HRM 3705
COMPENSATION MANAGEMENT
1. Most employees believe their performance is above average or they feel that they are not
adequately paid. Therefore they believe that they should be paid more. A well designed
performance appraisal system should be defensible in a court of law. Discuss the importance of
performance appraisals, the law and elaborate on guidelines for setting up performance appraisal
system which is supported by the law. (25)
2. Identify and discuss a tool managers could use for fair pay increases. (15)
3. What is the role of compensation and rewards in modern organizations? What are the
advantages of fair compensation systems? (15)
4. Explain the importance of salary survey. What are the objectives of such survey? (20)
5. Discuss the differences between the traditional pay system and modern systems. (15)
6. What is seniority and longevity pay? (15)
7. Explain the following terms: Job based pay, skill based pay and competency based pay. (9)
8. What are the components of employee benefits? (15)
9. Discuss the factors affecting wage determination. (20)
10. What do you understand by the wage differentials? (20)
11. What do you understand by the internal and external equity in compensation system
differentials? (15)
12. What is the concept of internal equity? (20)
13. Explain the four different methods that can be used when setting CEO and Executive pay. (16)
14. Evaluate the four different methods of job evaluation. (25)
15. With an aid of a diagram, describe the theoretical equilibrium wage. (20).
16. Describe the ‘Peromnes systems’ job evaluation method. (20)
© 2015Together We Pass. All rights reserved.
pg. 3
, 17. Explain gain sharing and profit sharing methods of compensating employees. (20)
18. Explain the main factors evaluated in the Hay system. (15)
19. Evaluate any two non-quantitative job evaluation methods. (20)
20. Explain any five types of incentive schemes. (15)
Question 21
Question 22
Question 23
Question 24
Question 25
© 2015Together We Pass. All rights reserved.
pg. 4
,© 2015Together We Pass. All rights reserved.
pg. 5
, Answers
Question 1
Providing a Career Path
The performance appraisal is the perfect opportunity to address long-term goals that may not be on the
everyday to-do list. Not only does this provide the employee with an opportunity to be of greater use to
an organization, the employee feels pleased and valued. Lighting the way toward a successful career
path inspires loyalty and stability and can improve the bottom line, especially when the employee's first
concern is the health of the business, and subsequently, her career.
Encouraging Good Work and Improvement
Celebrating a job well-done is the easy part of the performance appraisal. Noting areas of improvement
is not so easy. Nevertheless, no one is perfect, and the performance appraisal is an ideal time to
diplomatically highlight areas that need improvement. Even the most valuable employee could benefit
from additional training, while those who are on the cusp of dismissal need the heads-up. Be specific by
providing examples and clearly explain what needs to occur to turn things around. Showing an employee
that you care enough about them by taking the time to work with them may make even the most
hardened employee feel better.
Improving Decision-Making Ability
When a company has detailed information on employee performance, business decisions become easier.
Filling open positions with existing staff strengthens the organization and promotes loyalty. Knowing
which employees display what strengths improves the speed with which projects can be assigned.
Appraisals also provide a framework when making decisions about compensation -- and layoffs. If the
organization becomes the unfortunate party to a lawsuit, the performance appraisal can refute or
support claims. As a result, the effective use of performance appraisals helps an organization operate
efficiently and with focus.
Improving Communication
All too often, employees and managers don't get along and can't understand why. Problems that stem
from a lack of communication can sometimes be resolved with a performance appraisal. If the appraisal
is used as an opportunity to describe the criteria on which performance is judged -- using meaningful
and relevant examples -- then the employee will walk away from the meeting with a better
understanding of how to best perform his job. For example, "John, when I say you need to be more
© 2015Together We Pass. All rights reserved.
pg. 6
COMPENSATION MANAGEMENT
1. Most employees believe their performance is above average or they feel that they are not
adequately paid. Therefore they believe that they should be paid more. A well designed
performance appraisal system should be defensible in a court of law. Discuss the importance of
performance appraisals, the law and elaborate on guidelines for setting up performance appraisal
system which is supported by the law. (25)
2. Identify and discuss a tool managers could use for fair pay increases. (15)
3. What is the role of compensation and rewards in modern organizations? What are the
advantages of fair compensation systems? (15)
4. Explain the importance of salary survey. What are the objectives of such survey? (20)
5. Discuss the differences between the traditional pay system and modern systems. (15)
6. What is seniority and longevity pay? (15)
7. Explain the following terms: Job based pay, skill based pay and competency based pay. (9)
8. What are the components of employee benefits? (15)
9. Discuss the factors affecting wage determination. (20)
10. What do you understand by the wage differentials? (20)
11. What do you understand by the internal and external equity in compensation system
differentials? (15)
12. What is the concept of internal equity? (20)
13. Explain the four different methods that can be used when setting CEO and Executive pay. (16)
14. Evaluate the four different methods of job evaluation. (25)
15. With an aid of a diagram, describe the theoretical equilibrium wage. (20).
16. Describe the ‘Peromnes systems’ job evaluation method. (20)
© 2015Together We Pass. All rights reserved.
pg. 3
, 17. Explain gain sharing and profit sharing methods of compensating employees. (20)
18. Explain the main factors evaluated in the Hay system. (15)
19. Evaluate any two non-quantitative job evaluation methods. (20)
20. Explain any five types of incentive schemes. (15)
Question 21
Question 22
Question 23
Question 24
Question 25
© 2015Together We Pass. All rights reserved.
pg. 4
,© 2015Together We Pass. All rights reserved.
pg. 5
, Answers
Question 1
Providing a Career Path
The performance appraisal is the perfect opportunity to address long-term goals that may not be on the
everyday to-do list. Not only does this provide the employee with an opportunity to be of greater use to
an organization, the employee feels pleased and valued. Lighting the way toward a successful career
path inspires loyalty and stability and can improve the bottom line, especially when the employee's first
concern is the health of the business, and subsequently, her career.
Encouraging Good Work and Improvement
Celebrating a job well-done is the easy part of the performance appraisal. Noting areas of improvement
is not so easy. Nevertheless, no one is perfect, and the performance appraisal is an ideal time to
diplomatically highlight areas that need improvement. Even the most valuable employee could benefit
from additional training, while those who are on the cusp of dismissal need the heads-up. Be specific by
providing examples and clearly explain what needs to occur to turn things around. Showing an employee
that you care enough about them by taking the time to work with them may make even the most
hardened employee feel better.
Improving Decision-Making Ability
When a company has detailed information on employee performance, business decisions become easier.
Filling open positions with existing staff strengthens the organization and promotes loyalty. Knowing
which employees display what strengths improves the speed with which projects can be assigned.
Appraisals also provide a framework when making decisions about compensation -- and layoffs. If the
organization becomes the unfortunate party to a lawsuit, the performance appraisal can refute or
support claims. As a result, the effective use of performance appraisals helps an organization operate
efficiently and with focus.
Improving Communication
All too often, employees and managers don't get along and can't understand why. Problems that stem
from a lack of communication can sometimes be resolved with a performance appraisal. If the appraisal
is used as an opportunity to describe the criteria on which performance is judged -- using meaningful
and relevant examples -- then the employee will walk away from the meeting with a better
understanding of how to best perform his job. For example, "John, when I say you need to be more
© 2015Together We Pass. All rights reserved.
pg. 6
