Compensation management - Questions and Answers fo Internal Assessment

1. COMPENSATION MANAGEMENT
MBA - II Year
Questions and Answers for Internal Assessment-II
Prepared by - Dr. G C Mohanta, BE (Mech), MSc (Engg.), MBA, PhD (Mgt), Professor
SECTION – A
Answer all questions. Each question carries ½ mark.
Write the choice in the given bracket for the following:
1. The factor/factors affecting Pay Structures is/are ------------------------------------------ ( e )
(a) Corporate culture and value, (b) Management Philosophy, (c) External Economic
Environment, (d) External “Socio-political” environment, (e) All, (f) None
2. Major compensable factor/factors is/are ------------------------------------------------------ ( e )
(a) Skill, (b) Responsibilities, (c) Effort , (d) Working Conditions , (e) All, (f) None
3. Flexible Workforce are ------------------------------------------------------------------------- (d )
(a) Part-time employees (b) Temporary & on-call workers, (c) Leased employees, (d) All,
(e) None
4. Factor/factors determining hardship premium of an expatriate is/are ---------------------- ( e )
(a) Assignment, (b) Actual hardship, (c) Tax consequences, (d) Length of assignment, (e) All,
(f) None
5. Going Rate Approach for international compensation is based on ------------------------ (a)
(a) Local market rates, (b) Home-country pay and benefits, (c) Both, (d) None
6. Balance Sheet Approach for international compensation is based on --------------------- (b)
(a) Local market rates, (b) Home-country pay and benefits, (c) Both, (d) None
7. Element/Elements of Executive Compensation is/are --------------------------------------- (e)
(a) Salary, (b) Bonus, (c) Long Term Incentive , (d) Perquisites, (e) All, (f) None
8. Stock options are --------------------------------------------------------------------------------- (b)
(a) Short term benefits, (b) Long term benefits, (c) Both, (d) None
9. Personal car service to Executive is ------------------------------------------------------------ (c)
(a) Incentive, (b) Fringe Benefit, (c) Perquisite, (d) All, (e) None
10. Benefit/benefits provided to Executives is/are ---------------------------------------------- (e)
(a) Retirement benefits, (b) Health insurance, (c) Vacations, (d) Health plans, (e) All,
(f) None
11. Executive compensation in India is built around -------------------------------------------- (d)
(a) Job complexity, (b) Employers ability to pay, (c) Executive human capital, (d) All,
(e) None

2. 12. Societal Objective/Objectives of Indirect Compensation is/are ----------------------------- (e)
(a) Reduce fatigue, (b) Discourage labour unrest, (c) Satisfy employee objectives, (d) All,
(e) None
13. Organizational Objective/Objectives of Indirect Compensation is/are -------------------- (a)
(a) To reduce fatigue, (b) To solve social problems and provide security for wage earners,
(c) Both, (d) None
14. Paid Time-Off Benefit/Benefits is/are --------------------------------------------------------- (c)
(a) Financial services, (b) Educational assistance, (c) Holidays & vacations, (d) All, (e) None
15. Employee Service/Services is/are -------------------------------------------------------------- (b)
(a) Paid sick leave, (b) Educational assistance, (c) Holidays & vacation, (d) All, (e) None
16. Benefit Audit is/are ------------------------------------------------------------------------------- (e)
(a) Defining objectives of organization, (b) Linking HR & organizational objectives,
(c) Assessing needs of employees, (d) All, (e) None
17. The establishments exempted from the Employees Provident Fund Act are ------------ (b)
(a) Establishments employing more than 20 employees, (b) Cooperative society employing
less than 50 employees, (c) Both, (d) None
18. As per Provident Fund Act, Central Govt’s contribution to Pension Fund is -------------(b)
(a) 8.33% of wages, (b) 1.16% of wages, (c) 0.50% of wages, (d) None
19. As per Employee’s State Insurance Act, Employer’s contribution is --------------------- (c)
(a) 8.33% of wages, (b) 1.16% of wages, (c) 4.75% of wages, (d) None
20. As per Payment of Bonus Act, minimum Bonus to be paid by an organization is ----- (b)
(a) 12.00%, (b) 8.33%, (c) 4.75%, (d) None
SECTION – B
Answer all questions. Each question carries ½ mark.
Fill in the Blanks for the following:
1. Pay Structure consists of a series of Pay Ranges, or “grades”, each with a .minimum and
maximum pay rate.
2. Pay Range has a minimum pay value, maximum pay value and a midpoint.
3. Ranking Method ranks each job relative to all other jobs, based on some overall factors.
4. Competency based pay is the pay given to an employee for his/her breadth and depth of
knowledge, rather than for the job title he/she holds.
5. In Job sharing, two or more part-timers perform one job.
6. Flexible Work Schedules are flextime, compressed work weeks and telecommuting.
7. Cost of Living Allowance is the Payment made to an expatriate with a view to compensate
the difference in expenditure between his/her home or parent country and host country.

