Establishing Strategic Pay PlansMultiple Choice

1. _____ refers to all forms of pay or rewards going to employees and arising from their employment. a. Reimbursementb. Employee compensationc. Salaryd. Benefitse. Remuneration(b; easy; p. 390)

2. Direct financial payments include all of the following except _____.a. wagesb. insurancec. salariesd. incentivese. commissions(b; easy; p. 390)

3. Which of the following is categorized as an indirect payment portion of employee compensation?a. wagesb. salariesc. employer-paid insuranced. commissionse. bonuses(c; moderate; p. 390)

4. John is a sales representative in a jewelry store. He typically works 40 hours per week and his pay is completely based on his sales. He earns a commission on every sale he makes. John’s pay is based on _____.a. timeb. payc. incentivesd. bonusese. seniority(b; moderate; p. 390)

5. Which of the following factors affects the design of any pay plan?a. legalb. unionc. company policyd. equitye. all of the above(e; easy; p. 390)

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6. Which law allows the secretary of labor to set wage rates for laborers and mechanics employed by contractors working for the federal government?a. Davis-Bacon Actb. Walsh-Healey Public Contractc. Fair Wages Actd. Civil Rights Acte. Fair Labor Standards Act(a; difficult; p. 390)

7. The _____ sets basic labor standards for employees working on any government contract that amounts to more than $10,000. a. Davis-Bacon Actb. Walsh-Healey Public Contractc. Fair Wages Actd. Civil Rights Acte. Fair Labor Standards Act(b; difficult; p. 390)

8. Which compensation-related law contains minimum wage, maximum hours, overtime pay, equal pay, and child labor provisions?a. Davis-Bacon Actb. Walsh-Healey Public Contractc. Fair Wages Actd. Civil Rights Acte. Fair Labor Standards Act(e; difficult; p. 391)

9. Which of the following is addressed by the Fair Labor Standards Act?a. minimum wageb. maximum hoursc. overtime payd. child labore. all of the above(e; easy; p. 391)

10. The Fair Labor Standards Act covers workers employed in _____.a. manufacturingb. retailingc. agricultured. service industriese. all of the above(e; easy; p. 391)

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11. Which law makes it illegal to discriminate against any individual with respect to compensation because of race, color, religion, sex, or national origin?a. Fair Labor Standards Actb. Civil Rights Actc. Employer Retirement Income Security Actd. Equal Pay Acte. Davis-Bacon Act(b; moderate; p. 390)

12. According to the Fair Labor Standards Act, if a worker covered by the act works more than 40 hours, he or she will receive overtime pay at a rate of _____ of normal pay for any hours worked over 40 in a workweek.a. 50%b. 100%c. 125%d. 150%e. 200%(d; difficult; p. 391)

13. Jill works as a cashier at a grocery store. She earns $8 an hour (or $320 for a 40-hour week). Last week, she worked 44 hours. What did she earn last week?a. $320b. $336c. $344d. $368e. $392(d; difficult; p. 391)

14. Jack worked 6 hours of overtime this week but has decided to take time off instead of overtime pay. How many hours will Jack get off?a. 3 hoursb. 6 hoursc. 9 hoursd. 12 hourse. 18 hours(c; difficult; p. 391)

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15. Which of the following occupations must adhere to overtime and minimum pay provisions stated in the Fair Labor Standards Act?a. paralegalsb. pharmacistsc. attorneysd. department headse. purchasing agents(a; moderate; p. 391)

16. All of the following occupations are exempt from the overtime provisions stated in the Fair Labor Standards Act except _____.a. physiciansb. dentistsc. management traineesd. teacherse. architects(c; moderate; p. 391)

17. Whether or not a position is exempt from provisions including overtime pay in the Fair Labor Standards Act depends upon the _____ associated with the job.a. job responsibilitiesb. job dutiesc. salaryd. employee experiencee. a, b, and c(e; moderate; p. 391)

18. The _____ states that employees of one sex may not be paid wages at a rate lower than that paid to employees of the opposite sex for doing roughly equivalent work. a. American Disabilities Actb. Civil Rights Actc. Employer Retirement Income Security Actd. Equal Pay Acte. Davis-Bacon Act(d; moderate; p. 391)

19. Under which condition below is it acceptable for employees of the opposite sex to receive different pay for doing roughly equivalent work?a. when the difference exists despite equal skillsb. when the difference exists despite equal effortsc. when the difference exists despite similar responsibilityd. when the difference exists because of a merit systeme. it is never acceptable(d; difficult; p. 391)

