Oakland University

ORG 330

Chapter 8

Variable Pay and Benefits

Multiple Choice

1)“Compensation________________linked                   to             individual,                    team,                     and/or organization     performance”                                                      is              a  definition                      of

                                                .

1. 1. compa-pay
   2. benefits
   3. executive perquisites
   4. variable pay 
2. Which of the following is an assumption of variable-pay

systems?

1. 1. Some jobs contribute more to organizational success than others.
   2. Time spent each day is the primary measure of short-term contributions.
   3. Differences in individual contributions to the organization are recognized through different base pay levels.
   4. Length of time with the organization is the primary differentiating factor among people.

3. One of the main objectives that organizations have for pay- for-performance plans is to               .
   1. punish lower-performing employees
   2. achieve HR objectives such as increasing retention and rewarding safety
   3. justify higher rates of pay for higher-performing individuals
   4. encourage a greater degree of teamwork within the organization

4. A common metric for variable pay plans is                                                                                                  .
   1. increase in market share
   2. turnover cost reduction
   3. increase in customer satisfaction levels
   4. return on investment 

5. Which of the following would be classified as an individual variable pay plan?
   1. gainsharing
   2. labor-cost reduction
   3. attendance bonuses
   4. employee stock options 
6. An individual incentive system will be counterproductive when                        .
   1. the organization emphasizes teamwork and cooperation
   2. there is a dynamic technological environment
   3. it results in competition among the employees
   4. the organizational culture stresses individualism 
7. Robert is paid by the number of bicycle tires he attaches to wheel rims. If he attaches more than his daily quota of tires, he receives 25 cents extra per extra tire. Robert is paid under a            system.
   1. bonus
   2. differential piece-rate
   3. straight piece-rate
   4. production commission 
8. One example of a/an                                                                        incentive is called

                                                , which is a system of sharing with employees greater-than-expected gains in profits and/or productivity.

1. 1. organizational; gainsharing
   2. group/team; profit sharing
   3. organizational; profit sharing
   4. group/team; gainsharing

9.                                                         

plan.

1. Bonuses

is a type of organization-wide variable pay

2. Quality improvement
3. Gainsharing
4. Profit sharing 

10. A/An                                                                                distributes a portion of the organizational profits to employees.
    1. profit sharing plan
    2. team-based incentive plan
    3. gainsharing plan
    4. employee stock ownership plan (ESOP) 
11. For a profit-sharing plan to be effective, management must

                                                .

11. 1. increase innovative solutions to technical problems
    2. discourage the employees from having high expectations of performance impact in the first year of the program
    3. be willing to disclose financial and profit information to employees
    4. link payouts to individual performance 
12. A/An                                                             is plan whereby employees gain stock ownership in the organization for which they work.
    1. employee stock ownership plan
    2. employee shareholder plan
    3. shareholder bonus plan
    4. NYSE stock bonus plan 
13. A           disadvantage                      to             profit-sharing                            plans                is              that

                                                .

1. 1. it is seen as a sort of “people’s capitalism”
   2. participation                        is            limited                 only            to          management-level employees
   3. it makes an employee’s compensation dependent on the performance of their employer
   4. employers are required to pay the taxes on the shares offered to employees

14. A                                                                     approach is useful when serving and retaining existing accounts is emphasized more than generating new sales and accounts.
    1. straight commission
    2. salary only
    3. salary plus commission

1. 4. salary draw 

15. All of the following are sales compensation plans EXCEPT

                                                .

15. 1. salary only
    2. piecework
    3. straight commission
    4. salary plus commission 
16. On average, benefits costs in the United States are

                                                  of an employers' payroll.

a. 10% - 20%

b. 20% - 30%

c. 30% - 40%

d. 40% - 50%

17. An annual "personal statement of benefits"                                                                                                 .
    1. is a report required by ERISA
    2. shows each employee how much his/her benefits are worth
    3. is a tool that allows employees to choose the type of benefits that best fits their personal needs
    4. is given to an employee upon termination so that he/she is informed on COBRA, severance pay, unemployment compensation, and other continuing benefits

18. Benefits costs have been escalating, but particularly for   
    1. health care
    2. group life insurance
    3. vacation pay
    4. retirement plans such as pensions and 401(K)
19. Which of the following benefits are not mandated by federal legislation?
    1. pension              plan             coverage               and          transferability                            between employers
    2. social security
    3. unemployment insurance
    4. workers’ compensation insurance 

20. Workers’ compensation is                                                                            .
    1. the pay and benefits package provided to employees
    2. benefits provided to persons injured on the job
    3. lawsuit judgments awarded to workers injured on the job
    4. what a worker receives in compensation for outstanding performance

21. How is workers’ compensation typically funded?
    1. by a tax levied by state governments based on size of payroll
    2. by a pool of organizations in the same industry
    3. through the Social Security Administration
    4. by insurance purchased from a private carrier or state insurance fund

22. Social                     security                       can                be              classified                           as               a/an benefit.
    1. voluntary
    2. insurance
    3. security
    4. retirement
23. The taxes an employer pays to unemployment compensation funds are determined by .
    1. experience rates
    2. the size of the organization
    3. the employer’s turnover rate
    4. provisions in the Social Security Act of 1935
24.                                                   is a security benefit voluntarily offered by employers to employees who lose their jobs.
    1. Unemployment insurance
    2. Supplemental unemployment benefit
    3. Severance pay
    4. Family security 

25.                                                       consists of approaches that monitor and

reduce medical costs using restrictions and market system alternatives.

