Question 1

Vroom Motors, an automobile company, ties individual performance, profits, and other measures of employees' success to a particular form of pay. This form of pay is influential because the amount paid is linked to certain predefined behaviors or outcomes. What pay structure is exemplified in this scenario?
A) minimum wage
B) overtime pay
C) incentive pay
D) piecework rates
E) salary

Accepted Answer

The scenario describes incentive pay, which is a pay structure that ties individual performance, profits, and other measures of employees' success to a particular form of pay. The amount paid is linked to certain predefined behaviors or outcomes.

Question 2

Trent owns and manages a small electronics repair store. He determines the time required by his employees to complete each task assigned by him. When employees complete the repairs in less time, they receive an amount of pay equal to that time determined by him. In this scenario, Trent is using a
A) standard hour plan.
B) differential piecework plan.
C) merit pay plan.
D) straight piecework plan.
E) Scanlon plan.

Accepted Answer

The standard hour plan pays employees based on the time it should take to complete a task, rather than the actual time taken, incentivizing efficiency if they finish faster.

Question 3

Which type of incentive plans are used to reward individual performance?
A) gainsharing
B) merit pay
C) Scanlon plan
D) profit sharing
E) stock ownership

Accepted Answer

Merit pay plans are used to reward individual performance. Gainsharing, Scanlon plans, profit sharing, and stock ownership generally reward group performance or company performance as a whole.

Question 4

Tucked Inc. is an envelope manufacturer based in Fort Worth. The employees of the organization receive pay based on the amount of work produced. If the output of an employee is more than the average production volume, then the organization pays more for the work performed. In this case, which incentive is offered by Tucked Inc.?
A) differential piecework rate
B) minimum wage
C) merit pay
D) retention bonus
E) group bonus

Accepted Answer

Tucked Inc. uses a differential piecework rate as an incentive for its employees. This means that employees are paid based on the amount of work they produce and if their output is more than the average, they get paid more. This incentivizes employees to work harder and produce more, resulting in higher pay.

Question 5

A standard hour incentive plan is likely to be successful if
A) most or all of a salesperson's compensation is in the form of commissions.
B) employers keep labor costs to a minimum.
C) the pay increase is linked to ratings on performance appraisals.
D) employees want the extra money more than they want to work at a pace that feels comfortable.
E) the organization values employee satisfaction, product quality, and customer service more than profits.

Accepted Answer

Standard hour incentive plans are successful when employees are motivated by the prospect of earning extra money, even if it means working harder or faster than they might otherwise prefer. This motivation aligns with the principle that employees will increase their effort if the reward (extra money) is something they highly value.

Question 6

As an incentive to work efficiently, some organizations pay production workers ________, a wage based on the amount they produce.
A) merit pay
B) a sales commission
C) standard hour pay
D) a piecework rate
E) a special bonus

Accepted Answer

The wage based on the amount of production is called a piecework rate. This is a common incentive used by organizations to motivate production workers to work efficiently and increase their output. Piecework rate pays workers for each unit or piece of work they complete, instead of paying them a fixed amount based on their working hours. Hence, the more they produce, the more they earn.

Question 7

Wayne Inc., a health insurance company, pays clerks an incentive based on the average amount of work completed per hour. Wayne pays $10 for processing 20 invoices per hour. An employee who processes 30 invoices would earn $15 per hour. Hence, Wayne pays the same rate per invoice no matter how many invoices an employee processes per hour. Which type of incentive pay does this scenario illustrate?
A) straight piecework plan
B) falling differential
C) rising differential
D) standard hour plan
E) straight commission plan

Accepted Answer

This scenario illustrates a straight piecework plan, where employees are paid a fixed amount per unit of output regardless of the number of hours worked. In this case, the incentive pay is based on the average amount of work completed per hour, which is a typical feature of a straight piecework plan.

Question 8

Piecework rate plans are most suited for
A) innovative tasks.
B) non-standard jobs.
C) managerial jobs.
D) jobs with difficult-to-measure output.
E) routine jobs.

