university. 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 AACSB: Analytical Thinking LO: 3.3: Explore a variety of performance appraisal methods.

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31) 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 AACSB: Analytical Thinking LO: 3.3: Explore a variety of performance appraisal methods.

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

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

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

Answer: BARS (behaviorally anchored rating scales) Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 3.3: Explore a variety of performance appraisal methods.

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

Answer: Management, objectives Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 3.3: Explore a variety of performance appraisal methods.

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

Answer: First, conduct job analyses to ascertain characteristics necessary for successful job performance. Companies must first establish job definitions and then discover what employee behaviors 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 behaviors 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 behaviors (e.g., behaviorally anchored rating scales), the courts routinely accept less-sophisticated approaches such as simple graphic rating scales and trait ranges. Regardless of the method, HR 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 AACSB: Analytical Thinking LO: 3.3: Explore a variety of performance appraisal methods.

36) Which practice enables HR professionals to develop performance measures?

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

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37) 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 HR certification.

Answer: B Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 3.4: Discuss how compensation professionals can strengthen the pay-for-performance link.

38) When companies' merit increases don't 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 AACSB: Analytical Thinking LO: 3.4: Discuss how compensation professionals can strengthen the pay-for-performance link.

39) 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: Difficult Skill: Concept AACSB: Analytical Thinking LO: 3.4: Discuss how compensation professionals can strengthen the pay-for-performance link.

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

A) discourage employees from referring friends for possible employment in the company B) influence in any way the perception among employees that pay reflects performance C) encourage employees to refer friends for possible employment in the company D) create the perception among employees that pay reflects performance Answer: D Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 3.5: Summarize the possible limitations of merit pay programs.

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41) A manager in a company 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 AACSB: Application of Knowledge LO: 3.5: Summarize the possible limitations of merit pay programs.

42) 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: Easy Skill: Concept AACSB: Analytical Thinking LO: 3.5: Summarize the possible limitations of merit pay programs.

43) 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 the above Answer: C Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 3.5: Summarize the possible limitations of merit pay programs.

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44) 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 company'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. HR departments can help raters to minimize errors by choosing better rating systems and recognizing common errors. For instance, to avoid errors of central tendency, HR 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 AACSB: Analytical Thinking LO: 3.5: Summarize the possible limitations of merit pay programs.

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Strategic Compensation, 9e (Martocchio) Chapter 4 Incentive Pay 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) Awards are granted as one-time payments.

D) Incentive levels are generally subjective in nature.

Answer: C Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 4.1: Explore the incentive pay approach.

2) Which best describes incentive pay?

A) Incentive pay is considered part of an employee's fringe 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 AACSB: Analytical Thinking LO: 4.1: Explore the incentive pay approach.

3) Over the past 10 years, Lincoln's profit-sharing payments have been substantial. Maria's annual salary was $40,000 last year, and she earned a profit-sharing payment of $10,000. Maria'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: B Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 4.1: Explore the incentive pay approach.

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4) Companies 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 AACSB: Analytical Thinking LO: 4.1: Explore the incentive pay approach.

5) Another name for incentive pay is ________ pay.

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

6) Nowadays, 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 AACSB: Analytical Thinking LO: 4.2: Describe the differences between incentive pay methods and traditional pay methods.

7) 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: Easy Skill: Concept AACSB: Analytical Thinking LO: 4.2: Describe the differences between incentive pay methods and traditional pay methods.

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8) Which of the following performance measures corresponds to individual-, group, and companywide 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 AACSB: Analytical Thinking LO: 4.2: Describe the differences between incentive pay methods and traditional pay methods.

9) 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. Companies 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. For example, Lincoln Electric determines the importance of the jobs within its job structure based on job evaluation techniques. The five criteria on which Lincoln evaluates jobs are skill, responsibility, mental aptitude, physical application, and working conditions. Lincoln Electric 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 (i.e., 2-6 percent is presently not uncommon), but the dollar impact represents a significant cost to employers over time.

Companies 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: Difficult Skill: Concept AACSB: Analytical Thinking LO: 4.2: Describe the differences between incentive pay methods and traditional pay methods.

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10) Briefly describe the three categories of incentive pay plans and give an example of each.

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, behavioral encouragement plans, and referral plans. Group incentive plans. These plans promote supportive, collaborative behavior 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. Companywide incentive plans. These plans tie employee compensation to a company's performance over a short time frame, usually from a 3-month period to a 5-year period. Examples include profit sharing plans and stock option plans.

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

11) In addition to the guaranteed hourly pay rate, John 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) behavioral encouragement Answer: C Difficulty: Easy Skill: Application of Knowledge AACSB: Application of Knowledge LO: 4.3: Summarize five types of individual incentive pay plans.

12) 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 AACSB: Analytical Thinking LO: 4.3: Summarize five types of individual incentive pay plans.

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13) 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) behavior encouragement Answer: C Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 4.3: Summarize five types of individual incentive pay plans.

14) To have better safety records, the XYZ Company gives monetary incentive awards to its workers 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) behavioral encouragement Answer: D Difficulty: Difficult Skill: Application of Knowledge AACSB: Application of Knowledge LO: 4.3: Summarize five types of individual incentive pay plans.

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

A) behavior encouragement B) referral C) management incentive D) piecework Answer: B Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 4.3: Summarize five types of individual incentive pay plans.

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

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

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17) 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 AACSB: Analytical Thinking LO: 4.3: Summarize five types of individual incentive pay plans.

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

Answer: Individual incentive pay plans are most appropriate under three conditions.

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, a company 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 company 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 AACSB: Analytical Thinking LO: 4.3: Summarize five types of individual incentive pay plans.

19) 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 AACSB: Analytical Thinking LO: 4.4: Explain two types of group incentive plans.

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20) John is a design engineer in an auto manufacturer's research and development department. In addition to his normal duties, he 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 John assigned?

A) incentive B) project C) work (process) D) parallel Answer: D Difficulty: Moderate Skill: Application of Knowledge AACSB: Application of Knowledge LO: 4.4: Explain two types of group incentive plans.

21) Gunther Rohn 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) gain sharing plan C) management incentive plans D) employee stock ownership plan Answer: B Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 4.4: Explain two types of group incentive plans.

22) 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 AACSB: Analytical Thinking LO: 4.4: Explain two types of group incentive plans.

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23) Which gain sharing plan bases incentives on the ratio between labor costs and sales value of production (SVOP)?

A) Rucker Plan B) referral plan C) Scanlon Plan D) Improshare Answer: C Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 4.4: Explain two types of group incentive plans.

24) Which of the following is an operational measure used in company-wide incentive plans?

A) safety/occupational injury rates B) revenue growth C) earnings per share D) operating income Answer: A Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 4.4: Explain two types of group incentive plans.

25) The XYZ Manufacturing Co. uses a gain sharing plan that gives incentives to employees to finish products rather than to incentivize dollar savings. Therefore, this company measures productivity as the ratio of standard labor hours and actual labor hours. Which kind of gain sharing program does XYZ Manufacturing Co. use?

A) Improshare B) Rucher C) Scanlon D) SVOP Answer: A Difficulty: Difficult Skill: Application of Knowledge AACSB: Application of Knowledge LO: 4.4: Explain two types of group incentive plans.

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

Answer: D Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 4.4: Explain two types of group incentive plans.

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

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

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

Answer: revenue Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 4.4: Explain two types of group incentive plans.

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

Answer: labor hour Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 4.4: Explain two types of group incentive plans.

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

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

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

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

32) 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 AACSB: Analytical Thinking LO: 4.5: Discuss two types of company-wide incentive plans.

33) The XYZ Company pays a portion of company profits to its employees. The management offers this incentive plan as one kind of retirement program. Which kind of companywide incentive plan does XYZ Co. 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 AACSB: Application of Knowledge LO: 4.5: Discuss two types of company-wide incentive plans.

34) 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 AACSB: Analytical Thinking LO: 4.5: Discuss two types of company-wide incentive plans.

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35) 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 AACSB: Analytical Thinking LO: 4.5: Discuss two types of company-wide incentive plans.

36) 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: Difficult Skill: Concept AACSB: Analytical Thinking LO: 4.5: Discuss two types of company-wide incentive plans.

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

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

38) ________ 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 AACSB: Analytical Thinking LO: 4.5: Discuss two types of company-wide incentive plans.

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39) Stock ________ describe an employee's right to purchase equity in the company.

Answer: options Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 4.5: Discuss two types of company-wide incentive plans.

40) 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 AACSB: Analytical Thinking LO: 4.6: Summarize considerations when designing incentive pay programs.

41) 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 AACSB: Analytical Thinking LO: 4.6: Summarize considerations when designing incentive pay programs.

42) The general rule of thumb is that short-term company goals last less than how long?

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

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43) Companies 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 AACSB: Analytical Thinking LO: 4.6: Summarize considerations when designing incentive pay programs.

44) In an effort to increase the productivity of its employees, a manufacturing company is considering adopting an incentive pay program. List and discuss the five factors the HR 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 company. 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 a company's competitive strategy. Further, the company 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 AACSB: Analytical Thinking LO: 4.6: Summarize considerations when designing incentive pay programs.

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Strategic Compensation, 9e (Martocchio) Chapter 5 Person-Focused Pay 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 AACSB: Analytical Thinking 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 AACSB: Analytical Thinking 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 AACSB: Analytical Thinking LO: 5.1: Define person-focused pay.

4) This type of pay program rewards employees for successfully learning specific curricula.

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

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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 AACSB: Analytical Thinking LO: 5.1: Define person-focused pay.

6) When a filing clerk is trained to maintain employee attendance records, 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 AACSB: 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 AACSB: Analytical Thinking LO: 5.1: Define person-focused pay.

8) In this 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 AACSB: Analytical Thinking LO: 5.1: Define person-focused pay.

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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 AACSB: Analytical Thinking LO: 5.1: Define person-focused pay.

10) James, who is a clerical employee of a university, has been trained to perform several kinds of record-keeping tasks. He maintains employee 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 AACSB: Analytical Thinking LO: 5.1: Define person-focused pay.

11) Both unions and contractors, who employ carpenters, use ________ pay plans.

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

12) ________ skills refer to similar skills or knowledge.

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

13) ________ skills are those skills typically considered supervisory.

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

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

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

15) Describe the concept of competencies.

Answer: The term competency has become increasingly important in HR 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 individual'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, HR and compensation professionals have embraced the ideas of competencies as the field has increasingly taken on strategic importance.

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

16) 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 AACSB: Application of Knowledge LO: 5.2: Describe the usage of person-focused pay.

17) 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 AACSB: Application of Knowledge LO: 5.2: Describe the usage of person-focused pay.

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18) 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 AACSB: Analytical Thinking LO: 5.2: Describe the usage of person-focused pay.

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

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

20) Summarize the findings of studies and anecdotal information about 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 anecdotal information suggest that companies of various sizes use personfocused pay programs. Many companies 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 company age is approximately 10 years. This study also conjectures that hundreds of Fortune 1000 firms use skill-based pay for manufacturing or production workers.

There is limited published 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 labor cost per part by 16 percent, and showed favorable 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 AACSB: Analytical Thinking LO: 5.2: Describe the usage of person-focused pay.

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

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

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

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 the United States.

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

D) Americans 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.

23) This is considered "at the heart" of 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.

24) 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 AACSB: Analytical Thinking LO: 5.3: Name and explain the reasons companies adopt person-focused pay programs.

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25) Jamie earned a raise in pay when he finished the training for the Technician 2 position. He will receive another raise when he finishes the training for the Technician 3 position. The company 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 AACSB: Application of Knowledge LO: 5.4: Summarize the varieties of person-focused pay programs.

26) 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 AACSB: Analytical Thinking LO: 5.4: Summarize the varieties of person-focused pay programs.

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

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

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28) 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 AACSB: Analytical Thinking LO: 5.4: Summarize the varieties of person-focused pay programs.

29) 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 AACSB: Analytical Thinking LO: 5.4: Summarize the varieties of person-focused pay programs.

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

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

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31) A company that designs, manufactures, and sells only Halloween costumes would probably benefit most from this model.

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

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

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

33) 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 work place.

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 AACSB: Analytical Thinking LO: 5.5: Contrast person-focused pay with job-based pay.

34) 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) company-based D) job-based Answer: D Difficulty: Easy Skill: Application of Knowledge AACSB: Application of Knowledge LO: 5.5: Contrast person-focused pay with job-based pay.

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

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

36) 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 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 workrelated 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 AACSB: Analytical Thinking LO: 5.5: Contrast person-focused pay with job-based pay.

37) This term reflects an approach to 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 AACSB: Analytical Thinking LO: 5.6: Explain the advantages and disadvantages of person-focused pay plans.

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38) In the garment factory of the XYZ Co., line workers are trained to work at different manufacturing steps such as grading, cutting, sewing and assembling, pressing, etc. XYZ Co.'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 AACSB: Application of Knowledge LO: 5.6: Explain the advantages and disadvantages of person-focused pay plans.

39) Evidence suggests that 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 AACSB: Analytical Thinking LO: 5.6: Explain the advantages and disadvantages of person-focused pay plans.

40) 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 AACSB: Analytical Thinking LO: 5.6: Explain the advantages and disadvantages of person-focused pay plans.

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41) 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 AACSB: Analytical Thinking LO: 5.6: Explain the advantages and disadvantages of person-focused pay plans.

