BASE PAY ADMINISTRATION AND PAY FOR PERFORMANCE
EVALUATION EXAM 2025/2026 QUESTIONS WITH ANSWERS
RATED A+
✔✔Midpoint differential guidelines - ✔✔5% to 12% between grades for
clericals/production
• 8% to 15% between grades for paraprofessional, professional management
• 15% to 25% total midpoint differential between supervisor and subordinates
• 20% to 35% midpoint differential between grades for executive levels
✔✔Midpoint to Midpoint Differential Formula - ✔✔(Midpoint of higher grade - Midpoint of
lower grade)/midpoint of lower grade
✔✔What is range overlap? - ✔✔allows for movement through a pay structure (grades
and ranges) due to performance, promotion, demotion, reclassification, market
adjustment, etc. Can be no overlap, moderate overlap, and substantial overlap.
✔✔Broadbanding - ✔✔results in a pay structure that consolidates a large number of
pay grades and salary ranges into much fewer broadbands with relatively wide salary
grandes. Typically goes with 100% differences between min and max or more.
✔✔Reasons to adopt broadbands - ✔✔1. improve competitive advantage
2. support a new culture/climate
3. support flatter organizational structure
4. promote broader view of work (less emphasis on promotions, more importance on
growing by taking on more/different responsibilities and training for new skills/improving
competencies)
5. increase flexibility of pay practices
✔✔Disadvantages of Broadbands - ✔✔1. lack of structure (can create confusion and
chaos)
2. Just old salary ranges repositioned within new bands
3. Need for higher level of compensation expertise
4. Salary increases may be less structured
✔✔Market-pricing Approach to Base Pay Structure Design - ✔✔use of market (external)
data as a priority to establish pay grades and ranges. Aligns pay structure closer to the
external market
✔✔Point factor approach to base pay structure design - ✔✔use of the job content
evaluation (internal) as a priority to establish pay grades and ranges. Aligns pay
structure to value internal hierarchy and culture
✔✔Integrated approach to base pay structure design - ✔✔utilizes market data to
incorporate external data into the internal job worth hierarchy. allows the organization to
,align pay structures to external market components while still valuing the internal
hierarchy
✔✔What are the four steps to market pricing approach? - ✔✔1. Complete a competitive
market pricing analysis
2. Develop a pay structure that covers lowest to highest market rates from step 1, plus
an additional grade or two at the top and bottom
3. Assign benchmark jobs to the pay structure based on the relationship of market rate
to midpoint, review benchmarks and modify based on internal equity. Some jobs may be
placed at different levels based on internal preferences, if the company does not agree
with the market rate
4. Assign nonbenchmark jobs to the pay structure
✔✔What are the 5 steps to the point factor evaluation approach? - ✔✔1. Review overall
job evaluation point differentials by job family
2. Rank order from high to low
3. Look for logical groupings of jobs
4. develop point bands (absolute or percent based)
5. check intra-family and supervisor/subordinate relationships
✔✔What are the 6 steps for Integrating Market data approach? - ✔✔1. incorporate
market data
2. review market inconsistencies and reassign jobs; compute raw averages and percent
differences by grade
3. smooth out grade averages
4. review differences between midpoints and market data
5. resolve inconsistencies between internal and external competitiveness (upgrade jobs,
change grade beaks, "overpay/underpay" jobs relative to market because of strong
conviction about relative internal value, take jobs out of system if no other option)
6. develop pay ranges around the proposed midpoints
✔✔Job based pay - ✔✔based on nature and level of defined job - these programs base
an employee's pay on the nature and level of a rigidly defined job. Job-based pay
typically does not recognize employee skills or knowledge for grade assignments
EXAMPLES: single rate, step rate (automatic,variable)
✔✔Single-Rate Pay - ✔✔each job has a fixed or flat rate of pay. No differences in pay
are made for employee skill, knowledge, performance, or time in the job
✔✔Best applications for Single Rate Pay - ✔✔- routine jobs/short learning time
- jobs with limited performance variability
- collective bargaining environments (unionized jobs)
- sales jobs where commission is significant
- summer intern/temporary jobs
, ✔✔Step Rate - Automatic Features: - ✔✔typically five to seven steps, 3-5% points apart
- prescribed time schedule
- structure updated to maintain competitive position
✔✔Step Rate - Automatic Best Applications - ✔✔- with routine jobs where limited
performance variability is possible and performance is not measured
- when the desire to acknowledge seniority exists
- in an organization culture where desire for stability and security is high
- collective bargaining agreements
- public sector
✔✔Step Rate - Automatic Potential Disadvantages - ✔✔- cannot acknowledge different
rates of progress in skill attainment
- cannot differentiate based on performance
- can be discouraging to employees seeking pay awards
- utilizes money that could be better spent
- pay inflation over time adds to labor costs for no corresponding increase in productivity
✔✔Step Rate - Variable - ✔✔In step rate, many of the same principles apply as in step
rate - automatic. Key Difference: opportunity to reward employee performance and/or
skill acquisition by granting more than one step.
