SHRM-CP Total Rewards & Compensation 1 — Questions and Answers
Question 1: Which compensation philosophy positions an organization's pay rates at or above the 50th percentile of the market?
- Lead the market strategy (Correct answer)
- Match the market strategy
- Lag the market strategy
- Broadband strategy
Correct answer: Lead the market strategy
A lead-the-market strategy intentionally sets compensation above the median to attract and retain top talent.
Question 2: A compa-ratio of 1.10 for an employee means:
- The employee is paid 10% above the midpoint of their pay grade (Correct answer)
- The employee is paid at exactly the midpoint
- The employee is paid 10% below the midpoint
- The employee's pay exceeds the maximum of the range
Correct answer: The employee is paid 10% above the midpoint of their pay grade
A compa-ratio above 1.0 indicates the employee's pay exceeds the midpoint; 1.10 means 10% above the grade midpoint.
Question 3: Which pay structure characteristic allows employees to progress through a wide salary band with few distinct pay grades?
- Broadbanding (Correct answer)
- Step progression
- Pay for performance
- Cost of living adjustment (COLA)
Correct answer: Broadbanding
Broadbanding consolidates many narrow pay grades into a few wide salary bands, providing flexibility for lateral moves and varied skills.
Question 4: The Equal Pay Act of 1963 requires equal pay for equal work. Which factors LEGALLY justify pay differences under this law?
- Seniority, merit, quantity or quality of production, and any factor other than sex (Correct answer)
- Race, national origin, religion, and disability status
- Marital status, age, and education level
- Geography, industry, and company size alone
Correct answer: Seniority, merit, quantity or quality of production, and any factor other than sex
The Equal Pay Act permits pay differentials based on seniority, merit, production-based systems, or any bona fide factor other than sex.
Question 5: A defined benefit pension plan provides retirement income based on:
- A formula using years of service and final average salary (Correct answer)
- The balance accumulated in the employee's individual account
- Employee and employer contributions plus investment returns
- The employee's age at retirement only
Correct answer: A formula using years of service and final average salary
Defined benefit plans calculate benefits using a predetermined formula, typically incorporating years of service and final or average salary.
Question 6: Under the Fair Labor Standards Act (FLSA), which employee classification is exempt from overtime pay requirements?
- Employees who meet the salary threshold and duties test for executive, administrative, or professional roles (Correct answer)
- All salaried employees regardless of duties
- All employees earning above $50,000 annually
- Part-time employees working fewer than 30 hours per week
Correct answer: Employees who meet the salary threshold and duties test for executive, administrative, or professional roles
FLSA exemption requires meeting both a minimum salary threshold AND a duties test for executive, administrative, or professional categories.
SHRM-CP Total Rewards & Compensation 1
Which compensation philosophy positions an organization's pay rates at or above the 50th percentile of the market?