Compensation & Benefits Administration Flashcards

A candidate currently earns a $70,000 base salary plus a 10% annual bonus. A recruiter is negotiating a counteroffer. What is the candidate's total cash compensation?

Answer: $77,000

$70,000 base + ($70,000 × 10% = $7,000 bonus) = $77,000 total cash compensation.

Which type of stock option gives employees the right to purchase company stock at a fixed price and is taxed as ordinary income at exercise?

Answer: Non-Qualified Stock Option (NQSO)

Non-Qualified Stock Options (NQSOs) trigger ordinary income tax at the time of exercise on the spread between the grant price and fair market value.

What is the main difference between a defined benefit (DB) plan and a defined contribution (DC) plan?

Answer: DB plans promise a specific retirement benefit based on a formula; DC plans accumulate contributions with investment returns

A defined benefit plan promises a specific monthly benefit at retirement using a formula (often based on years of service and salary), while a defined contribution plan's retirement income depends on contribution amounts and investment performance.

An organization wants to drive sales performance. Which compensation model is best aligned with this goal?

Answer: Salary plus commission tied to revenue generated

A salary-plus-commission plan directly ties a portion of pay to sales results, creating strong motivation to increase revenue.

Under the Affordable Care Act (ACA), employers with 50 or more full-time equivalent employees must offer health insurance or face penalties. This provision is known as the:

Answer: Employer Shared Responsibility Provision (Pay or Play)

The ACA's Employer Shared Responsibility Provision (often called 'Pay or Play') requires Applicable Large Employers to offer affordable minimum essential coverage or pay an IRS penalty.

A company's compensation philosophy states it targets the 75th percentile of the market. What does this mean in practice?

Answer: The company sets pay levels higher than 75% of competing employers

Targeting the 75th percentile means the company intends to pay more than 75% of its competitors, making it a market pay leader to attract and retain top talent.

Which federal agency enforces violations of the Equal Pay Act, which prohibits wage discrimination based on sex for substantially equal work?

Answer: Equal Employment Opportunity Commission (EEOC)

The EEOC has primary enforcement authority over the Equal Pay Act, which was amended under Title VII to address sex-based wage discrimination.