Compensation and Benefits Interview Questions | Vskills

Compensation and Benefits Interview Questions

We’ve compiled a list of the most common and frequently asked Compensation and
Benefits (HR) interview questions. If you want to ace your HR interview, then make sure
you master the answers to these questions below. The questions are perfect for anyone
interviewing for a HR Executive/Manager job.

Q.1Bonuses are very effective for

Directing sales efforts to short term goals

Q.2A salesperson’s compensation plan is typically made up of

A variable amount

Q.3Which steps in Maslow’s Hierarchy of Needs theory deals with achieving

ones potential
Self – Actualization

Q.4Which benefits is covered under social security system

Retirement Benefits and Medical Benefits

Q.5Which theory based on internal thought processes and perceptions about

motivation, states that by establishing goals employees are motivated to work
harder to achieve these goals
Locke’s Goal Setting Theory

Q.6Which theory based on internal thought processes and perceptions about

motivation, states that employees are motivated by performances and the
expected outcomes of their own behavior
Vroom’s Expectancy Theory

Q.7Which theory based on internal thought processes and perceptions about

motivation, states that employees are motivated when they feel that they are
equitably in comparison to others in the organization
Adam’s Equity Theory

Q.8Which need as per Maslow’s Hierarchy of need, includes status, recognition

and positive regard
Esteem

Q.9Total compensation includes

Wages and salaries and public (legally mandated) fringe benefits only

Q.10Paying workers a fixed sum for each unit of production completed is called
Piece rate

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Q.11How will you manage conflict amongst employees over compensation in the
company?
Conflicts regarding compensation in a company need to be analyzed for its root cause and
meeting with conflicting party or individual needs to be taken based on facts and figures
for resolution. Depending upon their concerns, future compensation can be negotiated
and
clarified. Clear communication to employees regarding compensation, perquisites, and
benefits should be developed by sending details on joining or promotion of the employee.

Q.12How will manage a difficult employee?

Managing a difficult employee involves connecting with them to addressing their issue,
listening to them and having clear communication without bias.

Q.13How will you address high pressure delivery due to financial year closure?
A financial year closure is a yearly exercise and pressure can be reduced by reconciling
every three months. Further, bank and tax reconciliation be done every month end.

Q.14How will you address under performance by the team?

Under performance by the team can be addressed by analyzing the reasons for under
performance, understanding and listening to the team members for problem being faced,
creating an encouraging and motivated environment to achieve the desired performance
and continuously monitoring to address any event or factor of underperformance.

Q.15What is Compensation and Benefits (C&B)?

C&B refers to the total rewards system, including pay, benefits, and perks.

Q.16Why is compensation important for employees?

Compensation directly impacts employee motivation and satisfaction.

Q.17Explain the difference between compensation and benefits.

Compensation is monetary, while benefits are non-monetary rewards.

Q.18What are direct compensation components?

Direct compensation includes base salary, bonuses, and incentives.

Q.19Define indirect compensation components.

Indirect compensation includes benefits like healthcare and retirement plans.

Q.20What is a salary structure?

A salary structure sets pay ranges for different job roles within an organization.

Q.21Describe the concept of "total rewards."

Total rewards encompass all the ways an employee is compensated and valued.

Q.22What is job evaluation in compensation?

Job evaluation assesses the relative worth of different jobs in the organization.

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Q.23Explain the term "market pricing" in compensation.

Market pricing involves comparing your organization's pay rates to those in the market.

Q.24What is a compensation philosophy?

A compensation philosophy outlines an organization's approach to pay and rewards.

Q.25Describe the concept of "pay equity."

Pay equity ensures that employees are paid fairly for equal work.

Q.26What is a merit-based pay system?

Merit-based pay rewards employees based on their performance.

Q.27What are job grades in compensation?

Job grades group similar jobs together for pay and organizational purposes.

Q.28Explain the concept of "compensation surveys."

Compensation surveys provide data on pay rates in the industry or region.

Q.29What is a compensation benchmark job?

A benchmark job is a standard job used as a reference for pay comparisons.

Q.30Describe the role of a compensation committee.

A compensation committee oversees and approves compensation policies.

Q.31What is variable pay, and why is it important?

Variable pay is performance-based and motivates employees to excel.

Q.32What are the different types of employee benefits?

Benefits can include healthcare, retirement plans, paid time off, and more.

Q.33Explain the concept of "cafeteria-style benefits."

Cafeteria-style benefits allow employees to choose from a menu of options.

Q.34Describe the concept of "vesting" in retirement plans.

