BASE PAY ADMINISTRATION AND PAY FOR PERFORMANCE
2025/2026 QUESTIONS WITH ANSWERS RATED A+
✔✔What are company generated pay actions: - ✔✔External: Market adjustments,
reclassifications
Internal: Promotion, demotion
✔✔What are employee generated pay actions: - ✔✔Requested demotion, requested
shift change
✔✔Examples of pay actions: - ✔✔- Pay increases: promotion, merit, general (across
board), market adjustments
- Pay decreases: demotion, reclassification
✔✔What are the types of pay increases: - ✔✔- Lump sum
- Periodic increases
- Other
✔✔what are the advantages and disadvantages of lump sum - ✔✔Advantages:
- not an increase of base pay, so no "rollup" cost as with increase in base pay
- employee receives entire increase at one time
- ease of administration, due to one time increase
Disadvantage:
- greater first year cost to company
- employee may leave after increase (costs more than if spread throughout year)
✔✔What are the advantages/disadvantages of periodic increase? - ✔✔Advantages:
- lower first year cost to company
- better control of pay action
- allows for a "probationary period"
Disadvantages:
- employee wonders why no the entire increase
- more difficult to administer
✔✔What are the advantages and disadvantages of an anniversary date review: -
✔✔Adv:
- spreads the administrative burden throughout year
- payroll increases are staggered, reducing the financial impact that accompanies a
single (company-wide) jump
- performance evaluation and increase is based on an individual performance
- employee believes the process is focused specifically on them
- allows the manager to spend more time specific to the employee evaluation
- internally, in the HR function, the paperwork stream will be minimal due to spacing of
reviews
Disadv:
, - relative performance is hard to judge
- occasionally conservative budget management might lead to lower increases at
beginning of year and higher increases towards end
- HR function will spend additional time doing projected spending analysis
✔✔What are the advantages and disadvantages of focial point review - ✔✔Adv:
- Ability to predict budgetary impact
- consolidates the administrative burden
- increases can become part of yearly budgeting process
- linkage among business unit performance, individual performance, and merit
increases can be clearer
- allows for HR function to better utilize budget analysis time, rather than projected
spending
Disadv:
- may put pressure on managers of large departments to complete all employee reviews
at one time
- workload may be onerous if timing of salary increase program coincides with other
major efforts
- cash flow implications for org may be extreme when all increases occur
simultaneously
- employee might not get the one-on one attention needed to explain and answer
questions that might arise
✔✔What are the promotion types? - ✔✔Organization: promotional due to a change in
nature of work, such as nonsupervisory to a supervisory position or to a significantly
different type of supervisory responsibility
Growth: promotion due to a recognition of personal development and the assumption
that growth will continue. There is a smaller change in duties in this type of promotion
compared to the organization promotion. Ex: account to sr accountant
✔✔Causes of Demotions and pay actions - ✔✔- poor employee performance
- reognization or reengineering
- employee request
Pay actions:
- take away money
freeze pay until it falls within range
✔✔What is a general (across the board) increase? - ✔✔An identical pay raise either in
a flat rate or as a percentage of salary given to all eligible employees. Normally used in
union/public sector settings. Employers who grant general increases will have less
money to reward performance
✔✔What is a cost of living adjustment - ✔✔an across the board wage and salary
increase or supplemental payment designed to bring pay in line with cost of living to
maintain real purchasing power
2025/2026 QUESTIONS WITH ANSWERS RATED A+
✔✔What are company generated pay actions: - ✔✔External: Market adjustments,
reclassifications
Internal: Promotion, demotion
✔✔What are employee generated pay actions: - ✔✔Requested demotion, requested
shift change
✔✔Examples of pay actions: - ✔✔- Pay increases: promotion, merit, general (across
board), market adjustments
- Pay decreases: demotion, reclassification
✔✔What are the types of pay increases: - ✔✔- Lump sum
- Periodic increases
- Other
✔✔what are the advantages and disadvantages of lump sum - ✔✔Advantages:
- not an increase of base pay, so no "rollup" cost as with increase in base pay
- employee receives entire increase at one time
- ease of administration, due to one time increase
Disadvantage:
- greater first year cost to company
- employee may leave after increase (costs more than if spread throughout year)
✔✔What are the advantages/disadvantages of periodic increase? - ✔✔Advantages:
- lower first year cost to company
- better control of pay action
- allows for a "probationary period"
Disadvantages:
- employee wonders why no the entire increase
- more difficult to administer
✔✔What are the advantages and disadvantages of an anniversary date review: -
✔✔Adv:
- spreads the administrative burden throughout year
- payroll increases are staggered, reducing the financial impact that accompanies a
single (company-wide) jump
- performance evaluation and increase is based on an individual performance
- employee believes the process is focused specifically on them
- allows the manager to spend more time specific to the employee evaluation
- internally, in the HR function, the paperwork stream will be minimal due to spacing of
reviews
Disadv:
, - relative performance is hard to judge
- occasionally conservative budget management might lead to lower increases at
beginning of year and higher increases towards end
- HR function will spend additional time doing projected spending analysis
✔✔What are the advantages and disadvantages of focial point review - ✔✔Adv:
- Ability to predict budgetary impact
- consolidates the administrative burden
- increases can become part of yearly budgeting process
- linkage among business unit performance, individual performance, and merit
increases can be clearer
- allows for HR function to better utilize budget analysis time, rather than projected
spending
Disadv:
- may put pressure on managers of large departments to complete all employee reviews
at one time
- workload may be onerous if timing of salary increase program coincides with other
major efforts
- cash flow implications for org may be extreme when all increases occur
simultaneously
- employee might not get the one-on one attention needed to explain and answer
questions that might arise
✔✔What are the promotion types? - ✔✔Organization: promotional due to a change in
nature of work, such as nonsupervisory to a supervisory position or to a significantly
different type of supervisory responsibility
Growth: promotion due to a recognition of personal development and the assumption
that growth will continue. There is a smaller change in duties in this type of promotion
compared to the organization promotion. Ex: account to sr accountant
✔✔Causes of Demotions and pay actions - ✔✔- poor employee performance
- reognization or reengineering
- employee request
Pay actions:
- take away money
freeze pay until it falls within range
✔✔What is a general (across the board) increase? - ✔✔An identical pay raise either in
a flat rate or as a percentage of salary given to all eligible employees. Normally used in
union/public sector settings. Employers who grant general increases will have less
money to reward performance
✔✔What is a cost of living adjustment - ✔✔an across the board wage and salary
increase or supplemental payment designed to bring pay in line with cost of living to
maintain real purchasing power
