Compensation and Reward Management-2



Compensation and Reward Management

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Assignment A
1. What is Employees Compensation? State its two components? Explain the various steps involved in establishing pay rates?

2. Give overview of legislations affecting compensation?

3. What are different elements of managerial compensation?

4. Outline the main employees’ services benefits?

5. What is goal sharing? Why organizations introduce goal sharing?

6. Define Benefits and incentives? Classify them? State its merits and demerits?

7. State the differences between absenteeism and retention? Explain the process, advantages and limitations of retention management

8. Explain performance based rewards and compensation schemes? Also explain competency mapping?

Assignment B
Case Study- Seat of the pants
Gaurav cleaning centers doesn’t have a formal wage structure nor does it have rate ranges or use compensable factors. Wage rates are based mostly on those prevailing in the surrounding community and tempered with an attempt on the part of Gaurav to maintain some semblance of equity between what workers with different responsibilities in the stores are paid.
Needless to say, Gaurav doesn’t make any formal surveys when determining what his company should pay. He peruses the want ads almost everyday and conducts informal surveys among his friends in the local chapter of the laundry and cleaners trade association. While Gaurav has taken a “seat-of-the-pants” approach to paying the employees, his salary schedule has been guided by several basic pay policies while many of his colleagues adhere to a policy of paying absolutely minimum rates, Gaurav has always followed a policy of paying his employees about 10%above what he feels are the prevailing rates, a policy that he believes reduces turnover while fostering employee loyalty. Of somewhat more concern to Pragati is her father’s informal policy of paying men about 20% more than women for the same job. Her father’s explanation is,” they are stronger and can work harder for longer hours and besides they all have families to support.”

1. Is the company at the point where it should be setting up a formal salary structure based on a complete job evaluation? Why?
2. Gaurav policy of paying 10%more than the prevailing rates a sound one and how could that be determined?

Case Study- Health care – Business or Employees
By February 2004 strike by southern Delhi grocery workers against the state’s major supermarket chains was almost 5 month old because so many workers were striking (70,000) and because of the issues involved, unions and employers across the country were closely following the negotiations. Indeed, grocery union contracts were said to expire in several cities later in 2004, and many believed the Delhi settlement-assuming one was reached-would set a pattern.
The main issue was employee benefits, and specifically how much (if any) of the employees health care costs the employees should pay themselves. Based on their existing contract, southern Delhi grocery workers had unusually good health benefits. For example they paid nothing toward their health insurance premiums, and paid only Rs 420 co-payments for doctor visits.However, supporting these excellent health benefits cost the big Southern Delhi grocery chain over Rs168 per hour per worker.
The big grocery chains were not proposing cutting health care insurance benefits for their existing employees. Instead, they proposed putting any new employees hired after the new contract went into effect into a separate insurance pool, and contributing Rs56.7 per hour for their health insurance coverage. That meant new employee’s health insurance would cost each new employee perhaps Rs420 per week. And, if that Rs420 per week wasn’t enough to cover the cost of health care, then the employees would have to pay more or do without some of their benefits.
It was difficult situation for all the parties involved. For the grocery chain employers sky rocketing health care cost per undermining their competitiveness; and the current employees feared any step down the slippery slope that might eventually mean cutting their own health benefits. The unions did not welcome a situation in which they’d end up representing two classes of employees, one(the existing employees) who had excellent health insurance benefits, another(newly hired employees)whose benefits were relatively meager and who might therefore be unhappy from the moment they took their jobs and joined the union.

Please give your answer in at least 25 words and press save and continue button.
1. Assume you are mediating this dispute. Discuss three creative solutions you would suggest for how the grocers could reduce the health insurance benefits and the cost of their total benefits package without making any employees pay more?
2. From the grocery chains point of view, what is the downside of having two classes of employees, one of which has superior health insurance benefits? How would you suggest they handle the problem?

