Compensation Chapter 9 Quiz

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Questions and Answers

What is BASE PAY primarily defined as?

A bonus awarded for exceptional performance.

A pay structure based on employee seniority.

The monetary compensation for performing a job on a regular basis. (correct)

An adjustment to offset inflation.

Which of the following is a feature of COST-OF-LIVING ADJUSTMENT (COLA)?

It helps offset inflation's impact on living expenses. (correct)

It is tied to an employee's hourly pay rate.

It is a one-time payment based on performance.

It rewards employees based on referral success.

MERIT PAY is best described as what type of compensation?

A fixed salary that does not vary with performance.

An increase added to base pay based on performance. (correct)

Compensation for overtime hours worked.

A financial award based solely on company profits.

What does PIECEWORK refer to in compensation plans?

Incentive pay based on the number of units produced. Signup and view all the answers

Which incentive plan is specifically designed for MANAGEMENT based on performance?

Management incentive plans. Signup and view all the answers

VESTING is primarily concerned with what aspect of employee compensation?

Employee rights to their pension benefits that cannot be forfeited. Signup and view all the answers

How does PERFORMANCE-BASED PAY typically influence employee compensation?

It links compensation directly to the employee's job performance. Signup and view all the answers

What distinguishes PERSON-FOCUSED PAY from other compensation types?

It compensates for the development of skills and knowledge across various jobs. Signup and view all the answers

What does direct financial compensation primarily include?

Wages, salary, commissions, and bonuses Signup and view all the answers

Which of the following is NOT considered a component of direct financial compensation?

Health insurance Signup and view all the answers

What is the definition of indirect financial compensation?

All financial rewards not included in direct financial compensation Signup and view all the answers

Which factor does NOT influence direct financial compensation?

Employee benefits Signup and view all the answers

What is a crucial method for creating job structures in compensation management?

Job evaluation techniques Signup and view all the answers

Which of the following best describes nonfinancial compensation?

Satisfaction from the job and work environment Signup and view all the answers

In compensation policies, competitive compensation aims to:

Attract and retain quality employees Signup and view all the answers

What role do compensation surveys play in direct financial compensation?

They determine market competitive pay structures Signup and view all the answers

What are discretionary benefits primarily based on?

Management decisions or labor negotiations Signup and view all the answers

Which of the following is an example of a legally required benefit?

Maternity Leave Signup and view all the answers

Which of the following is NOT considered an employee service benefit?

Paid Time Off Signup and view all the answers

What type of compensation is hazard pay categorized under?

Indirect financial compensation Signup and view all the answers

Which of the following benefits usually incurs an administrative cost to the employer despite being fully paid by the employee?

Voluntary benefits Signup and view all the answers

What is the primary purpose of legally required benefits?

To promote worker safety, health, and family income stability Signup and view all the answers

Shift differential is primarily intended to compensate employees for which of the following?

Less-desirable working hours Signup and view all the answers

Which voluntary benefit is often considered a way to assist employees with educational expenses?

Scholarship for Dependents Signup and view all the answers

What is the primary distinction between skill-based pay and competency-based pay?

Skill-based pay compensates employees for their job-related skills, while competency-based pay rewards capabilities. Signup and view all the answers

Which job evaluation method is the simplest and involves ranking jobs according to their value?

Ranking method Signup and view all the answers

In which job evaluation method are jobs grouped into defined classes or grades?

Classification method Signup and view all the answers

What is the main focus of the factor comparison method in job evaluation?

Assessing jobs based on five universal factors independently. Signup and view all the answers

Which of the following is a correct description of the point method in job evaluation?

It assigns numerical values to job aspects and sums them for assessment. Signup and view all the answers

Which of the following influences direct financial compensation?

Labor market dynamics Signup and view all the answers

Indirect financial compensation is primarily described as what?

Employee benefits beyond direct salary. Signup and view all the answers

What is a key objective of defining discretionary benefits?

To explain various types of non-essential employee benefits. Signup and view all the answers

Study Notes

Chapter 9: Direct Financial Compensation (Core Compensation)

Direct financial compensation is the core pay, including wages, salary, commissions, and bonuses.
Indirect financial compensation includes employee benefits, such as legally required and discretionary benefits.
Nonfinancial compensation refers to the satisfaction derived from the job itself and its environment.

Chapter Objectives (Direct Financial Compensation)

Describe direct financial, indirect financial, and nonfinancial compensation elements.
Identify and discuss components of direct financial compensation, reviewing determinants.
Describe contextual influences on direct financial compensation and job evaluation methods for structure-building.
Describe competitive compensation policies, using compensation surveys for job pricing and market competitiveness.
Discuss compensation structures for sales representatives.
Discuss compensation for contingent workers.

