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Chapter 08: Strategic Pay Plans
1. Total rewards refers to
A. payroll costs.
B. all forms of pay or other compensation provided to employees.
C. cash payments only.
D. certain forms of pay and rewards to employees.
E. contractual pay methods or fringe benefits to employees.
Answer: B. all forms of pay or other compensation provided to employees.
2. A total rewards approach considers
A. cost constraints.
B. business strategy.
C. individual reward components as part of an integrated whole.
D. employee value.
E. compensation and benefits together.
Answer: C. individual reward components as part of an integrated whole.
3. Work/life programs help employees do their jobs effectively using
A. flexible scheduling and childcare.
B. vacation and holidays.
C. employer-paid insurance.
D. advancement opportunities.
E. recognition programs.
Answer: A. flexible scheduling and childcare.
4. Engagement is
A. providing competitive base pay.
B. transactional rewards which are consistent across competing organizations.
C. a positive emotional connection to the employer and a clear understanding of the strategic
significance of the job.
D. the belief that the organization cares about talent management.
E. relational work experiences.
Answer: C. a positive emotional connection to the employer and a clear understanding of the
strategic significance of the job.

5. The Revlex Company did a salary survey and the results showed that 10 of its key
positions had lower wages compared with similar positions at their key competitors. The
problem the company faces is
A. comparable worth.
B. pay equity.
C. external equity.
D. internal inequity.
E. broadbanding.
Answer: C. external equity.
6. Pay equity laws were enacted in response to
A. pay discrimination against senior citizens.
B. the variety of compensable factors being used to evaluate jobs.
C. the historical undervaluing of "women's work."
D. gender-neutral job evaluation systems.
E. the variety of job evaluation systems being used to evaluate jobs.
Answer: C. the historical undervaluing of "women's work."
7. Important considerations for paying employees include all the following except
A. equity considerations.
B. legal considerations.
C. average age considerations.
D. union considerations.
E. policy considerations.
Answer: C. average age considerations.
8. Compensation policies are usually written by the HR or compensation manager together
with
A. supervisors.
B. employees.
C. stockholders.
D. compensation consultants.
E. senior management.
Answer: E. senior management.

9. Wages must compare favourably with rates in other organizations or an employer will find
it hard to attract and retain qualified employees. This is known as
A. compensation policy.
B. internal equity.
C. wage compensation.
D. external equity.
E. need for equity.
Answer: D. external equity.
10. Pay rates must be equitable for each employee relative to other pay rates inside the
organization. This is known as
A. need for equity.
B. internal equity.
C. compensation plan.
D. external equity.
E. wage compensation.
Answer: B. internal equity.
11. Job evaluation is a technique used to determine
A. performance appraisals of individuals to the group.
B. promotability.
C. merit reviews of individuals to the group.
D. the relative value of an individual's career earnings to the group's.
E. the relative worth of each job.
Answer: E. the relative worth of each job.
12. The basic procedure of job evaluation is to compare the content of jobs in relation to one
another in terms of all of the following except
A. effort.
B. responsibility.
C. working conditions.
D. personality traits.
E. skill.
Answer: D. personality traits.

13. Job evaluation involves comparing jobs to one another based on their content. Job content
is assessed using
A. critical incidence.
B. job design.
C. comparable worth.
D. behavioural anchors.
E. compensable factors.
Answer: E. compensable factors.
14. Jeffrey is the newly hired HR professional who is responsible for evaluating
compensation practices at the company. To determine if there are issues with internal equity,
he has chosen to conduct a job evaluation according to the method popularized by the Hay
consulting firm. Which of the following are the compensable factors he uses to evaluate jobs?
A. skill, effort, problem solving, and working conditions
B. responsibility, skill, effort, and working conditions
C. know-how, problem solving, accountability, and working conditions
D. effort, responsibility, authority, and working conditions
E. knowledge, problem solving, responsibility, and working conditions
Answer: B. responsibility, skill, effort, and working conditions
15. Job evaluation is mostly a judgmental process which requires close cooperation and input
from all of the following except
A. customer responses.
B. compensation specialists.
C. union representatives.
D. supervisors.
E. employees.
Answer: A. customer responses.
16. The process whereby several people meet together who are familiar with the jobs in
question, and who may have different perspectives regarding the nature of the jobs, is called a
A. performance appraisal.
B. job evaluation committee.
C. union negotiating team.
D. management negotiating team.