Assignment – C

1. All of the following are compensation objectives of the organization EXCEPT
a) legal compliance with relevant laws and regulations.
b) internal, external and individual equity for employees.
c) the lowest total cost of compensation among direct competitors.
d) performance enhancement for the organization.
2. If an organization’s competitive strategy relies on long-term relationships with the clients who purchase the organization’s goods and services, the organization should reward its employees from its executives to its sales staff with incentives based on
a) quarterly sales.
b) annual profits.
c) prices of its stocks in daily trading.
d) a rolling five-year measure of financial performance.
3. Compensation is one of the organization’s largest expenditures. Compensation philosophies and systems vary from one organization to the next. Why is that?
a) There is no “one right way” to compensate employees. Many systems will work equally well in any organization.
b) Different organizations have different organizational objectives and strategies.
c) Legal requirements mandate different types of compensation systems depending on the organization’s industry.
d) Organizations depend heavily on consultants to design their compensation systems, and each consulting firm has its own system.
4. Which of the following is NOT a non-monetary reward?
a) training and development programs.
b) matching stock purchase plans.
c) career management services.
d) employee recognition.
5. A compensation philosophy in which each employee who has gained another year of seniority should have an increase in pay is called the ____ philosophy.
a) entitlement
b) commitment
c) paternalistic
d) the equity-based
6. ____ are payments directly calculated on the amount of time worked.
a) Salaries
b) Wages
c) Stipends
d) Bonuses
7. The two basic compensation philosophies, which should be seen as opposite ends of a continuum, are the ____ and the ____ orientations.
a) competency, productivity
b) exempt; non-exempt
c) entitlement; performance
d) market-driven, equity-driven
8. Amber is the manager of a popular clothing store. She regularly works over 40 hour a week. But when new styles are coming in requiring new displays, she may put in as many as 60 hours a week. Amber’s paycheck is the same regardless of the number of hours she has worked. Amber is paid on a/an
a) total compensation arrangement.
b) incentive compensation program.
c) wage system.
d) salary basis.
9. Which type of compensation is linked directly to individual, team, or organizational performance?
a) variable pay
b) direct pay
c) wages
d) salary
10. A/an ____ is an indirect reward given to an employee or group of employees because they are members of the organization.
a) incentive
b) bonus
c) benefit
d) motivator
11. In an organization with a performance-oriented philosophy,
a) employees only get raises if their productivity has been satisfactory or better.
b) all employees can at least count on an annual cost-of-living adjustment to their salaries.
c) bonuses are based on what other companies in the industries are paying.
d) marginal performers tend to be satisfied with their compensation.
12. Justin is an hourly employee of Furnace Brick, a company that manufactures a special high-heat-resistant brick for industrial kilns. Justin is unhappy with the new compensation system introduced by the company’s new plant manager and HR director. This system has eliminated the practice of annual raises, the Christmas bonus, and raises based on seniority for a new system that ties every employee’s raise to how well Furnace Brick is performing in the market. Moreover, the plant manager has announced that twenty percent of the employees in the plant will receive no raise at all this year, regardless of the company’s performance. Furnace Brick has moved from a/an ____ compensation philosophy, to a/an____ compensation philosophy.
a) wage-based, salary-based
b) paternalistic, competitive
c) entitlement, performanc
d) meet-the-market, lag-the-market
13. Jack and Jerry are twins. Both started working at competing firms in the same industry. Jack and Jerry were given exactly the same starting salary. They have been with their companies for ten years, and both have identical positions and identical performance ratings. Both Jack and Jerry are consistently average performers. Jack works at a company with an entitlement compensation philosophy. Jerry works at a company with a pay-for-performance compensation philosophy. The two companies are identical in revenue and profitability. They allocate the same budget amount for employee raises each year. All other factors remaining equal, which of the following statements is most likely to be true?
a) Jerry will have a higher salary than Jack.
b) Jack will have a higher salary than Jerry.
c) Jerry and Jack will have identical salaries.
d) Jerry and Jack will have identical levels of pay satisfaction.
14. At Artistic Floral Creations, the non-managerial employees all receive the same pay increase every year. Usually this increase is about 5%, but some years it has been as high as 10% depending on changes in the cost-of-living. Artistic Floral Creations has a/an ____ philosophy of compensation.
a) performance
b) entitlement
c) quartile-based
d) total rewards
15. Simon is outraged that his co-worker Missy was given a raise. Simon believes Missy got the raise because she married the chairman of the board’s son. Simon’s sense of ____ has been violated.
a) compensatory equity
b) distributive justice
c) external equity
d) procedural justice
16. In terms of procedural justice, the process of determining base pay, allocating pay increases, and measuring performance all must be seen by employees as
a) fair.
b) legal.
c) performance-based.
d) non-discriminatory.