42) Wei is the HR manager of a manufacturing facility that has used the cross-departmental 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 company 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 AACSB: Application of Knowledge LO: 5.6: Explain the advantages and disadvantages of person-focused pay plans.

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

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

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

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

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Strategic Compensation, 9e (Martocchio) Chapter 6 Building Internally Consistent Compensation Systems 1) This clearly defines the relative value of each job among all jobs within a company.

A) internally consistent compensation system B) generalized work activities C) intra-organizational job markers D) market comparison standards Answer: A Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking 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 adequately?

A) job content B) job structure C) job summary D) job context Answer: A Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking 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 AACSB: Analytical Thinking LO: 6.1: Explain the concept of internal consistency.

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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 AACSB: Analytical Thinking LO: 6.1: Explain the concept of internal consistency.

5) Who leads the process of analyzing jobs?

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

6) ________ is a descriptive process.

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

7) 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. HR 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 HR 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 AACSB: Analytical Thinking LO: 6.1: Explain the concept of internal consistency.

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8) 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 a company'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 company. 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 AACSB: Analytical Thinking LO: 6.1: Explain the concept of internal consistency.

9) 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 AACSB: Analytical Thinking LO: 6.2: Summarize the practice of job analysis.

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10) One of the essential skills that software development engineers must have is the proficiency in at least one of the modern computer programming languages, such as Java or C++. This must be indicated in which part of the job analysis description?

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

11) 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 AACSB: Analytical Thinking LO: 6.2: Summarize the practice of job analysis.

12) 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 AACSB: Analytical Thinking LO: 6.2: Summarize the practice of job analysis.

13) These indicate the name of each job within a company's job structure.

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

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14) This section concisely summarizes 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 AACSB: Analytical Thinking LO: 6.2: Summarize the practice of job analysis.

15) What was the main effect created by the revisions to the ADA regulations passed in 2008?

A) Costs will be contained much more than in the past.

B) There are more hurdles for individuals seeking protection under the ADA to pass through in order to weed out false claims.

C) It is now easier for an individual seeking protection under the ADA to establish a disability within the meaning of the ADA. D) Companies may no longer perform job analyses to see if they comply with the Americans with Disabilities Act. Answer: C Difficulty: Difficult Skill: Concept AACSB: Application of Knowledge LO: 6.2: Summarize the practice of job analysis.

16) Generalized work activities, organizational context, and work context are requirements under which O*NET category?

A) experience B) occupation C) requirements D) labor market characteristics Answer: B Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 6.2: Summarize the practice of job analysis.

17) Abilities, interests and work styles are elements for which O*NET category?

A) occupation B) experience C) worker characteristics D) worker requirements Answer: C Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 6.2: Summarize the practice of job analysis.

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

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

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

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

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

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

21) 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 AACSB: Analytical Thinking LO: 6.2: Summarize the practice of job analysis.

22) According to the EEOC, ________ refers to a present competence to perform an observable behavior.

Answer: ability Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 6.2: Summarize the practice of job analysis.

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

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

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24) ________ describe preferences for work environments and outcomes.

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

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

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

26) Summarize the five main activities of job analysis work.

Answer: First, determine a job analysis program. A company 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 job-related 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 company ideally conducts the analysis, and HR staff members coordinate it. Although some companies rely on HR professionals to coordinate and conduct job analysis, many use teams to represent varying perspectives on work because virtually all employees interact with coworkers 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 Standard 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 company. Analysts should carefully choose the method of data collection and the sources of data. The most common methods are questionnaires and observation.

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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 company • Supervisory responsibilities, if any • Contacts (and purpose of these contacts) with other employees inside or outside the company • 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 AACSB: Analytical Thinking LO: 6.2: Summarize the practice of job analysis.

27) 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 AACSB: Analytical Thinking LO: 6.3: Describe the practice of job evaluation.

28) 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 AACSB: Analytical Thinking LO: 6.3: Describe the practice of job evaluation.

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29) These are the salient 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 AACSB: Analytical Thinking LO: 6.3: Describe the practice of job evaluation.

30) Universal compensable factors are derived from which federal Act? A) Fair Labor Standards Act B) Civil Rights Act of 1963 C) Equal Pay Act D) Americans with Disabilities Act Answer: C Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 6.3: Describe the practice of job evaluation.

31) 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 AACSB: Analytical Thinking LO: 6.3: Describe the practice of job evaluation.

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

A) behavioral observation B) interviews C) self-assessment D) surveys Answer: D Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 6.4: Summarize various job evaluation techniques.

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33) A human resource manager of a company decides to change the current job-content valuation technique by using a quantitative methodology. 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 HR manager?

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

34) Which type of jobs provides reference points to judge against other jobs within a company?

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

35) George 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 George likely to use?

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

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36) 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 AACSB: Analytical Thinking LO: 6.4: Summarize various job evaluation techniques.

37) 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 AACSB: Analytical Thinking LO: 6.4: Summarize various job evaluation techniques.

38) Sarah works at a federal government agency. Her pay rate is determined by her GS 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 AACSB: Application of Knowledge LO: 6.4: Summarize various job evaluation techniques.

39) Which of the following type of job evaluation plans is used when the company 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 AACSB: Analytical Thinking LO: 6.4: Summarize various job evaluation techniques.

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40) 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 AACSB: Analytical Thinking LO: 6.4: Summarize various job evaluation techniques.

41) 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 AACSB: Analytical Thinking LO: 6.4: Summarize various job evaluation techniques.

42) 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 AACSB: Analytical Thinking LO: 6.5: Explain how internally consistent compensation systems and competitive strategy relate to each other.

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43) Developing internally consistent job structures affects the competitive strategy of a company.

Which of the following is a potential constraint on competitive strategy?

A) reducing a company'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 AACSB: Analytical Thinking LO: 6.5: Explain how internally consistent compensation systems and competitive strategy relate to each other.

44) 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 a company'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 AACSB: Analytical Thinking LO: 6.5: Explain how internally consistent compensation systems and competitive strategy relate to each other.

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Strategic Compensation, 9e (Martocchio) Chapter 7 Building Market-Competitive Compensation Systems 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 company.

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

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4) Which of the following entails an examination of a company'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 AACSB: Analytical Thinking 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 company'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 labor costs between geographic locations Answer: A Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking 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 AACSB: Analytical Thinking LO: 7.1: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems.

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7) 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 a company'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 (Chapter 6) with the external market pay rates identified through compensation surveys. This integration results in pay rates that reflect both the company'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 companies' standing and competitive strategies. Compensation professionals must strike a balance between managing costs and attracting and retaining the best-qualified employees. Top management ultimately makes compensation policy decisions after careful consideration of compensation professionals' interpretation of the data.

Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 7.1: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems.

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8) Which process can companies 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 AACSB: Analytical Thinking LO: 7.2: Discuss compensation survey practices.

9) Which of the following are reference points against which jobs within the company are judged?

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

10) 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 AACSB: Analytical Thinking LO: 7.2: Discuss compensation survey practices.

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

A) the lag time between data collection and data usage B) pay compression C) changes in the unemployment rate D) changes in the company's geographic location Answer: A Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 7.2: Discuss compensation survey practices.

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12) If the means salary for B42DA, Inc., 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 AACSB: Application of Knowledge LO: 7.2: Discuss compensation survey practices.

13) 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 AACSB: Analytical Thinking LO: 7.2: Discuss compensation survey practices.

14) 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 AACSB: Analytical Thinking LO: 7.2: Discuss compensation survey practices.

15) 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 AACSB: Analytical Thinking LO: 7.2: Discuss compensation survey practices.

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16) 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 AACSB: Application of Knowledge LO: 7.2: Discuss compensation survey practices.

17) 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 AACSB: Analytical Thinking LO: 7.2: Discuss compensation survey practices.

18) Jose Escobar conducts a survey of salaries at ERL Enterprises and finds that 50% of the workers fall below the market pay average of $32,000. In which quartile do the workers at ERL Enterprises fall?

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

19) 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 AACSB: Analytical Thinking LO: 7.2: Discuss compensation survey practices.

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20) 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 AACSB: Analytical Thinking LO: 7.2: Discuss compensation survey practices.

21) How often is the Consumer Price Index calculated for the United States?

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

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

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

23) ________ represent the fields of potentially qualified candidates for particular jobs.

Answer: Relevant labor markets Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 7.2: Discuss compensation survey practices.

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24) ________ 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 AACSB: Analytical Thinking LO: 7.2: Discuss compensation survey practices.

25) HR professionals rely on ________ jobs as reference points for setting pay levels.

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

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

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

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

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

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

Answer: Quartiles Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 7.2: Discuss compensation survey practices.

29) The ________ is the most commonly used method for tracking cost changes throughout the United States.

Answer: Consumer Price Index (CPI) Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 7.2: Discuss compensation survey practices.

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30) Explain the three reasons why companies 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 companies are understandably reluctant to surrender information about their compensation packages to competitors because compensation systems are instrumental to competitive advantage if companies are willing to cooperate, the information may be incomplete or inaccurate. For example, rival companies may choose to report the salaries for their lowestpaid accountants instead of the typical salary levels. Such information may lead the surveying company 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 companies use published survey data to minimize costs such as staff salaries and benefits, telephone and mail charges, and computers for data analyses.

Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 7.2: Discuss compensation survey practices.

31) 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 AACSB: Analytical Thinking LO: 7.3: Describe how compensation professionals integrate internal job structures with external market pay rates.

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32) 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 AACSB: Analytical Thinking LO: 7.3: Describe how compensation professionals integrate internal job structures with external market pay rates.

33) The R2 statistic tells us how well the variation in the company'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 company's job structure.

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

C) All of the variation in market pay can be explained by the company'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 AACSB: Analytical Thinking LO: 7.3: Describe how compensation professionals integrate internal job structures with external market pay rates.

34) Compensation professionals in the XYZ Company use regression analysis to determine the pay rates of its marketing professionals. There are 4 different marketing job titles in the XYZ Company. 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 a company'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 AACSB: Application of Knowledge LO: 7.3: Describe how compensation professionals integrate internal job structures with external market pay rates.

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35) ________ 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 AACSB: Analytical Thinking LO: 7.3: Describe how compensation professionals integrate internal job structures with external market pay rates.

36) The XYZ Company is a world leader in medical device manufacturing. Aiming to continue its market position in this industry, the XYZ Company pursues a differentiation strategy. As a result, this company compensates its employees higher than competitors in order to attract and retain the best employees. What kind of pay level policy does the XYZ Company follow?

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

37) XYZ Inc. pursues a low-cost strategy in its 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 company became susceptible to labor shortages and high turnover. Which kind of pay level policy does XYZ Inc. follow?

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

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38) Market match 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 AACSB: Analytical Thinking LO: 7.4: Explain the basic concepts of compensation policies and strategic mandates: pay mix and pay level.

39) 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 AACSB: Analytical Thinking LO: 7.4: Explain the basic concepts of compensation policies and strategic mandates: pay mix and pay level.

40) Companies pursuing a differentiation strategy are most likely to use which pay level policy?

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

41) The market ________ policy distinguishes a company from competition by compensating employees less than most competitors.

Answer: lag Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 7.4: Explain the basic concepts of compensation policies and strategic mandates: pay mix and pay level.

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42) 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 AACSB: Analytical Thinking LO: 7.4: Explain the basic concepts of compensation policies and strategic mandates: pay mix and pay level.

43) 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 worker requirements of jobs within a particular structure. For example, in a technology company, a greater portion of bonus compensation might be allocated to engineers than to administrative staff. Engineers possess crucial skills relating to the company's ability to find 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 company, may not play as important a role in determining the company'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 AACSB: Analytical Thinking LO: 7.4: Explain the basic concepts of compensation policies and strategic mandates: pay mix and pay level.

44) Elaborate on the link between a company's pay level policy and its strategic mandate.

Answer: A company can choose from three pay level policies: 1) market lead, 2) market lag, or 3) market match. 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 match policy follows typical market rates.

Companies pursuing a differentiation strategy will opt for a market lead or market match policy.

The market lead policy can be used to attract the very best employees to promote its competitive strategy. For less labor-intensive industries, a market match policy will suffice because funds can be used for capital needs. Companies pursuing a lowest cost strategy would more likely adopt a market lag policy. Companies can realize cost savings by paying less than the market pay line.

However, these firms may have difficulty attracting and retaining highly qualified employees.

Typically, companies will use more than one pay policy simultaneously.

Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 7.4: Explain the basic concepts of compensation policies and strategic mandates: pay mix and pay level.

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Strategic Compensation, 9e (Martocchio) Chapter 8 Building Pay Structures that Recognize Individual Contributions 1) This federal act requires contractors with federal contracts worth over $2,000 to pay wages at least equal to those prevailing in the area where the work is being done.

A) Fair Labor Standards Act B) Davis-Bacon Act C) Equal Pay Act D) Civil Rights Act of 1964 Answer: B Difficulty: Easy Skill: Concept AACSB: Analytical Thinking 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 a company'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 line Answer: D Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking 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.

A) market lines B) market-competitive pay structures C) pay grades D) pay ranges Answer: C Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures.

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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 points Answer: D Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking 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: Difficult Skill: Concept AACSB: Analytical Thinking 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 AACSB: Analytical Thinking LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures.