E. position review committee.
Answer: B. job evaluation committee.
17. The following are all primary functions of the job evaluation committee except
A. evaluating the worth of each job.
B. selecting a job evaluation method.
C. identifying 10 or 15 key benchmark jobs.
D. selecting behavioural anchors.
E. selecting compensable factors.
Answer: D. selecting behavioural anchors.
18. The classification method is widely used
A. in small businesses.
B. in leading-edge Fortune 500 businesses.
C. in the public sector.
D. for technicians/technologists in hospitals.
E. for executive positions that are too difficult to assess using other methods.
Answer: C. in the public sector.
19. The job evaluation method that rates each job relative to all other jobs, usually based on
some overall factor like "job difficulty," is the
A. critical incidence method.
B. factor comparison method.
C. classification method.
D. point method plan.
E. ranking method.
Answer: E. ranking method.
20. The job classification method of job evaluation is a widely used method in which jobs are
categorized into
A. functions.
B. groups.
C. factors.
D. clusters.
E. departments.

Answer: B. groups.
21. The type of job evaluation method where the groups are called classes if they contain
similar jobs is called the
A. ranking method.
B. point method.
C. Hay plan method.
D. job classification method.
E. factor comparison method.
Answer: D. job classification method.
22. Another way to categorize jobs when undertaking the job classification method, other
than using class descriptions, is to
A. draw up a set of classifying rules.
B. rank jobs by compensable factors.
C. rank jobs against one another.
D. assign points to compensable factors.
E. rank jobs from lowest to highest.
Answer: A. draw up a set of classifying rules.
23. A disadvantage of the job classification method of job evaluation is the difficulty in
A. grouping jobs.
B. classifying jobs.
C. writing job descriptions.
D. writing grade descriptions.
E. developing job clusters.
Answer: D. writing grade descriptions.
24. The job evaluation method in which a number of compensable factors are identified, and
then the degree to which each of these factors is present on the job is determined, is the
A. factor comparison method.
B. ranking method.
C. point method.
D. Hay plan method.
E. job classification method.

Answer: C. point method.
25. The point method of job evaluation identifies several compensable factors, each having
several degrees, in addition to
A. degrees to which each of these factors is present in the job.
B. degrees within a present job.
C. identifying behavioural anchors.
D. establishing points in ranking jobs.
E. ranking jobs.
Answer: A. degrees to which each of these factors is present in the job.
26. Once a job evaluation method has been used to determine the relative worth of each job,
the committee can turn to the task of assigning pay rates to each job, but it will usually want
to first group jobs into
A. labour contracts.
B. range rates.
C. personal contracts.
D. department classes.
E. pay grades.
Answer: E. pay grades.
27. The job evaluation committee will want to group similar jobs (in terms of their ranking or
number of points, for instance) into grades for
A. personal growth.
B. pay purposes.
C. assessment purposes.
D. wage structure purposes.
E. non-economic reasons.
Answer: B. pay purposes.
28. In establishing pay rates, an employer should conduct a salary survey for the purpose of
A. fine tuning pay rates.
B. pricing jobs.
C. job evaluation.
D. performance appraisals.
E. slotting jobs into pay grades.