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20. Which act provided for the creation of government-run employer-financed corporations to protect employees against the failure of their employer’s pension plan? a. Fair Labor Standards Actb. Civil Rights Actc. Employer Retirement Income Security Actd. Equal Pay Acte. Davis-Bacon Act(c; moderate; p. 391)

21. _____ refers to the ownership employees build up in their pension plan should their employment be terminated before retirement.a. Portabilityb. Equityc. Vestingd. Unemployment e. 401k(c; easy; p. 391)

22. The _____ prohibits discriminating against employees who are 40 years of age and older in all aspects of employment, including compensation.a. Fair Labor Standards Actb. Civil Rights Actc. Employer Retirement Income Security Actd. Equal Pay Acte. Age Discrimination in Employment Act(e; moderate; p. 391)

23. According to the Family and Medical Leave Act, eligible employees can take up to _____ weeks of unpaid, job-protected leave for the birth of a child or for the care of a child, spouse, or parent. a. twob. fourc. sixd. twelvee. sixteen(d; moderate; p. 392)

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24. According to the Family and Medical Leave Act, eligible employees can take unpaid, job-protected leave for the _____.a. care of a childb. birth of a childc. care of a parentd. care of a spousee. all of the above(e; easy; p. 392)

25. Which of the following is true for employers who use independent contractors?a. Fair Labor Standards Act regulations do not applyb. Social Security taxes are higher than for regular employeesc. Federal income taxes are charged at a reduced rated. State income taxes are charged at a higher ratee. Social Security taxes are charged at a higher rate(a; moderate; p. 391)

26. The _____ gave employees the right to organize, bargain collectively, and engage in concerted activities for the purpose of collective bargaining.a. Fair Labor Standards Actb. Civil Rights Actc. Employer Retirement Income Security Actd. Equal Pay Acte. National Labor Relations Act(e; moderate; p. 394)

27. Historically, the main issue in collective bargaining is _____.a. time off with payb. wage ratesc. income securityd. cost-of-living adjustmentse. health care benefits(b; moderate; p. 394)

28. Unions negotiate all of the following pay-related issues except _____.a. wage ratesb. income securityc. unpaid leave to care for an immediate family memberd. time off with paye. all of the above(c; moderate; p. 394)

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29. When managers ask “how can I construct a total portfolio of reward programs that link to both short and long-term business success, drive shareholder value, encourage desired behaviors, and deliver value to our employees,” they are seeking to produce a(n) _____.a. wage curveb. strategic compensation packagec. labor relations boardd. aligned reward strategye. pay-for-performance program(d; moderate; p. 395)

30. When longer-term employees’ salaries are lower than those of workers entering the firm today, _____ has occurred.a. wage curveb. salary compressionc. age discriminationd. market expansione. reward strategy(b; easy; p. 396)

31. Salary compression can be caused by _____.a. recessionb. inflationc. economic depressiond. all of the abovee. none of the above(b; difficult; p. 396)

32. How are cost-of-living differentials handled by employers when employees are transferred from one location to one with a higher cost of living?a. payment of a nonrecurring, lump sum amountb. payment of a differential for ongoing costsc. raise employee’s base salaryd. pay an ongoing differential for ongoing costs plus a lump sum amounte. all of the above(e; easy; p. 396)

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33. When an employee transferred to an international location and his or her base salary reflects his or her home country’s salary with allowances added for cost-of-living differences, the employer has used a _____ salary plan.a. transferb. home-basedc. host-basedd. cost-of-livinge. allowances included(b; moderate; p. 397)

34. When an employee transferred to another country is assigned a salary based on the base salary for that position in the country where he or she will work, the employer has used a _____ salary plan.a. transferb. home-basedc. host-basedd. cost-of-livinge. allowances included(c; moderate; p. 397)

35. Who usually pays the extra tax burden resulting from taxes a manager on international assignment is liable for over and above those he or she would have to pay in the home country?a. the employeeb. the employerc. the home countryd. the host countrye. there are no additional tax burdens(b; moderate; p. 397)

36. What theory of motivation states that people are strongly motivated to maintain a balance between what they perceive as their inputs or contributions and their rewards?a. Maslow’s hierarchy of needsb. Two-factor theoryc. Equity theoryd. Learned needs theorye. Expectancy theory(c; moderate; p. 396)