✔✔Step Rate - Variable Features - ✔✔5-10 steps, 2-5% apart
- prescribed time schedule
- outstanding: 2 steps, expected: 1 step, marginal: 0-1 with delay, unacceptable:
terminated, demoted, no increase
- step structure updated for competitive position
✔✔Step Rate - Variable Best Applications - ✔✔- where step structure is appropriate, but
environment lends itself to performance-based differences in levels
- in repetitive jobs, but where it is possible to measure performance differences
- in an employee relations environment such that differences in pay due to performance
occurs in exceptional cases
✔✔Step Rate - Variable Potential Disadvantages - ✔✔- relatively few increase
amount/timing choices
- requires justification of performance distinctions
✔✔What is a differential? - ✔✔- additional pay made to employees due to a change in
work pattern, location, or environment.
- typically used for hourly employees
- also referred to as premium pay
✔✔Types of Differentials - ✔✔- Shift
- Geographic
EVALUATION EXAM 2025/2026 QUESTIONS WITH ANSWERS
RATED A+
✔✔Midpoint differential guidelines - ✔✔5% to 12% between grades for
clericals/production
• 8% to 15% between grades for paraprofessional, professional management
• 15% to 25% total midpoint differential between supervisor and subordinates
• 20% to 35% midpoint differential between grades for executive levels
✔✔Midpoint to Midpoint Differential Formula - ✔✔(Midpoint of higher grade - Midpoint of
lower grade)/midpoint of lower grade
✔✔What is range overlap? - ✔✔allows for movement through a pay structure (grades
and ranges) due to performance, promotion, demotion, reclassification, market
adjustment, etc. Can be no overlap, moderate overlap, and substantial overlap.
✔✔Broadbanding - ✔✔results in a pay structure that consolidates a large number of
pay grades and salary ranges into much fewer broadbands with relatively wide salary
grandes. Typically goes with 100% differences between min and max or more.
