CPHR Total Rewards and Compensation 2 — Questions and Answers
Question 1: Which pay structure design uses broad salary bands that overlap significantly, giving managers more flexibility in rewarding performance?
- Broadbanding (Correct answer)
- Step-rate progression
- Flat-rate pay
- Pay grades
Correct answer: Broadbanding
Broadbanding consolidates many traditional pay grades into fewer, wider salary bands, granting managers greater discretion over pay decisions.
Question 2: Under the Fair Labor Standards Act (FLSA), which of the following employees is most likely classified as exempt from overtime requirements?
- A cashier earning $18/hour
- A salaried marketing director earning $75,000/year (Correct answer)
- A part-time warehouse associate
- A non-supervisory data entry clerk earning $30,000/year
Correct answer: A salaried marketing director earning $75,000/year
Salaried employees in bona fide executive, administrative, or professional roles who meet the salary threshold are exempt from FLSA overtime provisions.
Question 3: A company offers employees the option to redirect a portion of their salary to pay for dependent care expenses before taxes are applied. This is an example of:
- A health reimbursement arrangement (HRA)
- A flexible spending account (FSA) (Correct answer)
- A qualified transportation benefit
- A supplemental executive retirement plan (SERP)
Correct answer: A flexible spending account (FSA)
A Dependent Care FSA allows employees to set aside pre-tax dollars to pay for eligible dependent care expenses, reducing taxable income.
Question 4: When designing a long-term incentive plan for senior executives, which vehicle aligns executive interests most directly with shareholder value creation?
- Spot bonuses
- Restricted stock units (RSUs) (Correct answer)
- Sign-on bonuses
- Shift differentials
Correct answer: Restricted stock units (RSUs)
RSUs tie compensation directly to the company's stock price, aligning executives' financial interests with those of shareholders over a vesting period.
Question 5: Which compensation philosophy positions an organization's pay rates at the 75th percentile of the market?
- Lag strategy
- Lead strategy (Correct answer)
- Match strategy
- Hybrid strategy
Correct answer: Lead strategy
A lead strategy sets pay above the market median, used to attract talent and reduce turnover at the cost of higher payroll expense.
Question 6: An employee receives additional pay for working the 11 PM–7 AM shift. This is classified as:
- Hazard pay
- Shift differential (Correct answer)
- On-call pay
- Callback pay
Correct answer: Shift differential
Shift differential is supplemental pay provided to employees who work less desirable hours such as evenings, nights, or weekends.
Question 7: The compa-ratio is calculated as an employee's actual pay divided by:
- Their previous year's salary
- The minimum of the pay range
- The midpoint of the pay range (Correct answer)
- The maximum of the pay range
Correct answer: The midpoint of the pay range
Compa-ratio = actual pay ÷ range midpoint × 100; a ratio of 1.0 (or 100%) means the employee is paid exactly at the market midpoint.
CPHR Total Rewards and Compensation 2
Which pay structure design uses broad salary bands that overlap significantly, giving managers more flexibility in rewarding performance?