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37. Which of the following is not a form of equity that should be addressed by managers dealing with compensation issues?a. underrewardb. internalc. externald. individuale. procedural(a; moderate; p. 397)

38. Which form of equity refers to how a job’s pay rate in one company compares to the job’s pay rate in other companies?a. externalb. internalc. distributived. individuale. procedural(a; easy; p. 397)

39. Jason is an information systems technician in a town in North Carolina with a population of 100,000. He earns 35,000/year. He recently found out that a nearby town with a similar population pays people in the same position $40,000/year. Jason is concerned with the _____ form of equity.a. distributiveb. proceduralc. internald. externale. individual(d; moderate; p. 397)

40. Which form of equity refers to how fair a job’s pay rate is, when compared to other jobs within the same company?a. externalb. internalc. distributived. individuale. procedural(b; easy; p. 397)

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41. Jack is a sales manager and he recently learned that human resource managers with similar responsibilities and spans of control earn more than he does. Jack is concerned with the _____ form of equity.a. externalb. internalc. distributived. individuale. procedural(b; moderate; p. 397)

42. Which form of equity refers to the fairness of an individual’s pay as compared with what his or her coworkers are earning for the same or very similar jobs within the company, based on each individual’s performance?a. externalb. internalc. distributived. individuale. procedural(d; easy; p. 397)

43. Audrey is a lawyer in a mid-size firm in Chicago. She recently learned that another lawyer who joined the firm at the same time earns a lower salary than she does. Audrey is experiencing the _____ form of equity.a. externalb. internalc. distributived. individuale. procedural(d; easy; p. 397)

44. Which form of equity refers to the perceived fairness of the processes and procedures used to make decisions regarding the allocation of pay?a. externalb. internalc. distributived. individuale. procedural(e; easy; p. 397)

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45. External equity refers to _____.a. how a job’s pay rate in one company compares the job’s pay rate in

other companiesb. how fair the job’s pay rate is, when compared to other jobs within the

same companyc. the fairness of an individual’s pay as compared with what his or her

coworkers are earning for the same or very similar jobs within the company, based on each individual’s performance

d. the perceived fairness of the processes and procedures used to make decisions regarding the allocation of pay

e. the use of salary surveys to monitor levels paid for jobs industry-wide(a; moderate; p. 397)

46. Internal equity refers to _____.a. how a job’s pay rate in one company compares the job’s pay rate in

other companiesb. how fair the job’s pay rate is, when compared to other jobs within the

same companyc. the fairness of an individual’s pay as compared with what his or her

coworkers are earning for the same or very similar jobs within the company, based on each individual’s performance

d. the perceived fairness of the processes and procedures used to make decisions regarding the allocation of pay

e. the use of salary surveys to monitor levels paid for jobs industry-wide(b; moderate; p. 397)

47. Individual equity refers to _____.a. how a job’s pay rate in one company compares the job’s pay rate in

other companiesb. how fair the job’s pay rate is, when compared to other jobs within the

same companyc. the fairness of an individual’s pay as compared with what his or her

coworkers are earning for the same or very similar jobs within the company, based on each individual’s performance

d. the perceived fairness of the processes and procedures used to make decisions regarding the allocation of pay

e. the use of salary surveys to monitor levels paid for jobs industry-wide(c; moderate; p. 397)

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48. Procedural equity refers to _____.a. how a job’s pay rate in one company compares the job’s pay rate in

other companiesb. how fair the job’s pay rate is, when compared to other jobs within the

same companyc. the fairness of an individual’s pay as compared with what his or her

coworkers are earning for the same or very similar jobs within the company, based on each individual’s performance

d. the perceived fairness of the processes and procedures used to make decisions regarding the allocation of pay

e. the use of salary surveys to monitor levels paid for jobs industry-wide(d; moderate; p. 397)

49. _____ is a formal and systematic comparison of jobs to determine the worth of one job relative to another.a. Job analysisb. Job evaluationc. Benchmark analysisd. Compensable evaluatione. Job ranking(b; easy; p. 400)

50. Which of the following is not one of the compensable factors emphasized in the Equal Pay Act?a. skillsb. effortc. accountabilityd. responsibilitye. working conditions(c; moderate; p. 400)

51. Factors that establish how the jobs compare to one another and set the pay for each job are called _____.a. compensable factorsb. job evaluation factorsc. comparison factorsd. ranking factorse. analysis factors(a; easy; p. 400)