Vesting determines when employees fully own their retirement plan contributions.

Q.35Explain the term "employee stock options."

Stock options give employees the right to purchase company stock at a predetermined
price.

Q.36What are wellness programs in employee benefits?

Wellness programs promote employee health and well-being.

Q.37Describe the role of HR in administering benefits.

HR is responsible for managing benefit programs and assisting employees with inquiries.

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Q.38What is a benefits enrollment period?

An enrollment period is the time frame during which employees can select their benefits.

Q.39What are non-monetary benefits, and why are they important?

Non-monetary benefits enhance job satisfaction without increasing pay.

Q.40What is a compensation survey participation rate?

The participation rate indicates the percentage of employees included in the survey data.

Q.41What is the role of a compensation analyst?

A compensation analyst collects and analyzes data to determine pay structures.

Q.42Describe the purpose of a salary review process.

A salary review process evaluates and adjusts employee pay as needed.

Q.43What is the impact of inflation on compensation?

Inflation erodes the purchasing power of employee salaries.

Q.44Explain the concept of "salary compression."

Salary compression occurs when new hires earn nearly as much as existing employees.

Q.45Describe the concept of "executive compensation."

Executive compensation packages are tailored to top-level leaders.

Q.46What is a job offer negotiation, and why is it important?

Negotiation allows candidates to secure competitive compensation packages.

Q.47Explain the term "bonus structure."

A bonus structure outlines how bonuses are calculated and awarded.

Q.48What is a compensation review board?

A review board assesses compensation plans and ensures fairness.

Q.49Describe the concept of "salary surveys."

Salary surveys provide data on pay practices across organizations.

Q.50What is the purpose of a compensation communication strategy?

Communication ensures employees understand their total rewards.

Q.51Explain the concept of "employee recognition programs."

Recognition programs reward and acknowledge employee contributions.

Q.52What is a benefits compliance audit?

An audit ensures that benefit programs adhere to legal requirements.

Q.53Describe the role of HR in managing retirement benefits.

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HR administers and communicates retirement plans to employees.

Q.54What is a deferred compensation plan?

A deferred compensation plan allows employees to defer a portion of their pay.

Q.55Explain the concept of "salary sacrifice" in benefits.

Salary sacrifice involves trading part of a salary for non-monetary benefits.

Q.56What is the role of a compensation consultant?

A compensation consultant provides expert advice on compensation strategies.

Q.57Describe the impact of market forces on compensation.

Market forces can influence pay rates and benefit offerings.

Q.58What is a compensation budget, and why is it important?

A budget outlines the allocation of funds for employee compensation.

Q.59Explain the term "equity-based compensation."

Equity-based compensation includes stock options, RSUs, and ESOPs.

Q.60What is a variable pay plan, and how does it work?

A variable pay plan ties pay to individual or company performance metrics.

Q.61Describe the concept of "job classification."

Job classification groups positions based on their duties and responsibilities.

Q.62What are bonus pay types, and how do they differ?

Bonus types can include performance bonuses, sign-on bonuses, and retention bonuses.

Q.63Explain the concept of "salary range."

A salary range sets the minimum and maximum pay for a specific job role.

Q.64What is a compensation survey provider?

A survey provider collects and disseminates compensation data to subscribers.

Q.65Describe the role of a benefits specialist.

A benefits specialist manages and administers employee benefits programs.

Q.66What is a compensation strategy, and why is it essential?

A compensation strategy aligns pay practices with organizational goals.

Q.67What are some common challenges in compensation and benefits?

Challenges include maintaining competitiveness and controlling costs.

Q.68Explain the concept of "total cash compensation."

Total cash compensation includes base salary, bonuses, and incentives.

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Q.69What is the role of employee feedback in shaping compensation and

benefits?
Employee feedback helps organizations tailor rewards to employee needs and
preferences.

Q.70What is EVA and how is it calculated?

Economic Value Added or EVA, is a measure of a company's financial performance based
on the residual wealth calculated by deducting cost of capital from its operating profit
(adjusted for taxes on a cash basis). (Also referred to as "economic profit".). The formula
for calculating EVA is - (Net investment) x (Actual return on investment – Percentage
cost of capital)

Q.71Which step in Maslow’s Hierarchy of Needs theory deals with achieving

ones potential ?
Self-Actualization needs deals with ones potential, desire for achievement, personal growth
and development and autonomy.

Q.72What is MBO?
MBO or management by objective evaluation requires the supervisor and employee to
agree upon a set of objectives before the process of evaluation. This method depends
upon setting of goal and constructive feedback for success.

Q.73What are supplementary benefits and services an employee receives in

addition to the wages?
Fringe benefits are benefits provided by an employer to an employee, independent
contractor or partner, some of which are tax-exempt when certain conditions are met.
Recipients of taxable fringe benefits have to include the fair market value of the benefit in
their taxable income for the year.

Q.74How many levels of need are listed by Maslow’s Hierarchy of need?

In 1954, Maslow postulated a hierarchy of needs from the lowest subsistence level needs to
the highest level of self awareness and actuality. It is said that once all these levels are met
the employee will be motivated to work to satisfy a higher level of need. There are five
levels i Maslow’s Hierarchy of need.

Q.75Which approach to determine the international compensation package,

relies on comparisons of survey of the local nationals? Explain the approach
using example?
The going rate is based on the local market rates. It relies on comparisons of survey of the
local nationals, expatriates of same nationality and expatriates of all nationalities’ pay
packages. In this approach, the compensation is based on the selected survey comparison.
The base pay and benefits may be supplemented by additional payments for low pay
countries.
For example: If a Pakistani bank operating in London uses local British salaries, the salaries
that other Pakistani competitor banks in London or the average salary offered by all foreign
banks operating in London will be the reference point for the base salary offered.

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Q.76Which employee evaluation system surveys colleagues, supervisors,

subordinates and even customers about the actions of each employee ?
In 360-degree feedback, the employer surveys colleagues, supervisors, subordinates and
eve customers about the actions of each employee. The multiple channels of feedback
offer objective perspectives of behavioral traits and actions. From this kind of feedback,
the employee is able to set goals for personal development that allow them to make
progress in their career and benefit the organization.

Q.77What is base salary?

The base salary refers to the salary which an employee gets in their home-country.

Q.78How to calculate compensation for a job?

Compensation is influenced by various factors and primary ones are: the cost of living,
taxation and healthcare costs.

Q.79How will you determine senior management or executive compensation?

Senior management or executive compensation is determined by education and work
experience of the candidate and the level of hierarchy for the executive.

Q.80What will you do if the process of collective bargaining fails with the
employees?
We will engage a third party to break the deadlock under conciliation/mediation

Q.81How does the pensionable salary calculated in India?

The pensionable salary in India is the average of last 12 months pay

Q.82ESI Fund is administered by

ESI Corporation

Q.83Who is not covered under Payment Of Gratuity Act in India?

Teacher is not covered under Payment Of Gratuity Act

Q.84When should you avoid a 3rd-party intervention during a negotiation?

During negotiation if progress is occurring or likely to occur then, avoid a 3rd-party
intervention

Q.85Why should we have an employee exit policy?

An employee exit policy is useful as it explains the steps and completes the separation of
employee for full and final settlement of the employee and ensures the handover process
addresses company's interests

Q.86What is usually included in an exit policy?

An exit policy usually includes the process for separation of all of the employee types and
conditions during the notice period.

Q.87What is golden handshake?

The term golden handshake refers to specific condition in an employment agreement about

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employer giving a significant severance package on the event of the employee losing
their job

Q.88List various involuntary termination of employment?

Involuntary termination of employment includes: Layoffs, downsizing and getting fired due
to unsatisfactory work performance.

Q.89Calculate the bonus to pay in a 500-employee company with fixed standard

output at 1000 tonnes per month. Employees get productivity bonus for
percentage increase in
production and this month output was 1200 tonnes with 550 employees.
The bonus to pay is 8.34%

Q.90What motivates employees in a team to volunteer for the achievement of

the assigned goals?
A team-based compensation plan motivates team members

Q.91What is involved while performing job evaluation to ascertain salary

structure?
Job evaluation involves, having good understanding of the job role with clearly defined job
details and its evaluation as per approved evaluation scheme.

Q.92Does job analysis and evaluation are same or not?

No, both are different as job analysis collects data on the job with focus on the job's worth
and it is the first step for job evaluation. Job evaluation on other hand is wider and it
provides the basis for a balanced wage structure by measuring the job's value to the
company and using the job analysis data.

Q.93What does UAN refers to, in a salary structure in India?

UAN refers to Universal Account Number used for EPF or Employee PF. It is an identification
for employee enrolled under the EPF scheme and links different member Ids allotted by
different companies in his or her career.

Q.94List the EPF forms a company in India needs to submit for a new joinee or an
employee leaving the company.
The EPF forms to be filed are: Form 5 (for new employees joined that month) and Form 10
(fo employees leaving that month).

Q.95How will you determine compensation based on competency of the

employee?
Competency refers to ability of an individual to apply knowledge and skills for performing
specific work. Competency based compensation need to factor in complexity and difficulty
in completing the job, the variation in the job and the relevance of the job for the
company.

Q.96What do understand by fringe benefits?

Fringe benefits refer to various monetary benefits being provided to the employee and

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usually include: Medical care, canteen facilities and recreational facilities.

Q.97What are perquisites for an employee?

The perquisites for an employee are special benefits offered to executives for retaining
them and usually include: Company car, Club membership, paid holidays, and furnished
house or accommodation and Stock option schemes.

Q.98Describe Non-monetary benefits

Non-monetary benefits are benefits which provide psychological satisfaction to employees
and usually include: recognition of merit through certificate, offering challenging job
responsibilities, Promoting growth prospects, Comfortable working conditions and Job
sharing and flexi-time.

Q.99The advantages of the Balance Sheet Approach for calculating international

compensation package includes
Equality with local nationals

Q.100Reverse culture shock is the

Occurs when expatriates return to their own country

Q.101What is a payment system which rewards groups of employees with

incentive payments when they put in place initiatives which reduce costs
Gain sharing

Q.102Income paid to an annuitant under life annuity is comprised of all except

Insurer expenses

Q.103Variable pay depends on performance and is not added to

Employee’s pay base

Q.104Which component is not necessary to solve EVA

WACP

Q.105What is the salary received by an individual, paid to the employee at the

time of his retirement or to his legal heir in the case of death of the employee?
Gratuity

106 Have you had experience presenting to a board’s compensation committee

in a public company? Engaging with a board’s compensation committee is a vital
aspect of the role in larger, public companies.
“Yes, I’ve presented to the compensation committee multiple times in my pervious role and
current role in Mercy Corps. I provided insights on market trends, proposed compensation
structures, and ensured our packages were competitive and aligned with company goals.

107 Can you share your experience implementing benefits and creating
structures for smaller companies? Smaller companies often require more tailored
benefits structures due to budget constraints and unique needs.

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“At ABC Start-up, I designed a flexible benefits program that allowed employees to choose
the benefits most relevant to them, ensuring satisfaction while staying within our budget.”

108. How have you demonstrated management capabilities, both with people
and vendors, in larger organizations? Managing both internal teams and external
vendors is crucial for this role.
“In my role at DEF Ltd., I led a team of five and oversaw relationships with multiple
vendors. I ensured timely reviews, negotiations, and managed any conflicts or issues that
arose, ensuring smooth operations.”

109. For smaller companies, have you had more hands-on experiences? Smaller
companies often require a more hands-on approach due to limited resources.
“Absolutely. At GHI Tech, I was directly involved in every aspect of the compensation and
benefits process, from designing to implementing and even addressing individual employee
queries.”

110. Do you have specific experience with 401(k) plans, as our company has
particular needs in that area? 401(k) plans are a significant component of employee
benefits in many U.S. companies.
“Yes, I’ve managed 401(k) plans at both large and small companies. I’ve worked closely
with plan providers, ensured compliance, and conducted regular employee education
sessions about maximizing their benefits.”

111. What does a good compensation and benefits manager candidate look like?
An ideal candidate for this role should possess a deep understanding of compensation and
benefits structures across various company sizes. They should be adept at data analysis,
negotiations, and have a track record of designing competitive packages that align with
business goals. Strong communication skills, especially when presenting to senior
stakeholders, and a hands-on approach, especially in smaller companies, are also essential.

Red flags

Watch out for candidates who lack experience with diverse company sizes or specific
benefits like 401(k) plans if that’s crucial for your organization. A lack of strategic vision or
an over-reliance on one-size-fits-all solutions can also be concerning. Additionally, poor
communication skills or a lack of confidence when discussing presentations to senior
stakeholders might indicate potential challenges in the role.

112. What is the best way to prepare for a Compensation and Benefits Manager
interview?
Familiarize yourself with the company's current compensation and benefits structure, be
ready to discuss past initiatives, and stay updated on industry trends.

113. What are the 3 qualities of a Compensation and Benefits Manager

candidate?
Strategic thinking, strong communication skills, and a deep understanding of diverse
compensation structures are vital.

114. How does a Compensation and Benefits Manager add value to a company?

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They ensure that the company offers competitive compensation and benefits packages,
aiding in talent acquisition, retention, and overall employee satisfaction.

115. Why is hands-on experience important for this role in smaller companies?
Smaller companies often have unique needs and constraints, requiring a more tailored and
direct approach to compensation and benefits.

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