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7) If the company adopts a market lead policy, how will that company'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: Moderate Skill: Application of Knowledge AACSB: 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 AACSB: Analytical Thinking LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures.

9) John is just hired by a software company as a programmer. He is also a part-time student at the local college and needs just a few credits to graduate from this college. A college degree is required in order to work as a programmer in this software company. Therefore, John receives below-minimum pay rate until he graduates from college. Which type of pay rate does John receive?

A) green circle B) red circle C) midpoint pay D) two-tier pay Answer: A Difficulty: Moderate Skill: Application of Knowledge AACSB: Application of Knowledge LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures.

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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 AACSB: Analytical Thinking 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 AACSB: Application of Knowledge LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures.

12) Richard's job has a compa-ratio of 0.85. What does this ratio tell about Richard'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 AACSB: Application of Knowledge LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures.

13) ________ 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 AACSB: Analytical Thinking LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures.

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14) ________ represent the vertical dimension of pay structures.

Answer: Pay ranges Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures.

15) The ________ pay value is the centrally located mark between the range minimum and maximum rates.

Answer: midpoint Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures.

16) A ________ is the difference between the maximum and minimum pay rates of a given pay grade.

Answer: range spread Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures.

17) ________ rates pay wages higher than the maximum listed in order to help retain valued employees fielding big job offers elsewhere.

Answer: Red circle Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures.

18) 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. In other words, 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 AACSB: Analytical Thinking LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures.

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19) What is pay compression and how can companies minimize the occurrence of it?

Answer: Pay compression occurs whenever a company's pay spread between less qualified employees and more qualified job incumbents is small. Companies 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 a company to raise pay rates for high-quality employees who may consider employment opportunities with a competitor.

Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 8.1: Explain the concept of pay structures and the five steps necessary to construct pay structures.

20) 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 company?

A) comparable ratio theory B) comparable pay theory C) equality theory D) equity theory Answer: D Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 8.2: Discuss the components of merit pay systems.

21) 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: Easy Skill: Concept AACSB: Analytical Thinking LO: 8.2: Discuss the components of merit pay systems.

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22) Common review dates provide which of the following advantage?

A) The company can equate all employees' job performance at the same time.

B) The company minimizes the administrative burden of the plan.

C) The company 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: Difficult Skill: Concept AACSB: Analytical Thinking LO: 8.2: Discuss the components of merit pay systems.

23) ________ describe the allocation of monetary resources to fund pay structures.

Answer: Compensation budgets Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 8.2: Discuss the components of merit pay systems.

24) ________, or lump sum bonuses, lend themselves well to cost containment since these bonuses are not permanent percentage increases.

Answer: Nonrecurring merit increases Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 8.2: Discuss the components of merit pay systems.

25) 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: Easy Skill: Concept AACSB: Analytical Thinking LO: 8.3: Summarize the features of sales compensation plan design.

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26) 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 company wants to save money due to budget constraints D) The company wants to create competition among its sales staff Answer: A Difficulty: Difficult Skill: Application of Knowledge AACSB: Application of Knowledge LO: 8.3: Summarize the features of sales compensation plan design.

27) This type of sales incentive compensation plan offers the sales person 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 AACSB: Analytical Thinking LO: 8.3: Summarize the features of sales compensation plan design.

28) Jasmine Black believes that the company 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 AACSB: Application of Knowledge LO: 8.3: Summarize the features of sales compensation plan design.

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29) A recently opened car dealership uses an incentive compensation plan for its sales people.

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 he/she 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: Difficult Skill: Application of Knowledge AACSB: Application of Knowledge LO: 8.3: Summarize the features of sales compensation plan design.

30) Wherever proprietary information is the subject of training, a company most often relies on which of the following sources of expertise?

A) expertise in university professors B) expertise within the company C) both expertise within and outside the company to provide training D) expertise in competitor companies Answer: B Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 8.3: Summarize the features of sales compensation plan design.

31) 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: Difficult Skill: Concept AACSB: Analytical Thinking LO: 8.3: Summarize the features of sales compensation plan design.

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32) A company 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: Difficult Skill: Application of Knowledge AACSB: Application of Knowledge LO: 8.3: Summarize the features of sales compensation plan design.

33) ________ is a form of compensation based upon a percentage of the selling price of a product or service.

Answer: Commission Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 8.3: Summarize the features of sales compensation plan design.

34) Money that covers the basic living expenses of sales professionals is better known as a ________.

Answer: draw Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 8.3: Summarize the features of sales compensation plan design.

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35) 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 (e.g., television or newspaper ad campaigns) are determined by store management.

On the other end of the spectrum, some employees serve as consultants to the client. For instance, when a company 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. A company's compensation mix must be competitive if the company wants to recruit high-quality sales professionals. Industry norms and the selling situation are among the key determinants of compensation mix. For instance, competitive standards may dictate that the company must give greater weight to either incentive or fixed pay. Incentive (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 the U.S. Food and Drug Administration 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 Nonsales Activities Required. In general, the more nonsales 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 Bristol-Myers Squibb, Lilly, and Merck must maintain a comprehensive understanding of their products' chemical compositions, clinical uses, and contraindications.

Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 8.3: Summarize the features of sales compensation plan design.

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36) 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 AACSB: Analytical Thinking LO: 8.4: Describe the essentials of person-focused pay program design.

37) 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: Difficult Skill: Application of Knowledge AACSB: Application of Knowledge LO: 8.4: Describe the essentials of person-focused pay program design.

38) 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 AACSB: Analytical Thinking LO: 8.4: Describe the essentials of person-focused pay program design.

39) ________ 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 AACSB: Analytical Thinking LO: 8.4: Describe the essentials of person-focused pay program design.

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40) The HR manager of a company thinks that they have too many narrow pay grades within the organization. By getting the support from upper management, 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 AACSB: Application of Knowledge LO: 8.5: Summarize pay structure variations.

41) Which of the following would be considered as an advantage of broadbanding?

A) Creation of broad bands 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: Difficult Skill: Concept AACSB: Analytical Thinking LO: 8.5: Summarize pay structure variations.

42) Alejandro Martinez is responsible for setting up the pay structure for his company. He believes that newly hired employees should not be paid as much as established employees.

Which type of pay structure should Mr. Martinez use?

A) broadbanding B) sales incentives C) two-tiered D) merit pay Answer: C Difficulty: Difficult Skill: Application of Knowledge AACSB: Application of Knowledge LO: 8.5: Summarize pay structure variations.

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43) 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: Difficult Skill: Concept AACSB: Analytical Thinking LO: 8.5: Summarize pay structure variations.

44) 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, lesshierarchical 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 companies establish broadbands for distinct employee groups within the organizational hierarchy. Other companies 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 AACSB: Analytical Thinking LO: 8.5: Summarize pay structure variations.

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Strategic Compensation, 9e (Martocchio) Chapter 9 Discretionary Benefits 1) Which type of plan appeared as one of the first discretionary benefits practices?

A) wellness plans B) employee discounts C) educational assistance D) retirement plans Answer: D Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 9.1: Discuss the origins of discretionary benefits.

2) Which government action contributed to the use of welfare benefits?

A) the passage of the National Labor Relations Act B) the passage of the Social Security Act C) wage freezes D) recovery from economic depression Answer: C Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 9.1: Discuss the origins of discretionary benefits.

3) 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 AACSB: Analytical Thinking LO: 9.1: Discuss the origins of discretionary benefits.

4) Which of the following benefits was previously offered on a discretionary basis, but, is now mandatory?

A) health insurance B) retirement plans C) paid time off D) employee assistance programs Answer: A Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 9.1: Discuss the origins of discretionary benefits.

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5) In response to government-imposed wage freezes, many companies began offering ________ as an alternative to motivate employees through greater work benefits.

Answer: welfare benefits Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 9.1: Discuss the origins of discretionary benefits.

6) What are the implications of discretionary benefits for strategic compensation?

Answer: Answer should include the following main points: Discretionary benefits, like core compensation, can contribute to a company's competitive advantage.

Management can use discretionary benefit offerings to promote particular employee behaviors that have strategic value.

A company can use discretionary benefits to distinguish itself from the competition.

Discretionary benefits also serve a strategic purpose by accommodating the needs of a diverse workforce.

The tax advantage afforded companies from offering particular discretionary benefits has strategic value.

Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 9.1: Discuss the origins of discretionary benefits.

7) Which of the following is a commonly used employer-sponsored retirement plan design?

A) defined contribution B) qualified contribution C) Roth IRA D) IRA Answer: A Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 9.2: Explain the three categories of discretionary benefits.

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8) You broke your neck at work. The company called to inform you that they had to switch your benefits from the short-term disability account to the long-term disability account. Based on this decision, how long have you been off work?

A) at least 3 to 6 months B) at least 1 to 2 months C) 12 months D) 18 months Answer: A Difficulty: Difficult Skill: Application of Knowledge AACSB: Application of Knowledge LO: 9.2: Explain the three categories of discretionary benefits.

9) These represent 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: D Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 9.2: Explain the three categories of discretionary benefits.

10) A 401(k) plan is which of the following types of retirement benefits?

A) defined contribution B) defined benefit C) qualified benefit D) nonqualified benefit Answer: A Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 9.2: Explain the three categories of discretionary benefits.

11) 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 AACSB: Analytical Thinking LO: 9.2: Explain the three categories of discretionary benefits.

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12) Which of the following is the most common type of life insurance policy offered by companies?

A) group life B) term life C) whole life D) universal Answer: B Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 9.2: Explain the three categories of discretionary benefits.

13) Which of the following is associated with Roth 401(k) plans?

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: A Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 9.2: Explain the three categories of discretionary benefits.

14) Unscheduled absenteeism has climbed to its highest levels in the XYZ Company last month.

In order to reduce costs, HR professionals in the XYZ Company changed their paid time off policy. This company 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 company combines vacation, sick leave, and personal leave policies into one paid time off policy (i.e., 19 days). The management kept funeral leave as a stand-alone policy. What is the XYZ Company's 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 AACSB: Application of Knowledge LO: 9.2: Explain the three categories of discretionary benefits.

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15) The XYZ Company provides a program for its employees who need help dealing with the effects of domestic violence. The XYZ Company can offer this kind of 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 AACSB: Analytical Thinking LO: 9.2: Explain the three categories of discretionary benefits.

16) In 2014, 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) 54 percent, 74 percent D) 74 percent, 39 percent Answer: C Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 9.2: Explain the three categories of discretionary benefits.

17) Due to a recent merger with another major airline, ABC Airlines decided to lay off some of its employees. ABC 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 AACSB: Application of Knowledge LO: 9.2: Explain the three categories of discretionary benefits.

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18) Outplacement assistance programs are best suited for which condition?

A) new plant openings B) mergers and acquisitions C) workforce increases D) global operations Answer: B Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 9.2: Explain the three categories of discretionary benefits.

19) The XYZ Company tries to influence employee food choices by stocking vending machines with l healthy food. They also offer programs to teach stress reduction techniques. Which kind of discretionary benefit program does this company sponsor?

A) family assistance program B) employee assistance program C) wellness program D) employer assistance program Answer: C Difficulty: Easy Skill: Application of Knowledge AACSB: Application of Knowledge LO: 9.2: Explain the three categories of discretionary benefits.

20) Which of the following would be considered part of a company'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 AACSB: Application of Knowledge LO: 9.2: Explain the three categories of discretionary benefits.

21) An ________ 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 AACSB: Analytical Thinking LO: 9.2: Explain the three categories of discretionary benefits.

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22) IRS guidelines define ________ plans as "defined benefit plans that define benefits for each employee by reference to the amount of the employee's hypothetical account balance."

Answer: cash balance Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 9.2: Explain the three categories of discretionary benefits.

23) 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 AACSB: Analytical Thinking LO: 9.2: Explain the three categories of discretionary benefits.

24) ________ help bring employees to the workplace and back home again.

Answer: Transportation services Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 9.2: Explain the three categories of discretionary benefits.

25) ________ are career and personal programs designed to develop the job-hunting skills and strategies of employees being laid off or terminated.

Answer: Outplacement assistance Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 9.2: Explain the three categories of discretionary benefits.

26) 401(k) and 403(b) plans are examples of ________ plans.

Answer: defined contribution Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 9.2: Explain the three categories of discretionary benefits.

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27) Define three types of life insurance.

Answer: There are three kinds of life insurance: term life insurance, whole life insurance, and universal life insurance. 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 (e.g., 5 years) subject to a maximum age (e.g., 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 employer-sponsored 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.

Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 9.2: Explain the three categories of discretionary benefits.

28) 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 AACSB: Analytical Thinking LO: 9.2: Explain the three categories of discretionary benefits.

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29) Distinguish between qualified and nonqualified retirement plans.

Answer: Tax incentives encourage companies to offer retirement programs. Some of the Employee Retirement Income Security Act of 1974 (ERISA) Title I and Title II provisions set the minimum standards required to "qualify" pension plans for favorable tax treatment. Failure to meet any of the minimum standard provisions "disqualifies" pension plans for favorable tax treatment. Pension plans that meet these minimum standards are known as qualified plans.

Nonqualified plans refer to pension plans that do not meet at least one of the minimum standard provisions; typically, highly paid employees benefit from participation in nonqualified plans.

Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 9.2: Explain the three categories of discretionary benefits.

30) Which of the following laws permit employers to automatically enroll employees in a defined contribution plan?