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52. Another term for job classification is _____.a. job rankingb. job gradingc. job categorizationd. job evaluatione. none of the above(b; easy; p. 403)

53. When using the job classification method of job evaluation, raters categorize jobs into groups of similar jobs called _____.a. classesb. gradesc. sectionsd. schedulese. cohorts(a; moderate; p. 403)

54. When using the job classification method of job evaluation, raters categorize jobs into groups of jobs that are similar in difficulty but not in context called _____.a. classesb. gradesc. sectionsd. schedulese. cohorts(b; moderate; p. 403)

55. The point method of job evaluation entails _____.a. identifying several compensable factors, each having several degrees,

and the degree to which each of these factors is present in the jobb. ranking each job relative to all other jobs based on some overall factorc. using raters to categorize jobs into groupsd. deciding which jobs have more of the chosen compensable factorse. none of the above(a; moderate; p. 404)

56. The ranking method of job evaluation entails _____.a. identifying several compensable factors, each having several degrees,

and the degree to which each of these factors is present in the jobb. ranking each job relative to all other jobs based on some overall factorc. using raters to categorize jobs into groupsd. deciding which jobs have more of the chosen compensable factorse. none of the above(b; moderate; p. 404)

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57. The job grading method of job evaluation entails _____.a. identifying several compensable factors, each having several degrees,

and the degree to which each of these factors is present in the jobb. ranking each job relative to all other jobs based on some overall factorc. using raters to categorize jobs into groupsd. deciding which jobs have more of the chosen compensable factorse. none of the above(c; moderate; p. 403)

58. The factor comparison method of job evaluation entails _____.a. identifying several compensable factors, each having several degrees,

and the degree to which each of these factors is present in the jobb. ranking each job relative to all other jobs based on some overall factorc. using raters to categorize jobs into groupsd. deciding which jobs have more of the chosen compensable factorse. none of the above(d; moderate; p. 404)

59. Which job evaluation method is a quantitative technique involving the identification of several compensable factors and the degree to which each of these factors is present in the job?a. ranking methodb. point methodc. factor comparisond. job grading methode. job classification method(b; moderate; p. 404)

60. Which job evaluation method entails deciding which jobs have more of the chosen compensable factors?a. ranking methodb. point methodc. factor comparisond. job grading methode. job classification method(c; moderate; p. 404)

61. A _____ is comprised of jobs of approximately equal difficulty or importance as established by job evaluation.a. pay groupb. benchmarkc. pay graded. classe. wage curve(c; easy; p. 405)

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62. The _____ shows the pay rates currently paid for jobs in each pay grade, relative to the points or rankings assigned to each job or grade by the job evaluation.a. pay groupb. benchmarkc. pay graded. classe. wage curve(e; easy; p. 405)

63. What is the purpose of the wage curve?a. to show the relationship between the value of the job as determined by

one of the job evaluation methods and the current average pay rates for your grades

b. to equate jobs of approximately equal difficulty or importance as established by job evaluation

c. to cluster jobs into logical groupingsd. to assign pay rates to pay gradese. to choose benchmark jobs within each pay grade(a; difficult; p. 405)

64. If the current rate being paid for a job falls below the wage line, what step should be taken?a. a pay freeze should be enacted for that jobb. a pay decrease should be assessedc. a pay raise should be providedd. no steps are necessary e. a bonus should be offered(c; difficult; p. 405)

65. Which of the following is typically included in compensation packages for a company’s top executives?a. base payb. short-term and long-term incentivesc. perksd. executive benefitse. all of the above(e; easy; p. 410)

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66. Supplemental executive retirement plans and supplemental life insurance are classified as _____ in executive compensation packages.a. base payb. short-term incentivesc. long-term incentivesd. executive benefitse. bonuses(d; easy; p. 410)

67. When employers set salary for professional employees by pricing professional jobs in the marketplace to establish the values for benchmark jobs, and then develop a salary structure based on the benchmarks and their other professional jobs, the employer has used a _____ approach.a. job evaluationb. job rankingc. market-pricingd. coste. point(c; moderate; p. 412)

68. A company using competency-based pay pays for all of the following except an employee’s _____.a. range of skillsb. job titlec. depth of knowledged. type of skillse. all of the above are part of competency-based pay plans(b; difficult; p. 412)

69. _____ means collapsing salary grades and ranges into just a few wide levels or bands, each of which contains a relatively wide range of jobs and salary levels.a. Comparable worthb. Strategic compensationc. Job evaluationd. Broadbandinge. Job grading(d; easy; p. 415)