17. Amanda is upset because she makes the same salary as Carl does, even though Amanda has 18 clients and Carl has only 11 clients. Amanda is making a judgment about
a) discriminatory compensation.
b) procedural justice.
c) internal equity.
d) external equity.
18. Typical compensation appeals procedures require the employee to discuss the problem first with
a) the organizational ombuds.
b) the EEOC.
c) the HR department.
d) his/her supervisor.
19. Organizations that have specific policies about where they wish to position themselves in the labor market use a/an ____ strategy.
a) industry
b) quartile
c) benchmarking
d) labor market
20. Abundance Nurseries needs large numbers of unskilled employees every spring and summer to plant, maintain, and harvest the flower fields. Abundance is located in an area where there is a large supply of unskilled workers, and it has few problems recruiting workers as needed. It would be reasonable for Abundance Nurseries to position its pay for these workers in the ____ -quartile of the labor market.
a) first
b) second
c) third
d) fourth
21. A company that structures its compensation system so that half of its competitors pay their employees more than it does and half of its competitors pay less than it does is using a ____ the market strategy.
a) lag
b) meet
c) lead
d) follow
22. A third-quartile approach is a compensation strategy
a) in which the company pays higher wages than its competitors do.
b) to pay below the average in the labor market.
c) where one-third of the competitors in the labor market pay higher wages than what the company does.
d) in which the company pays the median of what its competitors pay.
23. Larry has decided to go back to his hometown of Mellonburg and set up an architectural design business for “green” homes. Mellonburg is a depressed farming community of 1,351 residents. It is 20 miles from the nearest restaurant, 70 miles from the nearest Starbucks coffee shop, and the local schools are the worst in the state. The winters are severe, the summers are oppressive. Few single people live there, and the social and cultural life is negligible. In order to attract good quality architects, Larry will probably
a) need to ignore the market compensation for architects and pay the architects on an entitlement basis.
b) be able to lag the market significantly in pay because of the low cost of living.
c) have pay more than the market because of the unappealing location.
d) make market comparisons irrelevant by hiring the architects as independent contractors.
24. Paul is a single parent. He received consistently high performance appraisals from his employer, until the company went bankrupt. Now, Paul is looking for a new job. As the recruiter at MilqueMaid Chocolate, you are very interested in Paul. But, your firm has a lag-the-market compensation strategy. You know that Paul has had an offer from a firm that has a meet-the-market strategy. You are not authorized to offer Paul a market-level salary. Your best way to lure Paul to MilqueMaid is to
a) point out MilqueMaid’s broad-based performance incentive programs.
b) emphasizeMilqueMaid’s entitlement compensation philosophy.
c) discuss the method that MilqueMaid used to determine its quartile strategy.
d) discussMilqueMaid’s broadband pay structure.
25. An organization can benefit from a properly designed and implemented competency-based pay system through
a) lower overall labor costs.
b) reduction of overtime costs by the move to an all-salaried workforce.
c) greater workforce skills and knowledge.
d) higher employee satisfaction with pay
26. In a competency-based pay system employees are paid
a) on the skills and knowledge they have, whether they use these or not.
b) according to their job performance, measured either by quality or quantity.
c) on the basis of their scores on annual competency tests.
d) on whether they have added value to the organization in the last year.
27. As HR director, you are discussing the implementation of a competency-based compensation system with the company’s CEO. You point out that in order for the competency system to be effective
a) the company must place its base pay in the third quartile.
b) the company’s pay structure must be broad-banded.
c) the company must invest heavily in employee training programs.
d) the company must implement work teams.
28. Which of the following is the typical structure of team-based compensation?
a) individual pay-for-performance based on team member input
b) skill-based pay plus a percentage of base pay
c) equal pay for each team member based on team performance
d) team-based variable pay on top of individual base pay
29. Ernest, a U. S. citizen employee is being assigned to the company’s German office in Munich because of his intimate knowledge of the company’s main product. Ernest was previously stationed at the company headquarters in Kansas City. Al,l of the following issues should be taken into account when determining Ernest’s pay during the years he works in Munich EXCEPT
a) the compensation that a German would make in a similar job in Munich.
b) German income tax policies.
c) cost of living differences between Kansas City and Munich.
d) fluctuations between the value of the dollar and the euro.
30. In a true pay-for-performance system, which of the following employees would qualify for incentive reward?
a) Jack has met his sales quota even though he was hospitalized for appendicitis during the year.
b) Otto manages to meet the minimum required sales on his store location despite the fact that the business building next door, where he receives most of his customer traffic, has closed.
c) Charlene performs up to expectations as a science teacher at a magnet high school
d) Chris brings in 20 percent more new clients for the branch bank than is required.

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31. All of the following are potential outcomes of a successful pay-for-performance plan EXCEPT
a) greater predictability of employee pay.
b) retention of high performers.
c) improved safety records.
d) aligning employee behavior with organizational business goals.
32. What are variable pay plans?
a) methods of tying compensation to the Consumer Price Index (CPI) in order to keep up with inflation
b) additional tangible rewards given to employees for performance beyond normal expectations
c) compensation that increases as employees gain new job-related knowledge, skills, and abilities
d) incentives to meet required performance standards
33. Traditional compensation systems pay employees differently based on their job responsibilities and base employee increases mainly on
a) meeting organizational objectives.
b) growth in capabilities and competencies.
c) years of seniority.
d) changes in the Consumer Price Index.
34. Which of the following is an assumption of variable-pay systems?
a) Some jobs contribute more to organizational success than others.
b) Cooperation and teamwork can be enhanced when individuals are rewarded for extra efforts.
c) Equality in pay is a strong motivator of exceptional employee performance.
d) Both good and poor performing employees will perceive a pay system that rewards high performance as satisfying and equitable.
35. As director of compensation for BlueBottle Enterprises, you have implemented a highly successful pay-for-performance system. This system has worked successfully for three years as measured by a number of financial and non-financial measures. Because of this success you are considering quitting BlueBottle and setting up your own consulting firm to promote this system. Which of the following statements is TRUE?
a) This will be a successful undertaking because effective pay-for-performance systems are translatable across industries.
b) You should target poor-performing firms as potential clients because most firms’ performance will be enhanced by a pay-for-performance system.
c) As long as most employees will experience an increase in pay with this system, they will be satisfied with it.
d) You need to have a way to evaluate organizational cultures in order to select the organizations in which your pay-for-performance system will be effective.
36. Performance incentives include all the following EXCEPT
a) plane tickets to a resort destination.
b) commissions.
c) cost-of-living increases.
d) profit-sharing.
37. In a TV interview, the CEO of Trevelyan, Inc. , commented that the pay-for-performance system used by her company was effective because, “Now everyone is pulling in the same direction. ” What does the CEO mean by this observation?
a) The pay-for-performance system is linking employee performance and the organization’s strategic goals.
b) Employees are being motivated to gain more competencies and skills. .
c) Employees are receiving higher total compensation under the pay-for-performance system than under the former, traditional compensation system. .
d) Important HR objectives have been achieved, such as reduction in turnover and better attendance.
The CEO of MasterFiber Textiles attended a conference where he spoke with the CEO of Golden Fleece Manufacturing. Golden Fleece has had great success in implementing an individual pay-for-performance system. The CEO of MasterFiber has directed the vice president of HR to implement the Golden Fleece method at MasterFiber. The FIRST concern of the VP of HR should be
a) Can current executive compensation be retained under this system?
b) Is the plan simple or complex to administer?
c) Does the plan fit with the business strategies and culture at MasterFiber?
d) Can MasterFiber afford to pay higher compensation to its employees?
39. It is important to make sure that what is being rewarded by the compensation system is strongly tied to organizational objectives, because people tend to
a) guess what they think management wants done.
b) produce what is convenient.
c) produce what is measured and rewarded.
d) avoid doing unpleasant tasks.
40. Bonuses are less costly to the organization than general wage increases, because
a) bonuses receive preferential tax treatment.
b) the annual amount given as a bonus tends to be smaller than the annual amount given as a raise.
c) bonuses are frequently given in the form of non-cash items.
d) bonuses do not become part of employees’ base wages.



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