WORLD AT WORK C17 MARKET PRICING
ACTUAL TEST QUESTIONS WITH
COMPLETE ANSWER KEY
●● Market Pricing
Answer: Powerful tool that directly supports an organization's business
strategy by providing key competitive information on how the
organization's compensation levels compare to the market.
●● Compensation Philosophy
Answer: A broad statement of what the organization believes about how
people should be rewarded. It should support the business strategy and
be a god fit with the organization's culture. Includes: Desired
competitive pay levels versus market; Definition of "Market"; Mix of
reward elements; How jobs are valued; What behaviors are rewarded.
●● Compensation Strategy
Answer: Specific principles that guide the design, implementation and
administration of a compensation program in an organization.
●● Factors Influencing Compensation
Answer: - External Competitiveness
- Pay Competitiveness
,- Relevant Labor Market
- Organizations must be willing and able to pay
- In-demand Employees
- Internal vs External Equity
- Desire Competitive Pay Level vs Market
●● External Competitiveness
Answer: A primary objective for most companies; Market pricing assists
organizations in remaining competitive by helping companies know
what the prevailing rates for jobs are in the current marketplace.
●● Pay Competitiveness
Answer: Market pricing assists organizations with analyzing pay
competitiveness by: Collecting information on the prevailing market
rates for benchmark jobs in organizations with whom the organization
competes for human resources; Analyzing pay trends by identifying
year-to-year movement of salaries and cash compensation in the labor
market; Identifying pay practices by gathering information on
competitive compensation practices, programs, policies and procedures.
●● Relevant Labor Market
Answer: The market(s) from which the organization draws or loses
employees. It is defined by organizational size, geographic location, and
industry.
,●● Organizations must be willing and able to pay
Answer: Organizations must be both willing and able to pay wages at
particular levels in order to be competitive.
●● In-demand Employees
Answer: Companies must keep close watch on how competitors are
paying their employees and, in particular, hot skills, and identified
critical key talent.
●● Internal vs External Equity
Answer: Challenges arise from the periodic conflict between the
perceived fairness of how employees are compensated internally relative
to other employees versus the differences in compensation levels
between jobs necessary to achieve external competitiveness outside the
organization.
●● Equity
Answer: Employee's perceptions of fairness and consistency.
●● Internal Equity
Answer: Each job's relative value - the factor that drives an employer to
establish pay rates that correspond to each job's relative value in the
organization.
Equal pay for equal worth - may be perceived differently by employer
and employee.
, ●● External Equity
Answer: - Pay Levels compared to competitors
- Prevailing external rates
- Achieving equity - when employees believe compensation is equal to
what they would receive if they worked in a similar job at another
company.
●● Why is it important to attempt to keep a compensation system
aligned with an overall pay philosophy and strategy?
Answer: To ensure that a company has the appropriate workforce to
meet its business objectives. Two methods: Blend and balance; Job
Value.
●● Blend and Balance
Answer: Organizations may emphasize either internal equity or external
competitiveness, but should blend and balance the two to meet their
overall pay objectives.
●● Job Value
Answer: Organizations need to determine which jobs are of higher value
to the organization.
ACTUAL TEST QUESTIONS WITH
COMPLETE ANSWER KEY
●● Market Pricing
Answer: Powerful tool that directly supports an organization's business
strategy by providing key competitive information on how the
organization's compensation levels compare to the market.
●● Compensation Philosophy
Answer: A broad statement of what the organization believes about how
people should be rewarded. It should support the business strategy and
be a god fit with the organization's culture. Includes: Desired
competitive pay levels versus market; Definition of "Market"; Mix of
reward elements; How jobs are valued; What behaviors are rewarded.
●● Compensation Strategy
Answer: Specific principles that guide the design, implementation and
administration of a compensation program in an organization.
●● Factors Influencing Compensation
Answer: - External Competitiveness
- Pay Competitiveness
,- Relevant Labor Market
- Organizations must be willing and able to pay
- In-demand Employees
- Internal vs External Equity
- Desire Competitive Pay Level vs Market
●● External Competitiveness
Answer: A primary objective for most companies; Market pricing assists
organizations in remaining competitive by helping companies know
what the prevailing rates for jobs are in the current marketplace.
●● Pay Competitiveness
Answer: Market pricing assists organizations with analyzing pay
competitiveness by: Collecting information on the prevailing market
rates for benchmark jobs in organizations with whom the organization
competes for human resources; Analyzing pay trends by identifying
year-to-year movement of salaries and cash compensation in the labor
market; Identifying pay practices by gathering information on
competitive compensation practices, programs, policies and procedures.
●● Relevant Labor Market
Answer: The market(s) from which the organization draws or loses
employees. It is defined by organizational size, geographic location, and
industry.
,●● Organizations must be willing and able to pay
Answer: Organizations must be both willing and able to pay wages at
particular levels in order to be competitive.
●● In-demand Employees
Answer: Companies must keep close watch on how competitors are
paying their employees and, in particular, hot skills, and identified
critical key talent.
●● Internal vs External Equity
Answer: Challenges arise from the periodic conflict between the
perceived fairness of how employees are compensated internally relative
to other employees versus the differences in compensation levels
between jobs necessary to achieve external competitiveness outside the
organization.
●● Equity
Answer: Employee's perceptions of fairness and consistency.
●● Internal Equity
Answer: Each job's relative value - the factor that drives an employer to
establish pay rates that correspond to each job's relative value in the
organization.
Equal pay for equal worth - may be perceived differently by employer
and employee.
, ●● External Equity
Answer: - Pay Levels compared to competitors
- Prevailing external rates
- Achieving equity - when employees believe compensation is equal to
what they would receive if they worked in a similar job at another
company.
●● Why is it important to attempt to keep a compensation system
aligned with an overall pay philosophy and strategy?
Answer: To ensure that a company has the appropriate workforce to
meet its business objectives. Two methods: Blend and balance; Job
Value.
●● Blend and Balance
Answer: Organizations may emphasize either internal equity or external
competitiveness, but should blend and balance the two to meet their
overall pay objectives.
●● Job Value
Answer: Organizations need to determine which jobs are of higher value
to the organization.
