Strategic Compensation A Human Resource Management Approach, Global Edition, 8th edition By Joseph J

Type:

Test Bank

Strategic Compensation A Resource: Human Resource Management Approach Edition:

8th Edition

Author(s):

Joseph J. Martocchio

Strategic Compensation, 8e, Global Edition (Martocchio) Chapter 1 Strategic Compensation: A Component of Human Resource Systems 1) What is the primary factor that will prevent companies from growing in the next decade?

A) increased government regulations B) the inability to attract and retain employees C) caps on executive pay in some organizations D) increased global competition Answer: B Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Describe what compensation is. (1) 2) Protection programs are what type of compensation benefits?

A) external B) non-monetary C) internal D) monetary Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Describe what compensation is. (1) 3) Which of the following would be an example of a non-monetary reward?

A) medical insurance B) vacations C) day care assistance D) all of the above Answer: D Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Describe what compensation is. (1) 4) 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 AACSB: Analytic Thinking Learning Obj.: Describe what compensation is. (1)

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5) What is the typical annual Cost-of-living adjustment (COLA) in recent years?

A) 0 to 1 percent B) 2 to 3 percent C) 3 to 5 percent D) 8 to 10 percent Answer: B Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Describe what compensation is. (1) 6) 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 AACSB: Analytic Thinking Learning Obj.: Describe what compensation is. (1) 7) 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: Easy AACSB: Application of Knowledge Learning Obj.: Describe what compensation is. (1) 8) Which of the following is NOT one of the three broad categories that are considered discretionary benefits?

A) worker's compensation laws B) paid time off C) protection programs D) services Answer: A Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Describe what compensation is. (1)

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9) Samuel is a recently hired HR professional working at XYZ Motor Co. His current project involves recording the time it takes assembly workers to complete their tasks. With the help of industrial engineers in the manufacturing plant, the aim of this project is to identify the most effective ways of assembly operations. Which of the following is NOT related to Samuel's project?

A) scientific management practices B) time-and-motion studies C) job analysis D) welfare practices Answer: D Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: Summarize at least two historical events in the evolution of compensation practice leading to the current strategic compensation era. (2) 10) These are positive employer gestures that go beyond what was required by law, created in part to thwart potential union activity.

A) employee benefit plans B) welfare practices C) scientific management practices D) compensable factors Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize at least two historical events in the evolution of compensation practice leading to the current strategic compensation era. (2) 11) A company's ability to sustain market share and profitability for several years running is referred to by what term?

A) differentiation B) personnel administration C) compensation practices D) competitive advantage Answer: D Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Summarize at least two historical events in the evolution of compensation practice leading to the current strategic compensation era. (2)

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12) 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 AACSB: Analytic Thinking Learning Obj.: Discuss at least two differences between strategic and tactical compensation. (3) 13) What strategy describes the use of benefit and compensation packages in order to support both HR and competitive strategies?

A) worker welfare strategies B) total compensation strategies C) total quality management strategies D) worker satisfaction strategies Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Discuss at least two differences between strategic and tactical compensation. (3) 14) Ryanair uses one type of aircraft in its fleet and requires their passengers to carry their luggage to the plane. Ryanair's decisions exemplify which of the following competitive strategies?

A) differentiation strategy B) high quality strategy C) brand notoriety D) lowest-cost strategy Answer: D Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: Discuss at least two differences between strategic and tactical compensation. (3) 15) 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: Moderate AACSB: Analytic Thinking Learning Obj.: Discuss at least two differences between strategic and tactical compensation. (3)

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16) Which of these actions would HR seek to 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 AACSB: Analytic Thinking Learning Obj.: Discuss at least two differences between strategic and tactical compensation. (3) 17) 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 AACSB: Analytic Thinking Learning Obj.: Name and summarize the goals of compensation professionals. (4) 18) 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 AACSB: Analytic Thinking Learning Obj.: Name and summarize the goals of compensation professionals. (4) 19) 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 is more applicable to Sandra's situation?

A) maintaining focus with less responsibilities B) a lateral move across the company's hierarchy C) moving upward through a company's hierarchy D) maintaining the focus and assume greater responsibilities Answer: B Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: Name and summarize the goals of compensation professionals. (4)

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20) Which of the following plans is considered a company sponsored program that provides income to workers throughout their retirement?

A) pension plans B) severance plans C) loyalty plans D) longevity plans Answer: A Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Name and summarize the goals of compensation professionals. (4) 21) 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 AACSB: Analytic Thinking Learning Obj.: Name and summarize the goals of compensation professionals. (4) 22) What U.S. federal law established a national minimum wage for employees involved in commerce (rather than just those employed by companies working for the U.S. government), as well as prohibit most employment of minors in oppressive child labor?

A) The Equal Pay Act of 1963 B) The Civil Rights Act of 1964 C) The Fair Labor Standards Act of 1938 D) The Family and Medical Leave Act of 1993 Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Name and summarize the goals of compensation professionals. (4) 23) These ordered sets of jobs make it easy for compensation managers to give a clear relative value for all jobs within a company.

A) externally consistent compensation systems B) internally consistent compensation systems C) market-wide consistent compensation systems D) comparably consistent compensation systems Answer: B Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Name and summarize the goals of compensation professionals. (4)

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24) What is a systematic process for gathering, documenting, and analyzing information in order to describe jobs?

A) job evaluation B) internal consistency C) job analysis D) strategic analysis Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Name and summarize the goals of compensation professionals. (4) 25) What do compensation managers use to recognize differences in the relative net 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 AACSB: Analytic Thinking Learning Obj.: Name and summarize the goals of compensation professionals. (4) 26) 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 AACSB: Analytic Thinking Learning Obj.: Name and summarize the goals of compensation professionals. (4) 27) Which analysis allows business professionals to determine where they currently stand in the market based on both the external market context and internal factors?

A) market analysis B) comparative analysis C) 360 degree analysis D) strategic analysis Answer: D Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Name and summarize the goals of compensation professionals. (4)

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28) 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 AACSB: Analytic Thinking Learning Obj.: Name and summarize the goals of compensation professionals. (4) 29) These build upon pay grades and include maximum, minimum, and mid-point pay rates for jobs in particular pay grades.

A) pay ranges B) pay slopes C) piece rates D) pay determinates Answer: A Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Name and summarize the goals of compensation professionals. (4) 30) Which of the following are stakeholders within a company?

A) line managers B) executives C) unions D) all of the above Answer: D Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Identify the stakeholders of the compensation and summarize their stake in the work compensation professionals perform. (5) 31) ________ compensation refers to the mental state of employees as a result of their performance on the job.

Answer: Intrinsic Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Describe what compensation is. (1) 32) ________ pay systems reward employees with base pay raises according to their length of service on the job.

Answer: Seniority Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Describe what compensation is. (1) 8 © Pearson Education Limited 2015

33) ________ decisions are made in order to support the fulfillment of strategic decisions.

Answer: Tactical Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Discuss at least two differences between strategic and tactical compensation. (3) 34) Strategic management involves distinguishing between ________ and ________ in attempting to achieve company goals, thus making strategic management an imprecise process.

Answer: threats, opportunities Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Discuss at least two differences between strategic and tactical compensation. (3) 35) Competitive ________ is the use of company resources (such as capital, technology, and human resources) to promote and sustain competitive advantage.

Answer: strategy Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Discuss at least two differences between strategic and tactical compensation. (3) 36) P&G uses a ________ strategy based on brand image and price premium in between its Iams and Eukanuba brands.

Answer: differentiation Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: Discuss at least two differences between strategic and tactical compensation. (3) 37) Human resource professionals are ________ employees because they exist to provide support services for line employees.

Answer: staff Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Name and summarize the goals of compensation professionals. (4) 38) Companies that are implementing ________ 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 Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Name and summarize the goals of compensation professionals. (4)

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

Answer: termination Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Name and summarize the goals of compensation professionals. (4) 40) Due to recent economic downturn, XYZ Co. decided to shut down one of its appliance manufacturing plants in the United States, and therefore around 300 workers need to be laid off.

XYZ Co. will award these laid off workers with 6 months of ________ pay.

Answer: severence Difficulty: Difficult AACSB: Application of Knowledge Learning Obj.: Name and summarize the goals of compensation professionals. (4) 41) 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. As we will discuss shortly, monetary compensation represents core compensation. 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 AACSB: Synthesis Learning Obj.: Describe what compensation is. (1) 42) How did scientific management methods influence compensation practices?

Answer: Scientific management methods gave rise to the use of piecework plans. Under piecework plans, an employee's compensation depends on the number of units she or he produces over a given period. Specifically, these plans reward employees on the basis of their individual hourly production against an objective output standard, determined by the pace at which manufacturing equipment operates. For each hour, workers receive piecework incentives for every item produced over the designated production standard.

Difficulty: Moderate AACSB: Synthesis Learning Obj.: Summarize at least two historical events in the evolution of compensation practice leading to the current strategic compensation era. (2)

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43) 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 their 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 their 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: Moderate AACSB: Analytic Thinking Learning Obj.: Identify the stakeholders of the compensation and summarize their stake in the work compensation professionals perform. (5) 44) 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 jobs 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 AACSB: Analytic Thinking Learning Obj.: Name and summarize the goals of compensation professionals. (4)

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Strategic Compensation, 8e, Global Edition (Martocchio) Chapter 2 Contextual Influences on Compensation Practice 1) This 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 AACSB: Analytic Thinking Learning Obj.: List four groups of federal laws that apply to compensation tactics. (1) 2) 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 AACSB: Analytic Thinking Learning Obj.: List four groups of federal laws that apply to compensation tactics. (1) 3) Which branch of the federal government is responsible for interpreting laws?

A) service branch B) legislative branch C) executive branch D) judicial branch Answer: D Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: List four groups of federal laws that apply to compensation tactics. (1) 4) This program grants income to workers who are unable to work due to injuries sustained while on the job.

A) sick leave B) FMLA C) workforce restitution D) workers' compensation Answer: D Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Identify and describe at least one law in each of the four groups of federal laws that apply to compensation practices. (2) 1 © Pearson Education Limited 2015

5) Which of the following is NOT addressed by the Fair Labor Standards Act of 1938?

A) minimum wage B) overtime pay C) executive compensation D) child labor provisions Answer: C Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Identify and describe at least one law in each of the four groups of federal laws that apply to compensation practices. (2) 6) 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 AACSB: Application of Knowledge Learning Obj.: Identify and describe at least one law in each of the four groups of federal laws that apply to compensation practices. (2) 7) An employee has a regular hourly rate equal to $10 and works 45 hours within a period of 7 consecutive days. How much should the employer pay this employee for 45 hours in total?

A) $425 B) $450 C) $475 D) $500 Answer: C Difficulty: Difficult AACSB: Application of Knowledge Learning Obj.: Identify and describe at least one law in each of the four groups of federal laws that apply to compensation practices. (2) 8) What are the revised guidelines introduced in 2004 for determining whether jobs are exempt from FLSA overtime pay provisions called?

A) Glass Ceiling Act B) Overtime Nonexempt Rules C) Bennett Amendment D) Fair Pay Rules Answer: D Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Identify and describe at least one law in each of the four groups of federal laws that apply to compensation practices. (2) 2 © Pearson Education Limited 2015

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

A) a fireman who 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 to his/her home at the end of the workday D) an employee takes a 15-minute rest during work time Answer: C Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: Identify and describe at least one law in each of the four groups of federal laws that apply to compensation practices. (2) 10) 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 AACSB: Analytic Thinking Learning Obj.: Identify and describe at least one law in each of the four groups of federal laws that apply to compensation practices. (2) 11) 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) gender Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Identify and describe at least one law in each of the four groups of federal laws that apply to compensation practices. (2) 12) Intentionally treating women less favorably than men solely 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 AACSB: Analytic Thinking Learning Obj.: Identify and describe at least one law in each of the four groups of federal laws that apply to compensation practices. (2) 3 © Pearson Education Limited 2015

13) A policy that applies to all company employees, but unintentionally hurts a protected group disproportionately, would be what form of discrimination?

A) disparate treatment B) disparate impact C) disparate causality D) situational discrimination Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Identify and describe at least one law in each of the four groups of federal laws that apply to compensation practices. (2) 14) 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 Davis Act Answer: A Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Identify and describe at least one law in each of the four groups of federal laws that apply to compensation practices. (2) 15) The "equal benefit or equal cost principle" is part of which Act? A) The Older Workers Benefits Protection Act (OWBPA) B) The Americans with Disabilities Act (ADA) C) The Employee Retirement Income Security Act of 1974 (ERISA) D) The Fair Labor Standards Act of 1938 (FLSA) Answer: A Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Define at least two federal laws that shape discretionary benefits practices and identify the relevant employee benefits practices to which they apply. (3)

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16) 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 AACSB: Analytic Thinking Learning Obj.: Identify and describe at least one law in each of the four groups of federal laws that apply to compensation practices. (2) 17) This law makes it illegal to discriminate against people with physical and mental disabilities both within and outside employment settings, including public transportation, public accommodations, and employment.

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: A Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Identify and describe at least one law in each of the four groups of federal laws that apply to compensation practices. (2) 18) The Americans with Disabilities Act of 1990 (ADA) applies to companies that employ at least how many workers?

A) 50 B) 25 C) 15 D) 100 Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Identify and describe at least one law in each of the four groups of federal laws that apply to compensation practices. (2)

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19) Jennifer works as a clerk in a company. The essential function of her job is producing memoranda using word processing software. If she develops crippling arthritis, 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 Disability Act of 1990 C) Davis-Bacon Act of 1931 D) Occupational Safety and Health Act of 1970 Answer: B Difficulty: Easy AACSB: Application of Knowledge Learning Obj.: Identify and describe at least one law in each of the four groups of federal laws that apply to compensation practices. (2) 20) 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 according to the Davis-Bacon Act of 1931?

A) minimum wage B) prevailing wage C) prevalent wage D) discretionary wage Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Identify and describe at least one law in each of the four groups of federal laws that apply to compensation practices. (2) 21) Which of the following laws established a law in order to regulate the implementation of various employee benefits and pension programs?

A) The Older Workers Benefit Protection Act (OWBPA) B) The Americans with Disabilities Act of 1990 (ADA) C) The Employee Retirement Income Security Act of 1974 (ERISA) D) The Fair Labor Standards Act of 1938 Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Define at least two federal laws that shape discretionary benefits practices and identify the relevant employee benefits practices to which they apply. (3)

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22) Melissa has been working in XYZ Company for the last 8 years. She got a very attractive job offer from another company in the same industry and decided to leave her current company. She is one hundred percent vested. Which of the following acts guarantees that she cannot lose the pension benefits after she leaves her job in XYZ Company?

A) HIPAA B) ADA C) COBRA D) ERISA Answer: D Difficulty: Difficult AACSB: Application of Knowledge Learning Obj.: Define at least two federal laws that shape discretionary benefits practices and identify the relevant employee benefits practices to which they apply. (3) 23) Which of the following acts was enacted in order to allow employees who are terminated, laid off, or have a change in their employment status to temporarily remain on the employersponsored medical insurance plan?

A) The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) B) The Older Workers Benefit Protection Act (OWBPA) C) The Americans with Disabilities Act of 1990 (ADA) D) The Civil Rights Act of 1991 Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Identify and describe at least one law in each of the four groups of federal laws that apply to compensation practices. (2) 24) Title VII and ADEA do not protect federal government employees. Which one of the following executive orders and/or laws gives similar protection to federal government employees?

A) Family and Medical Leave Act of 1993 B) Executive Order 11478 C) Executive Order 11935 D) The Rehabilitation Act Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize at least three laws that apply exclusively to federal employers' compensation practices. (4)

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25) This provision mandates that federal government agencies take affirmative action in providing jobs for individuals with disabilities.

A) The Rehabilitation Act B) ADA C) Executive Order 11478 D) The Government Employee Rights Act of 1991 Answer: A Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Summarize at least three laws that apply exclusively to federal employers' compensation practices. (4) 26) PPACA and its amendment Health Care and Education Reconciliation Act of 2010 are considered to be the basis for health care reform in the United States. Which of the following is NOT considered to be one of the goals of this health care reform?

A) to reduce the number of uninsured U.S. residents B) to help more children get health coverage C) to increase the fund for the Medicare program D) to give patients access to recommended preventive services without cost Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Identify and describe at least one law in each of the four groups of federal laws that apply to compensation practices. (2) 27) What is it called when the compensation practices in non-unionized companies mirror those found in unionized settings?

A) progressive compensation B) the spillover effect C) concessionary bargaining D) inter-industry compensation differentials Answer: B Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Explain how labor unions influence compensation practices. (5) 28) Which of these was given as a reason why union influence has diminished?

A) foreign automobile manufacturers producing higher quality vehicles B) union companies demonstrating lower profits than non-union companies C) technological advances D) all of the above Answer: D Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Explain how labor unions influence compensation practices. (5)

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29) This type of bargaining occurs when unions shift from bargaining for large pay increases to simply bargaining for greater job security.

A) guarded B) concessionary C) heightened D) compensationary Answer: B Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Explain how labor unions influence compensation practices. (5) 30) Which refers to the set of regulations that applies to taxation in the United States?

A) Federal Unemployment Tax Act B) Tax Equity and Responsibility Act C) Comprehensive Tax Act D) Internal Revenue Code Answer: D Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Define at least two federal laws that shape discretionary benefits practices and identify the relevant employee benefits practices to which they apply. (3) 31) Congress creates and passes laws within the ________ branch of the American government.

Answer: legislative Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: List four groups of federal laws that apply to compensation tactics. (1) 32) During the ________, which took place in the 1930s, a great number of businesses failed and unemployment soared, forcing the government to intervene.

Answer: Great Depression Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: List four groups of federal laws that apply to compensation tactics. (1) 33) 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 AACSB: Analytic Thinking Learning Obj.: Identify and describe at least one law in each of the four groups of federal laws that apply to compensation practices. (2)

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

Answer: Equal Pay Act Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Identify and describe at least one law in each of the four groups of federal laws that apply to compensation practices. (2) 35) 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 AACSB: Analytic Thinking Learning Obj.: Identify and describe at least one law in each of the four groups of federal laws that apply to compensation practices. (2) 36) The ________ in Employment Act of 1967 was passed by Congress in order to protect workers 40 years of age and older from unlawful discrimination.

Answer: Age Discrimination Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Identify and describe at least one law in each of the four groups of federal laws that apply to compensation practices. (2) 37) 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 AACSB: Analytic Thinking Learning Obj.: Identify and describe at least one law in each of the four groups of federal laws that apply to compensation practices. (2) 38) The ________ of 1978 was put in place to prohibit disparate impact discrimination from occurring against pregnant women in all employment practices, as well as to ensure that pregnancy was treated the same as any other form of disability.

Answer: Pregnancy Discrimination Act Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Identify and describe at least one law in each of the four groups of federal laws that apply to compensation practices. (2)

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

Answer: Family and Medical Leave Act (FMLA) Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Identify and describe at least one law in each of the four groups of federal laws that apply to compensation practices. (2) 40) ________ refers to an employee acquiring non-forfeitable rights to an employer's contribution to fund benefits.

Answer: Vesting Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Summarize at least three laws that apply exclusively to federal employers' compensation practices. (4) 41) Summarize the key provisions of the Consolidated Omnibus Budget Reconciliation Act (COBRA).

Answer: The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) was enacted to provide employees with the opportunity to continue receiving their employersponsored medical care insurance temporarily under their employer's plan if their coverage otherwise would cease because of termination, layoff, or other change in employment status.

COBRA applies to a wide variety of employers, with exemptions available only for companies that normally employ fewer than 20 workers, church plans, and plans maintained by the U.S. government.

