Chapter 9: Compensation

Question 1

fixed pay

Answer 1

based on working hours

Question 2

variable pay

Answer 2

based on the employee outcomes or job performance

Question 3

Barr states that compensation can contribute to the organization’s effectiveness in 3 ways:

Answer 3

1. attract the best human assets to the firm.
2. help retain good performers.
3. motivate to affect performance.

Question 4

aims of compensation

Answer 4

1. influence employee attitudes and behaviors
2. controlling labour costs
3. employer branding

Question 5

basis for pay

Answer 5

1. set of tasks within given position
2. individuals knowledge and skills
3. seniority
4. status, reputation

Question 6

what temporary contracts are connected with

Answer 6

saving labor costs,

but low commitment to the org, and high turnover

Question 7

payrolling

Answer 7

new employees are not officially employed, but instead they have a legal and transactional contract with an external org specialize d in both the administration and legal affairs of employement relationships

Question 8

fixed pay is also known as

Answer 8

salary; and is mainly determined by CBAs

Question 9

variable pay limitations

Answer 9

• Measurement
• Influence
• Transparency and fairness
• Too narrow focus on financial success
• Continuous renewal of PRP systems

Question 10

whats required for cafeteria plan

Answer 10

IT system

Question 11

equity theory

Answer 11

people’s attitudes and behaviors are affected by their assessment of their work contributions (inputs) and the rewards they recieve (outputs)

Question 12

equitable payment

Answer 12

individual employee perceives their outcome / input ratio to match that of the others

Question 13

i-deals

Answer 13

deals between 1 individual and the direct supervisor that are often not written down

Question 14

Lazear tournament model + relative compensation theory

Answer 14

1. promotion leads to better compensation.
2. workers are not promoted because they are good, but because they are better than the others at their current level.
3. The level of effort with which employees pursue the promotion depends on the size of the
   potential increase in their wages
4. There is a limit to spread the model. People are not likely to participate in a winner-takes-all
   tournament because of the high risk of ending with nothing.

Question 15

key concepts of expectancy theory

Answer 15

1. Expectancy representing the individual employee belief ‘that a particular degree of effort will
   be followed by a particular level of performance’.
2. Instrumentality representing the perceived link between employee behaviour and pay.
3. Valence representing ‘the positive or negative value people place on outcomes’.

Question 16

1 of the serious threats resulting from top management variable pay

Answer 16

decoupling - top management’s inclination to link their pay to performance outcomes that they
can directly influence and cut out pay related to performance systems that are more difficult to
affect

Question 17

Tinbergen norm

Answer 17

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