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					Human Resource Management: An Asian Perspective (Second Edition)


Chapter 11: Establishing Strategic Pay Plans

Multiple Choice

1.      _____ refers to all forms of pay or rewards going to employees and arising
        from their employment.
        a. Reimbursement
        b. Employee compensation
        c. Salary
        d. Benefits
        e. Remuneration
        (b; easy)

2.      Direct financial payments include all of the following except _____.
        a. wages
        b. insurance
        c. salaries
        d. incentives
        e. commissions
        (b; easy)

3.      Which of the following is categorized as an indirect payment portion of
        employee compensation?
        a. wages
        b. salaries
        c. employer-paid insurance
        d. commissions
        e. bonuses
        (c; moderate)

4.      Joh is a sales representative in a jewelry store. He typically works 40 hours per
        week and his pay is completely based on his sales. He earns a commission on
        every sale he makes. His pay is based on _____.
        a. time
        b. pay
        c. incentives
        d. bonuses
        e. seniority
        (b; moderate)

5.      Which of the following factors affects the design of any pay plan?
        a. legal
        b. union
        c. company policy
        d. equity
        e. all of the above
        (e; easy)




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6.    In general, the main issue in collective bargaining is _____.
      a. time off with pay
      b. wage rates
      c. income security
      d. cost-of-living adjustments
      e. health care benefits
      (b; moderate)

7.    Unions negotiate all of the following pay-related issues except _____.
      a. wage rates
      b. income security
      c. unpaid leave to care for an immediate family member
      d. time off with pay
      e. all of the above
      (c; moderate)

8.    When longer-term employees’ salaries are lower than those of workers
      entering the firm today, _____ has occurred.
      a. wage curve
      b. salary compression
      c. age discrimination
      d. market expansion
      e. reward strategy
      (b; easy)

9.    Salary compression can be caused by _____.
      a. recession
      b. inflation
      c. economic depression
      d. all of the above
      e. none of the above
      (b; difficult)

10.   How are cost-of-living differentials handled by employers when employees
      are transferred from one location to one with a higher cost of living?
      a. payment of a nonrecurring, lump sum amount
      b. payment of a differential for ongoing costs
      c. raise employee’s base salary
      d. pay an ongoing differential for ongoing costs plus a lump sum amount
      e. all of the above
      (e; easy)

11.   When an employee is transferred to an international location and his or her
      base salary reflects his or her home country’s salary with allowances added for
      cost-of-living differences, the employer has used a _____ salary plan.
      a. transfer
      b. home-based
      c. host-based
      d. cost-of-living
      e. allowances included
      (b; moderate)

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12.     When an employee who is transferred to another country is assigned a salary
        based on the base salary for that position in the country where he or she will
        work, the employer has used a _____ salary plan.
        a. transfer
        b. home-based
        c. host-based
        d. cost-of-living
        e. allowances included
        (c; moderate)

13.     Who usually pays the extra tax burden resulting from taxes a manager on
        international assignment is liable for over and above those he or she would
        have to pay in the home country?
        a. the employee
        b. the employer
        c. the home country
        d. the host country
        e. there are no additional tax burdens
        (b; moderate)

14.     What theory of motivation states that people are strongly motivated to
        maintain a balance between what they perceive as their inputs or contributions
        and their rewards?
        a. Maslow’s hierarchy of needs
        b. Two-factor theory
        c. Equity theory
        d. Learned needs theory
        e. Expectancy theory
        (c; moderate)

15.     Which of the following is not a form of equity that should be addressed by
        managers dealing with compensation issues?
        a. underreward
        b. internal
        c. external
        d. individual
        e. procedural
        (a; moderate)

16.     Which form of equity refers to how a job’s pay rate in one company compares
        to the job’s pay rate in other companies?
        a. external
        b. internal
        c. distributive
        d. individual
        e. procedural
        (a; easy)




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17.   Which form of equity refers to how fair a job’s pay rate is, when compared to
      other jobs within the same company?
      a. external
      b. internal
      c. distributive
      d. individual
      e. procedural
      (b; easy)

18.   Jak is a sales manager and he recently learned that human resource managers
      with similar responsibilities and spans of control earn more than he does. He is
      concerned with the _____ form of equity.
      a. external
      b. internal
      c. distributive
      d. individual
      e. procedural
      (b; moderate)

