Chapter 11 - Total Rewards and Compensation

Question 1

Define “Total Rewards”.

Answer 1

-Monetary and non-monetary rewards provided by companies to attract, motivate, and retain employees.
Page 374

Question 2

Define “Tangible Rewards”.

Answer 2

-Elements of compensation that can be quantitatively measured and compared between different organizations.
Page 375

Question 3

Define “Intangible”.

Answer 3

-Elements of compensation that cannot be easily measured or quantified.
Page 375

Question 4

Define “Base Pay”.

Answer 4

-Basic compensation that an employee receives, often as an hourly wage or salary.
Page 376

Question 5

Define “Wages”.

Answer 5

-Payments calculated directly on the basis of time worked by employees.
Page 376

Question 6

Define “Salary”.

Answer 6

-Consistent payments made each period regardless of the number of hours worked.
Page 376

Question 7

Define “Variable Pay”.

Answer 7

-Compensation linked directly to individual, team, or organizational performance.
Page 376

Question 8

Define “Benefit”.

Answer 8

-Indirect reward given to an employee or group of employees as part of membership in the organization, regardless of performance.
Pages 376, 414

Question 9

Define “Exempt Employees”.

Answer 9

-Employees who hold positions for which they are not paid overtime.
Page 377

Question 10

Define “Nonexempt Employees”.

Answer 10

-Employees who must be paid overtime.

Page 377

Question 11

Define “Prevailing Wage”.

Answer 11

-An hourly wage determined by a formula that considers the rate paid for a job by a majority of the employers in the appropriate geographic area.
Page 381

Question 12

Define “Garnishment”.

Answer 12

-A court order that directs an employer to set aside a portion of an employee’s wages to pay a debt owed to a creditor.
Page 381

Question 13

Define “Entitlement Philosophy”.

Answer 13

-Assumes that individuals who have worked another year with the company are entitled to pay increases with little regard for performance differences.
Page 382

Question 14

Define “Pay-for-Performance”.

Answer 14

-Assumes that compensation decisions reflect performance differences.
Page 382

Question 15

Define “Expectancy Theory”.

Answer 15

-States that an employee’s motivation is based on the probability that his/her efforts will lead to an expected level of performance that is linked to a valued reward.
Page 383

Question 16

Define “Equity Theory”.

Answer 16

-States that individuals judge fairness (equity) in compensation by comparing their inputs and outcomes against the inputs and outcomes of referent others.
Page 383

Question 17

Define “Competency-Based Pay”.

Answer 17

-Rewards individuals for the capabilities they demonstrate and acquire.
Page 388

Question 18

Define “Job Evaluation”.

Answer 18

-Forma, systematic means to determine the relative worth of jobs within an organization.
Page 389

Question 19

Define “Compensable Factor”.

Answer 19

-Job dimension commonly present throughout a group of jobs within an organization that can be rated for each job.
Page 389

Question 20

Define “Market Pricing”.

Answer 20

-Uses market pay data to identify the relative value of jobs based on what other employers pay for similar jobs.
Page 390

Question 21

Define “Benchmark Jobs”.

Answer 21

-Jobs that are found in many other organizations that can be used for the purpose of comparison.
Page 391

Question 22

Define “Pay Survey”.

Answer 22

-Collection of data on compensation rates for workers performing similar jobs in other organizations.
Page 391

Question 23

Define “Pay Grades”.

Answer 23

-Grouping of individual jobs that have approximately the same value to the organization.
Page 392

Question 24

Define “Market Line”.

Answer 24

-Graph line that shows the relationship between job value as determined by job evaluation points and job value as determined by pay survey rates.
Page 392

Question 25

Define “Market Banding”.

Answer 25

-Grouping jobs into pay grades based on similar market survey amounts. Page 392

Question 26

Define “Broadbanding”.

Answer 26

-Practice of using fewer pay grades with much broader ranges than in traditional compensation systems. Page 393

Question 27

Define “Compa-Ratio”.

Answer 27

-Pay level divided by the midpoint of the pay range. | Page 394

Question 28

Define “Red-Circled Employee”.

Answer 28

-Incumbent who is paid above the range set for a job. | Page 394

Question 29

Define “Green-Circled Employee”.

Answer 29

-Incumbent who is paid below the range set for a job. | Page 394

Question 30

Define “Pay Compression”.

Answer 30

-Occurs when the pay differences among individuals with different levels of experience and performance become small. Page 395

Question 31

Define “Salary Inversion”.

Answer 31

-Occurs when the pay given to new hires is higher than the compensation provided to more senior employees. Page 395

Question 32

Define “Seniority”.

Answer 32

-Time spent in an organization or working in a particular job. Page 396

Question 33

Define “Lump-Sum Increase”.

Answer 33

-One-time payment of all or part of a yearly pay increase. | Page 397

Question 34

Define “Incentives”.

Answer 34

-Tangible rewards that encourage or motivate action. | Page 398

Question 35

Define “Extrinsic Rewards”.

Answer 35

-Rewards that are external to the individual. | Page 398

Question 36

Define “Intrinsic Rewards”.

Answer 36

-Rewards that are internal to the individual. | Page 399

Question 37

Define “Line of Sight”.

Answer 37

-Idea that employees can clearly see how their actions and decisions lead to desired outcomes. Page 400

Question 38

Define “Critical Success Factors”.

Answer 38

-Variables that have a strong influence on the results of the organization. Page 400

Question 39

Define “Key Performance Indicators (KPIs)”.

Answer 39

-Scorecard measures that tell managers how well the organization is performing relative to critical success factors. Page 400

Question 40

Define “Piece-Rate System”.

Answer 40

-Pay system in which wages are determined by multiplying the number of units produced by the piece rate for one unit. Page 401

Question 41

Define “Bonus”.

Answer 41

-One-time payment that does not become part of the employee’s base pay. Page 402

Question 42

Define “Non-monetary Incentives”.

Answer 42

-Rewards that are not given in cash. | Page 402

Question 43

Define “Free Rider”.

Answer 43

-A member of the group who contributes little. | Page 403

Question 44

Define “Gainsharing”.

Answer 44

-System of sharing with employees greater than expected gains in profits and/or productivity. Page 404

Question 45

Define “Profit Sharing”.

Answer 45

-System to distribute a portion of an organization’s profits to employees. Page 404

Question 46

Define “Stock Option Plan”.

Answer 46

-Gives employees the right to purchase a fixed number of shares of company stock at a specified price for a limited period of time. Page 404

Question 47

Define “Employee Stock Ownership Plan (ESOP)”.

Answer 47

-Designed to give employees significant stock ownership in their organizations. Page 404

Question 48

Define “Commission”.

Answer 48

-A percentage of the revenue generated by sales that is given to an agent or salesperson. Page 405

Question 49

Define “Clawback Provision”.

Answer 49

-Provision which permits the organization to require an employee to return rewards obtained through unethical or negligent actions. Page 405