STRATEGIC COMPENSATION ACTUAL TEST
QUESTIONS AND SOLUTIONS
COMPREHENSIVE REVIEW PACKAGE
●● Total Compensation =
Answer: base, incentives, (short and long term) benefits
●● Examples of benefits
Answer: life insurance, pensions, social security, vacation, health
insurance
●● average % of compensation represented by benefits
Answer: 30%
●● T or F: Small Companies are more likely to have fewer incentives
than larger corporations
Answer: T
●● Important benefit facts:
Answer: - trillions of dollars spent a year (about 23K per employee)
- BIG increase in benefit costs to 1950s to 1970s --> Historical reasons,
tax breaks, group rates
,●● Satisfaction of Benefits
Answer: - low level of satisfaction from employees
- employees don't value the benefits they receive
- Employees are unaware of costs behind benefits→ if they know, they
may value benefit more
●● Why Offer Any Benefits?
Answer: 1. some are legally required
- social secruity, worker's comp, unemployment
2. Employees expect benefits
- difficult to attract and retain employees without benefits
3. Employer-provided benefits have advantages over cash compensation
- tax advantage
- group rates
●● Strategic Choices: Benefits Adminstration--> Who to choose?
Answer: full time, part time, retirees
●● What Kind of Benefits?
Answer: employee preferences, flexible "cafeteria styled" benefits
, ●● How to finance?
Answer: Contributionary vs. Noncontributionary
- should employees pay for apart of benefits or should employers pay
all?
- economists argue they should contribute
●● workers compensation (state)
Answer: legally required programs in each state that provide payment of
medical expense and compensation for lost wages resulted from work-
related injuries or disabilities
- Form of no fault insurance
- covered by STATE not federal
●● Unemployment insurance (federal)
Answer: State administered program that provides financial security for
workers during periods of joblessness
- financed by state and federal
- Each company's rate depends on its prior experience
~Layoff rate
~ Incentive for employers to not layoff people
~To be qualified as unemployed, you have to have prerequisites, such as
working a job for at least 6 months, then being laid off
~Unemployed because job is eliminated by employer
QUESTIONS AND SOLUTIONS
COMPREHENSIVE REVIEW PACKAGE
●● Total Compensation =
Answer: base, incentives, (short and long term) benefits
●● Examples of benefits
Answer: life insurance, pensions, social security, vacation, health
insurance
●● average % of compensation represented by benefits
Answer: 30%
●● T or F: Small Companies are more likely to have fewer incentives
than larger corporations
Answer: T
●● Important benefit facts:
Answer: - trillions of dollars spent a year (about 23K per employee)
- BIG increase in benefit costs to 1950s to 1970s --> Historical reasons,
tax breaks, group rates
,●● Satisfaction of Benefits
Answer: - low level of satisfaction from employees
- employees don't value the benefits they receive
- Employees are unaware of costs behind benefits→ if they know, they
may value benefit more
●● Why Offer Any Benefits?
Answer: 1. some are legally required
- social secruity, worker's comp, unemployment
2. Employees expect benefits
- difficult to attract and retain employees without benefits
3. Employer-provided benefits have advantages over cash compensation
- tax advantage
- group rates
●● Strategic Choices: Benefits Adminstration--> Who to choose?
Answer: full time, part time, retirees
●● What Kind of Benefits?
Answer: employee preferences, flexible "cafeteria styled" benefits
, ●● How to finance?
Answer: Contributionary vs. Noncontributionary
- should employees pay for apart of benefits or should employers pay
all?
- economists argue they should contribute
●● workers compensation (state)
Answer: legally required programs in each state that provide payment of
medical expense and compensation for lost wages resulted from work-
related injuries or disabilities
- Form of no fault insurance
- covered by STATE not federal
●● Unemployment insurance (federal)
Answer: State administered program that provides financial security for
workers during periods of joblessness
- financed by state and federal
- Each company's rate depends on its prior experience
~Layoff rate
~ Incentive for employers to not layoff people
~To be qualified as unemployed, you have to have prerequisites, such as
working a job for at least 6 months, then being laid off
~Unemployed because job is eliminated by employer