19.   Which form of equity refers to the fairness of an individual’s pay as compared
      with what his or her coworkers are earning for the same or very similar jobs
      within the company, based on each individual’s performance?
      a. external
      b. internal
      c. distributive
      d. individual
      e. procedural
      (d; easy)

20.   Amina is a lawyer in a mid-size firm. She recently learned that another lawyer
      who joined the firm at the same time earns a lower salary than she does.
      Amina is experiencing the _____ form of equity.
      a. external
      b. internal
      c. distributive
      d. individual
      e. procedural
      (d; easy)

21.   Which form of equity refers to the perceived fairness of the processes and
      procedures used to make decisions regarding the allocation of pay?
      a. external
      b. internal
      c. distributive
      d. individual
      e. procedural
      (e; easy)




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22.     External equity refers to _____.
        a. how a job’s pay rate in one company compares the job’s pay rate in other
            companies
        b. how fair the job’s pay rate is, when compared to other jobs within the
            same company
        c. the fairness of an individual’s pay as compared with what his or her
            coworkers are earning for the same or very similar jobs within the
            company, based on each individual’s performance
        d. the perceived fairness of the processes and procedures used to make
            decisions regarding the allocation of pay
        e. the use of salary surveys to monitor levels paid for jobs industry-wide
        (a; moderate)

23.     Internal equity refers to _____.
        a. how a job’s pay rate in one company compares the job’s pay rate in other
            companies
        b. how fair the job’s pay rate is, when compared to other jobs within the
            same company
        c. the fairness of an individual’s pay as compared with what his or her
            coworkers are earning for the same or very similar jobs within the
            company, based on each individual’s performance
        d. the perceived fairness of the processes and procedures used to make
            decisions regarding the allocation of pay
        e. the use of salary surveys to monitor levels paid for jobs industry-wide
        (b; moderate)

24.     Individual equity refers to _____.
        a. how a job’s pay rate in one company compares the job’s pay rate in other
            companies
        b. how fair the job’s pay rate is, when compared to other jobs within the
            same company
        c. the fairness of an individual’s pay as compared with what his or her
            coworkers are earning for the same or very similar jobs within the
            company, based on each individual’s performance
        d. the perceived fairness of the processes and procedures used to make
            decisions regarding the allocation of pay
        e. the use of salary surveys to monitor levels paid for jobs industry-wide
        (c; moderate)

25.     Procedural equity refers to _____.
        a. how a job’s pay rate in one company compares the job’s pay rate in other
            companies
        b. how fair the job’s pay rate is, when compared to other jobs within the
            same company
        c. the fairness of an individual’s pay as compared with what his or her
            coworkers are earning for the same or very similar jobs within the
            company, based on each individual’s performance
        d. the perceived fairness of the processes and procedures used to make
            decisions regarding the allocation of pay
        e. the use of salary surveys to monitor levels paid for jobs industry-wide
        (d; moderate)

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26.   _____ is a formal and systematic comparison of jobs to determine the worth of
      one job relative to another.
      a. Job analysis
      b. Job evaluation
      c. Benchmark analysis
      d. Compensable evaluation
      e. Job ranking
      (b; easy)


27.   Factors that establish how the jobs compare to one another and set the pay for
      each job are called _____.
      a. compensable factors
      b. job evaluation factors
      c. comparison factors
      d. ranking factors
      e. analysis factors
      (a; easy)

28.   Another term for job classification is _____.
      a. job ranking
      b. job grading
      c. job categorization
      d. job evaluation
      e. none of the above
      (b; easy)

29.   When using the job classification method of job evaluation, raters categorize
      jobs into groups of similar jobs called _____.
      a. classes
      b. grades
      c. sections
      d. schedules
      e. cohorts
      (a; moderate)

30.   When using the job classification method of job evaluation, raters categorize
      jobs into groups of jobs that are similar in difficulty but not in context called
      _____.
      a. classes
      b. grades
      c. sections
      d. schedules
      e. cohorts
      (b; moderate)




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31.     The point method of job evaluation entails _____.
        a. identifying several compensable factors, each having several degrees, and
            the degree to which each of these factors is present in the job
        b. ranking each job relative to all other jobs based on some overall factor
        c. using raters to categorize jobs into groups
        d. deciding which jobs have more of the chosen compensable factors
        e. none of the above
        (a; moderate)