Under COBRA, individuals may continue their coverage, as well as coverage for their spouses and dependents, for up to 18 months. Coverage may extend for up to 36 months for spouses and dependents facing a loss of employer-provided coverage because of an employee's death, a divorce or legal separation, or certain other qualifying events, which include employee termination, retirement, and layoff.

Companies are permitted to charge COBRA beneficiaries a premium for continuation coverage of up to 102 percent of the cost of the coverage to the plan. The 2 percent markup reflects a charge for administering COBRA. Employers that violate the COBRA requirements are subject to an excise tax per affected employee for each day that the violation continues. In addition, plan administrators who fail to provide required COBRA notices to employees may be personally liable for a civil penalty for each day the notice is not provided.

Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Define at least two federal laws that shape discretionary benefits practices and identify the relevant employee benefits practices to which they apply. (3)

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42) Discuss how the Pension Protection Act strengthens protections for employee defined benefit and defined contribution plans.

Answer: The Pension Protection Act is designed to strengthen protections for employees' company-sponsored retirement plans in at least two ways. The first consideration refers to defined benefit plans and the second refers to defined contribution plans. Defined benefit plans guarantee monthly income for the duration of a retiree's life, which employers typically fund in full. Defined contribution plans are savings plans that employees may contribute to for use during their retirement. First, this law should strengthen the financial condition of the Pension Benefit Guaranty Corporation (PBGC) by requiring that private sector companies that underfund their defined benefit plans pay substantially higher premiums (i.e., cost to provide insurance protection) to insure retirement benefits. After all, experience tells us there is a greater likelihood that the PBGC has had to take over highly underfunded defined benefit plans. The increase in underfunded plans poses a greater risk to the financial solvency of the PBGC. In other words, think of the PBGC as an automobile insurance company and young drivers with automobile insurance as companies with underfunded defined benefit plans. An automobile insurance company charges higher premiums to drivers under age 25 because years of data show that young drivers are more likely to get into multiple serious accidents than older drivers. After getting into a car accident, a person files a claim to the insurance company to pay for the costs of repairs. Of course, repair costs for serious accidents will be much more expensive than for minor accidents. So, insurance companies charge higher premiums to these drivers because they are more likely to file claims. Higher premiums will make it easier for insurance companies to stay financially solvent because they anticipated such claims. The Pension Protection Act law also aims to strengthen the PBGC financial condition by making it more difficult for companies to skip making premium payments. Finally, this new law raises the amount that employers can contribute to pension funding with tax advantages, creating an additional incentive to adequately fund pension plans.

Second, the Pension Protection Act makes it easier for employees to participate in such employer-sponsored defined contribution plans as 401(k) plans. Millions of workers who are eligible to participate in their employers' defined contribution plans do not contribute to them.

There are a variety of reasons why employees choose not to participate; however, a prominent reason is that most individuals feel they do not have sufficient knowledge about how to choose investment options (e.g., a high-risk mutual fund versus a fixed-rate annuity) that will help them earn sufficient money for retirement. In addition, once employees make the decision to participate in these plans and have been making regular contributions, they are not likely to stop.

With these issues in mind, the Pension Protection Act enables companies to enroll their employees automatically in defined contribution plans and provides greater access to professional advice about investing for retirement. In addition, this act requires that companies give multiple investment options to allow employees to select how much risk they are willing to bear. As an aside, risky investments usually have the potential for substantial gains or losses in value. Less risky investments usually have the potential for lower gains or losses. Some companies previously limited investment opportunities to company stock, which exposes employees to substantial investment risk.

Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Define at least two federal laws that shape discretionary benefits practices and identify the relevant employee benefits practices to which they apply. (3) 12 © Pearson Education Limited 2015

43) Explain interindustry wage differentials and discuss the role of unionization on the interindustry differentials.

Answer: There are differences in wages across industries, which are known as interindustry wage differentials. For instance, workers in different industries such as mining, construction, manufacturing, and services earn different wages on average. There are a variety of factors that could explain the wage differentials among different industries. Unionization is considered as one of the important factors of interindustry differentials. On average, highly unionized industries tend to pay higher wages than do nonunion industries. Most highly unionized industries such as manufacturing, construction, and mining are capital intensive therefore, requires employees to learn and use complex production technology. However, we should also consider the fact that unions' influence has been declining since 1980s. In order to promote job security, many unions focus more on promoting job security than securing large pay increases (known as concessionary bargaining). For instance, the union that represents the pilots of Delta Airlines agreed to substantial cuts in base pay and in future retirement income to help the company avoid dissolution. Substantial cuts like the one in this example was very unlikely before the 1980s.

Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Explain how labor unions influence compensation practices. (5)

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Strategic Compensation, 8e, Global Edition (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 AACSB: Analytic Thinking Learning Obj.: Describe seniority and longevity pay practices. (1) 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 AACSB: Analytic Thinking Learning Obj.: Describe seniority and longevity pay practices. (1) 3) This type of pay is defined as added pay for employees that have reached the maximum of a pay grade and are unlikely to move into higher grades.

A) longevity pay B) merit pay C) seniority-based pay D) incentive pay Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Describe seniority and longevity pay practices. (1) 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 skillsets.

C) They help to promote product quality.

D) They reward employees on an objective basis.

Answer: D Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Describe seniority and longevity pay practices. (1)

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5) In 2011, employees were expected to earn average merit increases of what percent?

A) 1.3% B) 2.9% C) 5.2% D) 8.3% Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Describe seniority and longevity pay practices. (1) 6) Which pay system is most widely used in America today?

A) skill based pay B) longevity pay C) merit pay D) seniority pay Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: List at least three elements of merit pay. (2) 7) Which two factors should compensation professionals consider before endorsing the use of merit pay systems?

A) supervisor's rating bias and stock price B) job design and supervisor's rating bias C) job analysis and stock price D) commitment from top management and job design Answer: D Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: List at least three elements of merit pay. (2) 8) This term refers to the minimum pay increase that employees view as a significant change in their compensation amount.

A) halo effect increase B) minimal pay incident C) just-meaningful pay increase D) satisfactory compensation payment Answer: C Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: List at least three elements of merit pay. (2)

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

A) trait system B) goal-oriented system C) comparison system D) behavioral system Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Give examples and definitions of performance appraisal methods. (3) 10) 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 AACSB: Application of Knowledge Learning Obj.: Give examples and definitions of performance appraisal methods. (3) 11) There are 15 animal keepers working for the XYZ Company. 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 AACSB: Application of Knowledge Learning Obj.: Give examples and definitions of performance appraisal methods. (3) 12) Which evaluation system requires that supervisors compare each employee to every other employee, identifying the better performer in each pair?

A) forced distribution B) hierarchical C) paired comparison D) the critical incident technique Answer: C Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Give examples and definitions of performance appraisal methods. (3) 3 © Pearson Education Limited 2015

13) 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 AACSB: Analytic Thinking Learning Obj.: Give examples and definitions of performance appraisal methods. (3) 14) This performance appraisal system is based on employees and supervisors identifying onthe-job behaviors and behavioral outcomes that distinguish successful from unsuccessful performances.

A) behaviorally anchored rating scales B) critical incident technique C) behavioral observation scales D) forced distribution system Answer: B Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Give examples and definitions of performance appraisal methods. (3) 15) Among the various performance appraisal techniques, this appraisal system is the most defensible in court because it is based on actual observable job performance behaviors.

A) behaviorally anchored rating scales B) 360 degree performance appraisals C) paired comparison D) forced distribution Answer: A Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Give examples and definitions of performance appraisal methods. (3) 16) Which performance appraisal system displays illustrations only of positive behaviors shown by an employee in various job dimensions?

A) behaviorally anchored rating scales (BARS) B) behavioral observation scales (BOS) C) management by objectives (MBO) D) critical incident technique (CIT) Answer: B Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Give examples and definitions of performance appraisal methods. (3)

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17) 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 AACSB: Analytic Thinking Learning Obj.: Give examples and definitions of performance appraisal methods. (3) 18) Who determines the particular objectives in a management by objectives (MBO) appraisal system?

A) the employees B) the supervisors C) both the employees and supervisors D) the board of directors Answer: C Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Give examples and definitions of performance appraisal methods. (3) 19) Which performance appraisal tool is most often used with managers and professional employees?

A) trait systems B) management by objectives C) comparison systems D) behavioral systems Answer: B Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Give examples and definitions of performance appraisal methods. (3) 20) Jack works at an auto dealer as a sales professional. 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 the 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 customer satisfaction survey results. What kind of performance appraisal method does this auto dealer use for Jack?

A) trait systems B) comparison systems C) behavioral systems D) goal-oriented systems Answer: D Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: Give examples and definitions of performance appraisal methods. (3) 5 © Pearson Education Limited 2015

21) 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 his/her supervisor and team member ratings. Which of the following best describes this situation?

A) paired comparisons B) positive halo effect C) 360-degree performance appraisals D) first-impression effect Answer: C Difficulty: Easy AACSB: Application of Knowledge Learning Obj.: Give examples and definitions of performance appraisal methods. (3) 22) This term refers to a difference between the output of a human judgment process 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 AACSB: Analytic Thinking Learning Obj.: Give examples and definitions of performance appraisal methods. (3) 23) The halo effect and similar-to-me effects are considered examples of which type of rating error?

A) trait system errors B) contrast errors C) illegal discrimination errors D) bias errors Answer: D Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Give examples and definitions of performance appraisal methods. (3)

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24) A manager expects high levels of performance from a newly hired employee, Ashley, as she graduated from a prestigious Ivy League university. A year later, the manager rates Ashley's job performance higher than her actual performance due to 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 AACSB: Analytic Thinking Learning Obj.: Give examples and definitions of performance appraisal methods. (3) 25) This effect occurs when a rater generalizes good performance behavior in one aspect of the job to all aspects of the job.

A) similar-to-me effect B) first-impression effect C) positive halo effect D) negative halo effect Answer: C Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Give examples and definitions of performance appraisal methods. (3) 26) This type of performance rater's error occurs when the rater generalizes bad behavior on one aspect of the employee's job performance to the employee's over-all performance.

A) negative impression errors B) negative leniency error C) error of strictness D) negative halo effect Answer: D Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Give examples and definitions of performance appraisal methods. (3) 27) A manager in a company gives higher performance appraisal rating to employees whose children attend the same elementary school as his/her children than employees without any children. What kind of rater error was made by the manager?

A) negative halo effect B) first-impression effect C) similar-to-me effect D) contrast errors Answer: C Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: Give examples and definitions of performance appraisal methods. (3) 7 © Pearson Education Limited 2015

28) This type of appraisal error takes place when managers rate employees' performance more highly than they should compared with objective criteria.

A) errors of strictness B) errors of central tendency C) errors of leniency D) contrast errors Answer: C Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Give examples and definitions of performance appraisal methods. (3) 29) With these errors, supervisors tend to rate employees' performances lower than they would be if compared against objective criteria.

A) critical errors B) leniency errors C) strictness errors D) contrast errors Answer: C Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Give examples and definitions of performance appraisal methods. (3) 30) 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 AACSB: Analytic Thinking Learning Obj.: Give examples and definitions of performance appraisal methods. (3) 31) The concept that employee's knowledge and skills can be used to generate superior productivity is known as ________ theory.

Answer: human capital Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Describe seniority and longevity pay practices. (1) 32) The General Schedule (GS) classifies federal government jobs into ________ classifications based on such factors as skill, education, and experience levels.

Answer: 15 Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Describe seniority and longevity pay practices. (1) 8 © Pearson Education Limited 2015

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

Answer: Just-meaningful Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: List at least three elements of merit pay. (2) 34) ________ systems evaluate a given employee's performance against the performance of other employees.

Answer: Comparison Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Give examples and definitions of performance appraisal methods. (3) 35) An appraisal system that requires all employees be placed in groups that span the spectrum from well above average to well below average performance is called a ________ performance appraisal.

Answer: forced distribution Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Give examples and definitions of performance appraisal methods. (3) 36) With the ________ comparative appraisal technique, supervisors compare each employee to every other employee, selecting the best performer in each dyadic instance.

Answer: paired comparison Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Give examples and definitions of performance appraisal methods. (3) 37) Among the various performance appraisal techniques, ________ is the only one based on actual observable job behaviors.

Answer: BARS (behaviorally anchored rating scales) Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Give examples and definitions of performance appraisal methods. (3) 38) ________ by ________ is used mainly for managerial and professional employees and typically evaluates employees' progress toward strategic planning objectives.

Answer: Management, objectives Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Give examples and definitions of performance appraisal methods. (3)

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39) When supervisors rate all employees close to average, they commit errors of ________.

Answer: central tendency Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Give examples and definitions of performance appraisal methods. (3) 40) Job analysis is vital to companies that wish to establish ________ comparison systems.

Answer: internally consistent Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Give examples and definitions of performance appraisal methods. (3) 41) How can empowering employees help strengthen the pay-for-performance link?

Answer: Because formal performance appraisals are conducted periodically–maybe only once per year–supervisors must empower their 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 as they develop. Empowering employees in this fashion should lead to more self-corrective actions rather than reactive courses of action to supervisory feedback and only to the criticisms addressed in performance appraisal meetings.

Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Explain at least three ways compensation professionals can strengthen the payfor-performance link and summarize each one. (4)

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42) 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 definitions of the jobs 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. For example, customer service associates' performance might be judged on the basis of courtesy and knowledge of the company's products or services, and these measures would be content-valid dimensions. Both measures are representative of and relative to the job. On the other hand, knowledge of the company's financial accounting practices would not be a contentvalid criterion of customer service associates' performance. 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 such less-sophisticated approaches as simple graphic rating scales and trait ranges. Regardless of the method, HR departments should provide all supervisors and raters with written definitive 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 they believe to be inaccurate or unjust opens a dialogue between employees and their supervisors that may shed light on the performance appraisal outcomes. Employees may be able to point out instances of their performances that may have been overlooked in the appraisal process or explain particular extreme instances as the result of extraordinary circumstances. For example, an ill parent in need of regular attention is the reason for an employee's absence rather than an employee's deliberate breach of work responsibilities because the employee chose to relax at the beach.

Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Give examples and definitions of performance appraisal methods. (3)

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43) List and discuss four possible limitations of merit pay programs. How can a company overcome these limitations?

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 and 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. A clear performance planning worksheet can help to establish performance expectations.

5) Undesirable social structures 6) Factors other than merit 7) Undesirable competition among employees 8) Little motivational value Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Discuss three possible limitations of merit pay programs. (5)

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Strategic Compensation, 8e, Global Edition (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) Motivates employees to be more productive, but does little to control payroll costs.

C) Awards are granted in one-time payouts.

D) Incentive levels are generally subjective in nature.

Answer: C Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Explain two reasons why companies use incentive pay. (1) 2) Which of the following is true of incentive pay?

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

B) The criteria for judging an award tends 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 AACSB: Analytic Thinking Learning Obj.: Explain two reasons why companies use incentive pay. (1) 3) Customer satisfaction, labor cost savings, materials cost savings, and reduction in accidents were listed as typical performance measures for which type of incentive plan?

A) individual B) group C) company-wide D) executive Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Provide the definition of group incentives and summarize two examples of group incentive plans. (5) 4) In addition to the guaranteed hourly pay rate, John receives incentives for every item produced over the designated production standard. What kind of incentive plan is used in this situation?

A) management incentive plans B) referral plans C) piecework plans D) behavioral encouragement plans Answer: C Difficulty: Easy AACSB: Application of Knowledge Learning Obj.: Define individual incentive plans and give one example. (4)

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5) The concept that a hard working employee is likely to stay at an incentive pay position is better known as which of the following effects?

A) representative effect B) structural effect C) sorting effect D) output effect Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Define individual incentive plans and give one example. (4) 6) Which type of individual incentive plan requires the achievement of multiple, complex objectives without compromising the quality and quantity of output that is generated by employees?

A) piecework plans B) referral plans C) management incentive plans D) behavior encouragement plans Answer: C Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Define individual incentive plans and give one example. (4) 7) To have better safety records, 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 plans B) referral plans C) piecework plans D) behavioral encouragement plans Answer: D Difficulty: Difficult AACSB: Application of Knowledge Learning Obj.: Learning Objective Define individual incentive plans and give one example. (4) 8) 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 AACSB: Analytic Thinking Learning Obj.: Define individual incentive plans and give one example. (4)

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9) On which team is membership relatively permanent and members work full-time?

A) work (process) B) project C) parallel D) innovative Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Provide the definition of group incentives and summarize two examples of group incentive plans. (5) 10) Which of the following is another name for parallel teams?

A) task forces B) innovation teams C) process teams D) work teams Answer: A Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Provide the definition of group incentives and summarize two examples of group incentive plans. (5) 11) John is a design engineer working at an auto manufacturer 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. What type of team is John assigned to?

A) incentive teams B) project teams C) work (process) teams D) parallel teams Answer: D Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: Provide the definition of group incentives and summarize two examples of group incentive plans. (5) 12) This method reinforces cooperation among team members except when team members perceive differences in other members' performances.

A) differential incentive payments approach B) differential payments by ratio of base pay C) equal incentives payment approach D) small group incentive plans Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Provide the definition of group incentives and summarize two examples of group incentive plans. (5) 3 © Pearson Education Limited 2015

13) Which of the following group incentive system was designed to provide employees with financial incentives for increasing customer satisfaction, increasing productivity, lowering costs, or improving safety?

A) gain sharing B) team based C) small group D) profit sharing Answer: A Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Provide the definition of group incentives and summarize two examples of group incentive plans. (5) 14) 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 AACSB: Analytic Thinking Learning Obj.: Provide the definition of group incentives and summarize two examples of group incentive plans. (5) 15) 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 AACSB: Analytic Thinking Learning Obj.: Provide the definition of group incentives and summarize two examples of group incentive plans. (5) 16) 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 AACSB: Analytic Thinking Learning Obj.: Provide the definition of group incentives and summarize two examples of group incentive plans. (5) 4 © Pearson Education Limited 2015

17) Which gain sharing plan focuses on lowering the percentage of labor costs using a valueadded formula?

A) Rucker Plan B) Scanlon Plan C) behavior encouragement plan D) Improshare Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Provide the definition of group incentives and summarize two examples of group incentive plans. (5) 18) 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. What kind of gain sharing program does XYZ Manufacturing Co. use?

A) Improshare B) Rucher C) Scanlon D) SVOP Answer: A Difficulty: Difficult AACSB: Application of Knowledge Learning Obj.: Provide the definition of group incentives and summarize two examples of group incentive plans. (5) 19) This incentive plan has a buy-back provision.

A) ESOPs B) Rucker C) Improshare D) Scanlon Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Provide the definition of group incentives and summarize two examples of group incentive plans. (5)

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20) Which of the following is true regarding group incentive plans as opposed to individual 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 group incentive plans.

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

Answer: D Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Provide the definition of group incentives and summarize two examples of group incentive plans. (5) 21) 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 AACSB: Analytic Thinking Learning Obj.: Offer a definition of company-wide incentive plans with an example. (7) 22) These profit sharing plans award cash to employees on a quarterly or annual basis as part of their regular compensation.

A) recent profit sharing plans B) current profit sharing plans C) deferred profit sharing plans D) anticipated profit sharing plans Answer: B Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Offer a definition of company-wide incentive plans with an example. (7) 23) XYZ Company pays a portion of company profits to its employees. The management offers this incentive plan as one kind of retirement program. What kind of companywide incentive plan does XYZ Co. offer?

