MGT 421 - Compensation and Benefits exam 2 Questions Well Answered Graded A+
Compensation survey: how they're formulated, strengths and weaknesses - Answers Serve 2
essential functions:
Define the relevant labor market.
Help choose the benchmark jobs for comparison.
Strengths: Able to gain valuable data on competitors compensation plans and trends from base
wages to discretionary benefits and how compensation plans are mixed between the two
(example: 60% wages, 40% benefits). Helps compensation professionals set compensation for
their employees and stay competitive in the marker.
Weaknesses: Compensation surveys contain a massive amount of data that can be
overwhelming to analyze without the use of statistics. Usually a large amount of variation in
comp between companies can make it hard to build a market competitive plan for your
company. Surveys often have outdated data as it takes a while to compile wages and benefits
to make the survey.
Evaluating raw compensation survey data (4 steps) - Answers 1.) measures of central tendency:
mean, median, mode
2.) measures of variation: standard deviation
3.) aging data (using CPI)
4.) performing regression analysis
Benchmark jobs - Answers contents well known, relatively stable, agreed upon by employees
common across different employers
represents the entire range of jobs that are being evaluated within a company
generally accepted in the labor market for the purpose of setting pay levels
Median vs. mean - Answers Median: the middle value of a data set, regardless of magnitude
, Mean: the average value of a data set, influenced by magnitude
Understanding the significance of quartiles - Answers Quartiles are useful for understanding the
spread of data based on a particular value; i.e. if the 25th quartile is $30,000 that means 25% of
people surveyed make less than or equal to $30,000.
Pay policies: market lead, market match, market lag - Answers Lead: distinguishes a company
from competition by compensating employees more highly than most competitors
Match: typically follows the market pay rates along the market pay line
Lag: distinguishes a company from competition by compensating employees less than most
competitors
Measures of dispersion - Answers Standard deviation: the average distance of each value from
the mean
Quartile: describing data sets in groups of four: 25th, 50th, 75th, 100th
Percentile: describing data sets in groups of ten: 10th, 20th, etc. If the 10th percentile is $27,000
that means 10% of individuals make less than or equal to $27,000
Pay grade including how they're established - Answers Groups jobs for pay policy application,
typically done by similar compensable factors and job evaluation points. Wider pay grades
decrease hierarchy and social distance, narrower pay grades do the opposite. Absolute pay
grades establish point spreads on factors: grade 1 is 0-200 points, grade 2 is 201-400 points,
etc.
Pay range - Answers Includes midpoint, maximum, and minimum pay rates acceptable for
positions within that pay grade.
Market line - Answers representative of typical market pay rates relative to a company's job
structure
Pay compression - Answers a company's pay spread between newly hired or less qualified
employees and more qualified job incumbents is small.
Red circle pay rates - Answers pay rates for exemplary employees that are greater than the
Compensation survey: how they're formulated, strengths and weaknesses - Answers Serve 2
essential functions:
Define the relevant labor market.
Help choose the benchmark jobs for comparison.
Strengths: Able to gain valuable data on competitors compensation plans and trends from base
wages to discretionary benefits and how compensation plans are mixed between the two
(example: 60% wages, 40% benefits). Helps compensation professionals set compensation for
their employees and stay competitive in the marker.
Weaknesses: Compensation surveys contain a massive amount of data that can be
overwhelming to analyze without the use of statistics. Usually a large amount of variation in
comp between companies can make it hard to build a market competitive plan for your
company. Surveys often have outdated data as it takes a while to compile wages and benefits
to make the survey.
Evaluating raw compensation survey data (4 steps) - Answers 1.) measures of central tendency:
mean, median, mode
2.) measures of variation: standard deviation
3.) aging data (using CPI)
4.) performing regression analysis
Benchmark jobs - Answers contents well known, relatively stable, agreed upon by employees
common across different employers
represents the entire range of jobs that are being evaluated within a company
generally accepted in the labor market for the purpose of setting pay levels
Median vs. mean - Answers Median: the middle value of a data set, regardless of magnitude
, Mean: the average value of a data set, influenced by magnitude
Understanding the significance of quartiles - Answers Quartiles are useful for understanding the
spread of data based on a particular value; i.e. if the 25th quartile is $30,000 that means 25% of
people surveyed make less than or equal to $30,000.
Pay policies: market lead, market match, market lag - Answers Lead: distinguishes a company
from competition by compensating employees more highly than most competitors
Match: typically follows the market pay rates along the market pay line
Lag: distinguishes a company from competition by compensating employees less than most
competitors
Measures of dispersion - Answers Standard deviation: the average distance of each value from
the mean
Quartile: describing data sets in groups of four: 25th, 50th, 75th, 100th
Percentile: describing data sets in groups of ten: 10th, 20th, etc. If the 10th percentile is $27,000
that means 10% of individuals make less than or equal to $27,000
Pay grade including how they're established - Answers Groups jobs for pay policy application,
typically done by similar compensable factors and job evaluation points. Wider pay grades
decrease hierarchy and social distance, narrower pay grades do the opposite. Absolute pay
grades establish point spreads on factors: grade 1 is 0-200 points, grade 2 is 201-400 points,
etc.
Pay range - Answers Includes midpoint, maximum, and minimum pay rates acceptable for
positions within that pay grade.
Market line - Answers representative of typical market pay rates relative to a company's job
structure
Pay compression - Answers a company's pay spread between newly hired or less qualified
employees and more qualified job incumbents is small.
Red circle pay rates - Answers pay rates for exemplary employees that are greater than the
