Exam 9: Managing Compensation

How are the wages for jobs typically determined? Why is this process important?

Competence-based pay systems represent a fundamental change in the attitude of management regarding how work should be organized and how employees should be paid for their work efforts.

An advantage of published wage surveys is compatibility with the organization's jobs.

As the year 2000 approached, many organizations hired "young" and "inexperienced" information technology (IT)specialists to help address the Y2K problem. Many of these new hires were paid high compensation that brought them very close to the compensation earned by experienced IT specialists working with these companies. Which of the following can such a practice lead to?

Expectancy theory predicts that people expect to be paid as much or more than individuals in a similar job class.

Both Sam and Samantha work as cashiers at Modelo Hot Dogs. They do work of equal value to the firm, yet Sam receives less pay than Samantha. Sam is not happy because he perceives the system as being unfair to him. Which theory can you use to explain Sam's perceptions?

Wage-rate compression refers to the situation where employees perceive that there is too large a difference between their compensation and that of colleagues in higher-rated jobs.

Using the point manual, how is the relative worth of a job determined?

Scenario 9.1 Denton and Denton Inc. (D&D Inc.)is a small graphic design firm that designs tray liners for various small food chains across Canada and a major chain in the USA. D&D currently has 20 employees who are paid hourly rates for time worked, not projects completed. These workers consider themselves valuable, knowledge-based workers, and now that the company is expanding its client base they are not happy with the current pay structure. Management claims that this pay structure, ranging from $20 to $65 per hour, is based on collapsing the pay ranges for four job bands. -Refer to Scenario 9.1. What type of pay system is D&D Inc. currently using to compensate its employees?

Which of the following is NOT an idea that organizations may incorporate in an attempt to minimize the problem of wage-rate compression?

A wage curve represents the relationship between the relative worth of jobs and their wage rates.

The consumer price index tracks the change in price over time of a "market basket" of goods and services.

Managers will group similar jobs into a pay grade in order to help with the setting of wages for all jobs.

Which three factors does the Hay profile method use for evaluating jobs?

Which of the following is an external factor that can influence the rates at which employees are paid?

Pay equity is covered only under federal jurisdiction.

When time off is given in exchange for overtime work, it must be given hour-for-hour to the number of hours worked overtime.

What is NOT an outcome of wage-rate compression?

Scenario 9.2 Calendar "R" Us Ltd. is a small firm that manufactures yearly calendars with a specific focus on middle and high schools in Alberta. They started operations back in 2006 with just 12 employees, two machines, and a small warehouse that served as an office and production and storage facilities. Today, Calendar "R" Us has roughly 60 employees and supplies its calendars to most middle and high schools in Alberta. When employees join they are paid based on their relationship with the owners. Given the rapid growth in its staff complement, and the arbitrary way in which it normally compensates employees, payroll has proven to be quite a challenge for the company as management looks to expand into other provinces. -Refer to Scenario 9.2. Which of the following is a useful and cost-effective way for Calendar 'R" Us to find information on wage and salary trends in similar industries?

For real wages to increase, what is necessary?