25. 1. A benefits consolidation
    2. Social security
    3. Managed care
    4. Defined-contribution plans 
26. A/An                                                                supplies health care services to

employees at a competitive rate, while a/an                                                                                                      provides complete medical care at a flat rate per enrolled member.

26. 1. PPO; HMO
    2. point of service; PPO
    3. HMO; point of service
    4. HMO; PPO
27. In a health savings account,                                                                                     .
    1. unused amounts in the individual’s account cannot be rolled over to future years
    2. there is no incentive to employees to spend less on health expenses
    3. individual employees can set aside post-tax amounts for medical care into a health savings account
    4. both employees and employers can make contributions to the account

28. The Health Insurance Portability and Accountability Act (HIPAA) requires                .
    1. employers with more than 50 employees provide medical insurance for all full-time employees
    2. insurance companies to offer coverage to contingent workers
    3. that most employers offer extended health-care coverage to employees after they leave the organization
    4. that most employees be allowed to switch their health insurance from one company to another to get new health coverage, regardless of pre-existing conditions

29. The Family and Medical Leave Act requires that eligible employees be permitted to take leave for each of the following reasons EXCEPT                                                     .
    1. caring for a domestic partner with a serious health condition
    2. adoption of a child
    3. caring for a parent with a serious health condition
    4. a serious health condition of the employee 
30. Which of the following benefits is not provided by the Social Security system?
    1. displacement
    2. disability
    3. survivor
    4. old age 
31. How are Social Security benefits funded?
    1. employers are taxed on the amount of wages and salaries paid to employees
    2. a tax on employee wages and salaries, paid by the employee
    3. a tax on employee wages and salaries, paid by employers and employees
    4. general federal tax revenues 
32. Retirement programs established and funded by employers and employees are               .
    1. mandated by the Employee Retirement Income Security Act (ERISA)
    2. called pension plans
    3. often treated as "golden handcuffs"
    4. substitutes for Social Security 
33. In a                                                                       plan the employer makes an annual payment to an employee's pension account.
    1. vested
    2. defined-benefit
    3. non-contributory pension
    4. defined-contribution

34. The Family and Medical Leave Act of 1993 requires that employers allow eligible employees to take a total of during any                           period.
    1. 12 weeks’ paid leave; 12-month
    2. 12 weeks’ paid leave; 24-month
    3. 12 weeks’ unpaid leave; 12-month
    4. 12 weeks’ unpaid leave; 24-month 
35. Financial services offered as employee benefits may provide all but which of the following?        .
    1. information on investments
    2. information on tax shelters
    3. company reimbursement of income taxes
    4. comprehensive financial counseling
36. Employer-provided thrift plans, savings plans, and stock investment plans are considered   
    1. financial services

b family-oriented benefits

c. mandated benefits

d. health services

37. The federal statute that requires employers to provide leave to employees to care for relatives with serious health conditions is called the                                                              
    1. Fair Labor Standards Act
    2. Consolidated Omnibus Budget Reconciliation Act (COBRA)
    3. Health Insurance Portability and Accountability Act (HIPAA)
    4. Family and Medical Leave Act (FMLA)
38. Benefits plans that combine sick leave, vacation time, and holidays into a total number of days employees may take off with pay are called       plans.
    1. Recognition
    2. Omnibus
    3. Perquisite
    4. Paid Time Off

39. Which statement is not true about sick leave?
    1. It is closely related to medical leave.
    2. Only about 25% of U.S. workers receive paid sick leave.
    3. Employers in other developed countries pay sick leave for a proportionately greater share of their employees.
    4. Some employers pay employees for unused sick leave.

True and False

40. The role of variable pay is to link bonuses with performance.

41. Special incentive programs focus on rewarding lower- performing individuals in an attempt to motivate and encourage improved performance.

42. If a team incentive plan pays out the same bonus for each team member, most employees will be satisfied.

43. A stock option plan gives employees the right to purchase a fixed number of shares of company stock at a specific price for a limited period of time.

44. One problem with sales compensation programs is that it encourages unethical behavior.

45. The advantage to a straight commission system is that is offers security to the sales staff.

46. The most frequently used form of sales compensation is salary-plus-commission.

47. A major advantage of benefits is that they are generally not taxed as income to employees.

48. In exchange for workers compensation benefits, employees give up their right to legal actions and awards.

49. A co-payment strategy requires employees to pay a portion of the cost of insurance premiums, medical care, and prescription drugs.

50. Many employers are turning to consumer-driven health (CDH) plans, which place more of the

control over employee health care with the employer.

51. COBRA allows employees who leave a job, either voluntarily or involuntarily, to continue participation in the employers' group health plan for a period of time.

52. A pension plan that is paid based on age and service is a defined-contribution plan.

53. ERISA requires many companies to offer retirement plans to all employees if they are offered to any employee.

54. One way in which employers are assisting with childcare is the offering of on-site child-care centers.

55. Paid-time-off or PTO plans tend to be more effective in reducing absenteeism than traditional vacation and sick plans.

Essay

56. Explain the philosophical basic assumptions behind variable pay plans.

57. Describe                the           various                methods             of           compensating                  sales employees.