32.     The ranking method of job evaluation entails _____.
        a. identifying several compensable factors, each having several degrees, and
            the degree to which each of these factors is present in the job
        b. ranking each job relative to all other jobs based on some overall factor
        c. using raters to categorize jobs into groups
        d. deciding which jobs have more of the chosen compensable factors
        e. none of the above
        (b; moderate)

33.     The job grading method of job evaluation entails _____.
        a. identifying several compensable factors, each having several degrees, and
            the degree to which each of these factors is present in the job
        b. ranking each job relative to all other jobs based on some overall factor
        c. using raters to categorize jobs into groups
        d. deciding which jobs have more of the chosen compensable factors
        e. none of the above
        (c; moderate)

34.     The factor comparison method of job evaluation entails _____.
        a. identifying several compensable factors, each having several degrees, and
            the degree to which each of these factors is present in the job
        b. ranking each job relative to all other jobs based on some overall factor
        c. using raters to categorize jobs into groups
        d. deciding which jobs have more of the chosen compensable factors
        e. none of the above
        (d; moderate)

35.     Which job evaluation method is a quantitative technique involving the
        identification of several compensable factors and the degree to which each of
        these factors is present in the job?
        a. ranking method
        b. point method
        c. factor comparison
        d. job grading method
        e. job classification method
        (b; moderate)




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36.   Which job evaluation method entails deciding which jobs have more of the
      chosen compensable factors?
      a. ranking method
      b. point method
      c. factor comparison
      d. job grading method
      e. job classification method
      (c; moderate)

37.   A _____ is comprised of jobs of approximately equal difficulty or importance
      as established by job evaluation.
      a. pay group
      b. benchmark
      c. pay grade
      d. class
      e. wage curve
      (c; easy)

38.   The _____ shows the pay rates currently paid for jobs in each pay grade,
      relative to the points or rankings assigned to each job or grade by the job
      evaluation.
      a. pay group
      b. benchmark
      c. pay grade
      d. class
      e. wage curve
      (e; easy)

39.   What is the purpose of the wage curve?
      a. to show the relationship between the value of the job as determined by one
          of the job evaluation methods and the current average pay rates for your
          grades
      b. to equate jobs of approximately equal difficulty or importance as
          established by job evaluation
      c. to cluster jobs into logical groupings
      d. to assign pay rates to pay grades
      e. to choose benchmark jobs within each pay grade
      (a; difficult)

40.   If the current rate being paid for a job falls below the wage line, what step
      should be taken?
      a. a pay freeze should be enacted for that job
      b. a pay decrease should be assessed
      c. a pay raise should be provided
      d. no steps are necessary
      e. a bonus should be offered
      (c; difficult)




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41.     Which of the following is typically included in compensation packages for a
        company’s top executives?
        a. base pay
        b. short-term and long-term incentives
        c. perks
        d. executive benefits
        e. all of the above
        (e; easy)

42.     When employers set salary for professional employees by pricing professional
        jobs in the marketplace to establish the values for benchmark jobs, and then
        develop a salary structure based on the benchmarks and their other
        professional jobs, the employer has used a _____ approach.
        a. job evaluation
        b. job ranking
        c. market-pricing
        d. cost
        e. point
        (c; moderate)

43.     A company using competency-based pay pays for all of the following except
        an employee’s _____.
        a. range of skills
        b. job title
        c. depth of knowledge
        d. type of skills
        e. all of the above are part of competency-based pay plans
        (b; difficult)

44.     _____ means collapsing salary grades and ranges into just a few wide levels or
        bands, each of which contains a relatively wide range of jobs and salary levels.
        a. Comparable worth
        b. Strategic compensation
        c. Job evaluation
        d. Broadbanding
        e. Job grading
        (d; easy)

True/ False

45.     Financial benefits like employer-paid insurance and vacations are not a part of
        employee compensation. (F; easy)

46.     Indirect payments that contribute to an employee’s compensation include
        variable pay like commissions and bonuses. (F; moderate)

47.     Direct financial payments may be based on increments of time and on
        performance. (T; easy)

48.     Performance-based pay is more popular than time-based pay. (F; moderate)


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49.   Wage rate has been the main issue negotiated by unions in collective
      bargaining. (T; easy)

50.   A union is entitled to know the salary of each employee it is representing. (T;
      moderate)

51.   Most expatriate salaries are set using the host-country base pay. (F; moderate)

52.   External equity refers to how fair the job’s pay rate is, when compared to other
      jobs within the same company. (F; moderate)

