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Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) Which of the following is NOT a form of cash compensation? 1)
A) allowances
B) pensions
C) stock options
D) financial planning
E) insurance
Answer: C
Explanation: A)
B)
C)
D)
E)
2) Which of the following is NOT a benefit component of total compensation? 2)
A) relational returns
B) cost-of-living adjustment
C) allowances
D) incentives
E) merit increase
Answer: C
Explanation: A)
B)
C)
D)
E)
3) Which of the following best describes cost-of-living adjustment? 3)
A) one-time payments for meeting previously established performance objectives
B) consolidated pay which is not subject to any change regardless of the cost-of-living
C) percentage increment to base pay provided to all employees regardless of
performance
D) compensation to provide for items that are in short supply
E) increment to base pay in recognition of past work behaviour
Answer: C
Explanation: A)
B)
C)
D)
E)
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4) Which of the following is a work/life program? 4)
A) health insurance
B) cost-of-living adjustment
C) stock options
D) employment Insurance
E) telecommuting
Answer: E
Explanation: A)
B)
C)
D)
E)
5) ________ refer to one-time payments for meeting previously established performance
objectives.
5)
A) Allowances
B) Merit increments
C) Relational returns
D) Cost-of-living adjustments
E) Incentives
Answer: E
Explanation: A)
B)
C)
D)
E)
6) Which of the following is a form of relational return? 6)
A) life Insurance
B) monitory incentives
C) allowances
D) benefits
E) recognition and status
Answer: E
Explanation: A)
B)
C)
D)
E)
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7) ________ refers to the compensation given to purchase items that are in short supply. 7)
A) Allowance
B) Incentive
C) Cost-of-living adjustment
D) Variable pay
E) Wage
Answer: A
Explanation: A)
B)
C)
D)
E)
8) External competitiveness refers to: 8)
A) the relative importance of jobs within a company
B) inflationary pressure caused by external market factors
C) comparison of compensation with that of competitors
D) competitiveness between different departments in a company
E) comparison of product prices with that of competitors
Answer: C
Explanation: A)
B)
C)
D)
E)
9) Which of the following pay policies lays emphasis on performance? 9)
A) Employee contributions
B) Management
C) Administration of the pay system
D) Internal alignment
E) External competitiveness
Answer: A
Explanation: A)
B)
C)
D)
E)
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10) All forms of financial returns and tangible services and benefits that employees receive
as part of an employment relationship are known as ________.
10)
A) relational returns
B) merit pay
C) compensation
D) base pay
E) total rewards
Answer: C
Explanation: A)
B)
C)
D)
E)
11) Which of the following is true of the present value perspective? 11)
A) It creates an external competitiveness through future promises.
B) It assesses the present value of a company to offer stock options to employees.
C) It considers today’s initial offers to employees.
D) It considers future bonuses, merit increases, and promotions.
E) It establishes a limit on the amount spent on benefits.
Answer: D
Explanation: A)
B)
C)
D)
E)
12) Total compensation does NOT include: 12)
A) base pay
B) insurance benefits
C) allowances
D) relational returns
E) incentives
Answer: D
Explanation: A)
B)
C)
D)
E)
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13) Which of the following best describes allowances? 13)
A) percentage increment to base pay provided to all employees regardless of
performance
B) one-time payments for meeting previously established performance objectives
C) compensation to provide for items that are in short supply
D) pay calculated at an annual or monthly rate
E) programs that help employees better integrate their work and life responsibilities
Answer: C
Explanation: A)
B)
C)
D)
E)
14) A merit increase is best described as: 14)
A) a one-time reward for past performance that does not increase base pay.
B) an increment to base pay that recognizes past work behaviour.
C) compensation given to provide for items that are in short supply.
D) psychological returns employees believe they receive in the workplace.
E) percentage increment to base pay provided to all employees regardless of
performance.
