COMPENSATING HUMAN RESOURCES
Questions 1 to 20: Select the best answer to each question. Note that a question and its answers may be split across a page break, so be sure that you have seen the entire question and all the answers before choosing an answer.
1. In 2003, a company employee received an option to purchase the company’s stock at $45 per share. If
the stock is trading at $40 a share in 2005, the employee will most likely
A. try changing the price in the original option agreement to improve the stock’s performance.
B. exercise the option, receiving a gain of $40.
C. exercise the option, receiving a gain of $5.
D. hold on to the option, hoping the stock price will increase in the future.
2. Three of the following are vesting rights. Which is not a vesting right?
A. In most cases, a waiting period of no more than five years or a three- to seven-year period, with 20 percent in the third and
each year thereafter
B. The right to a pension at retirement
C. The right to a pension regardless of whether or not the employee remains with the employer until retirement
D. A guarantee that the employer won’t switch the pension plan from defined-benefit to defined-contribution plan
3. Quality guru W. Edwards Deming advocates the use of
A. stock options.
B. group incentives.
C. merit-pay systems.
D. piecework incentives.
4. Which of the following is a false statement about Social Security benefits?
A. Eligibility rules must be met to receive benefits.
B. Benefits are taxed as ordinary income at both the federal and state level.
C. Employers and employees share the cost of the program through a payroll tax.
D. Workers who meet requirements receive retirement benefits according to age and earnings history.
5. Since the 1990s, the trend in larger public companies is to grant stock options to
A. all top and middle managers.
B. all employees.
C. all exempt employees.
D. only top management.
6. Which level of child care is most frequently provided by organizations with 100 or more employees?
A. The organization operates a day-care center at or near the workplace.
B. The organization offers no support within this area.
C. The organization provides vouchers or discounts for employees to use at existing child-care facilities.
D. The organization supplies and helps employees collect information about the cost and quality of available child care.
7. From which source do most retirees receive the largest percentage of their retirement income?
A. Social Security
B. Earnings from personal assets
C. Private pensions
D. Disability insurance
8. Which of the following is a false statement about key jobs?
A. Key jobs are jobs on which it’s possible to obtain market-pay survey data.
B. Key jobs have many incumbents within the organization.
C. Key jobs are common to many organizations.
D. Key jobs are relatively stable in content.
9. In response to the growing concern over ethical issues surrounding incentive pay for executives, three of the following actions have been taken. Which action has not been taken in response to the growing concern over ethical issues?
A. Imposing strict limits on insider trading
B. Requiring companies to more clearly report executive compensation levels and the company’s performance relative to that of competitors
C. Using the balanced-scorecard to design executive pay and incentives
D. Limiting the amount companies may deduct for executive and performance-related pay to no more than $1 million
10. Which of the following is a false statement about the Fair Labor Standards Act?
A. Nonexempt employees are covered by FLSA and include most hourly workers.
B. The overtime rate under the FLSA is one and a half times the employee’s hourly rate, including any bonuses and piece-rate payments.
C. The FLSA permits a subminimum training wage equal to 85 percent of the minimum wage.
D. The FLSA requires federal contractors to pay prevailing wage rates.
11. An organization is adjusting pay to better match a local labor market in which the cost of living is rising sharply. These adjustments are called
A. green-circle rates.
B. rank-and-file adjustments.
C. pay differentials.
12. Three of the following are objectives of the unemployment insurance program. Which is not an
objective of the unemployment insurance program?
A. To preserve investments in worker skills by providing income during short-term layoffs
B. To offset lost income during involuntary unemployment
C. To offset lost income during a labor dispute
D. To provide an incentive for employers to stabilize employment
13. The Scanlon plan is a variation of which type of incentive?
C. Profit sharing
D. Merit pay
14. Organizations being squeezed between labor and product markets need to
A. couple pay policies with creative HR, production, and marketing management to make workers’ contributions more valuable and products more profitable.
B. move their operations overseas.
C. move from job-based pay structures to skill-based pay systems, where employees are empowered and jobs are more enriched.
D. change their strategic mission and direction, moving to more attractive industries.
15. On average, out of every dollar spent on compensation, about _______ cents go to benefits.
16. An employee produces 10 components in an hour and earns $8.00 ($.80 × 10), while an employee who produces 12 components per hour earns $9.60 ($.80 × 12). This arrangement is an example of a _______ plan.
17. Three of the following are types of defined-contribution pension plans. Which of the following is not a type of defined-contribution pension plan?
A. Money purchase plan
B. Gainsharing plan
C. Employee stock option plan
D. Section 401(k) plan
18. Which act permits a lower training wage, which employers may pay to workers under the age of 20
for a period of up to 90 days?
19. Pay specifically designed to energize, direct, or control employees’ behavior is known as
A. incentive pay.
B. indirect pay.
C. empowerment pay.
D. exempt pay.
20. If employees conclude that they’re underrewarded, they’re likely to make up the difference in three of the following ways. Which is not a way in which employees who feel underrewarded are likely to make up the difference?
A. Finding a way to reduce their outcomes
B. Reducing their inputs
C. Withdrawing by leaving the organization
D. Refusing to cooperate