Human Resource Management 9th Edition by Gary Dessler – Test Bank

Chapter 11 Pay Structure Decisions Answer Key

True / False Questions

1. Pay level refers to the relative pay of jobs in an organization.

FALSE
Job structure refers to the relative pay of jobs in an organization. Pay level is defined as the average pay (including wages, salaries, and bonuses) of jobs in an organization.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-01 List the main decision areas and concepts in employee compensation management.
Topic: Introduction

2. The equity theory suggests that people evaluate the fairness of their situations by comparing them with how they were treated in their previous organization.

FALSE
Equity theory suggests that people evaluate the fairness of their situations by comparing them with those of other people. According to the theory, a person (p) compares her own ratio of perceived outcomes O (pay, benefits, working conditions) to perceived inputs I (effort, ability, experience) to the ratio of a comparison other (o).

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-01 List the main decision areas and concepts in employee compensation management.
Topic: Equity Theory and Fairness

3. Job evaluation is a more appropriate tool for internal equity pay comparisons than market pay surveys.

TRUE
Internal equity pay comparisons focus on what employees within the same organization, but in different jobs, are paid. Job evaluation is more appropriate to use for internal equity pay comparisons than pay market surveys.

Refer To: Table 11.2

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 11-01 List the main decision areas and concepts in employee compensation management.
Topic: Equity Theory and Fairness

4. The upper bound placed by product market competition is more constrictive when labor costs are a larger share of total costs.

TRUE
Product market competition places an upper bound on labor costs and compensation. This upper bound is more constrictive when labor costs are a larger share of total costs and when demand for the product is affected by changes in price (i.e., when demand is elastic).

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 11-02 Describe the major administrative tools used to manage employee compensation.
Topic: Developing Pay Levels

5. Labor market competition is the amount an organization must pay to compete against other companies that hire similar types of employees.

TRUE
Labor market competition is the amount an organization must pay to compete against other companies that hire similar employees. These labor market competitors typically include not only companies that have similar products but also those in different product markets that hire similar types of employees.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-02 Describe the major administrative tools used to manage employee compensation.
Topic: Developing Pay Levels

6. Benchmarking is a procedure in which a company compares its different practices with the standard set by the management.

FALSE
To compete for talent, organizations use benchmarking, a procedure in which an organization compares its own practices against those of the competition. In compensation management, benchmarking against product market and labor market competitors is typically accomplished through the use of one or more pay surveys, which provide information on going rates of pay among competing organizations.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-02 Describe the major administrative tools used to manage employee compensation.
Topic: Developing Pay Levels

7. Product market comparisons that focus on labor costs deserve greater weight when the product demand is inelastic.

FALSE
Product market comparisons that focus on labor costs are likely to deserve greater weight when (1) labor costs represent a large share of total costs, (2) product demand is elastic (it changes in response to product price changes), (3) the supply of labor is inelastic, and (4) employee skills are specific to the product market (and will remain so).

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-02 Describe the major administrative tools used to manage employee compensation.
Topic: Developing Pay Levels

8. For blue-collar jobs, particularly those covered by collective bargaining contracts, there may be a single rate of pay for all employees within the job.

TRUE
For blue-collar jobs, particularly those covered by collective bargaining contracts, there may be a single rate of pay for all employees within the job.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-02 Describe the major administrative tools used to manage employee compensation.
Topic: Developing Pay Levels

9. Nonkey jobs are those that are common to many organizations.

FALSE
Nonkey jobs are jobs those that are unique to organizations and that cannot be directly valued or compared through the use of market surveys. Therefore, they are treated differently in the pay-setting process.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-02 Describe the major administrative tools used to manage employee compensation.
Topic: Developing Pay Levels

10. Internal job worth can be measured using the administrative tool of job evaluation.

TRUE
One typical way of measuring internal job worth is to use an administrative procedure called job evaluation. A job evaluation system is composed of compensable factors and a weighting scheme based on the importance of each compensable factor to the organization.

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-02 Describe the major administrative tools used to manage employee compensation.
Topic: Developing Pay Levels