Answer: B
Explanation: A)
B)
C)
D)
E)
15) Pay for executives should supposedly to be tied to: 15)
A) the financial needs of the employee
B) the company’s financial performance
C) the company’s growth potential
D) the cost of living index
E) the company’s reputation
Answer: B
Explanation: A)
B)
C)
D)
E)
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16) Which of the following statements is true about the forms of pay? 16)
A) Unlike relational returns, total compensation typically refers to the psychological
returns people believe they receive in the workplace.
B) Base pay tends to reflect the value of the work or skills and generally ignores
differences attributable to individual employees.
C) Relational returns are more transactional than total compensation.
D) Merit increases refer to the same percentage increase that everyone receives
regardless of performance in order to maintain pay levels relative to increases in the
cost of living.
E) Base pay, incentives, and cost-of-living adjustments are the typical relational
returns.
Answer: B
Explanation: A)
B)
C)
D)
E)
17) Internal alignment may be achieved by: 17)
A) paying below-market base wages but offering training and rapid promotion
B) compensating employees at above-market rates
C) comparing pay between jobs or skill levels inside a single organization
D) creation of cross-functional departments
E) matching competitors’ wage rates
Answer: C
Explanation: A)
B)
C)
D)
E)
18) Which of the following best describes relational returns? 18)
A) programs that help employees better integrate their work and life responsibilities
B) the psychological returns people believe they receive in the workplace
C) all rewards received by employees, including cash compensation, benefits, and
psychological returns
D) one-time payments for meeting previously established performance objectives
E) all forms of financial returns and tangible services that employees receive as part of
an employment
Answer: B
Explanation: A)
B)
C)
D)
E)
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19) ________ include psychological aspects of work such as recognition and status,
challenging work, and learning opportunities.
19)
A) Relational returns
B) Subjective returns
C) Cognitive returns
D) Compensational returns
E) Qualitative returns
Answer: A
Explanation: A)
B)
C)
D)
E)
20) An incentive payment: 20)
A) is part of an employee’s base wage.
B) is non-taxable and therefore highly preferred by employees.
C) is made to provide for items that are in short supply.
D) ties pay increases directly to an employee’s performance.
E) refers to psychological returns employees believe they receive in the workplace.
Answer: D
Explanation: A)
B)
C)
D)
E)
21) Which of the following refers to pay calculated at an hourly rate? 21)
A) total reward
B) salary
C) merit increase
D) compensation
E) wage
Answer: E
Explanation: A)
B)
C)
D)
E)
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22) Which of the following is true of internal alignment? 22)
A) It places greater emphasis on performance than the other policies.
B) It relates to comparison of compensation with that of competitors.
C) It compares pay between jobs inside a single organization.
D) It does not influence the company’s compensation objectives.
E) It uses incentive programs as a technique to implement the policy.
Answer: C
Explanation: A)
B)
C)
D)
E)
23) Which of the following is NOT part of an employee’s total compensation? 23)
A) health insurance
B) paid vacation
C) pay
D) cost-of-living adjustments
E) relational returns
Answer: E
Explanation: A)
B)
C)
D)
E)
24) ________ includes cash compensation, benefits, and relational returns. 24)
A) Total compensation
B) Total incentive
C) Total reward
D) Total base pay
E) Total cash benefit
Answer: C
Explanation: A)
B)
C)
D)
E)
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25) ________ as a pay objective involves abiding by various federal, provincial, and
territorial compensation laws and regulations.
25)
A) Efficiency
B) Fairness
C) Compliance
D) Competitiveness
E) Alignment
Answer: C
Explanation: A)
B)
C)
D)
E)
TRUE/FALSE. Write ‘T’ if the statement is true and ‘F’ if the statement is false.
26) Procedural fairness is the fairness of the process used to make a decision about pay. 26)
Answer: True False
Explanation:
27) Merit pay is a one-time payment for meeting previously established performance
objectives.
27)
Answer: True False
Explanation:
28) Pay relationships within the organization affect employee decisions to stay with the
organization.