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70. _____ refers to the requirement to pay men and women equal wages for jobs of roughly equivalent value to the employer.a. Comparable worthb. Strategic compensationc. Job evaluationd. Broadbandinge. Job grading(a; easy; p. 418)

True/ False

71. Financial benefits like employer-paid insurance and vacations are not a part of employee compensation. (F; easy; p. 390)

72. Indirect payments that contribute to an employee’s compensation include variable pay like commissions and bonuses. (F; moderate; p. 390)

73. Direct financial payments may be based on increments of time and on performance. (T; easy; p. 390)

74. Performance-based pay is more popular than time-based pay. (F; moderate; p. 390)

75. When employees work more than 40 hours per week, employers must pay overtime at a rate of at least one and a half times the normal pay for any hours worked over 40 in a workweek. (T; moderate; p. 391)

76. Employers prefer to give time off in lieu of overtime pay because they only have to grant the same number of hours off as the employee worked overtime while overtime pay is calculated at 150% of normal pay. (F; difficult; p. 391)

77. Because the minimum wage is set by the Fair Labor Standards Act, all states adhere to that wage. (F; difficult; p. 391)

78. The Equal Pay Act states that employees of one sex may not be paid wages at a rate lower than that paid to employees of the opposite sex for doing roughly equivalent work. (T; moderate; p. 391)

79. Portability rights refer to the ability for an employee to transfer his or her vested rights from one organization to another. (T; moderate; p. 392)

80. While laws exist to protect against discrimination in compensation based on gender and age, no law protects against such discrimination against persons with disabilities. (F; moderate; p. 392)

81. The provision of the Family and Medical Leave Act that entitles employees to take up to 12 weeks of unpaid, job-protected leave for the birth of a child only applies to women. (F; moderate; p. 392)

82. In writing an offer, employers should refer to hourly pay rather than annual salary, because courts could interpret the offer as a one-year contract. (T; moderate; p. 393)

83. Some employers may misclassify employees as independent contractors to reduce the taxes they must pay. (T; moderate; p. 393)

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84. The U.S. Department of Labor says there is a specific test for determining whether an individual is an independent contractor or an employee. (F; moderate; p. 393)

85. Wage rate has been the main issue negotiated by unions in collective bargaining. (T; easy; p. 394)

86. A union is entitled to know the salary of each employee it is representing. (T; moderate; p. 395)

87. Most expatriate salaries are set using the host-country base pay. (F; moderate; p. 397)

88. External equity refers to how fair the job’s pay rate is, when compared to other jobs within the same company. (F; moderate; p. 397)

89. Informal telephone or Internet surveys are good for checking on a relatively small number of easily identified and quickly recognized jobs. (T; easy; p. 398)

90. The Equal Pay Act focuses on three compensable factors – know-how, problem solving, and accountability. (F; difficult; p. 400)

91. Job evaluation is primarily a judgmental process. (T; moderate; p. 400)92. Job classification is the simplest of the job evaluation methods. (F; easy; p.

400)93. Most employers use a market-pricing approach to determine compensation

for professional employees. (T; easy; p. 412)94. Competencies are demonstrable characteristics of a person including

knowledge, skills, and behaviors that enable performance. (T; moderate; p. 412)

95. There tends to be more opportunities for advancement with competency-based pay plans than with job-based pay plans because the focus on skill-building results in more developmental opportunities. (T; easy; p. 413)

96. Competency-based pay plans tie pay to seniority as well as to competence. (F; moderate; p. 413)

97. The primary advantage of broadbanding is that it provides greater flexibility into employee assignments. (T; difficult; p. 415)

98. Broadbanding refers to the requirement to pay men and women equal wages for jobs of comparable value to the employer. (F; easy; p. 415)

99. In the broadest sense, comparable worth may mean comparing jobs that are very dissimilar such as nursing to fire fighting. (T; moderate; p. 418)

100. A key issue in comparable worth is whether women should be paid equal wages for jobs that are truly equal to men’s or just comparable to men’s jobs. (T; easy; p. 418)

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Essay/ Short Answer

101. What are the advantages for employers of claiming that someone doing work for them is an independent contractor rather than an employee? (moderate; p. 393)

Answer: There are many advantages. The Fair Labor Standards Act does not apply to independent contractors. The employer does not have to pay unemployment compensation payroll taxes, Social Security taxes, or city, state, and federal income taxes.

