Deck 8: Building Pay Structures that Recognize Individual Contributions

Question 1

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 1

B

Question 2

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 2

B

Question 3

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 3

D

Question 4

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.

Question 5

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

Question 6

These represent the horizontal dimension of pay structures.

A) pay ranges
B) pay grades
C) job evaluation points
D) pay spreads

Question 7

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

Question 8

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

Question 9

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

Question 10

This theory 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

Question 11

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

Question 12

In establishing pay grades,which pay rate is established first?

A) minimum pay rate
B) midpoint
C) third quartile
D) maximum pay rate

Question 13

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

Question 14

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

Question 15

This term refers to the groupings of jobs based on compensable factors,for the purpose of applying pay policies.

A) market lines
B) market-competitive pay structures
C) pay grades
D) pay ranges

Question 16

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

Question 17

When these 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

Question 18

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.

Question 19

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

Question 20

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

Question 21

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.

Question 22

________,or lump sum bonuses,lend themselves well to cost containment,since these bonuses are not permanent percentage increases on worker base pay levels.

Question 23

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

Question 24

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

Question 25

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

Question 26

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

Question 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

Question 28

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

Question 29

________ represent the vertical dimension of pay structures.

Question 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

Question 31

________ assign different pay rates for jobs of unequal worth,and provide the basic framework for recognizing differences in individual's contributions.

Question 32

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

Question 33

This 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

Question 34

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

Question 35

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

Question 36

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

Question 37

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

Question 38

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

Question 39

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

Question 40

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

Question 41

Briefly discuss designing job-based pay system (i.e.merit pay,sales incentive pay)and person-focused programs.What considerations arise when making a transition from using a job-based pay system to using pay-for-knowledge?

Question 42

What is broadbanding? What are its limitations?

Question 43

Compare and contrast merit pay systems and sales compensation.