A) Consolidated Omnibus Reconciliation Act B) Employee Retirement Income Security Act C) Pension Protection Act D) Internal Revenue Code Answer: C Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 9.3: Summarize legislation that pertains to discretionary benefits.

31) 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 AACSB: Analytical Thinking LO: 9.3: Summarize legislation that pertains to discretionary benefits.

32) Which set of rules prohibit employers from discriminating in favor of highly compensated employees in contributions or benefits, availability of benefits, rights, or plan features?

A) Equal Pay Act B) vesting rules C) nondiscrimination rules D) participation rules Answer: C Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 9.3: Summarize legislation that pertains to discretionary benefits.

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33) Which of the following do qualified plans provide?

A) matching contributions to defined contribution plans B) substantial tax breaks to employers and employees C) substantial tax breaks to employees D) matching contributions to defined benefit plans Answer: B Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 9.3: Summarize legislation that pertains to discretionary benefits.

34) Which of the following is NOT a provision of the Employee Retirement Income Security Act? A) vesting rights B) fiduciary responsibilities C) employer matching contributions D) reporting and disclosure duties Answer: C Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 9.3: Summarize legislation that pertains to discretionary benefits.

35) The ________ is the U.S. tax code.

Answer: Internal Revenue Code Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 9.3: Summarize legislation that pertains to discretionary benefits.

36) ________ rights refer to nonforfeitable rights to retirement benefits.

Answer: Vesting Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 9.3: Summarize legislation that pertains to discretionary benefits.

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37) 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 AACSB: Analytical Thinking LO: 9.4: Discuss the fundamentals of designing and planning the benefits program.

38) Mary works at a pharmaceutical company 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 company gave her credits equal to 6% of her salary with which she decided to purchase dental and vision insurance. This pharmaceutical company uses what kind of benefits plan?

A) cafeteria B) flexible benefits C) employee-financed D) core plus option Answer: D Difficulty: Difficult Skill: Application of Knowledge AACSB: Application of Knowledge LO: 9.4: Discuss the fundamentals of designing and planning the benefits program.

39) Since the costs of benefits has risen so dramatically in recent years, the majority of the companies decided to finance discretionary 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 AACSB: Analytical Thinking LO: 9.4: Discuss the fundamentals of designing and planning the benefits program.

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40) 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 AACSB: Analytical Thinking LO: 9.4: Discuss the fundamentals of designing and planning the benefits program.

41) Which of the following is rationale to apply a probationary period prior to permitting participation in an employee benefits plan?

A) Companies view such periods as an opportunity to ensure that they have made sound hiring decisions.

B) Companies enable new employees to decide whether they wish to remain employed on a long-term basis before completing extensive paperwork.

C) Companies attempt to reduce employee entitlement.

D) Companies attempt to discourage long-term employment.

Answer: A Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 9.4: Discuss the fundamentals of designing and planning the benefits program.

42) The tax advantage afforded companies from offering particular discretionary benefits has strategic value for which of the following reasons?

A) It translates into cost savings to companies.

B) It may adversely undercut company profits.

C) It helps companies retain talented employees.

D) It may lead to a decrease in the number of benefits a company chooses to offer.

Answer: A Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 9.5: Explain the benefits and costs of discretionary benefits.

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43) 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: Difficult Skill: Concept AACSB: Analytical Thinking LO: 9.5: Explain the benefits and costs of discretionary benefits.

44) 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: Easy Skill: Concept AACSB: Analytical Thinking LO: 9.5: Explain the benefits and costs of discretionary benefits.

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Strategic Compensation, 9e (Martocchio) Chapter 10 Legally Required Benefits 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 AACSB: Analytical Thinking LO: 10.1: Discuss the origins of legally required benefits.

2) Which of the following is the fundamental purpose of legally required benefits?

A) Social Security benefits B) paid time off C) social insurance D) tax revenue source for the government Answer: C Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 10.1: Discuss the origins of legally required benefits.

3) During the early 20th century, high incidences of industrial accidents and occupational illnesses prompted which of the following benefits?

A) Social Security disability insurance B) Social Security unemployment insurance C) Social Security survivor insurance D) workers' compensation Answer: D Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 10.1: Discuss the origins of legally required benefits.

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4) The first 4 quarters of the last 5 completed calendar quarters in the previous year is the base period for which benefit?

A) OASDI B) Medicare Part A C) unemployment insurance D) workers' compensation Answer: C Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 10.2: Summarize the four main categories of legally required benefits.

5) To be fully insured under the OASDI retirement benefit, an employee would have to work at least how long?

A) 24 months B) 5 years C) 10 years D) 30 years Answer: C Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 10.2: Summarize the four main categories of legally required benefits.

6) Samuel's full retirement age is 65 years old; and his monthly benefit at that age is $1,000.

According to the Social Security Administration retirement program, what will Samuel's monthly benefit be if he decides to take retirement as early as age 63?

A) equal to $1,000 B) greater than $1,000 C) less than $1,000 but greater than $0 D) $0 Answer: C Difficulty: Easy Skill: Application of Knowledge AACSB: Application of Knowledge LO: 10.2: Summarize the four main categories of legally required benefits.

7) In 2022, how old will Cary have to be to receive full Social Security benefits?

A) 57 B) 62 C) 65 D) 67 Answer: D Difficulty: Difficult Skill: Application of Knowledge AACSB: Application of Knowledge LO: 10.2: Summarize the four main categories of legally required benefits.

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8) To receive OASDI disability benefits, Sung Lee's disability would have to be expected to last at least how long?

A) 6 months B) 12 months C) 3 months D) 18 months Answer: B Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 10.2: Summarize the four main categories of legally required benefits.

9) How is Medicare Part A financed?

A) payroll taxes paid only by employers B) out-of-pocket C) payroll taxes paid by both employers and employees D) congressional fiat Answer: C Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 10.2: Summarize the four main categories of legally required benefits.

10) Which of the following is covered by Medicare Part A? A) inpatient hospital care B) IV drugs C) ambulance D) outpatient care Answer: A Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 10.2: Summarize the four main categories of legally required benefits.

11) Compared to the FICA rate, the SECA tax rate is which of the following amounts?

A) half as much B) equal C) three times as much D) twice as much Answer: D Difficulty: Difficult Skill: Application of Knowledge AACSB: Application of Knowledge LO: 10.2: Summarize the four main categories of legally required benefits.

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12) PPACA has mandated that the "donut hole," which is the gap in Medicare Part D prescription drug coverage, must decrease each year until it reaches no more than which of the following?

A) 10 percent of the prescription drug medication cost B) 15 percent of the prescription drug medication cost C) 20 percent of the prescription drug medication cost D) 25 percent of the prescription drug medication cost Answer: D Difficulty: Moderate Skill: Application of Knowledge AACSB: Application of Knowledge LO: 10.2: Summarize the four main categories of legally required benefits.

13) To be eligible for unemployment insurance benefits, an individual must meet which of the following requirements?

A) has been employed for at least 5 years B) has not voluntarily changed employers within a 3-year period C) has not been terminated because of gross violations of workplace conduct D) has been eligible to receive Medicare benefits for at least 10 years Answer: C Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 10.2: Summarize the four main categories of legally required benefits.

14) Under the Family and Medical Leave Act, how many hours would Pierre have had to work in the previous 12 months in order for him to take time off to care for his wife and new child?

A) 1,000 B) 1,250 C) 1,600 D) 800 Answer: B Difficulty: Moderate Skill: Application of Knowledge AACSB: Application of Knowledge LO: 10.2: Summarize the four main categories of legally required benefits.

15) The ________ is the minimum period of time an individual must be employed before becoming eligible to receive unemployment insurance under the Social Security Act of 1935.

Answer: base period Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 10.2: Summarize the four main categories of legally required benefits.

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16) Both employers and employees finance Medicare Part A benefits through payroll taxes of ________ percent on all earnings.

Answer: 1.45% Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 10.2: Summarize the four main categories of legally required benefits.

17) Describe five ways that an employer-sponsored health plan could lose its grandfathered status.

Answer: Grandfathered plans could lose this status if at least one of the following modifications were made: ∙ Eliminating all or substantially all benefits to diagnose or treat a particular condition. ∙ Increase in a percentage cost-sharing requirement (e.g., raising an individual's coinsurance requirement from 20% to 25%). ∙ Increasing a deductible or out-of-pocket maximum by an amount that exceeds medical inflation plus 15 percentage points. ∙ Increasing a copayment by an amount that exceeds medical inflation plus 15 percentage points (or, if greater, $5 plus medical inflation). ∙ Decreasing an employer's contribution rate towards the cost of coverage by more than 5 percentage points. ∙ Imposing annual limits on the dollar value of all benefits below specified amounts.

Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 10.2: Summarize the four main categories of legally required benefits.

18) Compare Social Security disability benefits with the workers' compensation disability benefits.

Answer: Workers' compensation differs from Social Security disability insurance and Medicare in important ways. Workers' compensation pays for medical care for work-related injuries beginning immediately after the injury occurs; it pays temporary disability benefits after a waiting period of 3-7 days; it pays permanent partial and permanent total disability benefits to workers who have lasting consequences of disabilities caused on the job; in most states, it pays rehabilitation and training benefits for those unable to return to pre-injury careers; and it pays benefits to survivors of workers who die of work-related causes. Social Security, in contrast, pays benefits to workers with long-term disabilities from any cause, but only when the disabilities preclude work. Social Security also pays for rehabilitation services and for survivor benefits to families of deceased workers. Social Security begins after a 5-month waiting period and Medicare begins 29 months after the onset of medically verified inability to work.

Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 10.2: Summarize the four main categories of legally required benefits.

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19) Briefly discuss the components of legally required benefits. How can HR managers minimize the costs that are associated with legally required benefits?

Answer: Legally required benefits are mandated by: 1) Social Security Act of 1935, 2) various state workers' compensation laws, 3) Family and Medical Leave Act of 1993. Social Security Act of 1935 addresses: 1) unemployment insurance (for individuals who become unemployed through no fault of their own), 2) OASDI (provides retirement income, survivor's insurance, and disability insurance), and 3) Medicare (provides insurance coverage for hospitalization, convalescent care, and major doctor bills). Workers' compensation is designed to cover expenses due to work-related accidents. The Family and Medical Leave Act provides employees with job protection in case of family or medical emergency.

Minimizing the costs that are associated with legally required benefits may be achieved by implementing workplace safety. Workers' compensation claims can also be reduced through health promotion programs. Employers can integrate workers' compensation benefits into the rest of the benefits program. Further, employers can contain their costs for unemployment insurance by systematically monitoring the reasons of terminations.

Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 10.2: Summarize the four main categories of legally required benefits.

20) What is coinsurance?

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 AACSB: Analytical Thinking LO: 10.3: Describe fee-for-service plans, traditional managed care approaches, and more recent consumer-driven approaches to providing health care coverage.

21) Which approach to providing health care makes the most sense when a company'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: Difficult Skill: Application of Knowledge AACSB: Application of Knowledge LO: 10.3: Describe fee-for-service plans, traditional managed care approaches, and more recent consumer-driven approaches to providing health care coverage.

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22) What is another name for health maintenance organizations (HMOs)?

A) outpatient medical services B) prepaid medical services C) inpatient medical services D) on-call medical services Answer: B Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 10.3: Describe fee-for-service plans, traditional managed care approaches, and more recent consumer-driven approaches to providing health care coverage.

23) How often will Jill receive an unemployment check?

A) daily B) weekly C) bi-monthly D) monthly Answer: B Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 10.3: Describe fee-for-service plans, traditional managed care approaches, and more recent consumer-driven approaches to providing health care coverage.

24) In which plan do employees possess the option to receive care from health care providers outside the designated network of physicians, paying more for the choice?

A) fee-for-service plans B) preferred provider organizations C) HMOs D) point-of-service plans Answer: D Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 10.3: Describe fee-for-service plans, traditional managed care approaches, and more recent consumer-driven approaches to providing health care coverage.

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25) Why do health reimbursement accounts (HRAs) appeal to employees with low salaries or hourly wages?

A) The contribution of employees is on a pretax basis.

B) Employees have the option not to contribute to an HRA. C) Employees forfeit unused balances at the end of a year.

D) HRAs permit employees to carry unused balances from year to year.

Answer: D Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 10.3: Describe fee-for-service plans, traditional managed care approaches, and more recent consumer-driven approaches to providing health care coverage.

26) Which of the following refers to payments an individual makes as a condition of receiving medical services?

A) coinsurance B) premium C) deductible D) copayments Answer: D Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 10.3: Describe fee-for-service plans, traditional managed care approaches, and more recent consumer-driven approaches to providing health care coverage.

27) Consumer driven health care strives to achieve which of the following objective?

A) provide employees with a list of acceptable primary care physicians B) provide employees with greater choices while also containing costs C) increase the cost of health insurance D) maintain low copayments and coinsurance amounts Answer: B Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 10.3: Describe fee-for-service plans, traditional managed care approaches, and more recent consumer-driven approaches to providing health care coverage.

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28) This type of account does not permit employees to carry over any remaining balance from year to year.

A) health reimbursement account B) health savings account C) flexible spending account D) flexible savings account Answer: C Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 10.3: Describe fee-for-service plans, traditional managed care approaches, and more recent consumer-driven approaches to providing health care coverage.

