Exam #4
Study Guide
MGT 311 –Spring 2011

Chapters 11 and 12 – Compensation 1. What is compensation? What are the two main categories of compensation? “All forms of financial returns and tangible services and benefits employees receive as part of an employment relationship.” Direct: Base pay (wages, salaries); Variable pay (bonuses, incentive, stock options) Indirect: Health/Medical insurance; life/disability insurance; paid time off; retirement/pension plans; educational assistance

2. What are the factors that affect how much someone gets paid? (This was an in-class activity) Economic influence on pay;

3. What is equity theory? What are the consequences of inequity? • People measure outcomes such as pay in terms of their inputs. Fairness of pay relative to that of other employees (Op/Ip < = > Oo/Io) • Op/Ip = Oo/Io => balance – no change • Op/Ip > Oo/Io => overreward inequity (Re-evaluate to make = ) • Op/Ip < Oo/Io => underreward inequity (Reducing one’s inputs (not working as hard); Increasing one’s outcomes (theft); leaving( withdraw by leaving the organization or refusing to cooperate)

4. What are the three pay level policies we discussed in class? What are the advantages and disadvantages of using each type? P319. Lead, Match, or Follow (>the rate set by market force)

5. What are compensable factors? Why are they important for an organization? “Job attributes that provide the basis for evaluating the relative worth of jobs inside an organization.” What the organization wants to pay for Must be: Work-related, Business-related, Acceptable to employees and management

6. What are pay grades and pay ranges? Be able to describe actions required for a salary that falls outside of the range (e.g. green-circled employee) 7. What is meant by