✔✔Reasons to adopt broadbands - ✔✔1. improve competitive advantage
2. support a new culture/climate
3. support flatter organizational structure
4. promote broader view of work (less emphasis on promotions, more importance on
growing by taking on more/different responsibilities and training for new skills/improving
competencies)
5. increase flexibility of pay practices
✔✔Disadvantages of Broadbands - ✔✔1. lack of structure (can create confusion and
chaos)
2. Just old salary ranges repositioned within new bands
3. Need for higher level of compensation expertise
4. Salary increases may be less structured
✔✔Market-pricing Approach to Base Pay Structure Design - ✔✔use of market (external)
data as a priority to establish pay grades and ranges. Aligns pay structure closer to the
external market
✔✔Point factor approach to base pay structure design - ✔✔use of the job content
evaluation (internal) as a priority to establish pay grades and ranges. Aligns pay
structure to value internal hierarchy and culture
✔✔Integrated approach to base pay structure design - ✔✔utilizes market data to
incorporate external data into the internal job worth hierarchy. allows the organization to
,align pay structures to external market components while still valuing the internal
hierarchy
✔✔What are the four steps to market pricing approach? - ✔✔1. Complete a competitive
market pricing analysis
2. Develop a pay structure that covers lowest to highest market rates from step 1, plus
an additional grade or two at the top and bottom
3. Assign benchmark jobs to the pay structure based on the relationship of market rate
to midpoint, review benchmarks and modify based on internal equity. Some jobs may be
placed at different levels based on internal preferences, if the company does not agree
with the market rate
4. Assign nonbenchmark jobs to the pay structure
✔✔What are the 5 steps to the point factor evaluation approach? - ✔✔1. Review overall
job evaluation point differentials by job family
2. Rank order from high to low
3. Look for logical groupings of jobs
4. develop point bands (absolute or percent based)
5. check intra-family and supervisor/subordinate relationships
✔✔What are the 6 steps for Integrating Market data approach? - ✔✔1. incorporate
market data
2. review market inconsistencies and reassign jobs; compute raw averages and percent
differences by grade
3. smooth out grade averages
4. review differences between midpoints and market data
5. resolve inconsistencies between internal and external competitiveness (upgrade jobs,
change grade beaks, "overpay/underpay" jobs relative to market because of strong
conviction about relative internal value, take jobs out of system if no other option)
6. develop pay ranges around the proposed midpoints
✔✔Job based pay - ✔✔based on nature and level of defined job - these programs base
an employee's pay on the nature and level of a rigidly defined job. Job-based pay
typically does not recognize employee skills or knowledge for grade assignments
EXAMPLES: single rate, step rate (automatic,variable)
✔✔Single-Rate Pay - ✔✔each job has a fixed or flat rate of pay. No differences in pay
are made for employee skill, knowledge, performance, or time in the job
✔✔Best applications for Single Rate Pay - ✔✔- routine jobs/short learning time
- jobs with limited performance variability
- collective bargaining environments (unionized jobs)
- sales jobs where commission is significant
- summer intern/temporary jobs
, ✔✔Step Rate - Automatic Features: - ✔✔typically five to seven steps, 3-5% points apart
- prescribed time schedule
- structure updated to maintain competitive position
✔✔Step Rate - Automatic Best Applications - ✔✔- with routine jobs where limited
performance variability is possible and performance is not measured
- when the desire to acknowledge seniority exists
- in an organization culture where desire for stability and security is high
- collective bargaining agreements
- public sector
✔✔Step Rate - Automatic Potential Disadvantages - ✔✔- cannot acknowledge different
rates of progress in skill attainment
- cannot differentiate based on performance
- can be discouraging to employees seeking pay awards
- utilizes money that could be better spent
- pay inflation over time adds to labor costs for no corresponding increase in productivity
✔✔Step Rate - Variable - ✔✔In step rate, many of the same principles apply as in step
rate - automatic. Key Difference: opportunity to reward employee performance and/or
skill acquisition by granting more than one step.
✔✔Step Rate - Variable Features - ✔✔5-10 steps, 2-5% apart
- prescribed time schedule
- outstanding: 2 steps, expected: 1 step, marginal: 0-1 with delay, unacceptable:
terminated, demoted, no increase
- step structure updated for competitive position
✔✔Step Rate - Variable Best Applications - ✔✔- where step structure is appropriate, but
environment lends itself to performance-based differences in levels
- in repetitive jobs, but where it is possible to measure performance differences
- in an employee relations environment such that differences in pay due to performance
occurs in exceptional cases
✔✔Step Rate - Variable Potential Disadvantages - ✔✔- relatively few increase
amount/timing choices
- requires justification of performance distinctions
✔✔What is a differential? - ✔✔- additional pay made to employees due to a change in
work pattern, location, or environment.
- typically used for hourly employees
- also referred to as premium pay
✔✔Types of Differentials - ✔✔- Shift
- Geographic