A) employee stock ownership plan B) deferred profit sharing plan C) current profit sharing plan D) employee stock option plan Answer: B Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: Offer a definition of company-wide incentive plans with an example. (7) 6 © Pearson Education Limited 2015

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

A) fluctuating first-dollar-of-profits B) differed first-dollar-of-profits C) graduated first-dollar-of-profits D) fixed first-dollar-of-profits Answer: D Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Offer a definition of company-wide incentive plans with an example. (7) 25) This formula for calculating profit sharing awards gives the employees a higher percentage of the profits as the profits increase.

A) fluctuating first-dollar-of-profits B) differed first-dollar-of-profits C) graduated first-dollar-of-profits D) fixed first-dollar-of-profits Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Offer a definition of company-wide incentive plans with an example. (7) 26) With which profit sharing formula does the profit sharing pool become funded only after profits exceed a predetermined level but fall below some established maximum level?

A) fixed first-dollar-of-profits B) profitability threshold C) graduated first-dollar-of-profit D) equal payments Answer: B Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Offer a definition of company-wide incentive plans with an example. (7) 27) Which of the following is true of most general stock compensation plans?

A) The company stock shares represent equity segments of equal value.

B) Employees own the stock upon purchase.

C) Company stock represents partial equity in the company.

D) Stock options refer to what an employee can do with the stock once they purchase it.

Answer: A Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Offer a definition of company-wide incentive plans with an example. (7)

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28) Which of the following performance measures corresponds to individual/ group/ companywide incentive plans respectively?

A) customer satisfaction/quantity of work/market share B) quantity of work/market share/customer satisfaction C) quality of work output/customer satisfaction/market share D) customer satisfaction/market share/quality of work Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Define individual incentive plans and give one example. (4) 29) Which of the following is true about the level of risk involved with incentive pay?

A) The level of risk decreases as incentive pay represents a greater proportion of total core compensation.

B) The level of risk is lower for higher-level employees than those who are lower in the job structure.

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

D) The level of risk is dependent on subjective performance appraisals.

Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: List and summarize five factors in the design of incentive pay programs. (8) 30) 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 AACSB: Analytic Thinking Learning Obj.: Define individual incentive plans and give one example. (4) 31) Another name for incentive pay is ________ pay.

Answer: variable Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Explain two reasons why companies use incentive pay. (1) 32) Individual incentive plans help to promote the relationship between pay and ________.

Answer: performance Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Define individual incentive plans and give one example. (4)

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33) 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 AACSB: Analytic Thinking Learning Obj.: Define individual incentive plans and give one example. (4) 34) ________ teams consist of a group of people assigned to complete a one-time project.

Answer: Project Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Provide the definition of group incentives and summarize two examples of group incentive plans. (5) 35) The sales value of production (SVOP) is the sum of sales ________ plus the value of goods in inventory.

Answer: revenue Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Provide the definition of group incentives and summarize two examples of group incentive plans. (5) 36) The Improshare bonus is based on a ________ ratio formula.

Answer: labor hour Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Provide the definition of group incentives and summarize two examples of group incentive plans. (5) 37) The main disadvantage of group incentive compensation is employee ________.

Answer: turnover Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Discuss the advantages and disadvantages of group incentive plans. (6) 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 AACSB: Analytic Thinking Learning Obj.: Offer a definition of company-wide incentive plans with an example. (7)

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39) In a "pay at ________" profit sharing compensation package, base pay is set below the average for competing employers, and employees' pay can be very meager or very large compared to a similar position elsewhere.

Answer: risk Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Offer a definition of company-wide incentive plans with an example. (7) 40) Stock ________ describe an employee's right to purchase company stock.

Answer: options Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Offer a definition of company-wide incentive plans with an example. (7)

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41) 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 AACSB: Analytic Thinking Learning Obj.: Concisely provide a contrast between incentive pay methods and traditional pay methods (2)

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42) 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 she or he produces 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 AACSB: Analytic Thinking Learning Obj.: List three categories of incentive pay plans. (3)

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43) 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 such a 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, be accessible, and reflect 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 AACSB: Analytic Thinking Learning Obj.: List and summarize five factors in the design of incentive pay programs. (8)

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Strategic Compensation, 8e, Global Edition (Martocchio) Chapter 5 Person-Focused Pay 1) Which pay plan generally rewards employees for acquiring job-related competencies, knowledge, or skills rather than for demonstrating successful job performance?

A) knowledge-based B) incentive C) merit D) person-focused Answer: D Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize the varieties of person-focused pay programs. (4) 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 AACSB: Analytic Thinking Learning Obj.: Summarize the varieties of person-focused pay programs. (4) 3) Pay-for-knowledge and skill-based pay are two types of person-focused pay programs that fall under which pay category?

A) competency-based B) innovation-based C) service based D) stair-step Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize the varieties of person-focused pay programs. (4) 4) This type of pay program rewards employees for successfully learning specific criteria.

A) skill-based B) person-based C) pay-for-knowledge D) incentive Answer: C Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Summarize the varieties of person-focused pay programs. (4)

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

A) knowledge-based B) incentive C) skill-based D) merit-based Answer: C Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Summarize the varieties of person-focused pay programs. (4) 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 AACSB: Application of Knowledge Learning Obj.: Summarize the varieties of person-focused pay programs. (4) 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 AACSB: Analytic Thinking Learning Obj.: Summarize the varieties of person-focused pay programs. (4) 8) In this team, members learn scheduling, coordinating, training, leadership. Which of the following describes this type of work team?

A) self-regulating work groups B) supervisory work teams C) management teams D) non-supervised work teams Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize the varieties of person-focused pay programs. (4)

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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 AACSB: Analytic Thinking Learning Obj.: Summarize the varieties of person-focused pay programs. (4) 10) The level of specialization or expertise an employee brings to a job are what type of skills?

A) work-team B) horizontal C) breadth D) depth Answer: D Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize the varieties of person-focused pay programs. (4) 11) Which company emphasizes globalization, product services, and six sigma quality improvements for corporate growth? This company also offers a renowned two-year global program for high potential HR professionals that includes the opportunity for cross-functional experience.

A) Lincoln Electric B) General Electric C) Nabisco D) Wal-Mart Answer: B Difficulty: Easy AACSB: Application of Knowledge Learning Obj.: Describe the type of setting in which person-focused pay is most likely to be used. (2) 12) Which of the following are the two main reasons given for adopting pay-for-knowledge 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 AACSB: Analytic Thinking Learning Obj.: Name and explain the reasons companies adopt person-focused pay programs.

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

A) Both European and Japanese 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 the European and Japanese economies.

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

Answer: A Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Name and explain the reasons companies adopt person-focused pay programs.

(3) 14) 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 pay program?

A) the stair-step model B) the skill blocks model C) the job-point accrual model D) the cross-departmental model Answer: A Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: Name and explain the reasons companies adopt person-focused pay programs.

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

A) the cross-departmental model B) the skill blocks model C) the job-point accrual model D) the stair-step model Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize the varieties of person-focused pay programs. (4)

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16) In this person-focused pay model, employees are rewarded for increasing their skills within a single job family, even if the skills do NOT build on each other.

A) stair-step B) skill blocks C) job-point accrual D) cross-departmental Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize the varieties of person-focused pay programs. (4) 17) 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) stair-step models do not apply to jobs within the same family Answer: B Difficulty: Moderate AACSB: Critical Thinking Learning Obj.: Summarize the varieties of person-focused pay programs. (4) 18) 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 AACSB: Analytic Thinking Learning Obj.: Summarize the varieties of person-focused pay programs. (4) 19) This model is geared to promoting staffing flexibility in a company by training employees in one department with some of the critical skills that are needed to perform effectively in another department.

A) the skill blocks B) the stair-step C) the job-point accrual D) the cross-departmental Answer: D Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize the varieties of person-focused pay programs. (4)

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20) A company that designs, manufactures, and sells only Halloween costumes would probably benefit most from this type of pay program.

A) the cross-departmental model B) the skill blocks model C) the job-point accrual model D) the stair-step model Answer: A Difficulty: Difficult AACSB: Application of Knowledge Learning Obj.: Summarize the varieties of person-focused pay programs. (4) 21) 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 are currently performing.

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

Answer: C Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Contrast person-focused pay with job-based pay. (5) 22) 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 AACSB: Analytic Thinking Learning Obj.: Provide an explanation of the advantages and disadvantages of person-focused pay plans. (6) 23) In the garment factory of XYZ Co., line workers are trained to be able to work at different manufacturing steps such as grading, cutting, sewing and assembling, pressing, etc. XYZ Co.'s strategy of training its workers to do different tasks is an example of which of the following?

A) task identity B) skill variety C) autonomy D) feedback Answer: B Difficulty: Easy AACSB: Application of Knowledge Learning Obj.: Provide an explanation of the advantages and disadvantages of person-focused pay plans. (6)

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24) In a TV set manufacturing facility of XYZ Inc.,there are different assembly lines in which workers focus on certain aspects of production.Senior line workers are capable of producing the TV sets from start to finish. This capability of doing the entire operation from start to finish is an example of which following term?

A) vertical skills B) feedback C) autonomy D) task identity Answer: D Difficulty: Easy AACSB: Application of Knowledge Learning Obj.: Provide an explanation of the advantages and disadvantages of person-focused pay plans. (6) 25) In the XYZ Corp. passenger car manufacturing plant, assembly line station team leaders are allowed to stop the assembly line by pulling a cord available at each station whenever they notice a serious quality problem in the assembly process. This is an example of which of the following?

A) task identity B) skill variety C) autonomy D) feedback Answer: C Difficulty: Easy AACSB: Application of Knowledge Learning Obj.: Provide an explanation of the advantages and disadvantages of person-focused pay plans. (6) 26) Skill variety, task identity, autonomy, and feedback are the elements that make up this theory.

A) job demands B) position requisite C) job characteristics D) position components Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Provide an explanation of the advantages and disadvantages of person-focused pay plans. (6)

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27) According to the job characteristics theory, this core characteristic refers to the amount of freedom, independence, and discretion the employee enjoys in determining how to do the job.

A) skill variety B) feedback C) autonomy D) task identity Answer: C Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Provide an explanation of the advantages and disadvantages of person-focused pay plans. (6) 28) Which of the following is a main reason for the increased costs associated with personfocused pay programs?

A) higher payroll costs B) increased overhead costs C) higher training costs D) all of the above Answer: D Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Provide an explanation of the advantages and disadvantages of person-focused pay plans. (6) 29) This is considered "at the heart" of person-focused pay programs.

A) innovation B) management C) training D) data Answer: C Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Provide an explanation of the advantages and disadvantages of person-focused pay plans. (6) 30) Which company discussed in the chapter tests its employees twice per year and has abnormally high training costs in assessing the skill levels of its employees?

A) McDonald's B) Wal-Mart C) Tiffany's D) Federal Express Answer: D Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: Provide an explanation of the advantages and disadvantages of person-focused pay plans. (6) 8 © Pearson Education Limited 2015

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

Answer: skill-based Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Summarize the varieties of person-focused pay programs. (4) 32) ________ skills refer to similar skills or knowledge.

Answer: Horizontal Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Summarize the varieties of person-focused pay programs. (4) 33) ________ skills are those skills typically considered supervisory.

Answer: Vertical Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Summarize the varieties of person-focused pay programs. (4) 34) ________ of skills is the level of expertise or specialization an employee brings to a job.

Answer: Depth Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize the varieties of person-focused pay programs. (4) 35) ________ pay programs have been used most widely in service and manufacturing industries.

Answer: Person-focused Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize the varieties of person-focused pay programs. (4) 36) Core ________ are often derived from the overall strategic statements of companies and are very general knowledge and skills.

Answer: competencies Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Explain the concept and practice of person-focused pay. (1) 37) A ________ encourages employees to develop skills and learn to perform jobs from different job families.

Answer: job-point accrual Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize the varieties of person-focused pay programs. (4)

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38) ________ pay compensates employees for jobs they currently perform.

Answer: Job-based Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Contrast person-focused pay with job-based pay. (5) 39) ________ is the degree which an employee receives clear and direct information about job performance from his or her employer.

Answer: Feedback Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Provide an explanation of the advantages and disadvantages of person-focused pay plans. (6) 40) Person-focused pay programs depend in large part on well-designed ________ programs.

Answer: training Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Provide an explanation of the advantages and disadvantages of person-focused pay plans. (6) 41) Describe the concept of competencies.

Answer: Many HR professionals and other functional managers (e.g., marketing) comment on the importance of paying employees based on competencies. There unfortunately seem to be as many definitions of competencies as there are professionals' calls for competency-based pay.

Many HR professionals typically refer to competencies as uniquely combined characteristics of the person, including personality, attitudes, knowledge, skills, and behaviors that enable an employee to fulfill job requirements well. Others simply use the terms knowledge and skills as synonyms for competencies. Competency-based pay programs apply to technical, managerial, service, or professionals employees (e.g., HR manager, marketing director) for whom it is difficult to define job performance according to observable or concrete behaviors. For instance, an animal keeper can be observed removing debris from enclosed animal habitats. On the other hand, a compensation director may be responsible for overseeing the ongoing development and implementation of an effective compensation system Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Explain the concept and practice of person-focused pay. (1)

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42) In which settings are person-focused pay programs likely to be found?

Answer: A wide variety of employers have established person-focused pay programs; however, no systematic survey research documents the actual number. Nevertheless, anecdotal information suggests that companies of various sizes use person-focused pay programs. More than half of the companies known to be using this kind of pay system employ between 150 and 2,000 employees.

The absence of detailed evaluative data makes it impossible to conclude whether size is related to the success of these programs. The lack of data is due, in part, to the fact that person-focused pay systems did not become popular until the 1990s, giving little opportunity to determine the long-term effectiveness. However, one study found that a skill-based pay plan in a manufacturing setting increased plant productivity by 58 percent. These programs are most commonly found in continuous process settings (e.g., manufacturing companies that use assembly lines where one employee's job depends on the work of at least one other employee).

Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Describe the type of setting in which person-focused pay is most likely to be used. (2) 43) 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 AACSB: Analytic Thinking Learning Obj.: Name and explain the reasons companies adopt person-focused pay programs.

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Strategic Compensation, 8e, Global Edition (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 AACSB: Analytic Thinking Learning Obj.: Explain the concept of internally consistent compensation systems. (1) 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 AACSB: Analytic Thinking Learning Obj.: Explain the concept of internally consistent compensation systems. (1) 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 AACSB: Analytic Thinking Learning Obj.: Explain the concept of internally consistent compensation systems. (1) 4) 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 AACSB: Analytic Thinking Learning Obj.: Give two examples of job evaluation techniques and briefly summarize each one.

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5) 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 AACSB: Analytic Thinking Learning Obj.: Summarize the practice of job analysis. (2) 6) 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 AACSB: Application of Knowledge Learning Obj.: Summarize the practice of job analysis. (2) 7) Which unit in the job analysis process is the smallest?

A) task B) element C) job D) family Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize the practice of job analysis. (2) 8) In the job analysis process, this term represents a group of positions that are identical with respect to their major tasks.

A) job B) element C) job family D) occupation Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize the practice of job analysis. (2)

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9) This unit of analysis is a group of jobs, which is found at more than one business and a common set of tasks are performed.

A) job family B) occupation C) position D) job group Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize the practice of job analysis. (2) 10) What 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 AACSB: Analytic Thinking Learning Obj.: Summarize the practice of job analysis. (2) 11) Valid and reliable job evaluations result from which two conditions?

A) The results are consistent; using multiple collection methods.

B) The results are consistent; data was taken under similar conditions.

C) data from multiple sources; using multiple collection methods D) data from multiple sources; data was taken under similar conditions Answer: C Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Give two examples of job evaluation techniques and briefly summarize each one.

(4) 12) A job analysis method is ________ if it yields the kind of information that it was designed to provide and accurately assesses each job's duties.

A) reliable B) complete C) valid D) market-based Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize the practice of job analysis. (2)

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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 AACSB: Analytic Thinking Learning Obj.: Summarize the practice of job analysis. (2) 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 AACSB: Analytic Thinking Learning Obj.: Summarize the practice of job analysis. (2) 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 that he or she has 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 AACSB: Application of Knowledge Learning Obj.: Summarize the practice of job analysis. (2) 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 AACSB: Analytic Thinking Learning Obj.: Summarize the practice of job analysis. (2)

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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 AACSB: Analytic Thinking Learning Obj.: Summarize the practice of job analysis. (2) 18) 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 AACSB: Analytic Thinking Learning Obj.: Give two examples of job evaluation techniques and briefly summarize each one.

(4) 19) 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 AACSB: Analytic Thinking Learning Obj.: Give two examples of job evaluation techniques and briefly summarize each one.

(4) 20) Which of the following are the four "universal compensable factors"?

A) cognitive ability, effort, responsibility, working conditions B) cognitive ability, effort, skill, responsibility C) skill, effort, responsibility, working conditions D) skill, effort, cognitive ability, working conditions Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize the practice of job analysis. (2)

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

A) observations B) interviews C) questionnaires D) surveys Answer: D Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Give two examples of job evaluation techniques and briefly summarize each one.

(4) 22) 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. What 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 AACSB: Application of Knowledge Learning Obj.: Give two examples of job evaluation techniques and briefly summarize each one.

(4) 23) 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 AACSB: Analytic Thinking Learning Obj.: Give two examples of job evaluation techniques and briefly summarize each one.

(4)

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24) George owns a small manufacturing plant that produces customized printed circuit boards.

There are about 15 jobs to rate. What type of job-content evaluation approach do you suggest to George?

A) alternation ranking B) simple ranking plans C) paired comparison D) classification plans Answer: B Difficulty: Easy AACSB: Application of Knowledge Learning Obj.: Give two examples of job evaluation techniques and briefly summarize each one.

(4) 25) 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 AACSB: Analytic Thinking Learning Obj.: Give two examples of job evaluation techniques and briefly summarize each one.

(4) 26) What 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 AACSB: Analytic Thinking Learning Obj.: Give two examples of job evaluation techniques and briefly summarize each one.

(4) 27) Sarah works at a federal government agency. Her pay rate is determined by her GS level and work seniority. What 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 AACSB: Application of Knowledge Learning Obj.: Give two examples of job evaluation techniques and briefly summarize each one.

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28) The federal GS classification system is divided into how many classifications?

A) 15 B) 10 C) 6 D) 21 Answer: A Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Give two examples of job evaluation techniques and briefly summarize each one.

(4) 29) Developing internally consistent job structures affects the competitive strategy of a company.

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

A) Internally consistent structures potentially reduce a company's rigidity to respond to moves by the competition.

B) Internally consistent job structures potentially cause the definition of jobs to become less fluid.

C) Internally consistent job structures lead to less routinization.

D) Internally consistent job structures potentially create far more bureaucratization within an organization.

Answer: D Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Explain how internally consistent compensation systems and competitive strategy relate to each other. (5) 30) Which of the following is NOT true for internally consistent compensation systems?

A) jobs that require higher qualifications, and more responsibilities should be paid more than jobs that require lower qualifications and fewer responsibilities B) internally consistent compensation systems are created through job analysis and job evaluation C) internally consistent compensation systems may increase a company's flexibility to respond to changes in competitor's pay practices D) internally consistent compensation structures is the resultant bureaucracy Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Explain how internally consistent compensation systems and competitive strategy relate to each other. (5) 31) ________ are the social context or physical environment where work will be performed.

Answer: Working conditions Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize the practice of job analysis. (2)

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

Answer: job task Difficulty: Difficult AACSB: Application of Knowledge Learning Obj.: Summarize the practice of job analysis. (2) 33) A ________ is a collection of tasks constituting the total work assignment of a single worker.

Answer: position Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Summarize the practice of job analysis. (2) 34) 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 AACSB: Analytic Thinking Learning Obj.: Summarize the practice of job analysis. (2) 35) According to the EEOC, ________ refers to a present competence to perform an observable behavior.