53.   Informal telephone or Internet surveys are good for checking on a relatively
      small number of easily identified and quickly recognized jobs. (T; easy)

54.   Job evaluation is primarily a judgmental process. (T; moderate)

55.   Job classification is the simplest of the job evaluation methods. (F; easy)

56.   Most employers use a market-pricing approach to determine compensation for
      professional employees. (T; easy)

57.   Competencies are demonstrable characteristics of a person including
      knowledge, skills, and behaviors that enable performance. (T; moderate)

58.   There tends to be more opportunities for advancement with competency-based
      pay plans than with job-based pay plans because the focus on skill-building
      results in more developmental opportunities. (T; easy)

59.   Competency-based pay plans tie pay to seniority as well as to competence. (F;
      moderate)

60.   The primary advantage of broadbanding is that it provides greater flexibility
      into employee assignments. (T; difficult)

61.   Broadbanding refers to the requirement to pay men and women equal wages
      for jobs of comparable value to the employer. (F; easy)

62.   In the broadest sense, comparable worth may mean comparing jobs that are
      very dissimilar such as nursing to fire fighting. (T; moderate)

63.   In many countries, governments have introduced wage laws to protect workers.
      (T; easy)

64.   In Malaysia, regulations on wage payment are stated in the Employment Act.
      (T; moderate)

65.   In Malaysia, employers must pay their workers every week. (F; difficult)

66.   In Malaysia, employers must pay their workers every month. (T; moderate)



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67.     In Malaysia, employers must pay their workers within seven days of the wage
        due date. (T; difficult)

68.     In Malaysia, when an employee terminates a contract of service, employers
        must pay the due wages within three days of the last date of service. (T;
        moderate)

69.     In Malaysia, it is unlawful to pay an employee a wage advance unless it is for
        some special purposes. (T; moderate)

70.     In Malaysia, an employer may pay an employee a wage advance to purchase a
        motorcycle or bicycle. (T; moderate)

71.     In Malaysia, the Employment Act specifies what deductions may or may not
        be made from wages. (T; easy)

72.     In Malaysia, an employer may deduct from employees’wages to pay for their
        Employee’s Provident Fund. (T; moderate)

73.     In Malaysia, wages should not be paid in taverns, amusement places, shops or
        stores. (T; moderate)

74.     In some countries such as Malaysia, the government imposes a foreign worker
        levy on employers who employ foreign workers. (T, easy)

75.     In Singapore, the government imposes a quota to control the number of
        foreign workers. (T; moderate)

76.     In many countries, there are minimum wage laws that specify the amount of
        wages to be paid. (T; easy).

77.     In China, the minimum wage is set by the Central Government. (F; moderate)

78.     In China, the minimum wage is set by the provincial and municipal
        governments. (T; easy)

79.     In Indonesia, the minimum wage is determined with union involvement. (T;
        easy).

80.     In Indonesia, the minimum wage rate is applied throughout the country. (F;
        moderate)

81.     In Indonesia, each region has its own minimum wage rate. (T; easy)

82.     In Indonesia, the minimum wage rate is based on the Consumer Price Index.
        (T; easy).

83.     In Japan, there is no minimum wage. (F; easy)

84.     In Japan, the minimum wage rate is fixed by the Prefecture Labor Office. (T;
        moderate)

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85.   In Laos, the minimum wage should be enough for a worker to buy four
      kilograms of rice each week. (T; moderate)

86.   In the Philippines, the minimum wage rates are amended periodically to reflect
      the cost of living. (T: moderate)

87.   In Singapore, the National Wages Council decides the minimum wage rate. (F;
      difficult)

88.   In Singapore, the recommendations of the National Wages Council are legally
      binding on the employers. (F; moderate)

89.   In South Korea, the Minimum Wage Council decides the minimum wage. (T;
      easy)

90.   In Thailand, the Minimum Wage Committee sets the minimum wage rates for
      the whole country. (T; moderate).

91.   In Thailand, there are different minimum wages rates for different regions in
      the country. (T; easy)

92.   In Thailand, the minimum wage rate in Bangkok and its surrounding provinces
      is higher than that of the other provinces. (T; moderate)

Essay/ Short Answer

93.   Describe the various approaches that an employer could take to address the
      cost-of-living differences associated with transferring an employee to a
      location with a higher cost-of-living. (moderate)

      Answer:       Employers have different ways of handling cost-of-living
      differentials. One is to give the transferred person a nonrecurring payment in a
      lump sum amount. Another is to pay a differential for ongoing costs in
      addition to a one time allocation. Others simply raise the employee’s base
      salary.