Accepted Answer

Piecework rate plans are most suited for routine jobs where the output can be easily measured, such as assembly line work.

Question 9

Jewels & Co., a watch manufacturing company, provides wages to its employees based on the number of watches the workers assemble. The more the employees assemble, the more they earn. This type of plan is called a
A) piecework rate plan.
B) merit pay plan.
C) Scanlon plan.
D) profit-sharing plan.
E) rapid hour plan.

Accepted Answer

The described plan is a piecework rate plan, where employees are paid based on the number of pieces they produce.

Question 10

The differential piece rate system refers to
A) an incentive pay plan in which the employer pays the rate per piece based on the difference in performance of employees.
B) a system that gives employees a bonus if the ratio of labor costs to the sales value of production is below a set standard.
C) an incentive pay in which the piece rate is higher when a greater amount is produced.
D) a system of linking pay increases to ratings on performance appraisals.
E) an incentive pay plan where employees are paid different wages based on the skills they possess.

Accepted Answer

The differential piece rate system is an incentive pay plan in which the piece rate is higher when a greater amount is produced. This system encourages employees to produce more so that they can earn more.

Question 11

In the process of designing incentives, managers should make sure that
A) all the employees are paid the same amount.
B) even the lowest performing employees are rewarded.
C) employees focus only on completing the task quickly.
D) employees believe that the pay plan is fair.
E) they hire employees who consider earning money as the sole reason to perform well.

Accepted Answer

It is important for managers to ensure that employees perceive the pay plan as fair to avoid demotivating them. This can be achieved by providing clear and transparent criteria for earning rewards and ensuring that rewards are distributed fairly. All employees should not be paid the same amount as this does not take into account differences in performance and can lead to resentment among high performing employees. Rewarding low performing employees may not be effective in incentivizing improved performance as it can create a sense of entitlement without the need to improve. Employees should focus on completing the task both quickly and effectively, not just quickly. Hiring employees who are solely motivated by money can lead to short-term motivation and may not be sustainable in the long run.

Question 12

________ refers to incentive pay in which the wage paid is higher when a greater amount is produced.
A) Profit sharing
B) Differential piece rate
C) Gainsharing
D) Scanlon pay
E) Merit pay

Accepted Answer

Differential piece rate refers to incentive pay in which the rate of wage paid is higher when a greater amount is produced. It motivates employees to increase their output because they will earn more as they become more productive.

Question 13

Which statement is true about standard hour plans?
A) They encourage employees to focus exclusively on customer service.
B) They succeed only for employees who are not motivated by money.
C) They encourage employees to focus mainly on quality.
D) In terms of their pros and cons, they are very different from piecework plans.
E) They encourage employees to work as fast as they can.

Accepted Answer

Standard hour plans incentivize employees to complete tasks quickly by paying them a set rate per hour, encouraging them to work as fast as possible to maximize earnings.

Question 14

A pay structure specifically designed to energize, direct, or control employees' behavior is known as
A) monthly salary.
B) wage.
C) incentive pay.
D) annual salary.
E) fixed pay.

Accepted Answer

Incentive pay is specifically designed to energize, direct, or control employees' behavior by providing an additional reward for achieving certain goals or objectives. This type of pay structure can help to increase motivation and productivity among employees. Monthly salary, wage, annual salary, and fixed pay do not necessarily provide additional rewards for achieving particular goals.

Question 15

For incentive pay to motivate employees to contribute to the organization's success, the pay plans must be well designed. Which statement describes a characteristic of a well-designed plan?
A) Performance measures are to be linked to the individual's goals.
B) Employees are given unattainable performance standards.
C) Employees value the rewards or incentives that are being offered.
D) Employees are given limited resources to meet their goals.
E) The pay plan takes into account that employees will accept all goals irrespective of their rewards.

Accepted Answer

A well-designed incentive pay plan should offer rewards or incentives that employees value, as this motivates them to work towards the organization's success.