Answer: B. pricing jobs.
29. Establishing pay rates involves three stages, which are
A. job evaluation, conducting salary surveys, and combining job evaluation and salary survey
results.
B. consulting with industry, determining salaries for executive positions, and deciding on a
benefits plan.
C. pricing of benchmark jobs, collecting data on insurance benefits, and evaluating benefits
packages.
D. collecting data on insurance benefits, creating a salary survey, and hiring external
consultants.
E. collecting data used to price every job in the organization, working with a compensation
consultant, and working with a benefits specialist.
Answer: A. job evaluation, conducting salary surveys, and combining job evaluation and
salary survey results.
30. Wage surveys undertaken by the human resources department may collect other data
which would include all of the following except
A. sick leave benefits.
B. vacation time.
C. industry demand.
D. employee benefits.
E. insurance benefits.
Answer: C. industry demand.
31. The problem resulting from using data in employee compensation surveys is known as
A. employee discrimination.
B. upward bias.
C. systemic undervaluing.
D. stereotyping of data.
E. report bias.
Answer: B. upward bias.
32. An example of an informal survey conducted by an employer would be a(n)
A. governmental agency survey.
B. professional organization survey.
C. telephone survey.

D. industry-wide survey.
E. commercial survey.
Answer: C. telephone survey.
33. Statistics Canada provides monthly data on earnings by
A. geographic area and size of company.
B. size of company.
C. industry and city.
D. geographic area, industry, and occupation.
E. city and occupation.
Answer: D. geographic area, industry, and occupation.
34. A wage survey that pertains to members of associations might involve
A. Professional Engineers Ontario.
B. geographic surveys.
C. area surveys.
D. local surveys.
E. benefits surveys.
Answer: A. Professional Engineers Ontario.
35. The graphic description of the relationship between the value of the job and the average
wage paid for this job is called a
A. pay grade.
B. wage curve.
C. rate range.
D. wage structure.
E. wage grade.
Answer: B. wage curve.
36. Assigning pay rates to each pay grade (or to each job) is usually accomplished with a
A. rate range.
B. job evaluation.
C. wage grade.
D. wage curve.
E. performance appraisal.

Answer: D. wage curve.
37. There are several steps in pricing jobs with a wage curve. The first is to
A. create a wage line.
B. find the average pay for each pay grade.
C. determine the pay grade.
D. determine the pay rate for a cluster of jobs.
E. determine the rate range.
Answer: B. find the average pay for each pay grade.
38. There are several steps in pricing jobs with a wage curve. The second is to
A. price jobs.
B. determine the rate range.
C. find the average pay for each pay grade.
D. create a wage line.
E. plot the pay rates.
Answer: E. plot the pay rates.
39. Rate ranges are a series of steps or levels of pay within a pay grade, usually based upon
A. peer appraisals.
B. years of education.
C. years of service.
D. teamwork.
E. amount of responsibility.
Answer: C. years of service.
40. One way to depict the pay rate ranges for each pay grade is with a wage structure
graphically depicting the
A. range of pay grades for each pay rate.
B. range of pay rates for each pay grade.
C. range of jobs.
D. pay for each job.
E. scatter-plot points within a pay grade.
Answer: B. range of pay rates for each pay grade.
41. An advantage of using rate ranges for each pay grade is that it allows for

A. age differences.
B. gender differences.
C. education differences.
D. employer inflexibility.
E. performance differences.
Answer: E. performance differences.
42. The rate range is usually built around the
A. job evaluation.
B. wage line or curve.
C. performance appraisal.
D. job specialization.
E. Hay system.
Answer: B. wage line or curve.
43. Collapsing salary grades and ranges into just a few wide levels or "bands" is called
A. broadbanding.
B. job specialization.
C. wide banding.
D. compensation banding.
E. red circle banding.
Answer: A. broadbanding.
44. Broadbanding facilitates less specialized, boundaryless
A. jobs and organizations.
B. division of work.
C. job evaluation.
D. geographic dispersion.
E. leniency and error.
Answer: A. jobs and organizations.
45. The problem with having a wage structure with underpaid employees can be solved
through raising their wages to
A. another pay grade.
B. the midrange of an employee's pay grade.