Answer: ability Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Summarize the practice of job analysis. (2) 36) ________ refers to a body of information applied directly to the performance of a function.

Answer: Knowledge Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Summarize the practice of job analysis. (2) 37) ________ information describes physical and social factors that influence the nature of work.

Answer: Work context Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Summarize the practice of job analysis. (2) 38) ________ describe preferences for work environments and outcomes.

Answer: Interests Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize the practice of job analysis. (2)

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

Answer: Basic Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Summarize the practice of job analysis. (2) 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 AACSB: Analytic Thinking Learning Obj.: Give two examples of job evaluation techniques and briefly summarize each one.

(4)

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41) 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 or 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.

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

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Job descriptions usually contain four sections: • Job title • Job summary • Job duties • Worker specifications Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize the practice of job analysis. (2) 42) 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 AACSB: Analytic Thinking Learning Obj.: Give two examples of job evaluation techniques and briefly summarize each one.

(4) 43) 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 AACSB: Analytic Thinking Learning Obj.: Explain the concept of internally consistent compensation systems. (1)

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Strategic Compensation, 8e, Global Edition (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 AACSB: Analytic Thinking Learning Obj.: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems. (1) 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 AACSB: Analytic Thinking Learning Obj.: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems. (1) 3) When examining competitors' compensation offerings, this term is used to describe the percentage of employer compensation costs that are applied to compensation and benefits.

A) mix B) quartile C) standard percentile D) nominal dollars Answer: A Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems. (1)

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4) As of December 2012, U.S. companies spent approximately how much per employee for discretionary benefits?

A) $28,995 B) $20,000 C) $3,050 D) $1,200 Answer: B Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems. (1) 5) This BLS survey provides the quarterly measure of changes in labor and compensation costs and is used as the principle economic indicator for the Federal Reserve.

A) National Compensation Survey B) Employment Cost Index C) Employer Costs for Employee Compensation D) National Benefit Index Answer: B Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems. (1) 6) The NCS provided incidence and extensive data on which two types of compensation benefits?

A) health insurance and retirement B) retirement and stock options C) health insurance and pay D) pay and stock options Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems. (1) 7) 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 AACSB: Analytic Thinking Learning Obj.: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems. (1) 2 © Pearson Education Limited 2015

8) 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 AACSB: Analytic Thinking Learning Obj.: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems. (1) 9) 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 AACSB: Analytic Thinking Learning Obj.: Discuss how compensation professionals integrate job structures with external market pay rates. (2) 10) This causes compensation survey data to become obsolete fairly quickly.

A) the lag time between when the data was collected and used B) pay compression C) changes in the unemployment rate D) changes in the geographic location of the company Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems. (1) 11) 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 AACSB: Application of Knowledge Learning Obj.: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems. (1) 3 © Pearson Education Limited 2015

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

A) deviations B) extremities C) outliers D) variants Answer: C Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems. (1) 13) Which of the following are the two types of central tendency measures that are pertinent to compensation?

A) mode and arithmetic mean B) median and mode C) mode and quartile D) arithmetic mean and median Answer: D Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems. (1) 14) Which of the following are the three measures of dispersion?

A) percentile standard, deviation, arithmetic mean B) standard deviation, quartile, percentile C) quartile, arithmetic mean, standard deviation D) arithmetic mean, percentile, quartile Answer: B Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems. (1) 15) Suppose that a compensation professional would like to calculate the median salary. He orders four salaries as follows: $20,000, $22,000, $24,000, $26,000. What is the median salary for this data set?

A) $21,000 B) $22,000 C) $23,000 D) $24,000 Answer: C Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems. (1) 4 © Pearson Education Limited 2015

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

A) strategic surveys B) external market surveys C) compensation surveys D) internal market surveys Answer: C Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems. (1) 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 AACSB: Analytic Thinking Learning Obj.: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems. (1) 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 AACSB: Application of Knowledge Learning Obj.: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems. (1) 19) What does Quartile 3 represent?

A) the number of figures that are above 25% B) the number of figures that fall below 25% C) the number of figures that are above 75% D) the number of figures that fall below 75% Answer: D Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems. (1) 5 © Pearson Education Limited 2015

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

A) There is a lower frequency of larger values and the median is greater than the mean.

B) There is a higher frequency of larger values and the median is greater than the mean C) There is a lower frequency of larger values and the mean is greater than the median.

D) There is a higher frequency of larger values and the mean is greater than the median Answer: C Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems. (1) 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 AACSB: Analytic Thinking Learning Obj.: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems. (1) 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 AACSB: Analytic Thinking Learning Obj.: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems. (1) 23) In the regression analysis formula, what does the X represent?

A) predicted salary B) job evaluation points C) the slope D) the Y intercept Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Discuss how compensation professionals integrate job structures with external market pay rates. (2)

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24) In regression, 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 AACSB: Analytic Thinking Learning Obj.: Discuss how compensation professionals integrate job structures with external market pay rates. (2) 25) Compensation professionals in XYZ Company use regression analysis to determine the pay rates of its marketing professionals. There are 4 different marketing job titles in 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. What does it mean when the R2 value of this regression turns out to be 0.85?

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) A large amount of the variation in market pay can be explained by company's job structure.

D) A small amount of the variation in market pay can be explained by company's job structure Answer: C Difficulty: Difficult AACSB: Application of Knowledge Learning Obj.: Discuss how compensation professionals integrate job structures with external market pay rates. (2) 26) XYZ Company is a world leader in medical device manufacturing. Aiming to continue its market position in this industry, XYZ Company pursues differentiation strategy. As a result, this company compensates its employees higher than almost all competitors in order to attract and retain best employees. What kind of pay level policy does XYZ Company follow?

A) market match B) market lag C) market lead D) market pay line Answer: C Difficulty: Easy AACSB: Application of Knowledge Learning Obj.: Present the basic concepts of two compensation policy types: pay mix and pay level. (3)

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27) 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. What kind of pay level policy does XYZ Inc. follow?

A) market match B) market lag C) market lead D) market pay line Answer: C Difficulty: Easy AACSB: Application of Knowledge Learning Obj.: Present the basic concepts of two compensation policy types: pay mix and pay level. (3) 28) 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 AACSB: Analytic Thinking Learning Obj.: Present the basic concepts of two compensation policy types: pay mix and pay level. (3) 29) Market lag policies are generally set to which quartile in the salary survey?

A) 1st B) 2nd C) 3rd D) 4th Answer: A Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Present the basic concepts of two compensation policy types: pay mix and pay level. (3) 30) 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 AACSB: Analytic Thinking Learning Obj.: Present the basic concepts of two compensation policy types: pay mix and pay level. (3) 8 © Pearson Education Limited 2015

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

Answer: Relevant labor markets Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems. (1) 32) ________ refers to a group of two or more jobs that are based on similar work characteristics, duties, and responsibilities.

Answer: Occupational classification Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems. (1) 33) HR professionals rely on ________ jobs as reference points for setting pay levels.

Answer: benchmark Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems. (1) 34) The ________ is the middle value in an ordered sequence of numerical data.

Answer: median Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems. (1) 35) ________ represents the amount of spread or dispersion in a set of data.

Answer: Variation Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems. (1) 36) ________ allow compensation professionals to describe the distribution of data based on four groupings.

Answer: Quartiles Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems. (1)

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

Answer: Consumer Price Index (CPI) Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems. (1) 38) ________ 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 AACSB: Analytic Thinking Learning Obj.: Discuss how compensation professionals integrate job structures with external market pay rates. (2) 39) The market ________ policy distinguishes a company from competition by compensating employees less than most competitors.

Answer: lag Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Present the basic concepts of two compensation policy types: pay mix and pay level. (3) 40) The market ________ policy most closely follows the typical market pay rates because companies pay according to the market pay line.

Answer: match Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Present the basic concepts of two compensation policy types: pay mix and pay level. (3)

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41) Explain the three reasons why companies often choose not to develop their own compensation surveys rather than use established 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 the survey asks and select respondent companies to provide the most useful and informative data. Custom survey development should enable employers to monitor the quality of the survey developers' 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 issues. 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 lowest-paid 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 about typical salary levels. 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 such costs as staff salaries and benefits (i.e., for those involved in developing a compensation survey as well as analyzing and interpreting the data), telephone and mail charges (depending on the data collection method), and computers for data analyses.

Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems. (1)

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42) 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 AACSB: Analytic Thinking Learning Obj.: Present the basic concepts of two compensation policy types: pay mix and pay level. (3) 43) 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 one's competitors. The market match policy follows the 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 they can use funds toward capital needs. Companies pursuing a lowest cost strategy would more likely adopt a market lag policy. Companies can realize cost savings by paying lower 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 AACSB: Analytic Thinking Learning Obj.: Present the basic concepts of two compensation policy types: pay mix and pay level. (3)

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Strategic Compensation, 8e, Global Edition (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 AACSB: Analytic Thinking Learning Obj.: Explain the concept of pay structures. (1) 2) What 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 AACSB: Analytic Thinking Learning Obj.: Specify and explain the five steps necessary to construct a pay structure. (2) 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 AACSB: Analytic Thinking Learning Obj.: Specify and explain the five steps necessary to construct a pay structure. (2)

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4) When these 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 spreads B) percentage-based job evaluation point spreads C) pay range spreads D) absolute job evaluation points spreads Answer: D Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Specify and explain the five steps necessary to construct a pay structure. (2) 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 AACSB: Analytic Thinking Learning Obj.: Specify and explain the five steps necessary to construct a pay structure. (2) 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 AACSB: Analytic Thinking Learning Obj.: Specify and explain the five steps necessary to construct a pay structure. (2) 7) In establishing pay grades, which pay rate is established first?

A) minimum pay rate B) midpoint C) third quartile D) maximum pay rate Answer: B Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Specify and explain the five steps necessary to construct a pay structure. (2)

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8) 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) not enough information to determine C) The midpoint will be higher than the market average.

D) The midpoint will be lower than the market average.

Answer: C Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: Specify and explain the five steps necessary to construct a pay structure. (2) 9) If the company adopts a market lag 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) not enough information to determine C) The midpoint will be higher than the market average.

D) The midpoint will be lower than the market average.

Answer: D Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: Specify and explain the five steps necessary to construct a pay structure. (2) 10) 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 AACSB: Analytic Thinking Learning Obj.: Specify and explain the five steps necessary to construct a pay structure. (2) 11) 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. What type of pay rate does John receive?

A) green circle rates B) red circle rate C) midpoint pay rate D) two-tier pay rate Answer: A Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: Specify and explain the five steps necessary to construct a pay structure. (2) 3 © Pearson Education Limited 2015

12) 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 pay B) green circle C) red circle D) multi-tier pay Answer: C Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Specify and explain the five steps necessary to construct a pay structure. (2) 13) How are compa-ratios calculated?

A) dividing the green circle rates midpoint by the normal pay range B) dividing the employee's pay rate by the market line rate C) dividing an employee's pay rate by the pay range midpoint D) dividing the red circle rates by the normal pay range Answer: C Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: Explain the concept of pay structures. (1) 14) Richard's job has a compa-ratio of 0.85. What does this ratio tell about Richard's pay rate?

A) Richard's pay is highly competitive with the market.

B) Richard's pay is not competitive with the market.

C) There is no way to judge the competitiveness of Richard's pay.

D) You need more information to be able to judge Richard's pay.

Answer: B Difficulty: Easy AACSB: Application of Knowledge Learning Obj.: Specify and explain the five steps necessary to construct a pay structure. (2) 15) 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 AACSB: Analytic Thinking Learning Obj.: Discuss at least two considerations in designing merit pay systems. (3)

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16) With which sales compensation plan does the level of pay not vary when sales volume does?

A) commission-only plan B) salary-only (base pay) plan C) salary (base pay)-plus-bonus plan D) salary (base pay)-plus-commission plan Answer: B Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Explain at least two sales compensation plan design considerations. (4) 17) Which scenario would be appropriate for using a salary-only plan?

A) the salesperson is selling high-priced products with long lead times B) the salesperson has substantial influence over sales C) the company is looking to save money due to budget constraints D) the company is looking to create competition among its sales staff Answer: A Difficulty: Difficult AACSB: Application of Knowledge Learning Obj.: Explain at least two sales compensation plan design considerations. (4) 18) This type of sales incentive compensation plan offers the sales person a salary and further compensation if they meet a specific, exceptional sales goal.

A) salary-plus-bonus B) salary-plus-commission C) salary-plus-draw D) salary-plus-graduated commission Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Explain at least two sales compensation plan design considerations. (4) 19) 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 plan B) salary-plus-commission plan C) commission-plus-draw plan D) commission-only plan Answer: B Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: Explain at least two sales compensation plan design considerations. (4)

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20) A recently opened car dealer 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 that a salesperson sells. However, the salesperson should repay the subsistence pay component within a year; otherwise he/she cannot continue in the employment of this dealer. What 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 AACSB: Application of Knowledge Learning Obj.: Explain at least two sales compensation plan design considerations. (4) 21) Which of the following is a loan from the company to the employee that is carried forward indefinitely until the employee sells enough to repay it?

A) commission-plus-draw plan B) a recoverable draw C) a non-recoverable draw D) an interest-free loan Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Explain at least two sales compensation plan design considerations. (4) 22) This type of commission draw acts as a salary because employees are not obligated to repay the loans if they do not sell enough to cover the amount.

A) nonrecurring draw B) safe draw C) nonrecoverable draw D) graduated draw Answer: C Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Explain at least two sales compensation plan design considerations. (4) 23) With which type of sales commission plan does an employee earn a higher rate of commission for all sales made in a given period if the sales level exceeds a predetermined level?

A) commission-plus-draw plan B) straight commission C) multiple-tiered commission D) graduated commission Answer: C Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Explain at least two sales compensation plan design considerations. (4) 6 © Pearson Education Limited 2015

24) In which situation is a commission-only plan best suited?

A) The salesperson has little influence over the sales.

B) The company is following a lowest-cost strategy.

C) Extensive training or expertise is required.

D) The sales cycle is long.

Answer: B Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Explain at least two sales compensation plan design considerations. (4) 25) A company adopting a commissions-oriented sales compensation plan would most likely be pursing which type of competitive strategy?

A) highest quality B) lowest-cost C) differentiation D) fairest-price Answer: B Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: Explain at least two sales compensation plan design considerations. (4) 26) This term describes a set of skills necessary to perform a specific job or a group of similar jobs.

A) skill range B) skill grade C) skill block D) skill structure Answer: C Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Explain the concept of pay structures. (1) 27) 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, they 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 AACSB: Application of Knowledge Learning Obj.: Present a summary of two pay structure variation practices. (6)

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28) Which of the following would NOT be considered as an advantage of broadbanding?

A) elimination of narrow bands broadens employees' job duties and responsibilities B) reduced organizational hierarchies that support job promotions C) reduced management layers that promotes quicker decision making cycles D) greater responsibility for supervisors for administering each employee's compensation within the confines of the broadbands Answer: B Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Present a summary of two pay structure variation practices. (6) 29) 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.

Accordingly, what type of pay structure should Mr. Martinez use?

A) broadbanding B) sales incentives C) two-tiered D) merit pay Answer: C Difficulty: Difficult AACSB: Application of Knowledge Learning Obj.: Discuss at least two considerations in designing merit pay systems. (3) 30) What 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 AACSB: Analytic Thinking Learning Obj.: Present a summary of two pay structure variation practices. (6) 31) ________ assign different pay rates for jobs of unequal worth and provide the basic framework for recognizing differences in individual's contributions.

Answer: Pay structures Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Explain the concept of pay structures. (1) 32) ________ represent the vertical dimension of pay structures.

Answer: Pay ranges Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Explain the concept of pay structures. (1)

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33) The ________ pay value is the halfway mark between the range minimum and maximum rates.

Answer: midpoint Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Explain the concept of pay structures. (1) 34) A ________ is the difference between the maximum and minimum pay rates of a given pay grade.

Answer: range spread Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Explain the concept of pay structures. (1) 35) ________ 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 AACSB: Analytic Thinking Learning Obj.: Explain the concept of pay structures. (1) 36) ________ describe the allocation of monetary resources to fund pay structures.

Answer: Compensation budgets Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Discuss at least two considerations in designing merit pay systems. (3) 37) ________, or lump sum bonuses, lend themselves well to cost containment since these bonuses are not permanent percentage increases on worker base pay levels.

Answer: Nonrecurring merit increases Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Discuss at least two considerations in designing merit pay systems. (3) 38) ________ is a form of compensation based upon a percentage of the selling price of a product or service.

Answer: Commission Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Explain at least two sales compensation plan design considerations. (4) 39) Money that covers the basic living expenses of sales professionals is better known as a ________.

Answer: draw Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Explain at least two sales compensation plan design considerations. (4) 9 © Pearson Education Limited 2015

40) ________ makes sure that employees have at least a minimally acceptable level of skill proficiency upon completion of a training unit.

Answer: Certification Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Describe three main considerations of person-focused pay program design. (5) 41) 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 alone.

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 AACSB: Analytic Thinking Learning Obj.: Present a summary of two pay structure variation practices. (6) 42) 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. (1) 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. (1) Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Explain the concept of pay structures. (1)

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

Answer: Pay compression occurs whenever a company's pay spread between newly hired or less qualified employees, and more qualified job incumbents is small. Companies can work to minimize the occurrence of pay compression by setting its maximum pay rates as close as possible to the maximum pay rates paid by other companies in the labor market 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 AACSB: Analytic Thinking Learning Obj.: Specify and explain the five steps necessary to construct a pay structure. (2)

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44) 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 because these stores send their buyers to manufacturers to purchase lines of products that will be sold in their stores throughout the United States and beyond. 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 entire worldwide operations, it may approach a computer manufacturer such as Dell to purchase the necessary equipment. Given the technical complexity of computerizing a company's worldwide operations, the client would depend on Dell to translate its networking needs into the appropriate configuration of hardware and software. These Dell sales professionals ultimately influence the purchaser's decision to buy.

Competitive Pay Standards within the Industry. A company's compensation mix must be as enticing as that offered by competitors 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, which we addressed earlier. 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. In the case of pharmaceuticals, barriers to entry include the U.S. Food and Drug Administration regulations on testing new products that significantly extend the time from product conception through testing to marketing for general use. 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 servicing activities. An excellent example is again 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 AACSB: Analytic Thinking Learning Obj.: Explain at least two sales compensation plan design considerations. (4)

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Strategic Compensation, 8e, Global Edition (Martocchio) Chapter 9 Discretionary Benefits 1) In 2010, discretionary benefits accounted for as much as what percentage of an employer's total payroll costs?

A) 21.5% B) 50.0% C) 60.5% D) 75.0% Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Give an overview of discretionary benefits. (1) 2) Discretionary benefits are generally divided into which three categories?

A) health benefits, intellectual enhancements, paid time-off B) pension benefits, protection programs, health benefits C) services, paid time-off, protection programs D) intellectual enhancements, health benefits, services Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: List the three broad components of discretionary benefits. (2) 3) Which of the following is an example of a welfare practice?

A) overtime pay B) regular wages C) workers' compensation laws D) employee recreational areas Answer: D Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3) 4) 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) 6 months B) 12 months C) 1 month D) 18 months Answer: A Difficulty: Easy AACSB: Application of Knowledge Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3) 1 © Pearson Education Limited 2015

5) Which of the following is NOT a condition manifesting short-term disability?

A) pregnancy B) recovery from surgery C) recovery from illness D) recovery from major injuries Answer: C Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3) 6) Which of the following conditions is a mental or physical disability for which medical advice, diagnosis, care, or treatment was received during a designated period preceding the beginning of disability insurance coverage?