Question 16

An incentive system in which an organization links pay increases to ratings on performance appraisals is referred to as
A) commissions.
B) the Scanlon plan.
C) merit pay.
D) gainsharing.
E) profit sharing.

Accepted Answer

This is a clear description of merit pay, which links pay increases to performance ratings. Commission is a type of pay structure based on sales, while the Scanlon plan, gainsharing, and profit sharing are all different types of group incentive systems.

Question 17

A piecework rate plan is best suited for
A) HR professionals.
B) executives.
C) production workers.
D) managers.
E) knowledge workers.

Accepted Answer

Piecework rate plans provide incentives for production workers to produce more, as they are compensated based on how much they produce. It is not as effective for HR professionals, executives, managers, or knowledge workers, whose job responsibilities do not directly involve producing physical goods.

Question 18

An employee at CellWorld who produces 10 phone components in an hour earns $9 ($0.90 ×10) per hour, while another employee who produces 15 components earns $13.50 ($0.90 ×15). This is an example of a
A) commission plan.
B) differential piece rate plan.
C) direct commission plan.
D) profit-sharing plan.
E) straight piecework plan.

Accepted Answer

This is an example of a straight piecework plan where employees are paid a fixed rate per unit produced, in this case, $0.90 per component.

Question 19

Saturn Systems, an information technology company, determines that most problems handled by employees at its help desk can be resolved within 20 minutes. The company sets 20 minutes as the standard time for resolving a customer problem. If an employee solves a customer's problem in less than 20 minutes, the employee still earns 20 minutes' worth of wages. Which payment method does this scenario illustrate?
A) piecework plan
B) differential plan
C) standard hour plan
D) merit pay
E) performance bonus

Accepted Answer

The scenario illustrates a standard hour plan, where a standard time is set for completing a task, and employees are paid based on the number of hours worked, regardless of the time taken to complete the task. In this case, the standard time set is 20 minutes, and employees are paid for 20 minutes' worth of wages, whether they solve the problem in less than 20 minutes or take longer.

Question 20

A feature of an effective incentive pay plan is that it should
A) have performance measures based on employees' requirements.
B) not be provided as a direct percentage of employees' performance.
C) encourage group performance and sideline individual achievements.
D) be the same for all employees in the organization.
E) have performance measures linked to the organization's goals.

Accepted Answer

An effective incentive pay plan should have performance measures linked to the organization's goals. This ensures that the incentives are tied to the success of the company as a whole, rather than individual employee achievements. Having clear measures of success that align with the organization's objectives also provides clarity for employees in terms of what they need to do to earn incentives.

Quiz 13: Recognizing Employee Contributions With Pay

Trent owns and manages a small electronics repair store. He determines the time required by his employees to complete each task assigned by him. When employees complete the repairs in less time, they receive an amount of pay equal to that time determined by him. In this scenario, Trent is using a

Which type of incentive plans are used to reward individual performance?

A standard hour incentive plan is likely to be successful if

As an incentive to work efficiently, some organizations pay production workers ________, a wage based on the amount they produce.

Piecework rate plans are most suited for

Jewels & Co., a watch manufacturing company, provides wages to its employees based on the number of watches the workers assemble. The more the employees assemble, the more they earn. This type of plan is called a

The differential piece rate system refers to

In the process of designing incentives, managers should make sure that

________ refers to incentive pay in which the wage paid is higher when a greater amount is produced.

Which statement is true about standard hour plans?

A pay structure specifically designed to energize, direct, or control employees' behavior is known as

For incentive pay to motivate employees to contribute to the organization's success, the pay plans must be well designed. Which statement describes a characteristic of a well-designed plan?

An incentive system in which an organization links pay increases to ratings on performance appraisals is referred to as

A piecework rate plan is best suited for

An employee at CellWorld who produces 10 phone components in an hour earns $9 ($0.90 ×10) per hour, while another employee who produces 15 components earns $13.50 ($0.90 ×15) . This is an example of a

A feature of an effective incentive pay plan is that it should