C. the minimum of the rate range for their pay grade.
D. the maximum of the rate range for their pay grade.
E. be competitive with other jobs in the firm.
Answer: C. the minimum of the rate range for their pay grade.
46. Rates being paid to overpaid employees are often called
A. red circle pay rates.
B. premium jobs pay rates.
C. excessive pay rates.
D. silver circle pay rates.
E. black circle pay rates.
Answer: A. red circle pay rates.
47. An alternative method to a traditional job evaluation is pay
A. based on seniority.
B. for education.
C. for skill/competency.
D. for responsibility.
E. for ability.
Answer: C. for skill/competency.
48. With skill/competency-based pay, employees are not paid for the job they currently hold,
but instead for all the following except
A. knowledge.
B. depth of skills.
C. years of experience.
D. types of skills.
E. range of skills.
Answer: C. years of experience.
49. The great challenge of competency-based pay is
A. competency definition.
B. educational levels of employees.
C. measurement of skills, abilities, and competencies.
D. determining bonuses.

E. determining base pay.
Answer: C. measurement of skills, abilities, and competencies.
50. The "wage gap" between men and women is a result of systemic discrimination, as well
as all of the following except
A. differences in hours worked.
B. education levels.
C. performance levels.
D. experience levels.
E. level of unionization.
Answer: C. performance levels.
51. You are the HR professional at a forestry company in New Brunswick. Regarding pay
equity, you should
A. hire pay equity consultants to develop a pay equity plan if you don't have one already,
since pay equity is required in New Brunswick.
B. not worry about pay equity at all since the rates are set through negotiation with the union.
C. review pay rates for gender bias and monitor legislative requirements.
D. make sure that some women are promoted into higher-paying jobs to satisfy quota
requirements.
E. initiate a plan to systematically reduce over-paid male employees by red-circling their
wages.
Answer: C. review pay rates for gender bias and monitor legislative requirements.
52. Total rewards refers to all forms of pay or other compensation arising from employment.
a. True
b. False
Answer: a. True
53. The two bases upon which to pay employees are increments of performance and seniority.
a. True
b. False
Answer: b. False
54. Most of the pay equity acts in Canada focus on four compensable factors—skill, effort,
responsibility, and working conditions.
a. True

b. False
Answer: a. True
55. The Employment Equity Act provides unemployment compensation for up to 65 weeks
for all Canadian workers.
a. True
b. False
Answer: b. False
56. Job evaluation involves an informal and unsystematic comparison of jobs to determine
the worth of one job relative to another.
a. True
b. False
Answer: b. False
57. Management does not have the right to serve on a job evaluation committee, because this
would constitute a conflict of interest.
a. True
b. False
Answer: b. False
58. The only way to categorize jobs is to draw up class descriptions and place jobs into
classes based on their correspondence to these descriptions.
a. True
b. False
Answer: b. False
59. The point method plan of job evaluation identifies several compensable factors, each
having several degrees, as well as the degree to which each of these factors is present in the
job.
a. True
b. False
Answer: a. True
60. The point method of job evaluation is easily explained to employees.
a. True
b. False
Answer: a. True

61. Employers usually survey other firms to see if they are paying comparable pay for
comparable jobs.
a. True
b. False
Answer: a. True
62. Most employers pay just one pay rate for all jobs in a particular pay grade.
a. True
b. False
Answer: b. False
63. With skill/competency-based pay, employees are paid for the range, depth, and type of
skills and knowledge they are capable of using, rather than for the job currently held.
a. True
b. False
Answer: a. True
64. Skill/competency-based and market-based pay entirely eliminates the need for evaluating
the worth of one job relative to others in the firm.
a. True
b. False
Answer: b. False
65. Identify and briefly describe the five components of total rewards.
Answer: Two points each for accurate identification and description of compensation,
benefits, work-life programs, performance and recognition, and development and career
opportunities.
66. Dominique has just been hired as the HR manager for a small but growing manufacturing
company. Up until now, pay rates have been determined at the time of hire and are loosely
based on "market" pay rates. Dominique has already noticed that some employees don't think
the rates of pay are fair. How should Dominique go about establishing pay rates that are both
externally and internally equitable? In your answer, indicate the issues that may arise if this is
not done.
Answer: Three points each for identifying and describing each of the stages:
1. Determining job worth through a method of job evaluation to insure internal equity
2. Conducting wage/salary surveys to determine external equity
3. Combining the information to establish pay rates for the company.

