CBP Compensation and Total Rewards 2

Question 1

Which type of incentive plan gives employees the right to purchase company stock at a fixed price within a specified period?

Accepted Answer

Stock options

Answer

Stock options grant the holder the right to buy company shares at a predetermined exercise price (grant price) within a defined exercise period.

Question 2

What is the purpose of a salary survey in compensation benchmarking?

Accepted Answer

To compare internal pay rates to external market pay levels for similar jobs

Answer

Salary surveys collect compensation data from multiple employers to allow organizations to benchmark their pay against market rates for comparable positions.

Question 3

What does the term 'pay mix' refer to in total compensation design?

Accepted Answer

The proportion of fixed base pay versus variable/incentive pay in total direct compensation

Answer

Pay mix describes the ratio of base salary to variable or incentive pay (e.g., 70% base/30% incentive), reflecting how much pay is at risk versus guaranteed.

Question 4

Which pay philosophy means an organization sets pay rates at the 50th percentile of the relevant labor market?

Accepted Answer

Meet the market

Answer

A 'meet the market' or market-match philosophy means the organization targets the median (50th percentile) of competitive market pay for comparable jobs.

Question 5

Under Section 162(m) of the IRC, deductions for compensation paid to certain covered executive officers are limited to:

Accepted Answer

$1 million per year

Answer

IRC Section 162(m) limits the tax deduction for compensation paid to covered executive officers of publicly held corporations to $1 million per officer per year.

CBP - Certified Benefit Professional Practice Test

CBP - Certified Benefit Professional Practice Test

CBP Compensation and Total Rewards 2