SPHR Total Rewards 4 — Questions and Answers
Question 1: The Affordable Care Act (ACA) employer mandate requires applicable large employers (ALEs) to offer minimum essential coverage or face potential penalties. An ALE is generally defined as an employer with:
- 25 or more full-time equivalent employees
- 50 or more full-time equivalent employees (Correct answer)
- 100 or more full-time equivalent employees
- All employers regardless of size
Correct answer: 50 or more full-time equivalent employees
Under the ACA, an ALE is an employer that employed an average of at least 50 full-time equivalent employees in the prior calendar year.
Question 2: A pay-for-performance program that ties individual incentive payouts to both individual and organizational results is known as:
- A profit-sharing plan
- A balanced scorecard incentive plan (Correct answer)
- A stock appreciation rights plan
- A merit matrix plan
Correct answer: A balanced scorecard incentive plan
A balanced scorecard incentive plan links payouts to performance across multiple dimensions including individual, team, and organizational metrics.
Question 3: Which pay equity analysis technique compares salaries of similarly situated employees by regressing pay against legitimate factors such as job level, tenure, and performance to identify unexplained gaps?
- Job evaluation point-factor analysis
- Regression-based pay equity audit (Correct answer)
- Market pricing benchmarking
- Broadband salary band analysis
Correct answer: Regression-based pay equity audit
Regression-based pay equity audits statistically control for legitimate pay factors to identify unexplained variance that may indicate discriminatory pay disparities.
Question 4: An employee stock purchase plan (ESPP) that qualifies under Section 423 of the IRC allows employees to purchase company stock at a discount. The maximum allowable discount under a qualified ESPP is:
- 5%
- 10%
- 15% (Correct answer)
- 25%
Correct answer: 15%
Under IRC Section 423, a qualified ESPP may offer employees a maximum discount of 15% off the stock's fair market value.
Question 5: A company is designing a long-term incentive plan for senior executives. Which vehicle best aligns executive interests with long-term shareholder value creation?
- Annual cash bonus paid based on quarterly sales targets
- Restricted stock units (RSUs) with a three-year cliff vesting schedule (Correct answer)
- A nonqualified deferred compensation plan funded by the employer
- A spot bonus program for individual project completion
Correct answer: Restricted stock units (RSUs) with a three-year cliff vesting schedule
RSUs with multi-year vesting tie executive wealth directly to stock performance over time, aligning executive and shareholder interests.
Question 6: When conducting an external equity analysis, an HR professional should primarily consult:
- Internal job descriptions and performance review records
- Published compensation surveys from reputable industry or professional sources (Correct answer)
- Employee self-reported pay expectations from engagement surveys
- The organization's current pay grades and midpoints
Correct answer: Published compensation surveys from reputable industry or professional sources
External equity requires benchmarking against market data, typically sourced from credible salary surveys such as those from WorldatWork or industry associations.
Question 7: A company's pay policy line is established by plotting survey midpoints against job evaluation points and fitting a trend line. The primary use of the pay policy line is to:
- Determine which employees are eligible for overtime pay
- Set the midpoints for internal pay grades based on market and internal equity (Correct answer)
- Calculate the total benefits cost as a percentage of payroll
- Identify which jobs should be reclassified as exempt under the FLSA
Correct answer: Set the midpoints for internal pay grades based on market and internal equity
The pay policy line translates job evaluation results and market data into a foundation for setting pay range midpoints that reflect both internal and external equity.
SPHR Total Rewards 4
The Affordable Care Act (ACA) employer mandate requires applicable large employers (ALEs) to offer minimum essential coverage or face potential penalties.
An ALE is generally defined as an employer with: