1. What are the relational returns?

o Answer: Non-tangible benefits such as recognition, job satisfaction, and a

positive work environment.

o Example: An employee feels valued and engaged due to regular acknowledgment

from her manager for her contributions, which motivates her to perform better.

2. What is internal and external alignment?

o Answer: Internal alignment is about consistency in pay within the organization,

while external alignment is positioning pay against market rates.

o Example: A company pays its clerical workers equally (internal alignment) and
ensures that they are also within the 75th percentile relative to competitors in the
same geographic area (external alignment).

3. What is competitive advantage?

o Answer: The edge a company gains by implementing unique strategies, such as

attractive compensation packages, to outperform competitors.

o Example: A tech company offers above-market salaries and benefits to attract

skilled software developers, outperforming its rivals in securing top talent.

4. What are the sources of compensation?

o Answer: Direct payments (salary), indirect payments (benefits), and intrinsic

rewards (personal satisfaction).

o Example: An employee receives a salary, health insurance, and feels fulfilled

from doing meaningful work.

5. What is internal equity?

o Answer: Fairness in pay among employees within the same organization or job
classification.

o Example: Two accountants with similar experience and responsibilities receive

similar salaries, reflecting internal equity.
6. What is an egalitarian structure?

o Answer: A pay structure that minimizes salary differentials among employees.

o Example: A small startup pays all its employees the same base salary, regardless
of their specific job titles or duties.

7. What is needed to prepare for job description?

o Answer: A clear understanding of the job's duties, responsibilities, skills, and

environmental conditions.

o Example: A manager outlines tasks, required qualifications, and expected

outcomes for a new marketing coordinator role to create an accurate job
description.

8. What is the job analysis method?

o Answer: Techniques used to gather information about a job, such as interviews

and surveys.

o Example: HR conducts interviews with current employees in similar roles to

collect detailed information on their daily tasks for job analysis.

9. What is job evaluation?

o Answer: A systematic process to determine the value of jobs within an

organization.

o Example: A company assesses the importance of various roles and assigns point
values based on skills and responsibilities, ranking jobs accordingly.

10. What is a method of conducting job analysis?

o Answer: Methods include interviews, surveys, and observation.

o Example: An HR team utilizes a questionnaire filled out by employees to

determine the critical aspects of their jobs.

11. What do you know about a skill-based pay structure?

 o Answer: A pay system rewarding employees based on their skills and
competencies rather than the job they perform.

o Example: An employee can earn higher pay by acquiring certifications in

multiple areas related to their job, reflecting their skill level.

12. What is the wage level at which an employee declines a job offer?

o Answer: The minimum pay a candidate is willing to accept; below this, they may
refuse the offer.

o Example: A job candidate expects at least $70,000 per year; if offered only
$65,000, they would decline the position.

13. What is a competitive pay policy?

o Answer: A strategy for setting pay rates comparable to or better than the market
average.

o Example: A retail company conducts market surveys and finds it needs to offer
wages at 10% above market rates to attract employees.

14. What are the steps involved in determining pay levels?

o Answer: Steps include job analysis, market analysis, evaluating internal equity,
and budgeting.

o Example: HR analyzes job responsibilities, surveys industry salaries, assesses

pay among current employees, and aligns these findings with the company’s
budget.

15. In which cases are compensation services used?

o Answer: These services are used for benchmarking pay rates and benefits against
industry standards.

o Example: A company hires a compensation consultant to assess if its salaries are

competitive compared to similar businesses.

16. What is the pay package?

 o Answer: Total compensation provided to an employee, including salary, benefits,
and bonuses.

o Example: An employee’s pay package includes a base salary of $60,000, health

benefits, a retirement plan, and performance bonuses.

17. What is base pay?

o Answer: The fixed amount of money paid to an employee, excluding bonuses or

benefits.

o Example: A software developer has a base pay of $80,000 per year, without
accounting for bonuses or benefits.

18. What is the aging and trending survey data?

o Answer: Adjustments made to compensation data over time to reflect inflation

and market changes.

o Example: HR uses historical wage data adjusted for inflation to ensure current
salaries remain competitive.

19. Which method of survey provides a statistical summary?

o Answer: Aggregated data analysis methods provide an overview of compensation

trends.

o Example: A survey report summarizes average salaries in a region for specific

job roles, aiding employers in setting competitive wages.

20. What is market pay line?

o Answer: A graph that represents salary data for similar jobs across the market.

o Example: A company uses a scatter plot to visualize where its salaries fall
concerning competitors’ pay for the same job roles.

21. What is market pricing?

o Answer: Setting compensation based on market rates for similar positions.

 o Example: An organization reviews industry salary surveys and adjusts its pay
rates to align with competitors.

22. In which plan do costs need to be shared between employer and employee?

o Answer: Shared cost plans, like health insurance, where both parties contribute to
the premium.

o Example: An employer pays 70% of health insurance premiums, while the

employee covers the remaining 30%.

23. What are the components of a benefit package?

o Answer: Elements such as health insurance, retirement plans, paid leave, and
other perks.

o Example: A benefits package includes medical, dental, and vision insurance, a

401(k) plan, and two weeks of paid vacation.

24. What are the cost containment strategies?

o Answer: Approaches to reduce expenses associated with benefits and

compensation.

o Example: A company implements a wellness program that emphasizes preventive

care to decrease health insurance costs.

25. What is an employment assistance plan?

o Answer: A program offering employees resources for personal issues, including

counseling.

o Example: An EAP provides free therapy sessions for employees facing personal
challenges, improving mental health and job performance.

26. Which benefits are required by law?

o Answer: Benefits mandated by law, such as Social Security and workers’

compensation.
 o Example: Employers are required to provide unemployment insurance to
employees who lose their jobs through no fault of their own.

27. What is the employment insurance program?

o Answer: A government program providing temporary financial assistance to

unemployed workers.

o Example: An employee who loses their job applies for employment insurance
benefits to support themselves while searching for new work.

28. What are work-sharing programs?

o Answer: Initiatives that allow employees to share work hours to prevent layoffs.

o Example: A company reduces the hours of all employees by 20% during an

economic downturn to avoid layoffs.

29. What are contributionary plans?

o Answer: Benefit plans funded by both employer and employee, such as

retirement plans.

o Example: A 401(k) plan allows employees to contribute a portion of their salary,

with the employer matching contributions up to a certain percentage.

30. What are wellness programs?

o Answer: Initiatives designed to promote employee health and well-being.

o Example: A company offers fitness classes and health screenings as part of its
wellness program to encourage healthy lifestyles.

31. What are the advantages and disadvantages of flexible benefit plans?

o Answer: Advantages include increased employee satisfaction; disadvantages

usually involve complexity and administration costs.

o Example: A flexible benefits plan allows employees to choose their preferred

benefits, but it can be complicated for HR to manage all options.
32. What is the theory of motivation?

o Answer: Psychological theories that explain what drives individuals to perform

and engage in work, such as Maslow's hierarchy of needs.

o Example: According to Maslow, an employee will seek job security (safety

needs) before trying to achieve higher-level goals like job satisfaction (self-
actualization).

33. What is profit sharing?

o Answer: A compensation strategy where employees receive a portion of company

profits.

o Example: Employees receive an annual bonus based on the company’s

profitability, incentivizing them to contribute to the company's success.

34. What is gain sharing?

o Answer: Programs that reward employees for improved productivity and cost
savings.

o Example: A manufacturing plant divides cost savings resulting from efficiency

improvements among the employees who implemented them.

35. What is turnover in HR sense?

o Answer: The rate at which employees leave and are replaced within an
organization.

o Example: A company has an annual turnover rate of 15%, indicating that 15% of
its workforce leaves each year.

36. What are performance ratings and their methods?

o Answer: Methods of evaluating employee performance, including self-

evaluations, peer reviews, and manager assessments.

o Example: A manager conducts quarterly performance reviews using a

combination of self-assessments and peer feedback.
37. What are the errors in performance rating?

o Answer: Common errors include bias, leniency, and halo effects that can distort
evaluations.

o Example: If a manager is overly lenient, they might assign high ratings to all
employees regardless of actual performance.

38. What are the outcomes of the appraisal process?

o Answer: Potential results of performance evaluations, such as promotions, salary

raises, and developmental feedback.

o Example: After a performance appraisal, an employee receives a raise and is

nominated for a leadership training program.

39. What is perceived fairness of pay?

o Answer: Employees' views on whether their compensation is fair relative to their

contributions and comparable roles.

o Example: An employee believes they deserve a raise when they see peers with
similar qualifications earning more for the same work.

40. What are lump sum bonuses?

o Answer: One-time payments awarded based on performance, not affecting base

salary.

o Example: An employee receives a $5,000 lump sum bonus for completing a

major project ahead of schedule.

41. Find an individual incentive payment plan.

o Answer: Compensation plans providing bonuses based on personal performance

metrics.

o Example: A sales representative earns a commission of 10% on every sale made,

aligning their income with individual performance.
42. What is the straight piecework system?

o Answer: A pay system where employees earn a flat rate for each unit produced.

o Example: A factory worker is paid $1 for each widget they assemble,

incentivizing productivity.

43. What is a group compensation system?

o Answer: A system that rewards teams for collective performance rather than
individual efforts.

o Example: A project team receives a bonus for completing a project under budget
and ahead of schedule.

44. What is an earning at risk plan?

o Answer: A compensation structure where a portion of pay is contingent on

performance metrics.

o Example: A sales manager’s salary includes a base pay of $60,000, with an

additional $20,000 at risk based on achieving sales targets.

45. What is an employee stock ownership plan?

o Answer: A program allowing employees to acquire shares in the company,

thereby involving them in ownership.

o Example: A company grants stock options to employees, allowing them to

purchase company stock at a predetermined price.

46. What are examples of long-term incentives?

o Answer: Rewards aimed at encouraging sustained performance over time, such as

stock options or performance shares.

o Example: An executive is granted stock options that vest over four years,
motivating them to stay and perform.

47. What is the spillover effect?

 o Answer: The broader impact of compensation practices on employee morale and
market perceptions.

o Example: A company that raises wages may see competitors follow suit to retain
their workforce, causing industry-wide wage increases.

48. Which law is intended to provide income for workers?

o Answer: Various labor laws, such as the Fair Labor Standards Act (FLSA), ensure
minimum wage and income security.

o Example: The FLSA mandates that employees are paid at least minimum wage
for all hours worked.

49. What is overtime pay legislation?

o Answer: Laws regulating pay for hours worked over a standard workweek,
typically at a higher rate.

o Example: An employee who works more than 40 hours in a week is entitled to

1.5 times their regular hourly rate for overtime hours.

50. What is the gender wage gap?

o Answer: The disparity in earnings between men and women within the same job
categories.

o Example: A study finds that female software engineers earn 80% of what their
male counterparts earn for similar roles.

51. What is a two-tier pay plan?

o Answer: A compensation structure where new employees are paid at a lower rate
than long-tenured employees.

o Example: A union negotiates a new contract resulting in new hires at 70% of the
pay that existing employees receive for the same jobs.

52. What is the role of unions in wage determination?

 o Answer: Unions negotiate collective bargaining agreements that set pay rates for
their members.

o Example: A union negotiates higher wages and better benefits during collective
bargaining for its members.

53. Which is the most common approach to manage labor costs?

o Answer: Strategies such as implementing pay freezes or layoffs to control costs.

o Example: During an economic downturn, a company imposes a hiring freeze to

manage labor costs effectively.

54. What is the top-down budgeting approach?

o Answer: A budgeting method where upper management sets the budget priorities
that flow down to departments.

o Example: A CEO allocates a fixed budget for each department based on overall
company goals rather than department requests.

55. What is the bottom-up budgeting method?

o Answer: A budgeting approach where individual departments create their budgets

based on their needs which are then combined.

o Example: Each department submits a budget proposal based on expected

expenses and growth, which management reviews and adjusts.

56. What is variable pay?

o Answer: Compensation that changes based on performance, such as bonuses and

commissions.

o Example: A salesperson's total earnings include a base salary and commissions

based on monthly sales performance.

57. What is the side effect of decentralized pay?

 o Answer: Potential inconsistencies in pay structures across departments due to
lack of standardized policies.

o Example: Different departments offer varying salaries for similar positions,

leading to employee dissatisfaction and perceptions of unfairness.

58. Which is the best approach for controlling salary levels?

o Answer: Involves using market analysis and budgeting controls to ensure

competitive pay.

o Example: HR regularly reviews market salary surveys and compares them with
internal pay rates to keep salaries competitive.

59. What is an advantage of outsourcing?

o Answer: Cost savings and access to specialized skills.

o Example: A company outsources its IT support to a specialized firm, reducing

costs and improving service quality.

60. What is the lead policy?

o Answer: A compensation strategy that sets wages higher than the market average.

o Example: A firm offers entry-level salaries 10% above the industry standard to
attract top talent.

61. What are pay grades?

o Answer: Levels within a compensation structure that classify jobs with similar
responsibilities.

o Example: An organization establishes grades for entry, mid, and senior-level

management roles, standardizing pay ranges within each grade.

62. What is market pay line? (repeated)

o Answer: A graphical representation of salary data against the market; helps

visualize competitive pay.
 o Example: A company charts its salaries against market averages to decide where
to adjust compensation for competitiveness.

63. What is the merit pay system?

o Answer: A compensation plan where increases are based on performance

evaluations.

o Example: Employees receive annual salary increases based on the results of their
performance appraisals.

64. What are individual support awards?

o Answer: Recognition or bonuses given to individuals for outstanding

contributions.

o Example: An employee is presented with an award and a bonus for completing a

project that significantly improves company efficiency.

65. What is the consumer price index?

o Answer: An economic measure documenting the average price of a basket of

consumer goods and services, often indicating inflation levels.

o Example: The CPI shows that inflation has increased by 3% over the last year,
prompting companies to consider wage increases to maintain employees'
purchasing power.