29) Jose invested $2,000 in pre-tax income into this healthcare plan but lost the $780 unspent balance remaining at the end of the year. What type of plan was it?

A) health savings account B) flexible spending account C) health reimbursement arrangement D) fee-for service plan Answer: B Difficulty: Moderate Skill: Application of Knowledge AACSB: Application of Knowledge LO: 10.3: Describe fee-for-service plans, traditional managed care approaches, and more recent consumer-driven approaches to providing health care coverage.

30) Starting January 1, 2004, eligible individuals are allowed to establish HSAs under which law?

A) Health Maintenance Organization Act B) Mental Health Parity Act C) Medicare Prescription Drug, Improvement and Modernization Act D) HIPAA Answer: C Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 10.3: Describe fee-for-service plans, traditional managed care approaches, and more recent consumer-driven approaches to providing health care coverage.

31) ________ physicians determine when patients need the care of specialists and help to control costs by reducing the number of unnecessary visits to specialists.

Answer: Primary care Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 10.3: Describe fee-for-service plans, traditional managed care approaches, and more recent consumer-driven approaches to providing health care coverage.

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32) ________ accounts allow employees to pay for specified health care costs not covered by an employer's insurance plan.

Answer: Flexible spending Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 10.3: Describe fee-for-service plans, traditional managed care approaches, and more recent consumer-driven approaches to providing health care coverage.

33) Mia has Parkinson's disease but is on an insurance plan that saves her from having to make frequent visits to the pharmacy. She is probably on a ________ drug plan.

Answer: mail order Difficulty: Difficult Skill: Application of Knowledge AACSB: Application of Knowledge LO: 10.3: Describe fee-for-service plans, traditional managed care approaches, and more recent consumer-driven approaches to providing health care coverage.

34) Approximately ________ percent of Americans experience some form of mental illness at least once during their lifetime.

Answer: 20% Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 10.3: Describe fee-for-service plans, traditional managed care approaches, and more recent consumer-driven approaches to providing health care coverage.

35) PPACA distinguishes between health plans that existed prior to the March 23, 2010, enactment date and those that come into existence afterward. Individual and group health plans already in existence prior to enactment are referred to as ________ plans.

Answer: grandfathered Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 10.3: Describe fee-for-service plans, traditional managed care approaches, and more recent consumer-driven approaches to providing health care coverage.

36) A health insurance plan would lose its grandfathered status if it were to change ________.

Answer: carriers (health insurance company) Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 10.3: Describe fee-for-service plans, traditional managed care approaches, and more recent consumer-driven approaches to providing health care coverage.

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37) ________ requires employers to offer affordable health insurance to employees.

Answer: Patient Protection and Affordable Care Act of 2010 Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 10.3: Describe fee-for-service plans, traditional managed care approaches, and more recent consumer-driven approaches to providing health care coverage.

38) Explain the difference between insurance plans offered by insurance companies and selffunded insurance plans.

Answer: The main difference between insurance plans offered by insurance companies and selffunded insurance plans centers on how benefits provided to policyholders are financed. When companies elect indemnity plans, they establish a contract with an independent insurance company. Insurance companies pay benefits from their financial reserves, which are based on the premiums companies and employees pay to receive insurance. Companies may instead choose to self-fund employee insurance. Such companies pay benefits directly from their own assets, either current cash flow or funds set aside in advance for potential future claims. The decision to selffund is based on financial considerations. Self-funding makes sense when a company's financial burden of covering employee medical expenses is less than the cost to subscribe to an insurance company for coverage. By not paying premiums in advance to an independent carrier, a company retains these funds for current cash flow.

Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 10.3: Describe fee-for-service plans, traditional managed care approaches, and more recent consumer-driven approaches to providing health care coverage.

39) What is the maximum amount that companies are permitted to charge COBRA beneficiaries?

A) 102 percent of all employees' annual pay B) 102 percent of the employee's annual pay C) 102 percent of the cost of health insurance to the beneficiary under the employer's plan D) 102 percent of the federal poverty guidelines Answer: C Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 10.4: Summarize two additional key laws pertaining to legally required benefits.

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40) Under which law must former employees be given the choice to continue their coverage, as well as coverage for their spouses and dependents, for up to 18 months?

A) Health Maintenance Act B) Patient Protection and Affordable Care Act C) Consolidated Omnibus Budget Reconciliation Act D) Employee Retirement Income Security Act Answer: C Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 10.4: Summarize two additional key laws pertaining to legally required benefits.

41) ________ protects the transfer, disclosure, and use of health care information.

Answer: Health Insurance Portability and Accountability Act (HIPAA) Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 10.4: Summarize two additional key laws pertaining to legally required benefits.

42) Which of the following type of program can help reduce workers' compensation claims?

A) COBRA coverage B) wellness C) workplace safety D) employee assistance Answer: C Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 10.5: Discuss the main benefits and costs of legally required benefits.

43) Managing staffing levels to avoid layoffs due to poor business conditions can help control which type of benefits cost?

A) unemployment insurance B) health care continuation coverage C) Medicare Part A coverage D) Social Security disability coverage Answer: A Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 10.5: Discuss the main benefits and costs of legally required benefits.

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44) 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 AACSB: Application of Knowledge LO: 10.5: Discuss the main benefits and costs of legally required benefits.

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Strategic Compensation, 9e (Martocchio) Chapter 11 Compensating Executives 1) In theory, the CEO hires the consultant to perform an objective analysis of the company's executive pay package and to make whatever recommendations the consultant feels are appropriate; however, in practice, which tends to be the case?

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 AACSB: Analytical Thinking LO: 11.1: Explain the difference between executive pay and pay for nonexecutives.

2) Which of the following describes CEO compensation that is deemed ineffective?

A) pay-for-status B) pay-for-nonperformance C) seniority-based pay D) person-focused pay Answer: B Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 11.1: Explain the difference between executive pay and pay for nonexecutives.

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: Difficult Skill: Concept AACSB: Analytical Thinking LO: 11.1: Explain the difference between executive pay and pay for nonexecutives.

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4) For which reason does the IRS use the term "key employees"?

A) non-discrimination rules in retirement benefits B) non-discrimination rules in health insurance benefits C) top-heavy provisions in employer-sponsored qualified retirement plans D) top-heavy provisions in employer-sponsored health insurance plans Answer: C Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 11.2: Define executive status.

5) The IRS considers Sylvia to be a highly compensated employee for Beautiful Pictures, Inc., which means that she met which one of the following criteria (assume that the previous year was 2015)?

A) either a current annual salary of more than $170,000; and, in the previous year, a 5% owner or a 1% owner of the employer's business whose annual pay was greater than $150,000 B) either an annual salary of more than $170,000; or, in the previous year, a 5% owner or a 1% owner of the employer's business whose annual pay was greater than $150,000 C) an annual salary exceeding $50,000 D) an annual salary less than $170,000 Answer: B Difficulty: Difficult Skill: Application of Knowledge AACSB: Application of Knowledge LO: 11.2: Define executive status.

6) 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 AACSB: Analytical Thinking LO: 11.2: Define executive status.

7) Which government agency provides the criteria for defining executive status?

A) Securities and Exchange Commission B) U.S. Department of Labor C) Internal Revenue Service D) Dodd-Frank Commission Answer: C Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 11.2: Define executive status.

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8) 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 AACSB: Analytical Thinking LO: 11.3: List the components of executive compensation packages.

9) Which type of plans provide an executive with ownership stakes in the company 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 AACSB: Analytical Thinking LO: 11.3: List the components of executive compensation packages.

10) 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 AACSB: Analytical Thinking LO: 11.3: List the components of executive compensation packages.

11) Which of the following is the term used when a company offers stock to its employees?

A) stock allocation B) stock option C) stock grant D) stock disposition Answer: C Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 11.3: List the components of executive compensation packages.

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12) 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 AACSB: Analytical Thinking LO: 11.3: List the components of executive compensation packages.

13) 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 AACSB: Analytical Thinking LO: 11.3: List the components of executive compensation packages.

14) Which of the following are shares of company 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: Difficult Skill: Concept AACSB: Analytical Thinking LO: 11.3: List the components of executive compensation packages.

15) As CEO, Duane was granted stock options that do not require him 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 AACSB: Application of Knowledge LO: 11.3: List the components of executive compensation packages.

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16) After the recent merger of ABC and XYZ Airlines, the former CFO of XYZ Airlines, John, lost his employment in the newly merged airline. Which executive compensation agreement is customary in such circumstances?

A) stock buyout plans B) clawback awards C) platinum parachutes D) golden parachutes Answer: D Difficulty: Easy Skill: Application of Knowledge AACSB: Application of Knowledge LO: 11.3: List the components of executive compensation packages.

17) The XYZ Co. took back performance-based compensation of $1.2 million from their CEO because of his decision of the buyout of another firm that eventually lowered the overall value of the XYZ 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 AACSB: Application of Knowledge LO: 11.3: List the components of executive compensation packages.

18) The recently appointed CEO of XYZ Inc. uses a luxury summerhouse owned by the company for rest and relaxation with his family as well as a place to invite important clients before a lucrative business deal. XYZ Inc. 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 AACSB: Application of Knowledge LO: 11.3: List the components of executive compensation packages.

19) ________ bonuses are awarded to executives by boards of directors on an elective basis.

Answer: Discretionary Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 11.3: List the components of executive compensation packages.

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20) Company stock shares are the main form of executives' ________ compensation.

Answer: deferred Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 11.3: List the components of executive compensation packages.

21) 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: Difficult Skill: Concept AACSB: Analytical Thinking LO: 11.3: List the components of executive compensation packages.

22) A ________ stock plan is an arrangement whereby executives receive a bonus that is equivalent to either the value of company shares or the increase in that value over time.

Answer: phantom Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 11.3: List the components of executive compensation packages.

23) ________ 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 AACSB: Analytical Thinking LO: 11.3: List the components of executive compensation packages.

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24) 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 companies.

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 company, it is possible that a CEO would work against it in order to save his or her job.

Companies benefit from golden parachute payments because they can treat these payments as business expenses. This means that companies 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 government-imposed intervention that limited tax benefits to companies.

Platinum parachutes are lucrative awards that compensate departing executives with severance pay, continuation of company benefits, and even stock options. Ideally, CEOs would perform on an exemplary basis, making decisions to drive up company 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 company executives, CEOs may be terminated even before the expiration of their employment contracts. Many companies 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 AACSB: Analytical Thinking LO: 11.3: List the components of executive compensation packages.

25) Using this executive compensation theory, shareholders negotiate the compensation contracts with the executive in hopes of aligning the executive's interests with theirs.

A) agency B) tournament C) social comparison D) strategic Answer: A Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 11.4: Discuss the principles and processes of setting executive compensation.

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26) In the end, Yolanda beat Tristen and Michel in a series of competitions among top-level managers to become CEO of National LemGlass. Which compensation theory did the company probably use?

A) tournament B) competition C) comparison D) agency Answer: A Difficulty: Easy Skill: Application of Knowledge AACSB: Application of Knowledge LO: 11.4: Discuss the principles and processes of setting executive compensation.

27) Shareholders' interests are represented by a ________, who weigh the pros and cons of top executives' decisions.

Answer: board of directors Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 11.4: Discuss the principles and processes of setting executive compensation.

28) The actions of executives on behalf of their own self-interest are known as the ________ problem.

Answer: agency Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 11.4: Discuss the principles and processes of setting executive compensation.

29) The concept that individuals evaluate their accomplishments by comparing themselves to similar individuals is based on ________ theory.

Answer: social comparison Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 11.4: Discuss the principles and processes of setting executive compensation.

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30) 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 favorable 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 company. 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.

Companies that sell and exchange securities on public stock exchanges are required to file various information with the Securities and Exchange Commission (SEC). One of the main objectives of SEC is to clarify the presentation of CEO compensation along with four mostly highly paid executives. Another important objective of the SEC is to increase the accountability of company boards of directors for executive compensation policies and decisions. The SEC requires companies to include the identity of consulting firms in public disclosure statements.

This creates concerns for conflict of interest for consulting firms that consult a company on more than one area. Consulting companies might intentionally recommend better executive compensation packages to get additional consulting opportunities from the management. SEC rulings also increased board members' accountability for approving sound executive compensation packages.

Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 11.4: Discuss the principles and processes of setting executive compensation.

31) Which organization has as one of its main goals to help prospective investors understand the financial matters of importance to companies?

A) U.S. Department of Labor B) Public Company Accounting Oversight Board C) Securities and Exchange Commission D) Dodd-Frank Commission Answer: C Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 11.5: Summarize the executive compensation disclosure rules and the reasons why they have been established.

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32) Which legally required document reveals detailed information about the compensation of the CEO and named executive officers (NEOs)?

A) company's annual report B) compensation and benefits scorecard C) definitive proxy statement (DEF 14(A)) D) say-on-pay summary statement Answer: C Difficulty: Moderate Skill: Application of Knowledge AACSB: Application of Knowledge LO: 11.5: Summarize the executive compensation disclosure rules and the reasons why they have been established.

33) The SEC requires compensation information about the CEO and how many of the highest paid executives?

A) 10 B) 7 C) 4 D) 2 Answer: C Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 11.5: Summarize the executive compensation disclosure rules and the reasons why they have been established.

34) Under SEC rules, which of the following is true?

A) Shareholders may be subject to personal liability for paying excessive executive compensation.

