Compensation Management

What is the primary goal of a compensation system?

• To reduce employee workload.

• To attract, retain, and motivate employees.

• To increase company profits only.

• To ensure compliance with labor laws.

Define monetary rewards in the context of compensation.

• Monetary rewards refer to employee recognition programs and awards.

• Monetary rewards are non-financial benefits like health insurance and vacation days.

• Monetary rewards are only applicable to management positions and not to regular employees.

• Monetary rewards are financial compensations such as salaries, bonuses, and commissions given to employees.

What are non-monetary rewards? Give examples.

• Paid vacation days

• Salary bonuses

• Examples of non-monetary rewards include recognition programs, flexible work hours, professional development opportunities, and a positive work environment.

• Company stock options

Explain intrinsic rewards and their importance.

• Intrinsic rewards are internal satisfactions that motivate individuals to engage in activities for their own sake, and they are important for enhancing motivation, creativity, and job satisfaction.

• Intrinsic rewards are always monetary benefits.

• Intrinsic rewards are external factors that drive performance.

• Intrinsic rewards are only relevant in team settings.

What is cafeteria style compensation?

• A compensation plan that only includes cash bonuses.

• A mandatory benefits package that all employees must take.

• A fixed salary structure with no flexibility.

• Cafeteria style compensation is a flexible benefits plan that allows employees to select from a range of options.

How does employee satisfaction relate to compensation design?

• Higher compensation always leads to lower employee satisfaction.

• Employee satisfaction is positively correlated with effective compensation design.

• Compensation design has no impact on employee morale.

• Employee satisfaction is unrelated to compensation design.

What factors contribute to motivation in compensation?

• High salary alone

• Job security only

• Limited benefits

• Fairness, performance recognition, market competitiveness, individual needs, and organizational culture.

Describe the concept of internal equity in compensation.

• Internal equity focuses solely on employee tenure rather than performance.

• Internal equity refers to the pay rates compared to industry standards.

• Internal equity in compensation is the fairness of pay rates among employees within the same organization based on their roles and performance.

• Internal equity is the process of adjusting salaries based on market trends.

What is external equity and why is it important?

• External equity is the fairness of compensation compared to the job market, and it is important for attracting and retaining talent.

• External equity is the process of evaluating employee performance.

• External equity refers to the internal pay structure of a company.

• External equity is only relevant for large corporations.

How can individual equity be established in a compensation system?

• Implement a flat salary structure for all employees

• Establish individual equity through market surveys, transparent structures, consistent evaluations, and employee involvement.

• Use a secretive evaluation process without employee feedback

• Base compensation solely on tenure