3. 8. Home Leave Allowance is the payment made to an expatriate with a view to facilitate
his/her visit back to home country, once or twice a year.
9. Relocation Allowance is payment made to an expatriate to enable relocation at assignment
location including moving, shipping, storage costs, subsidies for purchase of appliances, etc.
10. The competence and contribution are the strengths of executives for determining their pay
package.
11. The salary of top executives of public sector is less compared to private sector.
12. Cost control objective requires firms to reduce output costs per employee.
13. Contingent employment saves companies considerable amounts of money because they
do not give these workers most discretionary benefits.
14. Flexible Benefits allows employees to select benefits and services that match their
individual needs
15. Labour is one of the principal factors of production in any establishment.
16. Employee’s contribution to PF & Pension Fund is 12% of wages.
17. As per Employee’s State Insurance Act, Employee’s contribution is 1.75% of wages.
18. As per Equal Remuneration Act Payment of equal remuneration to be made to men &
women for the same work of regular nature.
19. Factory’s act provides safety measures and promotes health and welfare of workers,
employed in factories.
20. As per Minimum Wages Act, minimum food requirements of an adult is 2,700 calories.
SECTION – C
Answer all questions. Each question carries one mark.
1. What are the objectives of Pay program?
Ans. Pay program objectives are as follows:
(a) Internal equity, (b) External equity, (c) Individual equity, (d) Process equity,
(e) Performance or productivity incentives, (f) Maximum use of financial resources,
(g) Compliance with laws and regulations, and (h) Administrative efficiency.
2. What are the steps in constructing Pay Structure?
Ans. The following are the steps in constructing Pay Structure
Step 1: Job Evaluation - Deciding number of pay structures,
Step 2: Salary surveys - Determining external market pay structure,
Step 3: Grouping Jobs - Defining pay grades,
Step 4: Pricing each pay grade – Establishing wage curve and
Step 5: Formulating rate structure

4. 3. What are Competencies?
Ans. Competencies are demonstrable characteristics of a person, including knowledge, skills,
and behaviours, those enable performance.
4. What are factors which increase short term costs for contingent employees?
Ans. The following are the factors which increase short term costs for contingent employees:
(a) Cost of training materials and instructors’ professional fees, (b) Downtime while
employees are participating in training and (c) Inefficiencies that may result until employees
master new skills
5. What are the advantages of Flexible Work Schedules?
Ans. The following are the advantages of Flexible work schedules:
(a) Employees can work when they are at their physical or mental best and (b) Employees can
work with fewer distractions & worries about personal matters.
6. What is Benefit Administration?
Ans. (a) Creation and management of employee benefits, (b) Making employees aware of the
benefits & types of standards employees must meet in order to qualify for the benefits, (c)
Interacting with the employees to provide latest information on the status of their benefits, (d)
Overseeing health insurance coverage for qualified employees and (e) Developing benefit
programs those are good for the employees and the company is able to meet those benefit
commitments.
7. How do you cost Health Insurance Benefits?
Ans. The following data are required for costing health insurance benefits:
(a) Premium rates for each type of enrolment, such as, single, husband & wife, parent & child
and family (b) Number of members enrolled in each category.
Total cost of health insurance = (Number of employees in each category of enrolment) X
(Annual cost per category)
8. What are the various Labour Legislations on Compensation & Benefits?
Ans. The important Labour Legislations on Compensation & Benefits are as follows:
(a) The Employee’s Provident Fund and Miscellaneous Provisions Act, 1952; (b) The
Employees State Insurance Act, 1948; (c) The Equal Remuneration Act, 1938; (d) The
Industrial Disputes Act, 1947; (e) The Factory’s Act, 1948; (f) The Minimum Wages Act,
1948; (g) The Payment of Wages Act, 1936; (h) The Payment of Bonus Act, 1965 and (i)
The Payment of Gratuity Act, 1972
9. What are the objectives of Employees State Insurance Act?
Ans. The objectives of Employees State Insurance Act are as follows:
(a) To provide protection to worker in contingences, such as, illness, long term sickness and
any other health risk due to exposure to employment injury or occupational hazards
(b) To provide Medical facilities to legal dependents or insured person and
(c) To provide the benefits to retired /permanently disabled employee and their family.
10. What are the various schemes under Employee’s Provident Fund Act?
Ans. The following are the various schemes under Employee’s Provident Fund Act:

5. (a) Employees Provident Fund Scheme, (b) Employees Pension/Family Pension Scheme and
(c) Employees Deposit Linked Insurance Scheme.