B) Publicly held corporations must disclose executive compensation information to shareholders, but not the public.

C) Board of director members can sue a corporation for excessive executive compensation.

D) Board of director members may be subject to personal liability for paying excessive executive compensation.

Answer: D Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 11.5: Summarize the executive compensation disclosure rules and the reasons why they have been established.

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35) The SEC's Summary Compensation Table contains data covering how many years?

A) 3 B) 5 C) 7 D) 10 Answer: A Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 11.5: Summarize the executive compensation disclosure rules and the reasons why they have been established.

36) The ________ Act of 2002 brought a number of reforms to enhance corporate responsibility, enhance financial disclosures, and combat accounting fraud due to dishonesty in companies such as Enron and Tyco.

Answer: Sarbanes-Oxley Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 11.5: Summarize the executive compensation disclosure rules and the reasons why they have been established.

37) A provision of the ________ established the say-on-pay practice.

Answer: Dodd-Frank Act Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 11.5: Summarize the executive compensation disclosure rules and the reasons why they have been established.

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38) Discuss the three key provisions of the Dodd-Frank Act that apply to setting executive compensation.

Answer: President Barack Obama signed the Wall Street Reform and Consumer Protection Act of 2010 to further enhance the transparency of executive compensation practices. Also commonly referred to as the Dodd-Frank Act, the act requires the companies that trade stock on public exchanges to comply with three major provisions. The first provision requires say on pay.

Say on pay gives company shareholders the right to vote yes or no on executive compensation proposals that are contained in proxy statements, including current and deferred components, golden parachute agreements. The frequency is determined by shareholder vote.

The second provision details independence requirements for compensation committee members and their advisors such as compensation consultants and legal counsel. Members of compensation committees typically receive compensation for their services, and this practice is considered to be acceptable. However, possible violations of the Dodd-Frank independence requirement may arise when at least one committee member also receives compensation as a company employee. For example, a compensation committee member who also serves as the company's executive vice president may be considered violating the independence requirement.

On the other hand, a compensation committee member who does not receive compensation from the company as an employee or external consultant would not violate the independence requirement.

The third provision requires that companies disclose the circumstances under which an executive would benefit from a golden parachute arrangement. Specifically, disclosure is required of all agreements and understandings that the acquiring and target companies have with the executive officers of both companies.

Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 11.5: Summarize the executive compensation disclosure rules and the reasons why they have been established.

39) Which of the following arguments do labor unions use regarding the substantial pay discrepancies between CEOs and non CEOs? A) Discrepancies are socially unjust and promote economic inequality.

B) Discrepancies contribute to labor strikes.

C) Discrepancies undermine global competitiveness.

D) Discrepancies decrease which promotes effective companies seek to recruitment and retention.

Answer: A Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 11.6: Briefly explain the executive compensation controversy as it relates to whether U.S. executives are paid too much.

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40) When companies hire new CEOs from other companies, how do they compensate them?

A) approximately the same as individuals who are promoted to CEO from within the company B) substantially more than individuals who are promoted to CEO from within the company C) substantially less than individuals who are promoted to CEO from within the company D) at least 50 times the average median employee salary within the company Answer: B Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 11.6: Briefly explain the executive compensation controversy as it relates to whether U.S. executives are paid too much.

41) XYZ 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 company.

The company 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 XYZ 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 company handles this situation differently.

D) The compensation of this CEO depends only on pretax profit margins.

Answer: C Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 11.6: Briefly explain the executive compensation controversy as it relates to whether U.S. executives are paid too much.

42) What was the median annual earnings for all U.S. civilian workers in 2014?

A) $47,230 B) $51,980 C) $46,230 D) $41,778 Answer: A Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 11.6: Briefly explain the executive compensation controversy as it relates to whether U.S. executives are paid too much.

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43) In May 2014, the typical CEO earned approximately how much more annually than fast food cooks?

A) 100 times more B) 120 times more C) 160 times more D) approximately 180 times more Answer: D Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 11.6: Briefly explain the executive compensation controversy as it relates to whether U.S. executives are paid too much.

44) Are CEOs compensated commensurately with their companies' 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 company performance.

Therefore, a simple statement cannot be made about the relationship between CEO pay and company performance. Shareholder returns most often describe company 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 company, which often translates into lower shareholder returns. In the intervening time, the company 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 company performance does not meet a preestablished standard.

Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 11.6: Briefly explain the executive compensation controversy as it relates to whether U.S. executives are paid too much.

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Strategic Compensation, 9e (Martocchio) Chapter 12 Compensating the Flexible Work Force: Contingent Employees and Flexible Work Schedules 1) A worker, who is considered part-time, works less than how many hours per week?

A) 30 B) 35 C) 39 D) 25 Answer: B Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 12.1: Describe the four groups of contingent workers.

2) Which of the following is the arrangement where Tanesha and Jaunita both work part-time 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 AACSB: 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 AACSB: Analytical Thinking LO: 12.1: Describe the four groups of contingent workers.

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4) If a company wanted to hire contingent workers as a way to screen for possible full-time employment, which type of worker would the company likely employ?

A) consultants B) temporary C) freelance D) leased Answer: B Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 12.1: Describe the four groups of contingent workers.

5) Which type of contingent worker would work for a company on a long-term basis, presumably on an indefinite basis?

A) part-time employees B) temporary employees C) leased employees D) independent contractors Answer: C Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 12.1: Describe the four groups of contingent workers.

6) ARAMARK, a company which provides cafeteria service workers to a client company, 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 AACSB: Application of Knowledge LO: 12.1: Describe the four groups of contingent workers.

7) John has agreed to teach a statistics course on an adjunct basis while the professor who regularly teaches the course is on sabbatical. This example represents which of the following?

A) independent contractor B) on-call arrangement C) job sharing D) leased employee Answer: A Difficulty: Moderate Skill: Application of Knowledge AACSB: Application of Knowledge LO: 12.1: Describe the four groups of contingent workers.

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8) ________ have full-time jobs and plan on having long-term relationships with their employers.

Answer: Core employees Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 12.1: Describe the four groups of contingent workers.

9) ________ part-time employees work fewer than 35 hours per week because they are unable to find full-time employment.

Answer: Involuntary Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 12.1: Describe the four groups of contingent workers.

10) 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 AACSB: Analytical Thinking LO: 12.1: Describe the four groups of contingent workers.

11) With ________ arrangements, temporary employees generally do not work for more than one year, and the hiring companies are the temporary workers' legal employers.

Answer: direct hire Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 12.1: Describe the four groups of contingent workers.

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12) Explain the reasons why employers hire temporary workers.

Answer: Companies 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, jury duty, and military leave. Second, temporary workers offer extra sets of hands when companies' 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.

Companies 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 new positions. Second, temporary employment arrangements give employers the opportunity to decide whether to retain particular workers on an indefinite basis.

In effect, the temporary arrangement represents a probationary period, when employers observe whether workers are meeting job performance standards. As a corollary, such 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." Third, employing temporary workers is often less costly than employing core workers because temporary workers are less likely to receive costly discretionary benefits (e.g., medical insurance coverage).

Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 12.1: Describe the four groups of contingent workers.

13) Who is responsible for compensating on-call employees?

A) independent contractor B) hiring company C) temporary agency D) government Answer: B Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 12.2: Discuss pay and benefits issues for contingent workers.

14) Temporary employment agencies are responsible for complying with all employment legislation, except?

A) ADA B) FLSA C) workers' compensation D) ERISA Answer: C Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 12.2: Discuss pay and benefits issues for contingent workers.

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15) Ashley was working as a part-time employee in a private company and she received employer-sponsored health care. She has just been laid off. Under which act could she choose to continue receiving employer-sponsored health care insurance coverage?

A) Consolidated Omnibus Budget Reconciliation Act B) Emergency Economic Stabilization Act C) Family and Medical Leave Act D) Equal Pay Act Answer: A Difficulty: Easy Skill: Application of Knowledge AACSB: Application of Knowledge LO: 12.2: Discuss pay and benefits issues for contingent workers.

16) For part-time employees to be eligible to be in a company's retirement plan, which two qualifications must be met?

A) age 21 or older and worked 1500 hours in a year of service B) age 21 or older and worked 1000 hours in a year of service C) age 18 or older and worked 2000 hours in a year of service D) age 18 or older and worked 1500 hours in a year of service Answer: B Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 12.2: Discuss pay and benefits issues for contingent workers.

17) How many days will Jamal have to work to complete a "year of service"?

A) 125 B) 100 C) 185 D) 270 Answer: A Difficulty: Moderate Skill: Application of Knowledge AACSB: Application of Knowledge LO: 12.2: Discuss pay and benefits issues for contingent workers.

18) Which organization has the authority to define a "year of service" for pension protection purposes?

A) National Labor Relations Board B) U.S. Equal Employment Opportunity Commission C) U.S. Bureau of Labor Statistics D) U.S. Department of Labor Answer: D Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 12.2: Discuss pay and benefits issues for contingent workers.

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19) How many months in a year must seasonal employees work to qualify for protection under the FLSA overtime and minimum wage provisions?

A) 4 B) 7 C) 11 D) 12 Answer: B Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 12.2: Discuss pay and benefits issues for contingent workers.

20) Safe harbor rules limit the number of leased employees up to which percentage of a company's total workforce?

A) 20% B) 10% C) 25% D) 33% Answer: A Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 12.2: Discuss pay and benefits issues for contingent workers.

21) The U.S. Bureau of Labor Statistics does not monitor pay levels for which type of temporary workers?

A) part-time employees B) leased employees C) temporary employees D) independent contractors Answer: D Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 12.2: Discuss pay and benefits issues for contingent workers.

22) What type of test is used to determine if an independent contractor is financially dependent?

A) right to control B) safe harbor C) economic reality D) financial dependence Answer: C Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 12.2: Discuss pay and benefits issues for contingent workers.

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23) The ________ common law doctrine establishes temporary workers' rights to receive workers' compensation.

Answer: dual employer Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 12.2: Discuss pay and benefits issues for contingent workers.

24) Companies must use the IRC's ________ test to determine whether individuals are employees or independent contractors.

Answer: right to control Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 12.2: Discuss pay and benefits issues for contingent workers.

25) When a telecommuting employee works from a remote extension from the employer's office that includes a clerical staff and a full-time manager, that employee is said to be working at what type of office?

A) remote work office B) nomadic work center C) neighborhood work center D) satellite work center Answer: D Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 12.3: Summarize the three categories of flexible work schedules.

26) This type of telecommuting involves executives that travel extensively and maintain control over projects through the use of telephones, faxes, and e-mail.

A) neighborhood work center B) satellite work center C) nomadic executive office D) electronic remote work center Answer: C Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 12.3: Summarize the three categories of flexible work schedules.

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27) An employee living in which place would benefit most from telecommuting due to minimizing expenses and commute time?

A) Boston B) Oshkosh, Wisconsin C) rural Alabama D) Walla Walla, Washington Answer: A Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 12.3: Summarize the three categories of flexible work schedules.

28) Carlos works at XYZ Innovations Inc. as a computer scientist. ________ schedules enable Carlos to work four 10-hour days.

Answer: Compressed workweek Difficulty: Moderate Skill: Application of Knowledge AACSB: Application of Knowledge LO: 12.3: Summarize the three categories of flexible work schedules.

29) ________ allows for an alternative work arrangement in which employees are able to work at home or at an alternate location besides the office.

Answer: Telecommuting Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 12.3: Summarize the three categories of flexible work schedules.

30) James works at home 3 days a week and works at his office 2 days a week. His employer provides a computer, modem, and printer for him to use at home. The equipment for his off-site use is an example of ________.

Answer: working condition fringe benefits Difficulty: Moderate Skill: Application of Knowledge AACSB: Application of Knowledge LO: 12.3: Summarize the three categories of flexible work schedules.

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31) 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 altogether.

Second, flexible work schedules should lead to higher work productivity. Employees have more choice about when to work during the day. Individuals who work best during the morning hours may schedule morning hours, and individuals 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 focus on doing better jobs.

Third, flexible work schedules benefit employers by creating longer business hours and better service. Staggering employees' schedules should enable businesses to stay open longer hours without incurring overtime pay expenses. In addition, customers should perceive better service because of expanded business hours. Companies that conduct business by telephone with clients or other offices located in different time zones are more likely to be open during customers' normal operating hours in other time zones.

Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 12.3: Summarize the three categories of flexible work schedules.

32) Which of the following is a major challenge associated with the implementation of the Fair Labor Standards Act for workers employed on a flexible basis?

A) ensuring that the equal pay provision is not violated B) ensuring that workers are paid the minimum wage C) ensuring that the child labor provisions are not violated D) ensuring that overtime pay rates are calculated correctly Answer: D Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 12.4: Discuss the pay and employee benefits issues for flexible work schedules, compressed workweeks, and telecommuting arrangements.

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33) After working a regular 40-hour workweek in the office, Mary takes her company laptop home and generally spends an hour or two responding to work e-mails. 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: Difficult Skill: Application of Knowledge AACSB: Application of Knowledge LO: 12.4: Discuss the pay and employee benefits issues for flexible work schedules, compressed workweeks, and telecommuting arrangements.

34) What employment issue for flexible employees does the Walling v. A.H. Belo Corporation Supreme Court ruling address?