28)
Answer: True False
Explanation:
29) Total compensation includes psychological aspects of work such as recognition and
status, challenging work, and learning opportunities.
29)
Answer: True False
Explanation:
30) Allowances are rewards given to employees based on their performance. 30)
Answer: True False
Explanation:
31) Total compensation only includes salary and incentives; not benefits. 31)
Answer: True False
Explanation:
32) When executive pay is excessive relative to company performance, profits are diverted
away from stockholders to the executives.
32)
Answer: True False
Explanation:
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33) External competitiveness refers to pay comparisons between different skill levels in an
organization.
33)
Answer: True False
Explanation:
34) Making contributions to Workers’ Compensation is at discretion of the employer. 34)
Answer: True False
Explanation:
35) While external competitiveness directly affects efficiency, it does not affect fairness. 35)
Answer: True False
Explanation:
36) Incentives may be long-term or short-term. 36)
Answer: True False
Explanation:
37) Cost-of-living adjustment refers to percentage increment to base pay provided to
employees based on their performance.
37)
Answer: True False
Explanation:
38) Compensation objectives provide standards for evaluating the effectiveness of the pay
system.
38)
Answer: True False
Explanation:
39) Base pay is the cash compensation an employer pays for the work performed. 39)
Answer: True False
Explanation:
ESSAY. Write your answer in the space provided or on a separate sheet of paper.
40) Why is compensation important to managers?
Answer: Managers have a stake in compensation: It directly influences their success in two ways: (1)
compensation is a major expense, and (2) a manager uses it as a way to influence employee
behaviour and consequently improve organization performance.
41) What are the two major categories of total rewards?
Answer: Total compensation and relational returns
42) What is base pay? Distinguish between a wage and a salary.
Answer: Base pay is the cash compensation an employer pays for the work performed. Base pay tends to
reflect the value of the work or skills and generally ignores differences attributable to individual
employees.
A distinction is often made between a wage and a salary, with salary referring to pay that is
calculated at an annual or monthly rate rather than hourly which is the basis for wage.
10
43) Explain the two major categories of total rewards.
Answer: The two major categories of total rewards are relational returns and total compensation. The
relational returns (development opportunities, status, opportunity to belong, challenging work,
and so on) are the psychological returns people believe they receive in the workplace.
Total compensation is more transactional and includes pay received directly as cash (e.g., base,
merit increases, incentives, cost-of-living adjustments) and indirectly as benefits (e.g.,
pensions, medical insurance, programs to help balance work and life demands).
44) Why is executive pay in Canada of special interest to stockholders?
Answer: In Canada, pay for executives should supposedly be tied to the financial performance of the
company. When executive pay is excessive relative to company performance, profits are
diverted away from stockholders to the executives.
45) List the three basic objectives of a compensation system.
Answer: Efficiency, fairness and compliance to rules and regulations.
46) What is procedural fairness?
Answer: Procedural fairness is concerned with the processes used to make decisions about pay. It
suggests that the way a pay decision is made may be as important to employees as the result of
the decision.
47) What are the basic building blocks of a pay model?
Answer: A pay model contains three basic building blocks: (1) the strategic compensation objectives,
(2) the strategic policies that form the foundation of the compensation system, and (3) the
techniques of compensation.
48) What are long-term incentives?
Answer: Long-term incentives are intended to focus employee efforts on multi-year results. Typically,
they are in the form of stock ownership or options to buy stock at specified, advantageous
prices.
49) What does base pay reflect?
Answer: Base pay tends to reflect the value of the work or skills and generally ignores differences
attributable to individual employees.