A) preeligibility condition B) exclusive condition C) eliminating condition D) preexisting condition Answer: D Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3) 7) Which of the following is a feature of short-term disability plans?

A) preexisting conditions B) inclusion provisions C) partial disabilities inclusion D) waiting period Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3) 8) Self-inflicted wounds and drug dependency are generally considered as what in most shortterm disability insurance plans?

A) partial disability provisions B) exclusion provisions C) elimination provisions D) preexisting conditions Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3) 2 © Pearson Education Limited 2015

9) Long-term disability benefits usually pay employees which range of monthly pretax salary?

A) 10% to 20% B) 30 %to 45% C) 50% to 70% D) 80% to 95% Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3) 10) Companies that offer long-term disability insurance plans only require an elimination period that runs how long?

A) 12-18 months B) 1-2 months C) 8-12 months D) 3-6 months Answer: D Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3) 11) Employer sponsored disability plans supplement legally required benefits established by which law?

A) COBRA B) ERISA C) NLRA D) OASDI Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3) 12) What is the most common type of life insurance policy offered by companies?

A) group life insurance B) term life insurance C) whole life insurance D) universal insurance Answer: B Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3)

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13) By what percentage have total healthcare expenditures risen since 1960?

A) 100% B) 500% C) 2000% D) 5000% Answer: D Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3) 14) Unscheduled absenteeism has climbed to its highest levels in XYZ Company last month. In order to reduce the costs associated with unscheduled absenteeism, HR professionals in XYZ Company decided to change 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 single paid time off policy (i.e., 19 days). The management decided to keep funeral leave as a stand-alone policy. What is 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 AACSB: Application of Knowledge Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3) 15) Which of the following is a characteristic of integrated paid time off policies?

A) Such policies distinguish among reasons for absence.

B) Individuals have to justify reason for taking time off.

C) Holiday, vacation, sick leave, and personal leave are combined.

D) Can lead to increased unscheduled absences.

Answer: C Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3)

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16) This policy allows employees to schedule time off without having to justify the reasons and is more effective in controlling absenteeism than other types of absence control policies.

A) personal paid time off B) social service leaves C) sick leaves D) integrated paid time off Answer: D Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3) 17) Which of the following is an aspect of voluntary leaves to meet business needs?

A) given in times of downsizing B) they are paid leaves C) given in times of low production D) they are extended periods of time off Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3) 18) The giving of one's time to support a meaningful cause is better known as what?

A) volunteerism B) self-service C) cause-oriented efforts D) social empowerment Answer: A Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3) 19) Which of the following is true about providing paid time off for volunteer services?

A) They often help promote the company's overall image in the public eye.

B) They have a negative correlation with employee retention.

C) They make it more difficult to balance work and life demands.

D) They take away from commitment to the company.

Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3)

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20) XYZ Company provides a program for its employees who need help dealing with the effects of domestic violence. 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 AACSB: Analytic Thinking Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3) 21) The approximate annual cost of employee assistance programs (EAPs) is usually no more than how much?

A) $200 B) $100 C) $60 D) $10 Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3) 22) Referrals to on-site child care or elder care centers and company-sponsored day care programs are examples of which type of service?

A) employee assistance programs B) family assistance programs C) day care D) cessation programs Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3) 23) This type of flexible work schedule allows employees to work four 10-hour days a week.

A) flextime B) compressed work week C) job sharing D) relaxed work standards Answer: B Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3) 6 © Pearson Education Limited 2015

24) Full or partial reimbursement of training costs is which type of benefit?

A) financial assistance B) employee assistance C) tuition reimbursement D) sabbatical leave Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3) 25) Due to a recent merger with another major airline, ABC Airlines decided to layoff some of its employees. ABC Airlines offers training sessions to teach job search and interviewing techniques to those laid off employees. What 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 AACSB: Application of Knowledge Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3) 26) 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 AACSB: Analytic Thinking Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3)

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27) XYZ Company tries to influence employee food choices by stocking vending machines with nutritional food. They also offer programs to teach stress reduction techniques. What 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 AACSB: Application of Knowledge Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3) 28) Which of the following would be considered an act as 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 AACSB: Application of Knowledge Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3) 29) Smoking cessation, stress reduction, and weight loss programs are examples of which type of employee benefit program?

A) employee assistance B) employee welfare C) wellness D) employee education Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3) 30) Which of the following is a strategic purpose fulfilled by discretionary benefits?

A) accommodating a diverse workforce B) becoming similar to competing firms C) encouraging employee entitlements D) keeping a fixed workforce Answer: A Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Explain the benefits and costs of discretionary benefits. (4) 8 © Pearson Education Limited 2015

31) In the 1940s and 1950s, companies began offering ________ as an alternative to pay hikes in order to motivate employees through greater work benefits.

Answer: welfare practice, welfare benefits Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Explain the benefits and costs of discretionary benefits. (4) 32) ________ replaces income for employees who become unable to work because of sicknesses or accidents.

Answer: Disability insurance Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3) 33) The ________ is the time between the initial date of hire and the time that coverage in a disability insurance program begins.

Answer: preeligibility period Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3) 34) 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 AACSB: Analytic Thinking Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3) 35) ________ life insurance gives protection to the beneficiaries of employees 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.

Answer: Universal Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3) 36) Retirement programs, or ________, provide income to employees and their beneficiaries during some or all of their retirement.

Answer: pension plans Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3) 9 © Pearson Education Limited 2015

37) ________ are paid time off for professional activities, such as a research project or a curriculum development.

Answer: Sabbatical leaves Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3) 38) ________ programs help bring employees to the workplace and back home again by using more energy-efficient forms of transportation.

Answer: Transportation services Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3) 39) ________ 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 AACSB: Analytic Thinking Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3) 40) Employers sponsor ________ to promote employees' physical and psychological health.

Answer: wellness programs Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3)

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41) 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 his or her beneficiaries 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 as long as he or she is younger than the maximum allowed age for coverage.

Whole life insurance pays an amount to the designated beneficiaries of the deceased employee, 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 are term life policies, making the whole life insurance approach an uncommon feature of employer-sponsored insurance programs. From the employee's or his or her 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: Easy AACSB: Analytic Thinking Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3) 42) 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 as do specific policies. The idea is to provide individuals the freedom to schedule time off without justifying the reasons. This freedom should presumably substantially reduce the incidence of unscheduled absences that can be disruptive to the workplace because these policies require advance notice unless sudden illness is the cause (e.g., you went to sleep one evening feeling fine and then wake up the next morning on a scheduled work day with a stomach virus). 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 than other types of absence control policies. 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 AACSB: Analytic Thinking Learning Obj.: Identify and define one example of income protection programs, paid time off, and services. (3)

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43) 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.

Finally, the tax advantage afforded companies from offering particular discretionary benefits has strategic value.

Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Explain the benefits and costs of discretionary benefits. (4)

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Strategic Compensation, 8e, Global Edition (Martocchio) Chapter 10 Employer-Sponsored Retirement Plans and Health Insurance Programs 1) Companies establish retirement plans following which of these three design configurations?

A) defined benefit, defined contribution, hybrid B) qualified benefit, qualified contribution, hybrid C) qualified benefit, nonqualified benefit, hybrid D) funded, unfunded, hybrid Answer: A Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: State the definitions of qualified plans and nonqualified plans and indicate the main difference between them. (1) 2) A new employee comes into your office and asks you how many hours a year he has to work to qualify towards his vesting requirements. What would you tell him?

A) 1,000 B) 1,400 C) 800 D) 1,200 Answer: A Difficulty: Difficult AACSB: Application of Knowledge Learning Obj.: List nine minimum standards for qualified plans. (2) 3) What specifies the rate at which participants accumulate benefits?

A) accrual rules B) combination procedures C) Sarbanes-Oxley D) build-up rules Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: List nine minimum standards for qualified plans. (2) 4) 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 AACSB: Analytic Thinking Learning Obj.: Explain what defined benefit plans are. (3)

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5) What type of retirement plan is a 401(k)?

A) defined contribution B) defined benefit C) qualified benefit D) nonqualified benefit Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: List and summarize two types of defined contribution plans. (5) 6) What type of pension plan commonly includes profit-sharing plans, stock bonus plans, and employee stock ownership plans?

A) defined benefit B) defined contribution C) deferred contribution D) deferred benefit Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: List and summarize two types of defined contribution plans. (5) 7) This type of defined contribution plan, also known as a CODA, permits only private sector or tax-exempt employers' employees to tax defer part of their compensation to the trust of a qualified plan.

A) 401(k) plan B) profit sharing plan C) gain sharing plan D) incentive plan Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: List and summarize two types of defined contribution plans. (5) 8) Which of the following is associated with 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 cannot deduct their contributions from taxable income.

Answer: B Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: List and summarize two types of defined contribution plans. (5)

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9) A company uses graduated first-dollar-of-profits formula for their profit-sharing plans. They choose to share 4% of the first $10 million of after-tax profits and 7% of the after-tax profits in excess of that level. If this company's after-tax profit were $15 million last year, how much of this profit would be distributed to the employees?

A) $1,200,000 B) $1,000,000 C) $750,000 D) $600,000 Answer: C Difficulty: Difficult AACSB: Application of Knowledge Learning Obj.: List and summarize two types of defined contribution plans. (5) 10) Your company asked you to come up with a contribution plan that invests the contributions in company securities and distributes the payouts in stock instead of cash. Which plan would you suggest they use?

A) employee stock option plan (ESOP) B) 401(k)s C) profit sharing plan D) point-of-service plan (POS) Answer: A Difficulty: Difficult AACSB: Application of Knowledge Learning Obj.: List and summarize two types of defined contribution plans. (5) 11) Which of the following represents the most approximate percentage for private sector employees who have access to at least one employer-sponsored health insurance program in 2010?

A) 20% B) 50% C) 70% D) 90% Answer: C Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Identify and summarize three broad classes of health insurance programs. (6)

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12) Which of the following types of insurance plans provides protection against health care expenses in the form of cash benefits paid to the insured or directly to the provider after the services are rendered?

A) point-of-service plans B) managed care plans C) fee-for-service plans D) health savings accounts Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Identify and summarize three broad classes of health insurance programs. (6) 13) Which of the following is NOT a benefit covered by fee-for-service plans?

A) hospitalization benefits B) dentist visits C) physician visits D) surgical benefits Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Identify and summarize three broad classes of health insurance programs. (6) 14) What are the two types of fee-for-service plans?

A) health savings accounts, indemnity plans B) health savings accounts, health reimbursement plans C) health reimbursement plans, indemnity plans D) indemnity plans, self-funded plans Answer: D Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Identify and summarize three broad classes of health insurance programs. (6) 15) This term refers to the percentage of the health bill the insured employee is required to pay.

A) coinsurance B) co-admission C) co-premiums D) co-payment Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Identify and summarize three broad classes of health insurance programs. (6)

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16) What is coinsurance?

A) when both parents have employer-sponsored insurance coverage for their children B) two insurance companies combine to offer a group policy to an employer C) the amount an employee has to pay out-of-pocket before the insurance kicks in D) the percentage of covered expenses paid by the insured Answer: D Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Identify and summarize three broad classes of health insurance programs. (6) 17) This is the condition for which medical advice, diagnosis, care, or treatment was received or recommended during a designated period prior to coverage.

A) preadmission certification B) preexisting condition C) second opinions D) exclusion criteria Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Identify and summarize three broad classes of health insurance programs. (6) 18) 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 AACSB: Analytic Thinking Learning Obj.: Identify and summarize three broad classes of health insurance programs. (6) 19) Common HMO copayment amounts for each doctor's visit vary between A) $15-$50.

B) $0-$3.

C) $50-$75.

D) $100-$150.

Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Identify and summarize three broad classes of health insurance programs. (6)

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20) According to the provisions in her health insurance plan with Get Well Insurance, Ursula's coinsurance payment would be $50 if she goes to Dr. Kitt but will only be $25 if she goes to Dr. Matthew. She probably belongs to what type of insurance plan?

A) point-of-service plan (POS) B) preferred provider organization (PPO) C) health maintenance organization (HMO) D) fee-for-service plan Answer: B Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: Identify and summarize three broad classes of health insurance programs. (6) 21) 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 AACSB: Analytic Thinking Learning Obj.: Identify and summarize three broad classes of health insurance programs. (6) 22) Which of the following types of insurance plans are set up to cover things like dental care, vision care, and prescription drugs?

A) flexible savings plans B) flexible services accounts C) carve-out plans D) health services accounts Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Identify and summarize three broad classes of health insurance programs. (6) 23) Marty's employer has a prescription drug plan that will only make him pay 20% of cost of his prescription if he goes only to certain pharmacies. What type of prescription drug plan does he have?

A) prescription reimbursement plan B) medical reimbursement plan C) mail order prescription drug plan D) prescription card program Answer: D Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: Identify and summarize three broad classes of health insurance programs. (6)

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24) Mia has Parkinson's disease but is on an insurance plan that enables her to have the drugs shipped to her house. She is probably on which type of prescription drug plan?

A) prescription card program B) formulary C) mail order D) medical reimbursement Answer: C Difficulty: Difficult AACSB: Application of Knowledge Learning Obj.: Identify and summarize three broad classes of health insurance programs. (6) 25) What percentage of Americans experience some form of mental illness at least once during their lifetime?

A) 50% B) 45% C) 20% D) 10% Answer: C Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Identify and summarize three broad classes of health insurance programs. (6) 26) Jose invested $6,000 in pre-tax income into this healthcare plan but lost the $780 left in it at the end of the year because he didn't use it. 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 AACSB: Application of Knowledge Learning Obj.: Identify and summarize three broad classes of health insurance programs. (6) 27) This consumer-driven health care option allows employees to contribute pre-tax wages annually to pay for qualified medical expenses, but they will lose the balance not used at year's end.

A) flexible spending accounts B) health reimbursement arrangements C) health savings accounts D) flexible savings accounts Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Briefly state the rationale for consumer-driven health care. (7)

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28) This type of consumer driven health care program allows employees to carry-over the unused funds still in their account.

A) health reimbursement account B) health savings account C) flexible spending account D) flexible savings account Answer: A Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Briefly state the rationale for consumer-driven health care. (7) 29) 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 AACSB: Analytic Thinking Learning Obj.: Briefly state the rationale for consumer-driven health care. (7) 30) Which one of the following is probably the main reason that health reimbursement accounts (HRAs) are particularly appealing to employees with relatively low salaries or hourly wages?

A) the contribution of employees is on a pretax basis B) employees do not contribute to them C) employees forfeit unused balances present at the end of a year D) permits employees to carry unused balances from year to year Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Briefly state the rationale for consumer-driven health care. (7) 31) ________ plans refer to pension plans that do not meet at least one of the minimum standard provisions.

Answer: Nonqualified Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: List nine minimum standards for qualified plans. (2) 32) ________ refers to an employee's nonforfeitable rights to pension benefits.

Answer: Vesting Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: List nine minimum standards for qualified plans. (2)

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33) ________ plans permit employees to defer part of their compensation to the trust of a qualified defined contribution plan.

Answer: Section 401(k) Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Explain what defined contribution plans are. (4) 34) Fixed first-dollar-of-profits, graduated first-dollar-of-profits, and profitability threshold formulas establish ________ contributions.

Answer: employer Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Explain what defined contribution plans are. (4) 35) 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 AACSB: Analytic Thinking Learning Obj.: Explain what defined benefit plans are. (3) 36) ________ are nominal payments an individual makes as a condition of receiving services.

Answer: Copayments Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Identify and summarize three broad classes of health insurance programs. (6) 37) ________ 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 AACSB: Analytic Thinking Learning Obj.: Identify and summarize three broad classes of health insurance programs. (6) 38) Under a preferred provider organization (PPO), higher ________ are set for services rendered by nonnetwork providers to discourage participants from using services outside of the network.

Answer: deductibles Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Identify and summarize three broad classes of health insurance programs. (6)

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39) According to ________ Act of 2008, a plan must calculate only one deductible for treatment related substance use disorders and medical or surgical benefits.

Answer: Addiction Equity Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Identify and summarize three broad classes of health insurance programs. (6) 40) ________ accounts allow employees to pay for specified health care costs not covered by an employer's insurance plan.

Answer: Flexible spending Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Briefly state the rationale for consumer-driven health care. (7) 41) 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 AACSB: Analytic Thinking Learning Obj.: List nine minimum standards for qualified plans. (2)

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42) Provide the definition of defined benefit plans. Then, discuss two reasons for declining participation in defined benefit plan participation.

Answer: Defined benefit plans guarantee retirement benefits specified in the plan document.

This benefit usually is expressed in terms of a monthly sum equal to a percentage of a participant's preretirement pay multiplied by the number of years he or she has worked for the employer.

There are two important explanations for declining participation in defined benefit retirement plan participation. First, there has been a shift in the labor force toward different occupations and industries. There has specifically been a relative decline in employment among full-time workers, union workers, and workers in goods-producing businesses. The decline in full-time workers and increase in part-time workers has led to fewer opportunities for participation in company-sponsored retirement plans. Employers quite simply often employ part-time workers to save benefits costs. The decline in union affiliation (i.e., union members or just part of the bargaining unit) also contributes to the overall trends described earlier.

There is a second reason for changes away from participation in defined benefit plans to defined contribution plans. Defined benefit plans are quite costly to employers compared with defined contribution plans: Companies struggle to fund these plans adequately to ensure that retirees receive entitled benefits for the remainder of their lives. In addition, the Pension Benefit Guaranty Corporation (PBGC) serves as the insurer by taking over pension obligations for companies that terminate their defined benefit plans because of severe financial stress.

Companies with defined benefit plans pay premiums to the PBGC to insure defined benefit plans in the event of severe financial distress. The Pension Protection Act requires that companies that are at high risk of not meeting their pension obligations pay substantially more to insure defined benefit plans, adding to the substantial cost.

Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Explain what defined benefit plans are. (3) 43) Compare and contrast commercial insurance (fee-for-service) and self-funded insurance.

Answer: Although both plans specify areas of coverage, deductibles, and coinsurance rates, the major difference is in how benefits are financed. Commercial insurance companies pay benefits from their financial reserves that are based on the premiums companies and employees pay to receive insurance. With self-funding, companies will pay benefits directly from their own assets.

Companies may choose to self-fund when a company's financial burden associated with covering medical expenses for its employees is less than the cost to subscribe to a commercial insurance company for coverage. However, these companies often lose some of the advantages of going with a commercial carrier, such as pooling.

Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Identify and summarize three broad classes of health insurance programs. (6)

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Strategic Compensation, 8e, Global Edition (Martocchio) Chapter 11 Legally Required Benefits 1) As of September 2012, how much did U.S. companies spend per employee on average to provide legally required benefits?

A) $4,950 B) $495 C) $7,300 D) $730 Answer: A Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Indicate the main benefits and costs of legally required benefits. (3) 2) In 2012, Carnation Candles had 100 employees. Approximately how much did the legally required benefits cost the company that year?

A) $650,000 B) $730,000 C) $890,000 D) $495,000 Answer: D Difficulty: Difficult AACSB: Application of Knowledge Learning Obj.: Indicate the main benefits and costs of legally required benefits. (3) 3) 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 AACSB: Analytic Thinking Learning Obj.: Summarize three main components of legally required benefits. (2) 4) If an employee wants to apply for unemployment benefits, how much will she/he have to have earned in the last four quarters to qualify?

A) $100 total B) $1,000 total C) $5,000 total D) $10,000 total Answer: B Difficulty: Difficult AACSB: Application of Knowledge Learning Obj.: Summarize three main components of legally required benefits. (2) 1 © Pearson Education Limited 2015

5) How often will Jill receive an unemployment check?