A) retirement benefits B) overtime pay C) employee benefits D) fixed weekly pay Answer: D Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 12.4: Discuss the pay and employee benefits issues for flexible work schedules, compressed workweeks, and telecommuting arrangements.

35) To which group of workers does the issue of working condition fringe benefits apply?

Describe working condition fringe benefits.

Answer: An employee benefits issue known as working condition fringe benefits applies to telecommuters. Employers are likely to provide telecommuters with the necessary equipment to perform their jobs effectively while off-site: computers, modems, printers, photocopy machines, sundry office supplies, and Telex machines. In addition, some employers provide similar equipment to employees who wish to work additional hours outside their regular work schedules during the evenings or weekends. This arrangement does not qualify as telecommuting.

The IRS treats the home use of office equipment and supplies as employees' taxable income when the use falls outside established telecommuting relationships; however, employees are not taxed when the home use of employer-provided equipment falls within established telecommuting relationships. Under this condition, the IRS treats the home use of employerprovided equipment as a working condition fringe benefit.

Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 12.4: Discuss the pay and employee benefits issues for flexible work schedules, compressed workweeks, and telecommuting arrangements.

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36) 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: Difficult Skill: Concept AACSB: Analytical Thinking LO: 12.5: Describe unions' reactions to contingent work and flexible work schedule arrangements.

37) In which sector are some unions more likely to support the use of contingent workers?

A) private B) public C) profit-oriented D) non profit organizations Answer: B Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 12.5: Describe unions' reactions to contingent work and flexible work schedule arrangements.

38) Which of the following is a reason why unions tend not to support telecommuting arrangements?

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 AACSB: Analytical Thinking LO: 12.5: Describe unions' reactions to contingent work and flexible work schedule arrangements.

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39) Which stakeholder group most strongly opposes the engagement of contingent workers?

A) U.S. government B) line employees C) unions D) executives Answer: C Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 12.5: Describe unions' reactions to contingent work and flexible work schedule arrangements.

40) 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 AACSB: Analytical Thinking LO: 12.6: Identify strategic issues and choices companies have regarding the use of contingent workers.

41) Which of the following factors contributes to the short-term costs of engaging contingent workers?

A) Fair Labor Standards Act minimum wage provision B) downtime while employees are participating in training C) Fair Labor Standards Act overtime pay provision D) employee benefits costs Answer: B Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 12.6: Identify strategic issues and choices companies have regarding the use of contingent workers.

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42) 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 AACSB: Analytical Thinking LO: 12.6: Identify strategic issues and choices companies have regarding the use of contingent workers.

43) ________ 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 AACSB: Analytical Thinking LO: 12.6: Identify strategic issues and choices companies have regarding the use of contingent workers.

44) What are the strategic issues involved with contingent and flexible workers for a company pursuing a lowest cost strategy?

Answer: Because of the reduction in 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 companies to pursue this strategy. Although well-trained contingent workers may reduce company training costs, company-specific training may be needed, and a company may not be able to realize productivity benefits if these employees depart. Such an argument is moot if companies establish a track record of high productivity, quality, and exemplary customer service.

Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 12.6: Identify strategic issues and choices companies have regarding the use of contingent workers.

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Strategic Compensation, 9e (Martocchio) Chapter 13 Compensation Expatriates 1) Successful business endeavors rely on whom?

A) host country nationals B) the right people C) third country nationals D) expatriates Answer: B Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking 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 AACSB: Analytical Thinking LO: 13.1: Discuss competitive advantage and how international activities fit in.

3) Without which type of skills is an expatriate's credibility likely to be undermined?

A) accounting B) mathematical C) language D) marketing Answer: C Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 13.1: Discuss competitive advantage and how international activities fit in.

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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: Difficult Skill: Application of Knowledge AACSB: 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 labor laws outside the United States B) onshoring outside the United States C) multicultural diversity within the United States D) unification of the European markets Answer: D Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 13.1: Discuss competitive advantage and how international activities fit in.

6) Which of the following questions should HR 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 AACSB: Analytical Thinking LO: 13.1: Discuss competitive advantage and how international activities fit in.

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7) How does globalization affect HR departments?

Answer: The globalization of business requires that companies send employees overseas to establish and operate satellite plants and offices. Companies naturally must invest in the development of appropriate human resource (HR) practices. International business operations are destined to fail without the "right" people. HR 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 U.S. customs are the only appropriate way to approach problems? Are candidates' families willing to adjust to foreign lifestyles?

Another key HR 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 (hand shaking versus bowing).

The use of international assignments is an important issue addressed by companies located in countries across the world. A multitude of large consulting firms conduct extensive research for client companies to ensure the most effective deployment of expatriates worldwide. Such consulting firms focus on pay and benefits issues for expatriates, labor law, and useful information to help expatriates select and train local country nationals.

Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking 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 AACSB: Analytical Thinking LO: 13.2: Describe and explain preliminary considerations compensation professionals should take under advisement before designing international compensation programs.

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9) If your French-owned company, 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: Difficult Skill: Application of Knowledge AACSB: Application of Knowledge LO: 13.2: Describe and explain preliminary considerations compensation professionals should take under advisement before designing international compensation programs.

10) An international assignment is considered long-term when it lasts at least how long?

A) 3 months B) 6 months C) 2 years D) 1 year Answer: D Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 13.2: Describe and explain preliminary considerations compensation professionals should take under advisement before designing international compensation programs.

11) On which group of employees do U.S. companies 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 Washington, D.C. Answer: A Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 13.2: Describe and explain preliminary considerations compensation professionals should take under advisement before designing international compensation programs.

12) ________ nationals are foreign citizens that work in U.S. companies' branch offices or manufacturing plants in their home countries.

Answer: Host country Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 13.2: Describe and explain preliminary considerations compensation professionals should take under advisement before designing international compensation programs.

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13) ________ nationals are foreign national citizens who work in U.S. companies' branch offices or manufacturing plants in countries other than the United States or their own home countries.

Answer: Third country Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 13.2: Describe and explain preliminary considerations compensation professionals should take under advisement before designing international compensation programs.

14) U.S. citizens employed in U.S. companies with work assignments outside the United States are better known as ________.

Answer: expatriates Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 13.2: Describe and explain preliminary considerations compensation professionals should take under advisement before designing international compensation programs.

15) Since U.S. citizen David became an employee of American Eyeful Pictures, Inc., headquartered in Los Angeles, he has worked in Japan, China, and Thailand. The company has probably based his base pay using which method?

A) host country B) home country C) headquarters D) third countr Answer: C Difficulty: Moderate Skill: Application of Knowledge AACSB: Application of Knowledge LO: 13.3: List the main components of international compensation programs.

16) U.S. citizen John is an employee of GE, which is headquartered in the United States. 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: Difficult Skill: Application of Knowledge AACSB: Application of Knowledge LO: 13.3: List the main components of international compensation programs.

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17) About how often do companies 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: Difficult Skill: Concept AACSB: Analytical Thinking LO: 13.3: List the main components of international compensation programs.

18) Benjamin 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: Difficult Skill: Concept AACSB: Analytical Thinking LO: 13.3: List the main components of international compensation programs.

19) About how many countries are deemed as hardship locations by the U.S. State Department?

A) 300 B) 150 C) 750 D) 25 Answer: B Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 13.3: List the main components of international compensation programs.

20) Which of the following would be considered a hardship location (due to dangerous conditions)?

A) Baghdad, Iraq B) Basel, Switzerland C) Oslo, Norway D) Brisbane, Australia Answer: A Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 13.3: List the main components of international compensation programs.

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21) 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) a lump-sum payment Answer: D Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 13.3: List the main components of international compensation programs.

22) Tuition reimbursement and day care 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 AACSB: Analytical Thinking LO: 13.3: List the main components of international compensation programs.

23) 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: Difficult Skill: Concept AACSB: Analytical Thinking LO: 13.3: List the main components of international compensation programs.

24) When determining Ms. Jenkins' 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 AACSB: Analytical Thinking LO: 13.3: List the main components of international compensation programs.

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25) An ________ is the price at which one country's currency can be swapped for another.

Answer: exchange rate Difficulty: Easy Skill: Application of Knowledge AACSB: Application of Knowledge LO: 13.3: List the main components of international compensation programs.

26) ________ is the increase in prices for consumer goods and services.

Answer: Inflation Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 13.3: List the main components of international compensation programs.

27) The ________ allowance compensates expatriates for their sacrifices while on assignment.

Answer: hardship Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 13.3: List the main components of international compensation programs.

28) ________ premiums reward employees for moving from one assignment to another.

Answer: Mobility Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 13.3: List the main components of international compensation programs.

29) ________ benefits allow for expatriates to take paid time off back in the United States.

Answer: Home leave Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 13.3: List the main components of international compensation programs.

30) 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 misconstrue 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 the United States because they no longer receive this extra money.

Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 13.3: List the main components of international compensation programs.

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31) Prior to Juanita's first overseas assignment, she was told that she would receive a foreign service premium. Juanita 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 AACSB: Application of Knowledge LO: 13.4: Discuss the balance sheet approach for U.S. expatriates' compensation packages.

32) Andre is going to be stationed overseas for about 18 months. Andre's foreign service premium will increase his base pay by about how much?

A) 5 - 10 % B) 10 - 30 % C) 40 - 60 % D) 50 - 75 % Answer: B Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 13.4: Discuss the balance sheet approach for U.S. expatriates' compensation packages.

33) 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) chillaxtion time Answer: A Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 13.4: Discuss the balance sheet approach for U.S. expatriates' compensation packages.

34) Which of the following are used by the State Department 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 AACSB: Analytical Thinking LO: 13.4: Discuss the balance sheet approach for U.S. expatriates' compensation packages.

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35) Mary is a U.S. expatriate who is assigned to work in Belgium. In order to avoid double income taxation and maintaining residences in the United States and in Belgium, 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 AACSB: Application of Knowledge LO: 13.4: Discuss the balance sheet approach for U.S. expatriates' compensation packages.

36) Quarters allowance is the U.S. Department of State's nomenclature 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 AACSB: Analytical Thinking LO: 13.4: Discuss the balance sheet approach for U.S. expatriates' compensation packages.

37) 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: Difficult Skill: Concept AACSB: Analytical Thinking LO: 13.4: Discuss the balance sheet approach for U.S. expatriates' compensation packages.

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38) Employers usually rely on which source to determine housing and utilities support?

A) U.S. Department of State's quarters allowances B) Consumer Price Index C) Indexes of international labor costs D) U.S. Department of State's International Consumer Price Index Answer: A Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 13.4: Discuss the balance sheet approach for U.S. expatriates' compensation packages.

39) Which of the following occurs under tax equalization?

A) Expatriates realize tax benefits whenever actual taxes are less than the hypothetical tax.

B) The employee pays the foreign income tax, but not the U.S. 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: D Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 13.4: Discuss the balance sheet approach for U.S. expatriates' compensation packages.

40) Josh works at a U.S. construction company as a civil engineer. He has been working overseas for the last three years. The hypothetical tax calculated by his company turned out to be less than his actual income tax. In this situation, A) Josh pays the taxes.

B) the employer reimburses Josh.

C) under tax equalization, neither Josh nor his employer receives a reimbursement.

D) the foreign government reimburses Josh.

Answer: A Difficulty: Difficult Skill: Application of Knowledge AACSB: Application of Knowledge LO: 13.4: Discuss the balance sheet approach for U.S. expatriates' compensation packages.

41) Expatriates receive ________ allowances when the cost of living is higher where they work than in the home country.

Answer: goods and services Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 13.4: Discuss the balance sheet approach for U.S. expatriates' compensation packages.

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42) 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 the United States. 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 the United States.

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 company promises employees that they will not lose financially while on foreign assignment.

Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 13.4: Discuss the balance sheet approach for U.S. expatriates' compensation packages.

43) ________ 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 AACSB: Analytical Thinking LO: 13.5: Describe repatriation issues.

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44) What are some of the issues companies 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 companies' 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 "normal" compensation practices. Many expatriates may not adjust very well to compensation-as-usual 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.

Companies can actively prevent many of these problems by the following two measures. First, companies should invest in former expatriates' career development. Career development programs signal that companies 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, companies 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: Difficult Skill: Concept AACSB: Analytical Thinking LO: 13.5: Describe repatriation issues.

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Strategic Compensation, 9e (Martocchio) Chapter 14 Pay and Benefits Outside the United States 1) What is gross domestic product (GDP)?

A) GDP describes the amount a country spends on health care.

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: Difficult Skill: Concept AACSB: Analytical Thinking LO: 14.1: Explain the pertinent concepts for quantifying important economic elements in the discussion of pay and benefits outside the United States.

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: Difficult Skill: Concept AACSB: Analytical Thinking LO: 14.1: Explain the pertinent concepts for quantifying important economic elements in the discussion of pay and benefits outside the United States.

3) Which of the following describes the worth of all goods and services produced in a foreign country valued at prices prevailing in the United States?

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 AACSB: Analytical Thinking LO: 14.1: Explain the pertinent concepts for quantifying important economic elements in the discussion of pay and benefits outside the United States.

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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's expenditure on health care C) per country expenditure on health care D) per capita expenditure on health care Answer: D Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 14.1: Explain the pertinent concepts for quantifying important economic elements in the discussion of pay and benefits outside the United States.

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 AACSB: Application of Knowledge LO: 14.1: Explain the pertinent concepts for quantifying important economic elements in the discussion of pay and benefits outside the United States.