102. Describe the various approaches that an employer could take to address the cost-of-living differences associated with transferring an employee to a location with a higher cost-of-living. (moderate; p. 396)

Answer: Employers have different ways of handling cost-of-living differentials. One is to give the transferred person a nonrecurring payment in a lump sum amount. Another is to pay a differential for ongoing costs in addition to a one time allocation. Others simply raise the employee’s base salary.

103. List and explain the two basic international compensation policies that companies use when compensating expatriate employees. (moderate; p. 397)

Answer: The two basic international compensation policies include home-based and host-based plans. With a home-based salary plan, an international transferee’s base salary reflects his or her home country’s salary. The employer then adds allowances for cost-of-living differences such as housing and schooling costs. This is a good approach for short-term assignments and avoids the problem of changing an employee’s base salary. In the host-based plan, the firm ties the international transferee’s base salary to the host country’s salary structure. A manager sent to a specific, international location would have his or her base salary changed to the prevailing base salary for that position in that location. The firm usually tacks on cost-of-living, housing, schooling, and other allowances.

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104. Explain the implications suggested by the equity theory of motivation. What are the four forms of equity? (moderate; p. 396)

Answer: Equity theory states that people are strongly motivated to maintain a balance between what they perceive as their inputs or contributions and their rewards. If a person perceives an inequity, a tension or drive will develop in the person’s mind and the person will be motivated to reduce or eliminate the tension and perceived inequity. The four forms are external, internal, individual, and procedural. External equity refers to how a job’s pay rate in one company compares the job’s pay rate in other companies. Internal equity refers to how fair the job’s pay rate is, when compared to other jobs within the same company. Individual equity refers to the fairness of an individual’s pay as compared with what his or her coworkers are earning for the same or very similar jobs within the company, based on each individual’s performance. Procedural equity refers to the perceived fairness of the processes and procedures used to make decisions regarding the allocation of pay.

105. How can managers assess and address each equity issue? (moderate; p. 397)

Answer: Managers can use various methods to address each of these equity issues. They can use salary surveys to monitor and maintain external equity. They can use job analysis and job evaluation to maintain internal equity. They can use performance appraisal and various types of incentive pay to maintain individual equity. They can use communication, grievance mechanisms, and employee participation in developing the company pay plan to help ensure that employees view the pay process as transparent and fair. Managers can also use surveys to assess employee attitudes regarding the pay plan.

106. List the steps used to establish pay rates while ensuring external, internal, and procedural equity. (moderate; p. 398)

Answer: The five steps are as follows. Conduct a salary survey of what other employers are paying for

comparable jobs. Determine the worth of each job in your organization through job

evaluation. Group similar jobs into pay grades. Price each pay grade by using wave curves. Fine-tune pay rates.

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107. List the steps used in the job ranking method of job evaluation. (moderate; p. 402)

Answer: The steps in the job ranking method are as follows. Obtain job information Select jobs Select compensable factors Rank jobs Combine ratings and average the rankings

108. What are the steps for pricing jobs with a wage curve? (difficult; p. 405)

Answer: First, find the average pay for each pay grade, since each of the pay grades consists of several jobs. Next, plot the pay rates for each pay grade. Then fit a line, called a wage line, through the points. Finally, price the jobs. Wages along the wage line are the target wages or salary rats for the jobs in each pay grade.

109. Explain the four key differences between competency-based pay and traditional job-based pay. (difficult; p. 412)

Answer: With JBP, the employee receives the pay attached to the job regardless of whether the employee has the necessary competence for performing the job. With CBP, the supervisor certifies employee competence prior to any pay increases. With JBP, pay changes when one switches jobs. With CBP, one must demonstrate proficiency prior to getting a raise. Also, one could do a lower-paying job but still receive a higher pay based on skill. JBP systems may tie pay to grade or seniority. CBP pays for competencies, not seniority. There is more advancement possible with CBP plans than with JBP. CBP enhances organizational flexibility because workers’ skills are applicable to more jobs and therefore more portable.

110. What are the four main components of a competency-based pay plan? (moderate; p. 412)

Answer: CBP plans usually contain a 1) system that defines specific skills and a process for tying a person’s pay to his or her skill, 2) training system that lets employees seek and acquire skills, 3) formal competency testing system, and 4) work design that lets employees move among jobs to permit work assignment flexibility.

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