Components of Direct Financial Compensation

Base Pay: The monetary compensation employees receive regularly for job performance. Common forms are hourly and salary pay.
Hourly Pay: One base pay type where employees receive payment for each hour worked.
Cost-of-Living Adjustment (COLA): Additional payments given to offset inflation impacts on essential living costs like food, housing, clothing, and transportation.
Seniority Pay: A pay program that bases increases on the employee's length of service.

Performance-Based Pay

Merit Pay: Pay increases tied to employee performance levels.
Merit Bonus: One-time financial awards based on productivity, not added to base pay.
Spot Bonus: Small monetary gifts for outstanding work or effort during a short time period.
Incentive Pay: Compensation (beyond base wages or salaries), which fluctuates based on meeting standards.
Piecework: Incentive pay where employees are paid for each unit they produce.
Management Incentive Plans: Bonuses for managers meeting or exceeding sales, profit, or production objectives.
Referral Plans: Incentives for referring new customers or successful job applicants.

Company-wide Incentive Plans

Profit Sharing: Compensation systems distributing a pre-determined percentage of company profits to employees. This includes current plans, deferred plans, and combinations thereof.
Vesting: Employees acquire nonforfeitable rights to pension benefits.

Personnel-Focused Pay

Skill-Based Pay: Systems compensating employees based on job-related skills and knowledge, disregarding job titles.
Competency-Based Pay: Compensation plans rewarding employees for their attained capabilities.

Contextual Influences on Direct Compensation

Labor Market, including Labor Unions, economic conditions, and interindustry wage differences.

Build Job Structures Using Job Evaluation

Job Structure: An ordered set of similar jobs based on worth.
Job Evaluation: A process determining the relative value of one job compared to another.
Ranking Method: Simplest job evaluation method, where raters arrange jobs by worth.
Classification Method: Job evaluation where classes or grades define groups of jobs.
Factor Comparison: An evaluation assuming five universal factors: mental requirements, skills, physical requirements, responsibilities, and working conditions. Evaluators make decisions independently.
Point Method: Job evaluation where raters assign numerical values to job factors, summing these values to provide quantitative assessment of relative worth.

Chapter 10: Indirect Financial Compensation (Employee Benefits)

Indirect financial compensation encompasses employee benefits, distinct from direct pay.

Chapter 10 Objectives (Indirect Financial Compensation)

Defining indirect financial compensation (employee benefits), describing legally required benefits.
Defining discretionary benefits, explaining various types and discussing health care alternatives.
Explaining the various types of retirement, life insurance, and disability/health insurance plans.
Describing alternative paid time off policies and identifying employee service benefits.
Describing premium pay practices and detailing voluntary and customized benefits.
Explain employee benefit laws, outlining customized benefit plans.

Indirect Financial Compensation Details

Discretionary Benefits: Benefits provided by management decisions, unilateral and in negotiation with unions.
Voluntary Benefits: Benefits where employees typically cover the majority of the cost, although employers often cover administrative costs.

Legally Required Benefits

Service Incentive Leave (SIL)
Maternity Leave
Paternity Leave
Parental Leave for Solo Parents
Leave for Victims of Violence and Abuse (VAWC)
Special Leave for Women
Employee's Compensation Program
Philhealth
Social Security Benefits
Pag-IBIG Benefits

Discretionary Benefits

Health Care
Dental Care
Shuttle
Insurance
Retirement Plans
Paid Time Off
Sabbatical Leave

Employee Services

Child Care
Educational Assistance
Subsidized Cafeterias
Scholarships for Dependents
Relocation

Additional Compensation Considerations

Hazard Pay: Additional pay for extremely dangerous work conditions.
Shift Differential: Extra money for inconvenient or undesirable work hours.
Work-Life Balance: Creating a balanced work-life environment is crucial in attracting and retaining talent.
Flextime: Employee choice of working hours within constraints.
Compressed Workweek: Completing work obligations within fewer days than a typical workweek.
Job Sharing: Two part-time individuals split the duties of one job, paid according to contributions.
Telecommuting: Performing work remotely, using electronic devices to connect with the office.

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Description

Test your knowledge on direct financial compensation, including its core elements such as wages, bonuses, and employee benefits. This quiz will help you understand the distinctions between direct and indirect financial compensation, as well as nonfinancial aspects of job satisfaction. Assess your understanding of competitive compensation policies and their impact on job evaluation.