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 AACSB: Application of Knowledge 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 country with the lowest GDP per capita reviewed in Chapter 14 is ________.

Answer: India Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 14.1: Explain the pertinent concepts for quantifying important economic elements in the discussion of pay and benefits outside the United States.

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8) Canada has two state-run pension plans: one for ________ provincial residents only and one for the rest of Canada.

Answer: Quebec Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 14.1: Explain the pertinent concepts for quantifying important economic elements in the discussion of pay and benefits outside the United States.

9) 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 AACSB: Analytical Thinking LO: 14.1: Explain the pertinent concepts for quantifying important economic elements in the discussion of pay and benefits outside the United States.

10) ________ is one measure of a country's standard of living.

Answer: Per capita GDP Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 14.1: Explain the pertinent concepts for quantifying important economic elements in the discussion of pay and benefits outside the United States.

11) Of the countries studied in Chapter 14, ________ has the lowest hourly compensation costs.

Answer: Mexico Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 14.1: Explain the pertinent concepts for quantifying important economic elements in the discussion of pay and benefits outside the United States.

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12) 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 the United States.

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 AACSB: Analytical Thinking LO: 14.1: Explain the pertinent concepts for quantifying important economic elements in the discussion of pay and benefits outside the United States.

13) 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 AACSB: Analytical Thinking LO: 14.2: For North America (Canada and Mexico), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

14) The XYZ 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 labor-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 level.

D) There is one common law governing individual employment contracts for all provinces.

Answer: C Difficulty: Moderate Skill: Application of Knowledge AACSB: Application of Knowledge LO: 14.2: For North America (Canada and Mexico), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

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15) 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 AACSB: Analytical Thinking LO: 14.2: For North America (Canada and Mexico), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

16) Chris has been working in Vancouver, Canada at an accounting firm 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: Difficult Skill: Application of Knowledge AACSB: Application of Knowledge LO: 14.2: For North America (Canada and Mexico), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

17) In Canada, Maria earns an annual salary of $50,000. The amount of Maria's vacation pay is equal to what amount?

A) $1,000 B) $1,500 C) $1,750 D) $2,000 Answer: A Difficulty: Moderate Skill: Application of Knowledge AACSB: Application of Knowledge LO: 14.2: For North America (Canada and Mexico), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

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18) 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 AACSB: Analytical Thinking LO: 14.2: For North America (Canada and Mexico), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

19) 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 AACSB: Analytical Thinking LO: 14.2: For North America (Canada and Mexico), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

20) 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: Difficult Skill: Application of Knowledge AACSB: Application of Knowledge LO: 14.2: For North America (Canada and Mexico), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

21) The United States, Canada, and Mexico are part of a trade bloc better known as ________.

Answer: NAFTA (North American Free Trade Agreement) Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 14.2: For North America (Canada and Mexico), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

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22) Identify the countries that are part of NAFTA and NAFTA's main provisions.

Answer: Canada, Mexico, and the United States are part of a trade bloc known as NAFTA—the North Atlantic Free Trade Agreement. According to the Office of the United States Trade Representative, formed on January 1, 1994, NAFTA called for the elimination of duties and the phasing out of tariffs over a period of 14 years. Trade restrictions were removed under NAFTA from such industries as motor vehicles and automotive parts, computers, textiles, and agriculture.

In addition, the treaty also delineated the removal of investment restrictions between the three countries. As a result of supplemental agreements signed in 1993, worker and environmental protection provisions were added.

The labor side of NAFTA is the North American Agreement on Labor Cooperation (NAALC).

This was created in order to promote cooperation between trade unions and social organizations in order to champion improved labor conditions. Although there has definitely been a convergence of labor standards in North America as a result of NAALC, there has not been a convergence in employment, productivity, or salary trends. Overall, NAFTA is reported as having been good for Mexico, which saw a fall in poverty rates and a rise in real income as a result of the trade agreement.

Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 14.2: For North America (Canada and Mexico), summarize key facts about wage and salary, paid time-off benefits, and protection programs.

23) 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 AACSB: Analytical Thinking LO: 14.3: For South America (Brazil), summarize key facts about wage and salary, paid timeoff benefits, and protection programs.

24) 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 AACSB: Analytical Thinking LO: 14.3: For South America (Brazil), summarize key facts about wage and salary, paid timeoff benefits, and protection programs.

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25) Brazil's workforce has approximately how many million people?

A) 95 B) 110 C) 120 D) 125 Answer: B Difficulty: Moderate Skill: Application of Knowledge AACSB: Application of Knowledge LO: 14.3: For South America (Brazil), summarize key facts about wage and salary, paid timeoff benefits, and protection programs.

26) 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 Answer: D Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 14.3: For South America (Brazil), summarize key facts about wage and salary, paid timeoff benefits, and protection programs.

27) According to the ________ in Brazil, the minimum wage rate is nationally uniform and set by law.

Answer: Federal Constitution Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 14.3: For South America (Brazil), summarize key facts about wage and salary, paid timeoff benefits, and protection programs.

28) Oliver is employed as a blue-collar worker in the metalworking industry in BadenWurttemberg 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 AACSB: Application of Knowledge LO: 14.4: For Europe (Germany), summarize key facts about wage and salary, paid time off benefits, and protection programs.

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29) 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 AACSB: Analytical Thinking LO: 14.4: For Europe (Germany), summarize key facts about wage and salary, paid time off benefits, and protection programs.

30) 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 AACSB: Analytical Thinking LO: 14.4: For Europe (Germany), summarize key facts about wage and salary, paid time off benefits, and protection programs.

31) 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 AACSB: Application of Knowledge LO: 14.4: For Europe (Germany), summarize key facts about wage and salary, paid time off benefits, and protection programs.

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32) 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 AACSB: Analytical Thinking LO: 14.4: For Europe (Germany), summarize key facts about wage and salary, paid time off benefits, and protection programs.

33) In Germany, the minimum wage rate is established by the ________ process.

Answer: collective bargaining Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 14.4: For Europe (Germany), summarize key facts about wage and salary, paid time off benefits, and protection programs.

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34) 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 labor 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 Web site reports that community labor law was designed with the aim of ensuring that the creation of the single market did not result in a lowering of labor 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 AACSB: Analytical Thinking LO: 14.4: For Europe (Germany), summarize key facts about wage and salary, paid time off benefits, and protection programs.

35) Which of the following is NOT one of the top three largest economies in Asia as of 2015?

A) Philippines B) China C) India D) Japan Answer: A Difficulty: Easy Skill: Concept AACSB: Analytical Thinking 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.

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36) India's labor force has approximately how many million people?

A) 350 B) 400 C) 450 D) 500 Answer: D Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking 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.

37) 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 AACSB: Analytical Thinking 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.

38) 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: Difficult Skill: Concept AACSB: Analytical Thinking 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.

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39) 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 AACSB: 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.

40) Hui has worked for one month in Guangxi province where the monthly minimum wage is 830 yuan. What is the minimum allowable wage that Hui can earn in that period?

A) 830 yuan B) 664 yuan C) 415 yuan D) 500 yuan Answer: A Difficulty: Difficult Skill: Application of Knowledge AACSB: 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.

41) 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 labor-management relations Answer: B Difficulty: Difficult Skill: Application of Knowledge AACSB: 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.

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42) In China, how much was the per capita expenditure on health in 2012?

A) $480 based on purchasing power parity B) 480 yuan C) $970 based on purchasing power parity D) 970 yuan Answer: A Difficulty: Moderate Skill: Application of Knowledge AACSB: 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.

43) In China, the minimum wage rates are set for each ________.

Answer: region Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking 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.

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44) 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.

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 AACSB: Analytical Thinking 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.

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Strategic Compensation, 9e (Martocchio) Chapter 15 Challenges Facing Compensation Professionals 1) Although Congress has yet to raise the federal minimum wage (as of June 2015), A) some states have chosen to raise their minimum wage rates.

B) all of the states have set aside discussions of possibly raising their minimum wage rates.

C) businesses are pressuring the federal government to act on increasing the minimum wage rate.

D) some states have engaged in discussions about repealing their minimum wage laws.

Answer: A Difficulty: Easy Skill: Application of Knowledge AACSB: Application of Knowledge LO: 15.1: Explain the issues associated with a possible increase to the federal minimum wage rate and strengthening overtime pay protections.

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 AACSB: Analytical Thinking LO: 15.1: Explain the issues associated with a possible increase to the federal minimum wage rate and strengthening overtime pay protections.

3) One study about the minimum wage in particular cities concluded which of the following?

A) Those cities suffered job losses in both the retail and food service industries.

B) Those cities suffered job losses in the retail industry, but not in the food service industry.

C) Those cities didn't suffer job losses among low-wage restaurant workers.

D) Those cities didn't suffer job losses at any job level.

Answer: C Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 15.1: Explain the issues associated with a possible increase to the federal minimum wage rate and strengthening overtime pay protections.

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4) Which is believed to be one of the reasons for President Obama's call to increase the overtime pay threshold?

A) Companies believe that increasing the overtime pay threshold will promote competitive advantage.

B) Labor unions have threatened to strike.

C) New York and California have already set thresholds that are higher than the federal level (as of July 2015).

D) Raising the threshold will directly lead to a lower unionization rate in the private sector.

Answer: C Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 15.1: Explain the issues associated with a possible increase to the federal minimum wage rate and strengthening overtime pay protections.

5) Which of the following is a possible advantage of raising the overtime pay threshold?

A) lower income tax rate B) higher employee motivation to move into upper-level management positions C) pay increases for all employees D) higher discretionary income for the additional workers who meet the new exemption criteria Answer: D Difficulty: Difficult Skill: Application of Knowledge AACSB: Application of Knowledge LO: 15.1: Explain the issues associated with a possible increase to the federal minimum wage rate and strengthening overtime pay protections.

6) 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 associated with a possible increase to the federal minimum wage rate and strengthening overtime pay protections.

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7) Which of the following Asian countries has the highest average pay rate?

A) Vietnam B) China C) Indonesia D) Bangladesh Answer: B Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 15.2: Discuss the issue of rising wages in China.

8) 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) labor shortages D) increasing cost of exports Answer: D Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 15.2: Discuss the issue of rising wages in China.

9) 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 AACSB: Analytical Thinking LO: 15.2: Discuss the issue of rising wages in China.

10) Which one of the following factors has contributed to China's labor 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 AACSB: Analytical Thinking LO: 15.2: Discuss the issue of rising wages in China.

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11) 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 labor costs within China increase rapidly. As China's labor costs rise, so would the cost of its exports, making the country less competitive in the global economy.

Labor 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 AACSB: Analytical Thinking LO: 15.2: Discuss the issue of rising wages in China.

12) During which period did the so-called 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 AACSB: Analytical Thinking LO: 15.3: Describe the issue of underemployment and the compensation—productivity gap.

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13) Robert prefers to work full-time as a business analyst, but he is forced to work part-time for economic reasons because he is unable to find a full-time job. Which of the following best describes this situation?

A) underemployment B) malemployment C) underutilization D) discrimination Answer: A Difficulty: Moderate Skill: Application of Knowledge AACSB: Application of Knowledge LO: 15.3: Describe the issue of underemployment and the compensation—productivity gap.

14) Jane holds a doctoral degree in sociology and works as a taxi driver. Which of the following best describes this situation?

A) malemployment B) overstaffing C) discrimination D) unemployment Answer: A Difficulty: Easy Skill: Application of Knowledge AACSB: Application of Knowledge LO: 15.3: Describe the issue of underemployment and the compensation—productivity gap.

15) 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 AACSB: Analytical Thinking LO: 15.3: Describe the issue of underemployment and the compensation—productivity gap.

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16) 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 AACSB: Analytical Thinking LO: 15.3: Describe the issue of underemployment and the compensation—productivity gap.

17) ________ refers to a general slowdown in economic activity.

Answer: Economic recession Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 15.3: Describe the issue of underemployment and the compensation—productivity gap.

18) ________ is a situation in which a worker is forced to work part-time due to economic situations although she/he is willing to work full-time.

Answer: Underemployment Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 15.3: Describe the issue of underemployment and the compensation—productivity gap.

19) ________ is a situation in which a worker possesses more qualifications, skill, and education than is required by his/her existing job.

Answer: Malemployment Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 15.3: Describe the issue of underemployment and the compensation—productivity gap.

20) Companies promote profits, in part, by holding down employees' ________.

Answer: pay (or compensation) Difficulty: Difficult Skill: Concept AACSB: Analytical Thinking LO: 15.3: Describe the issue of underemployment and the compensation—productivity gap.

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21) Since the 1970s, ________ has lagged behind labor productivity growth.

Answer: real hourly compensation Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 15.3: Describe the issue of underemployment and the compensation—productivity gap.

22) 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 AACSB: Application of Knowledge LO: 15.4: Explain the influence of changing workforce demographics on employee benefits practice.

23) Which one of the following racial groups is expected to have the slowest labor force participation growth rate through the year 2022?

A) mixed races B) Asian C) African American D) Caucasian Answer: D Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 15.4: Explain the influence of changing workforce demographics on employee benefits practice.

24) 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 AACSB: Analytical Thinking LO: 15.4: Explain the influence of changing workforce demographics on employee benefits practice.

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25) 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) child care benefits Answer: C Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 15.4: Explain the influence of changing workforce demographics on employee benefits practice.

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