One point for a good rationale for doing this (reduce turnover, reduce adverse impact on
motivation, etc.).
67. Identify the four major compensable factors used in most point method job evaluation
plans and identify and describe two sub-factors that might be used for each of the four major
compensable factors.
Answer: One point for each major factor plus up to one and a half (1.5) points for the
identification and brief description of relevant sub-factors for each factor: skill (education,
experience, interpersonal skills), effort (physical, mental), responsibility (people, tools,
equipment, budgets), and working conditions (physical Environment, travel)
68. A plan that offers each person a bonus based on the company's results, regardless of the
person's actual effort, is called
A. profit sharing.
B. a lump-sum bonus.
C. gainsharing.
D. financial incentives.
E. piece-rate production.
Answer: A. profit sharing.
69. Many employers have incentive plans in which virtually all employees can participate.
They include all of the following except
A. employee stock ownership.
B. salary and fringe benefit programs.
C. gainsharing plans.
D. stock option plans.
E. profit-sharing plans.
Answer: D. stock option plans.
70. Untac Inc., a consulting engineering firm, has recently implemented a type of
organization-wide incentive plan whereby all full time employees share in the company's
profits. Untac Inc. has implemented a
A. profit-sharing plan.
B. gainsharing plan.
C. salary and commission plan.
D. profit-loss plan.
E. piece-rate incentive plan.
Answer: A. profit-sharing plan.

71. A type of organization-wide incentive plan which usually involves having a corporation
contribute shares of its own stock to a trust, and distributes the stock to employees on
retirement or separation from service, is referred to as a(n)
A. employee stock ownership plan.
B. individual retirement plan.
C. gainsharing plan.
D. profit-sharing plan.
E. employee trusteeship plan.
Answer: A. employee stock ownership plan.
72. Research suggests that employee stock ownership plans encourage employees to develop
A. concern about their retirement plan.
B. an interest in gainsharing.
C. a lack of interest in their job.
D. a sense of ownership in and commitment to the firm.
E. little interest in unions.
Answer: D. a sense of ownership in and commitment to the firm.
73. The benefits of a gainsharing plan
A. usually take many years to fully realize.
B. accrue mostly to senior managers and executives.
C. are generally lower in terms of overall payout than those of an employee share plan.
D. are generally realized in the early years.
E. are extremely difficult to calculate.
Answer: D. are generally realized in the early years.
74. A type of organization-wide incentive plan that engages many or all employees in a
common effort to achieve a company's productivity objectives by sharing the resulting cost
savings among employees and the company is referred to as a
A. gainsharing plan.
B. common incentive plan.
C. productivity plan.
D. profit-sharing plan.
E. cost savings plan.
Answer: A. gainsharing plan.

75. Reasons why incentive plans do not work include all of the following except
A. firms do not get what they pay for.
B. pay is not a motivator.
C. performance pay cannot replace good management.
D. rewards may undermine responsiveness.
E. rewards rupture relationships.
Answer: A. firms do not get what they pay for.
76. There are several specific common-sense considerations in establishing any incentive
plan. Of primary importance is
A. pay-for-performance.
B. superior business results.
C. relationship building.
D. line of sight.
E. goal setting.
Answer: D. line of sight.
77. Sue, a compensation analyst, found recent research that indicates that there are seven
principles that support effective implementation of incentive plans. They include
A. group incentives must be complex.
B. rewards may undermine responsiveness.
C. link incentives to measurable competencies.
D. firms get what they pay for.
E. none of the above.
Answer: C. link incentives to measurable competencies.
78. Amir is the director of human resources at a management consulting firm. He has been
asked to implement an organization-wide incentive plan aimed at increasing employee
commitment to company goals. Identify and discuss two different organization-wide
incentive plans Amir should consider.
Answer: Up to five points each for describing the application of two of profit sharing,
employee share purchase, or gainsharing

Test Bank for Management of Human Resources: The Essentials
Nina D. Cole, Gary Dessler, Nita Chhinzer
9780133807332, 9780134305066

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