94.   List and explain the two basic international compensation policies that
      companies use when compensating expatriate employees. (moderate)

      Answer: The two basic international compensation policies include home-
      based and host-based plans. With a home-based salary plan, an international
      transferee’s base salary reflects his or her home country’s salary. The
      employer then adds allowances for cost-of-living differences such as housing
      and schooling costs. This is a good approach for short-term assignments and
      avoids the problem of changing an employee’s base salary. In the host-based
      plan, the firm ties the international transferee’s base salary to the host
      country’s salary structure. A manager sent to a specific, international location
      would have his or her base salary changed to the prevailing base salary for that
      position in that location. The firm usually tacks on cost-of-living, housing,
      schooling, and other allowances.

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95.     Explain the implications suggested by the equity theory of motivation. What
        are the four forms of equity? (moderate)

        Answer: Equity theory states that people are strongly motivated to maintain a
        balance between what they perceive as their inputs or contributions and their
        rewards. If a person perceives an inequity, a tension or drive will develop in
        the person’s mind and the person will be motivated to reduce or eliminate the
        tension and perceived inequity. The four forms are external, internal,
        individual, and procedural. External equity refers to how a job’s pay rate in
        one company compares the job’s pay rate in other companies. Internal equity
        refers to how fair the job’s pay rate is, when compared to other jobs within the
        same company. Individual equity refers to the fairness of an individual’s pay
        as compared with what his or her coworkers are earning for the same or very
        similar jobs within the company, based on each individual’s performance.
        Procedural equity refers to the perceived fairness of the processes and
        procedures used to make decisions regarding the allocation of pay.

96.     How can managers assess and address each equity issue? (moderate)

        Answer: Managers can use various methods to address each of these equity
        issues. They can use salary surveys to monitor and maintain external equity.
        They can use job analysis and job evaluation to maintain internal equity. They
        can use performance appraisal and various types of incentive pay to maintain
        individual equity. They can use communication, grievance mechanisms, and
        employee participation in developing the company pay plan to help ensure that
        employees view the pay process as transparent and fair. Managers can also use
        surveys to assess employee attitudes regarding the pay plan.

97.     List the steps used to establish pay rates while ensuring external, internal, and
        procedural equity. (moderate)

        Answer: The five steps are as follows:
            Conduct a salary survey of what other employers are paying for
              comparable jobs.
            Determine the worth of each job in your organization through job
              evaluation.
            Group similar jobs into pay grades.
            Price each pay grade by using wave curves.
            Fine-tune pay rates.

98.     List the steps used in the job ranking method of job evaluation. (moderate)

        Answer: The steps in the job ranking method are as follows.
            Obtain job information
            Select jobs
            Select compensable factors
            Rank jobs
            Combine ratings and average the rankings



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99.    What are the steps for pricing jobs with a wage curve? (difficult)

       Answer: First, find the average pay for each pay grade, since each of the pay
       grades consists of several jobs. Next, plot the pay rates for each pay grade.
       Then fit a line, called a wage line, through the points. Finally, price the jobs.
       Wages along the wage line are the target wages or salary rats for the jobs in
       each pay grade.

100.   Explain the four key differences between competency-based pay (CBP) and
       traditional job-based pay (JBP). (difficult)

       Answer: With JBP, the employee receives the pay attached to the job
       regardless of whether the employee has the necessary competence for
       performing the job. With CBP, the supervisor certifies employee competence
       prior to any pay increases. With JBP, pay changes when one switches jobs.
       With CBP, one must demonstrate proficiency prior to getting a raise. Also,
       one could do a lower-paying job but still receive a higher pay based on skill.
       JBP systems may tie pay to grade or seniority. CBP pays for competencies,
       not seniority. There is more advancement possible with CBP plans than with
       JBP. CBP enhances organizational flexibility because workers’ skills are
       applicable to more jobs and therefore more portable.

101.   What are the four main components of a competency-based pay (CBP) plan?
       (moderate)

       Answer: CBP plans usually contain a: (1) system that defines specific skills
       and a process for tying a person’s pay to his or her skill, (2) training system
       that lets employees seek and acquire skills, (3) formal competency testing
       system, and (4) work design that lets employees move among jobs to permit
       work assignment flexibility.




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