A) daily B) weekly C) bi-monthly D) monthly Answer: B Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Summarize three main components of legally required benefits. (2) 6) What is the only state that requires employee contributions under the Federal Unemployment Tax Act (FUTA)?

A) Michigan B) Florida C) Alaska D) California Answer: C Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Summarize three main components of legally required benefits. (2) 7) If the CEO of a new company asked you how much per employee she will be taxed by FUTA, what would you tell her?

A) 3.5% of the first $7,000 B) 6.2% of the first $7,000 C) 6.2% of the first $10,000 D) 3.5% of the first $10,000 Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Indicate the main benefits and costs of legally required benefits. (3) 8) To be fully insured under OASDI, an employee would have to work at least how long?

A) 24 months B) 5 years C) 10 years D) 12 months Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize three main components of legally required benefits. (2)

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9) In 2013, how much would you have to earn to qualify for one quarter of credit for OASDI coverage?

A) $625 for each quarter B) $760 for each quarter C) $920 for each quarter D) $1,126 for each quarter Answer: D Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Summarize three main components of legally required benefits. (2) 10) 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 AACSB: Application of Knowledge Learning Obj.: Summarize three main components of legally required benefits. (2) 11) 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 AACSB: Application of Knowledge Learning Obj.: Summarize three main components of legally required benefits. (2) 12) The average monthly benefit for all retired workers earning old age benefits in 2013 was how much?

A) $425 B) $780 C) $1,261 D) $1,712 Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Indicate the main benefits and costs of legally required benefits. (3)

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13) 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 AACSB: Analytic Thinking Learning Obj.: Summarize three main components of legally required benefits. (2) 14) Medicare Part A is based on what type of health care option?

A) preferred provider plan B) medical savings account C) managed care plan D) fee-for-service Answer: D Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize three main components of legally required benefits. (2) 15) 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 AACSB: Analytic Thinking Learning Obj.: Summarize three main components of legally required benefits. (2) 16) Which of the following is covered by Medicare Part A? A) home health care B) IV drugs C) surgery expenses D) doctor's bills Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize three main components of legally required benefits. (2)

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17) What were the Medicare Part A monthly premiums in 2013?

A) $441 B) $250 C) $600 D) $161 Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Indicate the main benefits and costs of legally required benefits. (3) 18) If Fred signs up for Medicare Part B, what percent of his medical services and supplies will be covered after he has paid his annual deductible?

A) 25% B) 33% C) 60% D) 80% Answer: D Difficulty: Difficult AACSB: Application of Knowledge Learning Obj.: Indicate the main benefits and costs of legally required benefits. (3) 19) Medicare Select is one of the choices under which Medicare Plan?

A) Medicare Prescription Drug Program B) Medicare Advantage C) Medigap D) Medicare+Choice Answer: C Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Summarize three main components of legally required benefits. (2) 20) Which Medicare plan offers enrollees lower premiums in exchange for limiting their choice of health care providers?

A) Medicare+Choice B) Medigap C) Medicare Select D) Medicare Advantage Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize three main components of legally required benefits. (2)

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21) This Medicare Plan was established with the passage of the Balanced Budget Act of 1997 as an alternative to the original program (parts A and B).

A) Medicare Select B) Medicare Prescription Drug Program C) Medicare Advantage D) Medigap Answer: C Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Summarize three main components of legally required benefits. (2) 22) Which Medicare plan allows enrollees to use medical savings accounts?

A) Medicare Advantage B) Medigap C) Medicare Select D) Medicare Prescription Drug Program Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize three main components of legally required benefits. (2) 23) Medicare Prescription Drug Program will cover how much of Silvia's prescription costs after she meets the initial $325 deductible?

A) 60% B) 75% C) 90% D) 50% Answer: B Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Indicate the main benefits and costs of legally required benefits. (3) 24) Thelma is on the Medicare Prescription Drug Program and has just spent over $4,750 out-ofpocket on medications. How much of the prescription costs will Medicare now cover for her?

A) 67% B) 100% C) 50% D) 95% Answer: D Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: Indicate the main benefits and costs of legally required benefits. (3)

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25) Which one of the following is a wrong belief regarding the Social Security System in the United States?

A) The viability of Social Security programs has been a subject of heated debates between Democrats and Republicans across the country.

B) The Social Security taxes paid by today's workers and their employers are used to pay the benefits for today's retirees and other beneficiaries.

C) Social Security taxes paid by employees and their employers are held in interest-bearing accounts set aside by the federal government to meet their own future retirement income needs.

D) The Social Security System is a pay-as-you-go system.

Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize three main components of legally required benefits. (2) 26) MomPop's General Store can avoid paying workers' compensation taxes if it keeps its staff to less than how many employees?

A) 12 B) 50 C) 100 D) 25 Answer: A Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: Summarize three main components of legally required benefits. (2) 27) What is the only state where employers are not required to fund workers' compensation programs?

A) Michigan B) New York C) Texas D) Oregon Answer: C Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Summarize three main components of legally required benefits. (2) 28) 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 AACSB: Application of Knowledge Learning Obj.: Summarize three main components of legally required benefits. (2) 7 © Pearson Education Limited 2015

29) Due to the fact that the costs of benefits has risen so dramatically in recent years, the majority of the companies decided to finance discretionary benefits using A) noncontributory financing.

B) contributory financing.

C) employee-financed benefits.

D) employer-financed benefits.

Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize the five fundamental objectives of employee benefits program design. (4) 30) 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 plan B) flexible benefits plan C) employee-financed plan D) core plus option plan Answer: D Difficulty: Easy AACSB: Application of Knowledge Learning Obj.: Summarize the five fundamental objectives of employee benefits program design. (4) 31) Income discontinuity, caused by the ________, led to the Social Security Act as a means to protect families from financial devastation in the event of unemployment.

Answer: Great Depression Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: In a historical context, discuss at least two main reasons why the U.S. government required certain employee benefits. (1) 32) 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 AACSB: Analytic Thinking Learning Obj.: Summarize three main components of legally required benefits. (2)

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

Answer: 1.45% Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Indicate the main benefits and costs of legally required benefits. (3) 34) ________ plans emphasize cost control by limiting an employee's choice of doctors and hospitals and often pay a higher level of benefits if health care is received from approved providers.

Answer: Managed care Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Indicate the main benefits and costs of legally required benefits. (3) 35) ________ Act contains provisions to make health care more affordable and will slowly eliminate the "donut hole" coverage gap.

Answer: The Patient Protection and Affordable Care Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Indicate the main benefits and costs of legally required benefits. (3) 36) In 2011, the OASDI tax rate was temporarily reduced by 2% for employees, which leads to a ________ percent effective tax rate for employees.

Answer: 4.2 Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Indicate the main benefits and costs of legally required benefits. (3) 37) Violations of an ________ occur when an employer fails to reveal the exposure of one or more workers to harmful substances, or the employer does not disclose a medical condition typically caused by exposure.

Answer: affirmative duty Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize three main components of legally required benefits. (2) 38) ________ occurs when a worker has his or her job status negatively affected or is terminated as a result of filing a workers' compensation claim.

Answer: Retaliation Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Summarize three main components of legally required benefits. (2)

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39) ________ specify insurance rates based on classifications of businesses.

Answer: Rating manuals Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize three main components of legally required benefits. (2) 40) ________ financing implies that the company assumes total costs for each discretionary benefit.

Answer: Noncontributory Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize three main components of legally required benefits. (2) 41) Briefly describe the impetus for the establishment of legally required benefits in the United States.

Answer: As they design benefit programs, HR professionals must address fundamental issues, including: • Who receives coverage • Whether to include retirees in the plan • Whether to deny benefits to employees during their probationary periods • Financing of benefits • Degree of employee choice in determining benefits • Cost containment • Communication Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Summarize the five fundamental objectives of employee benefits program design. (4)

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42) Explain disability benefits under OASDI. Compare it with the workers' compensation.

Answer: Legally required benefits historically provided a form of social insurance. Prompted largely by the rapid growth of industrialization in the United States in the early nineteenth century and the Great Depression of the 1930s, initial social insurance programs were designed to minimize the possibility that individuals who became unemployed or severely injured while working would become destitute. In addition, social insurance programs aimed to stabilize the well-being of dependent family members of injured or unemployed individuals. Furthermore, early social insurance programs were designed to enable retirees to maintain subsistence income levels. These intents of legally required benefits remain intact today.

Legally required benefits currently apply to virtually all U.S. companies, and they "level the playing field," so to speak. These programs are unlikely to directly lead to a competitive advantage for one company over another; however, legally required benefits may indirectly promote competitive advantage for all companies by enabling unemployed individuals, disabled employees, and their dependent family members to participate in the economy as consumers of products and services. The government has a vested interest in promoting a vigorous economy that exhibits regular buying and selling, such that the demand for goods and services does not substantially outpace or fall below the supply of those goods and services. The key to maintaining a vigorous economy is clearly the participation of individuals as consumers of the products and services sold in the marketplace. In this chapter, it will become evident how many elements of employee benefits serve this end.

Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: In a historical context, discuss at least two main reasons why the U.S. government required certain employee benefits. (1) 43) 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. Family and Medical Leave provides employees with job protection in case of family or medical emergency.

Minimizing the costs that are associated with legally required benefits: Implementing workplace safety programs could reduce workers' compensation claims. Workers' compensation claims can also be reduced through health promotion programs. Employer can integrate workers' compensation benefits into the rest of the benefits program. Moreover, employers can contain their costs for unemployment insurance by systematically monitoring the reasons of terminations.

Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize three main components of legally required benefits. (2) 11 © Pearson Education Limited 2015

Strategic Compensation, 8e, Global Edition (Martocchio) Chapter 12 Compensating Executives 1) What does the IRS use the term "key employees" for?

A) for non-discrimination rules in retirement benefits B) for non-discrimination rules in health insurance benefits C) to determine the necessity of top-heavy provisions in employer-sponsored qualified retirement plans D) to determine the necessity of top-heavy provisions in employer-sponsored health insurance plans Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Explain the difference between executive pay with pay for nonexecutives. (1) 2) The IRS considers Sylvia to be a highly compensated employee for Beautiful Pictures, Inc., which means she has at least one of which of the following qualifications in the preceding year?

A) 1% owner in the top paid employee group B) 5% owner in the top paid employee group C) made over $50,000 D) made over $75,000 Answer: B Difficulty: Difficult AACSB: Application of Knowledge Learning Obj.: Explain the difference between executive pay with pay for nonexecutives. (1) 3) 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 AACSB: Analytic Thinking Learning Obj.: List the main components of executive compensation packages. (2) 4) Under the Troubled Assets Relief Program (TARP), banks with financial assistance from the federal government can only deduct how much annually for an executive's pay as a business expense?

A) $100,000 B) $200,000 C) $500,000 D) $1,000,000 Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Explain the difference between executive pay with pay for nonexecutives. (1) 1 © Pearson Education Limited 2015

5) This type of executive bonus plan is similar to the appraisal system used to determine merit increases for non-executive employees.

A) performance-incentive B) target C) performance-allocation D) performance-contingent Answer: D Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: List the main components of executive compensation packages. (2) 6) This type of executive bonus is based on a bonus pool that is determined by a fixed-formula that is not determined by the executive's performance.

A) target plan B) predetermined allocation C) performance-contingent D) discretionary Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: List the main components of executive compensation packages. (2) 7) Which executive bonus amount varies with the extent to which a pre-established minimum performance level is met?

A) target plan B) predetermined allocation C) performance-contingent D) discretionary Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: List the main components of executive compensation packages. (2) 8) As the vice-president, Sheila will receive short-term incentive compensation awards based on which two conditions?

A) her rank and compensation level B) her age and department C) her department and rank D) her age and compensation level Answer: A Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: List the main components of executive compensation packages. (2)

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9) A short-term incentive plan would most likely be used for which company employee?

A) a sanitation worker B) a new employee in training C) a mid-level manager D) the company's CEO Answer: D Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: List the main components of executive compensation packages. (2) 10) What is the advantage of compensation deferment until retirement for a CEO? A) The CEO can benefit from interest rates until retirement.

B) After retirement, the company's stock value will probably be higher.

C) The CEO's income taxes will probably be lower after retirement, so that deferring payment should lead to lower taxation.

D) The CEO will have enough time to make progress on reaching the company's strategic goals.

Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: List the main components of executive compensation packages. (2) 11) Which of the following stock options entitle an executive to purchase company stock in the future for a predetermined price?

A) nonstatutory stock options B) incentive stock options C) restricted stock options D) phantom stock options Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: List the main components of executive compensation packages. (2) 12) These rights provide employees with an opportunity to purchase a number of stocks at a designated price within a specified period of time.

A) stock option B) stock grant C) disposition D) exercise of one's grant Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: List the main components of executive compensation packages. (2)

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13) What 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 AACSB: Analytic Thinking Learning Obj.: List the main components of executive compensation packages. (2) 14) This 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 AACSB: Analytic Thinking Learning Obj.: List the main components of executive compensation packages. (2) 15) This 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 AACSB: Analytic Thinking Learning Obj.: List the main components of executive compensation packages. (2) 16) Which type of stock options does not give executives favorable tax treatment?

A) incentive B) restricted C) nonstatutory D) phantom Answer: C Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: List the main components of executive compensation packages. (2)

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17) Restricted stock generally allows the executives ownership of the stock after how many years?

A) 20-30 B) 5-10 C) 3-5 D) 1-3 Answer: B Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: List the main components of executive compensation packages. (2) 18) An insurance company's board of directors decided to promise Katherine, one of their recently hired senior executives, to pay a bonus that is equal to the value of 10,000 company shares at the time she started to work. What type of compensation arrangement did the board of directors promise?

A) discount stock option plans B) incentive stock options C) phantom stock D) golden parachutes Answer: C Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: List the main components of executive compensation packages. (2) 19) When he became CEO, Duane was given a stock option that does not require him to exercise his options in order to receive income. Which plan is it?

A) stock appreciation rights B) discount stock C) restricted stock D) golden parachute Answer: A Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: List the main components of executive compensation packages. (2) 20) 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 compensation agreement extends pay and benefits for John?

A) discount stock option plans B) incentive stock options C) phantom stock D) golden parachutes Answer: D Difficulty: Easy AACSB: Application of Knowledge Learning Obj.: List the main components of executive compensation packages. (2) 5 © Pearson Education Limited 2015

21) 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 AACSB: Application of Knowledge Learning Obj.: List the main components of executive compensation packages. (2) 22) 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 called A) discretionary bonuses.

B) perquisites.

C) golden parachutes.

D) clawback provisions.

Answer: B Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: List the main components of executive compensation packages. (2) 23) 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 AACSB: Analytic Thinking Learning Obj.: Discuss with examples the principles and processes of setting executive compensation, including the key players and the theoretical explanations for setting executive compensation. (3)

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24) 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 AACSB: Application of Knowledge Learning Obj.: Discuss with examples the principles and processes of setting executive compensation, including the key players and the theoretical explanations for setting executive compensation. (3) 25) The SEC requires compensation information on the CEO and how many of the highest paid executives?

A) 10 B) 7 C) 4 D) 2 Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize the executive compensation disclosure rules and the reasons why they have been established. (4) 26) 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 AACSB: Analytic Thinking Learning Obj.: Summarize the executive compensation disclosure rules and the reasons why they have been established. (4)

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

A) 3 B) 5 C) 7 D) 10 Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize the executive compensation disclosure rules and the reasons why they have been established. (4) 28) 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) There is no simple answer as to what should be the compensation level of this CEO. D) The compensation of this CEO depends only on pretax profit margins, so we need more information to decide on the compensation of this CEO. Answer: C Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Briefly explain the executive compensation controversy as it relates to whether U.S. executives are paid too much. (6) 29) What was the median annual earnings for all U.S. civilian workers in 2009?

A) $45,790 B) $51,980 C) $46,120 D) $41,778 Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Briefly explain the executive compensation controversy as it relates to whether U.S. executives are paid too much. (6)

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30) In 2011, the average CEO earned how much more annually than the average shampooer?

A) 12 times greater B) 38 times greater C) 74 times greater D) 178 times greater Answer: D Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Briefly explain the executive compensation controversy as it relates to whether U.S. executives are paid too much. (6) 31) ________ bonuses are awarded to executives by boards of directors on an elective basis.

Answer: Discretionary Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: List the main components of executive compensation packages. (2) 32) Company stock shares are the main form of executives' ________ compensation.

Answer: deferred Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: List the main components of executive compensation packages. (2) 33) 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 AACSB: Analytic Thinking Learning Obj.: List the main components of executive compensation packages. (2) 34) 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 AACSB: Analytic Thinking Learning Obj.: List the main components of executive compensation packages. (2) 35) ________ provide pay and benefits to executives after a termination that results from a change in ownership or merger.

Answer: Golden parachutes Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: List the main components of executive compensation packages. (2)

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

Answer: Sarbanes-Oxley Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize the executive compensation disclosure rules and the reasons why they have been established. (4) 37) A provision of the ________ established the say-on-pay requirement.

Answer: Dodd-Frank Act Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Concisely present the "say on pay" practice. (5) 38) Shareholders' interests are represented by a ________, who weigh the pros and cons of top executives' decisions.

Answer: board of directors Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Discuss with examples the principles and processes of setting executive compensation, including the key players and the theoretical explanations for setting executive compensation. (3) 39) The actions of executives on behalf of their own self-interest are known as the ________ problem.

Answer: agency Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Discuss with examples the principles and processes of setting executive compensation, including the key players and the theoretical explanations for setting executive compensation. (3) 40) The concept that individuals evaluate their accomplishments by comparing themselves to similar individuals is based on ________ theory.

Answer: social comparison Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Discuss with examples the principles and processes of setting executive compensation, including the key players and the theoretical explanations for setting executive compensation. (3)

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41) 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, including current and deferred components, including golden parachute agreements, at least once every 3 years. Although the say on pay provision guarantees shareholders the right to vote on executive compensation proposals, the vote is nonbinding. That is, the outcome of shareholders' voting does not overrule any compensation decision made by the company's board of directors. The nonbinding vote advises the company's board of directors of possible concerns about the structure of executive compensation packages, including excessive perks and the lack of clarity between compensation and business results.

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.

Similarly, the Dodd-Frank Act specifies independence requirements for advisors to the compensation committee such as compensation consultants and legal counsel. A company's compensation committee must consider whether the fees charged by advisors exceed reasonable limits based on the amount of the fees as a percentage of the company's total revenue. Another consideration is whether an advisor has a business or personal relationship with committee members.

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 AACSB: Analytic Thinking Learning Obj.: Concisely present the "say on pay" practice. (5)

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42) 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 include golden parachute clauses for two reasons. First, golden parachutes limit executives' risks in the event of these unforeseen events. Second, golden parachutes promote recruitment and retention of talented executives.

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. Companies may generally receive tax deductions on golden parachutes that amount to less than several times an executive's average annual compensation for the preceding 5 years.

Platinum parachutes are lucrative awards that compensate departing executives with severance pay, continuation of company benefits, and even stock options. In an ideal world, CEOs will perform on an exemplary basis, making decisions to drive up company profits. As you know, we do not live in a perfect world; sometimes, CEOs do not 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 often 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 give up his or her post.

Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: List the main components of executive compensation packages. (2)

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43) Who are the key players in setting executive compensation? Detail their different roles. How does 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 make final approval of the compensation package.

A compensation committee is comprised of board of directors members within and outside the company. The committee performs 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 their 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. 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 consults 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 AACSB: Analytic Thinking Learning Obj.: Summarize the executive compensation disclosure rules and the reasons why they have been established. (4)

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Strategic Compensation, 8e, Global Edition (Martocchio) Chapter 13 Compensating the Flexible Work Force: Contingent Employees and Flexible Work Schedules 1) According to the most recent data as of this book's publishing, what percentage of the U.S. civilian labor force did contingent and flextime-schedule employees comprise?