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Answer Key
Testname: C1
1) C
2) C
3) C
4) E
5) E
6) E
7) A
8) C
9) A
10) C
11) D
12) D
13) C
14) B
15) B
16) B
17) C
18) B
19) A
20) D
21) E
22) C
23) E
24) C
25) C
26) TRUE
27) FALSE
28) TRUE
29) FALSE
30) FALSE
31) FALSE
32) TRUE
33) FALSE
34) FALSE
35) FALSE
36) TRUE
37) FALSE
38) TRUE
39) TRUE
40) Managers have a stake in compensation: It directly influences their success in two ways: (1) compensation
is a major expense, and (2) a manager uses it as a way to influence employee behaviour and consequently
improve organization performance.
41) Total compensation and relational returns
42) Base pay is the cash compensation an employer pays for the work performed. Base pay tends to reflect the
value of the work or skills and generally ignores differences attributable to individual employees.
A distinction is often made between a wage and a salary, with salary referring to pay that is calculated at an
annual or monthly rate rather than hourly which is the basis for wage.
12
Answer Key
Testname: C1
43) The two major categories of total rewards are relational returns and total compensation. The relational
returns (development opportunities, status, opportunity to belong, challenging work, and so on) are the
psychological returns people believe they receive in the workplace.
Total compensation is more transactional and includes pay received directly as cash (e.g., base, merit
increases, incentives, cost-of-living adjustments) and indirectly as benefits (e.g., pensions, medical
insurance, programs to help balance work and life demands).
44) In Canada, pay for executives should supposedly be tied to the financial performance of the company.
When executive pay is excessive relative to company performance, profits are diverted away from
stockholders to the executives.
45) Efficiency, fairness and compliance to rules and regulations.
46) Procedural fairness is concerned with the processes used to make decisions about pay. It suggests that the
way a pay decision is made may be as important to employees as the result of the decision.
47) A pay model contains three basic building blocks: (1) the strategic compensation objectives, (2) the
strategic policies that form the foundation of the compensation system, and (3) the techniques of
compensation.
48) Long-term incentives are intended to focus employee efforts on multi-year results. Typically, they are in
the form of stock ownership or options to buy stock at specified, advantageous prices.
49) Base pay tends to reflect the value of the work or skills and generally ignores differences attributable to
individual employees.
13

Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) Which of the following is the first step in the design of a point plan for job evaluation? 1)
A) determine factor weights
B) establish plan for non-benchmark jobs
C) determine compensable factors
D) prepare a communication manual
E) conduct job analysis
Answer: E
Explanation: A)
B)
C)
D)
E)
2) ________ is the process of systematically determining the relative worth of jobs to create
a job structure for the organization.
2)
A) Job description
B) Job evaluation
C) Job structuring
D) Job processing
E) Factor weighting
Answer: B
Explanation: A)
B)
C)
D)
E)
3) Which of the following is the first step in the process of determining an internal job
structure?
3)
A) assessing value
B) determining compensable factors
C) job evaluation
D) job analysis
E) factor weighting
Answer: D
Explanation: A)
B)
C)
D)
E)
1
4) ________ grades the highest- and lowest-valued jobs first, then the next highest- and
lowest-valued jobs, repeating the process until all jobs have been graded.
4)
A) Paired comparison method
B) Classification method
C) Alternation ranking method
D) Simple ranking method
E) Point method
Answer: C
Explanation: A)
B)
C)
D)
E)
5) An internal job structure based on ________ refers to the skills required for the job, its
duties, and its responsibilities.
5)
A) compensable factors
B) external market rates
C) job value
D) job content
E) point methods
Answer: D
Explanation: A)
B)
C)
D)
E)
6) Point plans represent a significant change from ranking and classification methods in
that:
6)
A) they cannot be applied to non-benchmark jobs
B) they do not involve conducting job analysis
C) they make explicit the criteria for evaluating jobs
D) they assign the task of evaluation to a single employee
E) they list jobs from highest to lowest based on a global definition of value
Answer: C
Explanation: A)
B)
C)
D)
E)
2
7) To select compensable factors, an organization: 7)
A) asks what it is about the work that adds value
B) conducts a gap analysis
C) requires that all staff conduct a self-evaluation
D) interviews all staff to determine what is important to them
E) completes a cultural assessment
Answer: A
Explanation: A)
B)
C)
D)
E)
8) Which of the following is true about compensable factors? 8)
A) Differences in factors that are not based on the work itself diminishes the likelihood
of challenges arising.