A) 4.8% B) 14.2% C) 27.5% D) 48.7% Answer: C Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: List and define each of the four groups of contingent workers and the reasons for U.S. employers' increased reliance on them. (1) 2) A worker, who is considered part-time, works less than how many hours in a week?

A) 30 B) 35 C) 39 D) 25 Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: List and define each of the four groups of contingent workers and the reasons for U.S. employers' increased reliance on them. (1) 3) Contingent workers typically find employment in which of the following industries?

A) automotive B) transportation C) apparel manufacturing D) heavy equipment manufacturing Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: List and define each of the four groups of contingent workers and the reasons for U.S. employers' increased reliance on them. (1)

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4) In 2005, most contingent workers were employed as what?

A) on-call employees B) temporary employees C) leased employees D) independent contractors Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: List and define each of the four groups of contingent workers and the reasons for U.S. employers' increased reliance on them. (1) 5) What is it called when 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 AACSB: Application of Knowledge Learning Obj.: List and define each of the four groups of contingent workers and the reasons for U.S. employers' increased reliance on them. (1) 6) Which type of contingent worker 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 AACSB: Analytic Thinking Learning Obj.: List and define each of the four groups of contingent workers and the reasons for U.S. employers' increased reliance on them. (1) 7) If a company wanted to hire contingent workers as a way to screen workers for possible fulltime employment, which type of worker would the company likely employ?

A) consultants B) temporary C) freelance D) leased Answer: B Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: List and define each of the four groups of contingent workers and the reasons for U.S. employers' increased reliance on them. (1)

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8) Who is responsible for compensating on-call employees?

A) the independent contractor B) the hiring company C) the temporary agency D) the government Answer: B Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Discuss at least one compensation issue and one employee benefits issue for each of the four groups of contingent workers. (2) 9) 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 AACSB: Analytic Thinking Learning Obj.: List and define each of the four groups of contingent workers and the reasons for U.S. employers' increased reliance on them. (1) 10) Their placement fees are either a percentage of the client company's payroll or a fixed fee per employee.

A) temporary agency worker B) independent contractors C) freelancers D) leased employees Answer: D Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Discuss at least one compensation issue and one employee benefits issue for each of the four groups of contingent workers. (2) 11) ARAMARK, who provides cafeteria service workers to a client company, is an example of the utilization of which type of employees?

A) part-time employees B) leased employees C) temporary employees D) independent contractors Answer: B Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: List and define each of the four groups of contingent workers and the reasons for U.S. employers' increased reliance on them. (1) 3 © Pearson Education Limited 2015

12) John is offered to be an adjunct faculty for a semester to teach a statistics class in place of a professor, who is on a sabbatical leave. This example represents which of the following?

A) independent contractor B) on-call arrangement C) job sharing D) leased employee Answer: A Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: List and define each of the four groups of contingent workers and the reasons for U.S. employers' increased reliance on them. (1) 13) What percentage of part-time employees had access to employer-sponsored health insurance programs in 2012?

A) 10% B) 24% C) 50% D) 67% Answer: B Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Discuss at least one compensation issue and one employee benefits issue for each of the four groups of contingent workers. (2) 14) The average monthly health insurance premium for all private sector workers cost companies how much as of March 2012?

A) $107 per employee B) $191 per employee C) $258 per employee D) $467 per employee Answer: D Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Discuss at least one compensation issue and one employee benefits issue for each of the four groups of contingent workers. (2) 15) Temporary employment agencies are responsible for complying with all federal employment legislation, except which one of the following?

A) ADA B) FLSA C) workers' compensation D) ERISA Answer: C Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Discuss at least one compensation issue and one employee benefits issue for each of the four groups of contingent workers. (2) 4 © Pearson Education Limited 2015

16) Ashley was working as a part-time employee in a private company and has just been laid off.

Under which protection will she temporarily 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: C Difficulty: Difficult AACSB: Application of Knowledge Learning Obj.: Discuss at least one compensation issue and one employee benefits issue for each of the four groups of contingent workers. (2) 17) 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 2000 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 1000 hours in a year of service Answer: B Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Discuss at least one compensation issue and one employee benefits issue for each of the four groups of contingent workers. (2) 18) 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 AACSB: Application of Knowledge Learning Obj.: Discuss at least one compensation issue and one employee benefits issue for each of the four groups of contingent workers. (2) 19) Who has the authority to define a "year of service" for pension protection purposes?

A) the human resources department B) the chief executive officer C) the union D) the U.S. Department of Labor Answer: D Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Discuss at least one compensation issue and one employee benefits issue for each of the four groups of contingent workers. (2) 5 © Pearson Education Limited 2015

20) To be covered by FLSA overtime and minimum wage provisions, seasonal employees must work for a company that is open how many months in a year?

A) 4 B) 7 C) 11 D) 12 Answer: B Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Discuss at least one compensation issue and one employee benefits issue for each of the four groups of contingent workers. (2) 21) Since temporary workers are employees of both the temporary employment agency and the client company, the dual employer common law doctrine establishes temporary workers' right to receive which of the following?

A) retirement benefits B) workers' compensation C) health insurance D) employee benefits Answer: B Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Discuss at least one compensation issue and one employee benefits issue for each of the four groups of contingent workers. (2) 22) The safe harbor rule requires that the contingent worker be covered by whose pension plan?

A) the leasing company B) the client company C) depends on the contractual arrangement between the leasing company and the employer D) The employee is responsible for his or her own pension.

Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Discuss at least one compensation issue and one employee benefits issue for each of the four groups of contingent workers. (2)

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23) According to the safe harbor rules, leased employees can make up no more than what percentage of your company's total workforce?

A) 20% B) 10% C) 25% D) 33% Answer: A Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Discuss at least one compensation issue and one employee benefits issue for each of the four groups of contingent workers. (2) 24) The 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 AACSB: Analytic Thinking Learning Obj.: Discuss at least one compensation issue and one employee benefits issue for each of the four groups of contingent workers. (2) 25) What type of test is used to determine if an independent contractor is financially dependent?

A) right to control test B) safe harbor test C) economic reality test D) financial dependence test Answer: C Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Discuss at least one compensation issue and one employee benefits issue for each of the four groups of contingent workers. (2) 26) 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 AACSB: Analytic Thinking Learning Obj.: List the four categories of flexible work schedules. (3) 7 © Pearson Education Limited 2015

27) 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 AACSB: Analytic Thinking Learning Obj.: List the four categories of flexible work schedules. (3) 28) 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 AACSB: Analytic Thinking Learning Obj.: List the four categories of flexible work schedules. (3) 29) What employment issue does the Walling v. A.H. Belo Corporation Supreme Court ruling address?

A) retirement benefits for flexible employees B) overtime pay for flexible employees C) employee benefits for flexible employees D) fixed weekly pay for flexible employees Answer: D Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Summarize one pay and employee benefits issue for flexible work schedules, compressed workweeks, and telecommuting arrangements. (4) 30) What group most strongly opposes the use of contingent workers?

A) liberals B) conservatives C) trade unions D) executives Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Describe at least three reactions unions have about the use of contingent work and flexible work schedule arrangements. (5)

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

Answer: Core employees Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: List and define each of the four groups of contingent workers and the reasons for U.S. employers' increased reliance on them. (1) 32) ________ part-time employees work fewer than 35 hours per week because they are unable to find full-time employment.

Answer: Involuntary Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: List and define each of the four groups of contingent workers and the reasons for U.S. employers' increased reliance on them. (1) 33) 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 AACSB: Analytic Thinking Learning Obj.: List and define each of the four groups of contingent workers and the reasons for U.S. employers' increased reliance on them. (1) 34) 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 AACSB: Analytic Thinking Learning Obj.: List and define each of the four groups of contingent workers and the reasons for U.S. employers' increased reliance on them. (1) 35) The ________ common law doctrine establishes temporary workers' rights to receive workers' compensation.

Answer: dual employer Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Discuss at least one compensation issue and one employee benefits issue for each of the four groups of contingent workers. (2) 36) Companies must use the IRC's ________ test to determine whether individuals are employees or independent contractors.

Answer: right to control Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Discuss at least one compensation issue and one employee benefits issue for each of the four groups of contingent workers. (2) 9 © Pearson Education Limited 2015

37) Carlos works at XYZ Innovations Inc. as a computer scientist. ________ schedules enable Carlos working four 10-hour days.

Answer: Compressed workweek Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: List the four categories of flexible work schedules. (3) 38) ________ 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 AACSB: Analytic Thinking Learning Obj.: List the four categories of flexible work schedules. (3) 39) 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 benefit Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: List the four categories of flexible work schedules. (3) 40) ________ occurs when all members of a group agree on mistaken conclusions due to conformity in sharing the same mind-set.

Answer: Groupthink Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Identify two strategic issues and choices companies have regarding the use of contingent workers. (6)

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41) 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 AACSB: Analytic Thinking Learning Obj.: List and define each of the four groups of contingent workers and the reasons for U.S. employers' increased reliance on them. (1) 42) To which group of workers does the issue of working condition fringe benefits apply?

Describe what 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 AACSB: Analytic Thinking Learning Obj.: Summarize one pay and employee benefits issue for flexible work schedules, compressed workweeks, and telecommuting arrangements. (4)

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43) 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 AACSB: Analytic Thinking Learning Obj.: Identify two strategic issues and choices companies have regarding the use of contingent workers. (6)

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Strategic Compensation, 8e, Global Edition (Martocchio) Chapter 14 Compensation Expatriates 1) What law mandates that management bargain in good faith with labor unions over terms of employment, such as wages?

A) Fair Labor Standards Act of 1938 B) National Labor Relations Act of 1935 C) North American Free Trade Agreement D) North American Treaty Organization Answer: B Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Summarize the four reasons international activities facilitate the attainment of competitive advantage. (1) 2) What does the term repatriation refer to?

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 AACSB: Analytic Thinking Learning Obj.: Summarize the four reasons international activities facilitate the attainment of competitive advantage. (1) 3) Which of the following titles are international employees categorized?

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 AACSB: Analytic Thinking Learning Obj.: Describe the four preliminary considerations compensation professionals should take under advisement before designing international compensation programs. (2)

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4) If your company 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 AACSB: Application of Knowledge Learning Obj.: Describe the four preliminary considerations compensation professionals should take under advisement before designing international compensation programs. (2) 5) 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 AACSB: Analytic Thinking Learning Obj.: Describe the four preliminary considerations compensation professionals should take under advisement before designing international compensation programs. (2) 6) Your company is sending Sheila on a six-month assignment to Sweden. Which method should you use to determine her base pay?

A) headquarters-based B) host country-based C) home-country based D) foreign country-based Answer: C Difficulty: Difficult AACSB: Application of Knowledge Learning Obj.: Explain the three approaches available to companies for setting expatriate employees' base pay. (4) 7) AT&T plans on sending R.J. to Peru to work for at least 3 years. They will probably use which method to set his base pay?

A) host-country-based B) home-country-based C) headquarters-based D) third-country based Answer: A Difficulty: Difficult AACSB: Application of Knowledge Learning Obj.: Explain the three approaches available to companies for setting expatriate employees' base pay. (4) 2 © Pearson Education Limited 2015

8) Since he started at American Eyeful Pictures, Inc., David has worked in Japan, China, and Thailand. The company has probably set his base pay using which method?

A) host-country-based B) home-country-based C) headquarters-based D) third-country based Answer: C Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: Explain the three approaches available to companies for setting expatriate employees' base pay. (4) 9) Which base-pay method works best for expatriates that move from one foreign assignment to another and rarely, if ever, work in their home countries?

A) expatriate-based B) host-country-based C) home-country-based D) headquarters-based Answer: D Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Explain the three approaches available to companies for setting expatriate employees' base pay. (4) 10) Juanita was told that on her first overseas assignment she would be getting a foreign service premium. That probably means she will be there at least how long?

A) 12 months B) 6 months C) 3 months D) 24 months Answer: A Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: Explain the three approaches available to companies for setting expatriate employees' base pay. (4) 11) Andre is going to be stationed overseas for about 18 months, so his 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 AACSB: Analytic Thinking Learning Obj.: List the three main components of international compensation programs, and provide a specific example of each one. (3) 3 © Pearson Education Limited 2015

12) How are hardship allowances usually paid to expatriates?

A) over a two year period B) added to monthly salary amount C) several small payments D) single lump sum Answer: B Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Summarize the three types of incentive payments that are commonly used in international compensation programs. (5) 13) Benjamin is going on his first expatriate assignment to a country considered a hardship location. About how much will you have to increase his base pay?

A) 50% - 70% B) 5% - 35% C) 20% - 40% D) 40% - 50% Answer: B Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Summarize the three types of incentive payments that are commonly used in international compensation programs. (5) 14) 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 AACSB: Analytic Thinking Learning Obj.: Summarize the three types of incentive payments that are commonly used in international compensation programs. (5) 15) 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 AACSB: Analytic Thinking Learning Obj.: Summarize the three types of incentive payments that are commonly used in international compensation programs. (5) 4 © Pearson Education Limited 2015

16) Stephan is going to be getting a mobility premium for going to Saudi Arabia. How are you going to give it to him?

A) when he completes the assignment B) over the length of his assignment C) in 3 installments D) a lump-sum payment Answer: D Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize the three types of incentive payments that are commonly used in international compensation programs. (5) 17) Renata Marie has been given a mobility premium as a reward for moving from one assignment to another. In what form did she receive this premium?

A) lump-sum payment B) monthly payments C) a year-end bonus D) annuity payments Answer: A Difficulty: Difficult AACSB: Application of Knowledge Learning Obj.: Summarize the three types of incentive payments that are commonly used in international compensation programs. (5) 18) 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 AACSB: Analytic Thinking Learning Obj.: Give a description of two standard employee benefits and two illustrations of enhanced benefits for U.S. employees. (6) 19) Which of the following is considered an enhanced benefit for expatriates?

A) emergency leave B) education reimbursement for expatriates' children C) host country holiday pay D) pay for host country vacation days Answer: B Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Give a description of two standard employee benefits and two illustrations of enhanced benefits for U.S. employees. (6)

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20) When determining Ms. Jenkins' relocation assistance amount, what will you need to consider?

A) her distance B) her length of assignment C) her rank in the company D) all of the above Answer: D Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Give a description of two standard employee benefits and two illustrations of enhanced benefits for U.S. employees. (6) 21) Which of the following represent additional paid time off for employees working in hardship locations?

A) rest and relaxation leave benefits B) permissible premiums C) foreign service premiums D) chillaxtion time Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Give a description of two standard employee benefits and two illustrations of enhanced benefits for U.S. employees. (6) 22) Which of the following are used by the State Department to determine the 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 AACSB: Analytic Thinking Learning Obj.: Give a description of two standard employee benefits and two illustrations of enhanced benefits for U.S. employees. (6) 23) Which approach provides expatriates the standard of living that they normally enjoy in the United States?

A) the balance sheet approach B) the cost comparison approach C) the weights and measurements approach D) the retrospective approach Answer: A Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Explain the three approaches available to companies for setting expatriate employees' base pay. (4) 6 © Pearson Education Limited 2015

24) 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 AACSB: Analytic Thinking Learning Obj.: Explain the three approaches available to companies for setting expatriate employees' base pay. (4) 25) When is a goods and services allowance given?

A) to any person willing to work outside of the U.S. B) when there is a high level of stagflation C) when the cost of living is lower in the foreign work location than in the U.S. D) when the cost of living is higher in the foreign work location than in the U.S. Answer: D Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Explain the three approaches available to companies for setting expatriate employees' base pay. (4) 26) The State Department's Index compares the foreign costs of goods and services with which U.S. city?

A) Seattle B) Chicago C) Washington, D.C. D) New York Answer: C Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Explain the three approaches available to companies for setting expatriate employees' base pay. (4) 27) If the local index for Tel Aviv, Israel is 146, what does that mean?

A) The cost of living is 46% higher in Washington, D.C. than it is in Tel Aviv.

B) The cost of living is 146% higher in Washington, D.C. than it is in Tel Aviv.

C) The cost of living is 146% higher in Tel Aviv than Washington, D.C. D) The cost of living is 46% higher in Tel Aviv than Washington, D.C. Answer: D Difficulty: Difficult AACSB: Application of Knowledge Learning Obj.: Explain the three approaches available to companies for setting expatriate employees' base pay. (4) 7 © Pearson Education Limited 2015

28) If the local index in Tegucigalpa, Honduras is 99, what does that mean?

A) The cost of living in Tegucigalpa is 1% lower than in Washington, D.C. B) The cost of living in Tegucigalpa is 99% lower than in Washington, D.C. C) The cost of living in Tegucigalpa is 1% higher than in Washington, D.C. D) The cost of living in Tegucigalpa is 99% higher than in Washington, D.C. Answer: A Difficulty: Difficult AACSB: Application of Knowledge Learning Obj.: Explain the three approaches available to companies for setting expatriate employees' base pay. (4) 29) What happens 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 AACSB: Analytic Thinking Learning Obj.: Explain the three approaches available to companies for setting expatriate employees' base pay. (4) 30) 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 reimburses his employer.

B) his employer reimburses Josh.

C) under tax equalization, neither Josh nor his employer reimburses.

D) foreign government reimburses Josh.

Answer: A Difficulty: Difficult AACSB: Application of Knowledge Learning Obj.: Explain the three approaches available to companies for setting expatriate employees' base pay. (4) 31) ________ 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 AACSB: Analytic Thinking Learning Obj.: Describe the issue of repatriation. (7)

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32) ________ nationals are foreign citizens that work in U.S. companies' branch offices or manufacturing plants in their home countries.

Answer: Host country Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Describe the four preliminary considerations compensation professionals should take under advisement before designing international compensation programs. (2) 33) ________ 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 AACSB: Analytic Thinking Learning Obj.: Describe the four preliminary considerations compensation professionals should take under advisement before designing international compensation programs. (2) 34) U.S. citizens employed in U.S. companies with work assignments outside the United States are better known as ________.

Answer: expatriates Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Describe the four preliminary considerations compensation professionals should take under advisement before designing international compensation programs. (2) 35) An ________ is the price at which one country's currency can be swapped for another.

Answer: exchange rate Difficulty: Easy AACSB: Application of Knowledge Learning Obj.: Explain the three approaches available to companies for setting expatriate employees' base pay. (4) 36) ________ is the increase in prices for consumer goods and services.

Answer: Inflation Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Explain the three approaches available to companies for setting expatriate employees' base pay. (4) 37) The ________ allowance compensates expatriates for their sacrifices while on assignment.

Answer: hardship Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize the three types of incentive payments that are commonly used in international compensation programs. (5)

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38) ________ premiums reward employees for moving from one assignment to another.

Answer: Mobility Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize the three types of incentive payments that are commonly used in international compensation programs. (5) 39) ________ benefits allow for expatriates to take paid time off back in the United States.

Answer: Home leave Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Give a description of two standard employee benefits and two illustrations of enhanced benefits for U.S. employees. (6) 40) Expatriates receive ________ allowances when the cost of living is higher in the country that they work in than it is in the U.S. Answer: goods and services Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Explain the three approaches available to companies for setting expatriate employees' base pay. (4) 41) 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 AACSB: Analytic Thinking Learning Obj.: Summarize the three types of incentive payments that are commonly used in international compensation programs. (5)

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42) Explain headquarters-based method to calculate expatriates based pay. Which incentive might work better for this method?

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 AACSB: Analytic Thinking Learning Obj.: Describe the issue of repatriation. (7) 43) 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 AACSB: Analytic Thinking Learning Obj.: Explain the three approaches available to companies for setting expatriate employees' base pay. (4)

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Strategic Compensation, 8e, Global Edition (Martocchio) Chapter 15 Pay and Benefits Outside the United States 1) Former under-developed countries of the world are experiencing which of these conditions, thus eliciting greater interconnections with U.S. employers?

A) stagnant trade B) economic downturn C) labor shortages D) improved standard of living Answer: D Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Explain the differences between pay and benefits in the United States and in countries around the world. (1) 2) The average hourly cost to pay a manufacturing worker in the United States in 2011 was how much?

A) $17.23 B) $24.91 C) $35.33 D) $48.18 Answer: C Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: State the total costs of hourly compensation in manufacturing settings around the world. (2) 3) In which country do companies incur the highest hourly cost for employing a manufacturing worker?

A) China B) Norway C) United States D) Canada Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: State the total costs of hourly compensation in manufacturing settings around the world. (2)

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4) In which country are hourly compensation costs the lowest?

A) United States B) Norway C) Belgium D) Philippines Answer: D Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: State the total costs of hourly compensation in manufacturing settings around the world. (2) 5) Which one of the following is NOT a characteristic of NAFTA? A) NAALC B) convergence of labor standards C) only Mexico and United States are members D) trade deals Answer: C Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Explain the differences between pay and benefits in the United States and in countries around the world. (1) 6) Which of the following countries has the lowest per capita GDP? A) India B) Mexico C) Brazil D) China Answer: A Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: Explain the differences between pay and benefits in the United States and in countries around the world. (1) 7) Canada can best be defined as which of the following?

A) autocracy B) federal republic C) constitutional monarchy D) communist state Answer: C Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Explain the differences between pay and benefits in the United States and in countries around the world. (1)

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8) 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: D Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: Explain the differences between pay and benefits in the United States and in countries around the world. (1) 9) The origins of the common law governing individual employment contracts in Canada were based on the laws of which country?

A) Italy B) Spain C) Sweden D) England Answer: D Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Explain the differences between pay and benefits in the United States and in countries around the world. (1) 10) What Canadian province has the highest minimum wage?

A) Newfoundland B) British Columbia C) Nunavut D) Alberta Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: List the countries that impose minimum wage rates. (3) 11) Chris has been working in Vancouver, Canada at an accounting firm for the last 10 years.

Which of the following should not be true regarding his paid time off benefits?

A) He is entitled to 8 weeks of paid leave to care for a seriously ill family member (i.e., spouse, common law partner, children, parents).

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 along with a sum of money as vacation pay.

Answer: A Difficulty: Difficult AACSB: Application of Knowledge Learning Obj.: Summarize the paid time off benefits in at least two countries. (4) 3 © Pearson Education Limited 2015

12) In Canada, the amount of vacation pay is equal to what percentage of the employee's pay for the preceding year per week of vacation?

A) 2% B) 4% C) 6% D) 8% Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize the paid time off benefits in at least two countries. (4) 13) Canadian retirement plans are most similar to that of which of the following countries?

A) Brazil B) Italy C) U.S. D) Germany Answer: C Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Briefly summarize the protection benefits such as retirement, health care, and social security in at least two countries. (5) 14) Mexico can be defined as which of the following?

A) constitutional monarchy B) federal republic C) parliamentary democracy D) autocracy Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Explain the differences between pay and benefits in the United States and in countries around the world. (1) 15) Nora has been working at a manufacturing plant in Mexico for the last 18 months. Which of the following is NOT true regarding her paid time off benefits?

A) She is entitled to paid time off during public holidays.

B) She is entitled to 6 weeks of maternity leave with full pay.

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 AACSB: Application of Knowledge Learning Obj.: Summarize the paid time off benefits in at least two countries. (4)

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16) Which of the following country has the strongest economy in South America?

A) Chile B) Argentina C) Brazil D) Columbia Answer: C Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Explain the differences between pay and benefits in the United States and in countries around the world. (1) 17) Brazil's workforce has over how many people?

A) 92 million B) 107 million C) 115 million D) 127 million Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Explain the differences between pay and benefits in the United States and in countries around the world. (1) 18) What percentage of their gross earnings do Brazilian employees put towards social insurance?

A) 1.5% B) 3.7% C) 6.5% D) 8.5% Answer: D Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Briefly summarize the protection benefits such as retirement, health care, and social security in at least two countries. (5) 19) Oliver works as a blue-collar worker in the metalworking industry in Baden-Wurttemberg 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 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 AACSB: Application of Knowledge Learning Obj.: List the countries that impose minimum wage rates. (3)

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20) An employee should receive regular pay during illness for a period of how many weeks in Germany?

A) 4 weeks B) 6 weeks C) 8 weeks D) 10 weeks Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize the paid time off benefits in at least two countries. (4) 21) 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 AACSB: Analytic Thinking Learning Obj.: Summarize the paid time off benefits in at least two countries. (4) 22) 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 a 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 AACSB: Application of Knowledge Learning Obj.: Briefly summarize the protection benefits such as retirement, health care, and social security in at least two countries. (5) 23) Which of the following is NOT one of the top three largest economies in Asia as of 2010?

A) Philippines B) China C) India D) Japan Answer: A Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Explain the differences between pay and benefits in the United States and in countries around the world. (1) 6 © Pearson Education Limited 2015

24) India's labor force has over how many people based on 2012 estimates?

A) 118 million B) 273 million C) 388 million D) 498 million Answer: D Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Explain the differences between pay and benefits in the United States and in countries around the world. (1) 25) Indian per capita expenditure on health care in 2010 was what amount at the international dollar rate?

A) $132 B) $190 C) $650 D) $722 Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Briefly summarize the protection benefits such as retirement, health care, and social security in at least two countries. (5) 26) 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 AACSB: Analytic Thinking Learning Obj.: Explain the differences between pay and benefits in the United States and in countries around the world. (1) 27) Xue has been working at an electronics manufacturing plant in China for the last 5 years.

Which one of the following should NOT be true regarding her paid time off benefits?

A) She is entitled to "home leave" as her husband lives in another city in China.

B) Her employer is obliged to pay all her travel expenses when she visits her husband who lives in another city.

C) She is entitled to a minimum of 90 days maternity leave.

D) During an employer-approved medical treatment period, her salary is based on 50% of the local minimum wage.

Answer: D Difficulty: Moderate AACSB: Application of Knowledge Learning Obj.: Summarize the paid time off benefits in at least two countries. (4) 7 © Pearson Education Limited 2015

28) At least how many days of maternity leave are women entitled to in China?

A) 60 B) 90 C) 100 D) 120 Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize the paid time off benefits in at least two countries. (4) 29) In China, what percentage of local average annual wage for previous year is used to set minimum earnings for employee pension contributions?

A) 50% B) 60% C) 70% D) 80% Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Briefly summarize the protection benefits such as retirement, health care, and social security in at least two countries. (5) 30) In China, per capita expenditure on health was what amount at the international dollar rate in 2010?

A) $255 B) $379 C) $401 D) $478 Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Briefly summarize the protection benefits such as retirement, health care, and social security in at least two countries. (5) 31) The United States, Canada, and Mexico are part of a trade bloc better known as ________.

Answer: NAFTA (North American Free Trade Agreement) Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Explain the differences between pay and benefits in the United States and in countries around the world. (1)

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32) The country with the lowest GDP per capita reviewed in the chapter is ________.

Answer: India Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Explain the differences between pay and benefits in the United States and in countries around the world. (1) 33) Canada has two state-run pension plans: one for ________ provincial residents only and one for the rest of Canada.

Answer: Quebec Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Briefly summarize the protection benefits such as retirement, health care, and social security in at least two countries. (5) 34) 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 AACSB: Analytic Thinking Learning Obj.: Summarize the paid time off benefits in at least two countries. (4) 35) ________ has by far the strongest economy out of all the countries in South America.

Answer: Brazil Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Explain the differences between pay and benefits in the United States and in countries around the world. (1) 36) 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 AACSB: Analytic Thinking Learning Obj.: Explain the differences between pay and benefits in the United States and in countries around the world. (1) 37) In Germany, the minimum wage rate is established by the ________.

Answer: collective bargaining process Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: List the countries that impose minimum wage rates. (3)

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38) In ________, time away from work for pregnant women under the terms of the Maternity Leave Law still counts towards entitlement to vacation time.

Answer: Germany Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Summarize the paid time off benefits in at least two countries. (4) 39) In 2013, ________ is the largest economy in Asia (and growing rapidly).

Answer: China Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Explain the differences between pay and benefits in the United States and in countries around the world. (1) 40) In China, the minimum wage rates are set by ________.

Answer: region Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: List the countries that impose minimum wage rates. (3) 41) Identify the countries that are part of NAFTA and its 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 AACSB: Analytic Thinking Learning Obj.: Explain the differences between pay and benefits in the United States and in countries around the world. (1)

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42) 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 AACSB: Analytic Thinking Learning Obj.: Explain the differences between pay and benefits in the United States and in countries around the world. (1)

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43) 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 AACSB: Analytic Thinking Learning Obj.: Explain the differences between pay and benefits in the United States and in countries around the world. (1)

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Strategic Compensation, 8e, Global Edition (Martocchio) Chapter 16 Challenges Facing Compensation Professionals 1) During which timeframe did the U.S. economy experience the longest recession after World War II? A) between February 2005 and July 2008 B) between December 2008 and January 2010 C) between April 2007 and December 2009 D) between December 2007 and June 2009 Answer: D Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Explain the impact of economic recession and underemployment on compensation practice. (1) 2) How did General Motors and Chrysler respond to lower consumer demand during the Great Recession?

A) by cutting production levels B) by introducing new models C) by advertising more aggressively D) by merging with other companies Answer: A Difficulty: Easy AACSB: Application of Knowledge Learning Obj.: Explain the impact of economic recession and underemployment on compensation practice. (1) 3) According to the Federal Reserve Bank, what is the percentage of industries that have cut back production since the beginning of the Great Recession?

A) 82% B) 86% C) 90% D) 75% Answer: B Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Explain the impact of economic recession and underemployment on compensation practice. (1)

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4) What was the estimated number of underemployed workers in the United States during October-November 2007?

A) slightly more than 7.2 million B) around 6 million C) slightly more than 4.2 million D) slightly less than 3 million Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Explain the impact of economic recession and underemployment on compensation practice. (1) 5) What is the mean hourly wages for all underemployed workers?

A) $11.20 B) $12.80 C) $13.60 D) $14.30 Answer: B Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Explain the impact of economic recession and underemployment on compensation practice. (1) 6) Jane holds a bachelor's degree in sociology and works as a part-time taxi driver. This situation is an example of which of the following?

A) malemployment B) overstaffing C) discrimination D) unemployment Answer: A Difficulty: Easy AACSB: Application of Knowledge Learning Obj.: Explain the impact of economic recession and underemployment on compensation practice. (1) 7) Which one of the following is NOT considered a long-term implication of underemployment?

A) Underemployment may slow down the economic recovery from recession.

B) Underemployment will likely lead to higher spending by companies.

C) Underemployment will most likely lead to a reduced consumption of goods and services.

D) Underemployment will probably result in reduced business production.

Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Explain the impact of economic recession and underemployment on compensation practice. (1)

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8) The gap between productivity and real hourly compensation is the highest between the periods of A) 1947-1973.

B) 1979-1990.

C) 1990-2000.

D) 2000-2011.

Answer: D Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Explain the impact of economic recession and underemployment on compensation practice. (1) 9) Which one of the developing Asian countries has the highest average pay rate?

A) Vietnam B) China C) Indonesia D) Bangladesh Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Point to the reasons for rising wages in China. (2) 10) Which one 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 AACSB: Analytic Thinking Learning Obj.: Point to the reasons for rising wages in China. (2) 11) The goal of health care reform is to reduce the number of uninsured U.S. residents by how much in 2016?

A) 25 million B) 32 million C) 46 million D) 53 million Answer: B Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize the challenges associated with health care reform. (4)

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12) Which of the following is NOT true about the changes brought by PPACA? A) The new legislation will require most employers to provide health care insurance to employees.

B) The lifetime benefits cap will be eliminated.

C) Waiting periods before employees may receive health care coverage will be limited with a maximum of 70 days.

D) The fines will be higher for employers that offer unaffordable health insurance.

Answer: C Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize the challenges associated with health care reform. (4) 13) Tim owns a fruit distribution company and hires around 100 employees. Before PPACA became a law, he did not provide health insurance coverage for the workers. After March 2010, he started to provide the coverage. However, from then on, the costs of his company have been increasing exponentially. Which of the following cannot be one of the ways to limit the rising costs of offering health care coverage?

A) lowering wages to offset the costs of health insurance B) decreasing the size of his workforce C) limiting the waiting periods to receive health care coverage to 90 days (for new workers) D) imposing lifetime benefit caps at $1 million Answer: D Difficulty: Difficult AACSB: Application of Knowledge Learning Obj.: Summarize the challenges associated with health care reform. (4) 14) Which one of the following is NOT true about labor participation rate?

A) Labor participation rate for younger workers is expected to decline.

B) Labor participation rate for older workers is expected to rise.

C) Labor participation rate for women is expected to increase slightly.

D) Labor participation rate for men is expected to increase slightly.

Answer: D Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Describe the influence of changing workforce demographics on employee benefits practice. (5)

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15) Which of the following is a typical benefit preferred by employees with children (male or female, coupled or uncoupled)?

A) life insurance B) insurance with prescription drug benefits C) generous vacation allowances D) physical fitness programs Answer: A Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Describe the influence of changing workforce demographics on employee benefits practice. (5) 16) Which of the following is NOT a typical benefit preferred by older workers?

A) insurance with prescription drug benefits B) generous sick-leave allowances C) flexible work schedules D) disability insurance Answer: C Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Describe the influence of changing workforce demographics on employee benefits practice. (5) 17) ________ refers to a general slowdown in economic activity.

Answer: Economic recession Difficulty: Easy AACSB: Analytic Thinking Learning Obj.: Explain the impact of economic recession and underemployment on compensation practice. (1) 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 AACSB: Analytic Thinking Learning Obj.: Explain the impact of economic recession and underemployment on compensation practice. (1) 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 AACSB: Analytic Thinking Learning Obj.: Explain the impact of economic recession and underemployment on compensation practice. (1)

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20) ________ measures the purchasing power of a dollar.

Answer: Real hourly compensation Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Explain the impact of economic recession and underemployment on compensation practice. (1) 21) ________ is the face value of a dollar.

Answer: Nominal hourly compensation Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Explain the impact of economic recession and underemployment on compensation practice. (1) 22) The U.S. Supreme Court ruling that struck down Section 3 of the Defense of Marriage Act now requires that A) every gay couple receive company sponsored health insurance.

B) federal benefits be provided to married gay couples in states where gay marriage is legal.

C) every state outlaws marriage between same-sex individuals.

D) state benefits be provided to married gay couples.

Answer: B Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Summarize the issue of marriage between same-sex individuals and the U.S. Supreme Court ruling on the Defense of Marriage Act. (6) 23) Say-on-pay provides for which of the following?

A) Shareholders must be given the opportunity to cast an advisory vote on whether they support a proposed executive compensation package.

B) Shareholders must be given the opportunity to cast a binding vote on whether they support a proposed executive compensation package.

C) Employees must be given the chance to express their views on executive compensation to the company board of directors.

D) Boards of directors can veto executive compensation decisions.

Answer: A Difficulty: Difficult AACSB: Analytic Thinking Learning Obj.: Describe the challenges associated with executive compensation. (3)

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24) Discuss some of the ways in which the passage of the Patient Protection and Affordable Care Act (PPACA) will affect the way in which employers provide health care benefits to employees.

Answer: Health care reform will substantially influence the way employers provide health care benefits to employees. Prior to the passage of PPACA, companies generally chose whether to offer health care insurance to employees. The new legislation will require most employers to provide health care insurance to employees; otherwise, they will incur significant financial penalties. Beginning in 2014, if the employers with 50 or more full-time employees fail to offer health insurance coverage, they must pay a penalty to the government that equals $2,000 per employee. These terms represent the general rule, but there are higher fines for employers that offer unaffordable health insurance. It is possible that employers may lower wages to offset the costs of health insurance, decrease the size of their workforce, or, most unfavorably, go out of business.

It is expected that the cost of health care insurance will become more expensive to employers because of certain new requirements. These changes will include the elimination of the lifetime benefits cap. Until this health care reform, employers could choose to control costs by imposing lifetime benefit caps, say, at $1 million. Also previously, employers chose longer waiting periods to limit the rising costs of offering health care coverage. But now, PPACA will also limit waiting periods before new employees may receive health care coverage to a maximum of 90 days.

The expected increased costs associated with PPACA have led many companies to consider whether to offer health insurance at all in spite of the $2,000 per employee penalty for not offering health insurance coverage. Moreover, under the act, companies will be required to pay a 40 percent excise tax, referred to as the "Cadillac" tax, on overly generous benefit plans beginning in 2018. The term comes from the Cadillac car brand, which has signified American luxury since its introduction in the early twentieth century. Most noteworthy, generous plans contain low deductible amounts and generous medical coverage. Employers that offer overly generous plans will be taxed under the premise that such plans encourage participants to overuse and ultimately burden the U.S. health care system.

Difficulty: Moderate AACSB: Analytic Thinking Learning Obj.: Summarize the challenges associated with health care reform. (4)

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25) Briefly discuss the uncertainties brought by health care reform and changing workforce demographics.

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. This policy, still in effect, limits most couples to having one child only. 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 as intended, 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 AACSB: Analytic Thinking Learning Obj.: Point to the reasons for rising wages in China. (2)

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Master Answer Key for Martocchio, sc 8/e Chapter #

Simulation Title

# of Paths to 100%

1

HR

1

3

Organizational Structure

1

4

Motivation

3

16

HR and Diversity

1

Traditiona Traditiona Traditiona l Methods l Methods l Methods, Choosing Choosing and On- and On- On-theUncooper Managing Training a Training the-Job the-Job Job ative Employee Diagnosing the Problem Methods Method Training Training Training Manager Stress [Q1A]=2 [Q1]=1 [Q2]=1 [Q3]=1 [Q4]=2 [Q5]=2 [Q12]=3 [Q13]=3 Evaluating Evaluating the the Addressin Organizati Organizati g Making a onal onal Increased Shared Shared Choosing an Organizational Decision Structure Structure Costs Services Services Form [Q1]=1 [Q2]=3 [Q7]=2 [Q8]=3 [Q9]=3 [Q13]=3 [Q14]=1 Addressin g Sales Profession alism Selecting a Theory [Q1]=3 [Q8]=1 E1 Addressin Addressin Addressin Addressin g Sales g Sales g Sales g the Team Team Profession Commissi Motivatio Motivatio alism on Plan Selecting a Theory [Q1]=1 n [Q2A]=2 n [Q2B]=3 [Q3]=2 [Q4]=3 Addressin Addressin Addressin Addressin g Sales g Sales g Sales g the Team Team Profession Commissi Motivatio Motivatio alism on Plan Selecting a Theory [Q1]=1 n [Q5A]=3 n [Q5B]=3 [Q6]=1 [Q7]=3 Advantage s of Workforce Gender Demograp Is Diversity a Concern?

Diversity hics [Q3]= 1 [Q4]=2, 4 [Q1]=3 [Q1A]=2 [Q2]=3 and 2 [Q3A]=2 [Q3B]=1 or 5 [Q4C]=3

[Q4A]=2

[Q4B]=1

[Q4D]=2

[Q5]=1

[Q6]=2

[Q7B]=2

Answers Needed for 100% Score