B) Documentation supporting the choice of factors for different jobs provides the
rationale why work is paid differently or the same.
C) The compensable factors used to slot jobs into the pay structure should not be
differentiated based on their importance.
D) They should remain constant during major shifts in business strategies.
E) The compensable factors used to slot jobs into the pay structure should be
acceptable by employees; not stakeholders.
Answer: B
Explanation: A)
B)
C)
D)
E)
9) ________ is the hierarchy of all jobs based on value to the organization which provides
the basis for the pay structure.
9)
A) Factor degree
B) Job structure
C) Job description
D) Job process
E) Work culture
Answer: B
Explanation: A)
B)
C)
D)
E)
3
10) An internal job structure based on ________ refers to the relative contribution of the
skills, duties, and responsibilities of a job to the organization’s goals.
10)
A) job value
B) external market rates
C) point methods
D) compensable factors
E) job content
Answer: A
Explanation: A)
B)
C)
D)
E)
11) The ________ lists all jobs across columns and down rows of a matrix, analyzing the
two jobs in each cell and indicating which is of greater value, then ranking jobs based on
the total number of times each is ranked as being of greater value.
11)
A) point method
B) alternation ranking method
C) classification method
D) paired comparison method
E) repeat point method
Answer: D
Explanation: A)
B)
C)
D)
E)
12) Which of the following methods of job evaluation is the fastest, simplest, and easiest to
explain to employees?
12)
A) classification
B) absolution
C) ranking
D) point method
E) benchmarking
Answer: C
Explanation: A)
B)
C)
D)
E)
4
13) Which of the following is a criterion used in scaling factors? 13)
A) ensure the degree is separated from the job
B) use sophisticated terminology in order to be perceived as important
C) have no more than five degrees per factor
D) ensure the use of more than five degrees per factor
E) limit degrees to those necessary to distinguish between jobs
Answer: E
Explanation: A)
B)
C)
D)
E)
14) To be useful, compensable factors should be: 14)
A) constant during major shifts in business strategies
B) based on the strategy but not the values of the organization
C) acceptable to the stakeholders affected by the resulting pay structure
D) standardized across all employers
E) based on the strategy of the organization’s competitors
Answer: C
Explanation: A)
B)
C)
D)
E)
15) In a point plan process, which of the following steps follows immediately after the
design of the job evaluation plan is complete?
15)
A) apply the plan to non-benchmark jobs
B) prepare a manual to communicate the plan
C) conduct job analysis
D) determine compensable factors
E) perform job description
Answer: B
Explanation: A)
B)
C)
D)
E)
5
16) ________ is a job evaluation method that assigns a number to each job, based on
compensable factors that are numerically scaled and weighted.
16)
A) Simple ranking method
B) Paired comparison method
C) Classification method
D) Alternation ranking method
E) Point method
Answer: E
Explanation: A)
B)
C)
D)
E)
17) Which of the following is a characteristic of a benchmark job? 17)
A) Its contents fluctuate frequently.
B) It employs a reasonable proportion of the workforce.
C) It is unique to a particular employer.
D) It is the highest paid job in the industry.
E) Its contents are little known.
Answer: B
Explanation: A)
B)
C)
D)
E)
18) Which of the following is true about job evaluation? 18)
A) Employers design a single evaluation plan for all types of work.
B) It is seldom developed using benchmark jobs.
C) Typically, an employer evaluates all jobs in the organization at the same time.
D) It isolates each job’s pay from its relative contribution to the organization.
E) It is used to establish an internally aligned pay structure.
Answer: E
Explanation: A)
B)
C)
D)
E)
6