Compensation & Benefits Fundamentals Rules Flashcards

What does 'lag the market' compensation strategy mean?

Answer: Setting pay rates below the market median

A lag-the-market strategy intentionally sets pay rates below the external market median, often used to control labor costs.

Which type of variable pay plan distributes a share of company profits to employees at the organizational level?

Answer: Profit-sharing plan

Profit-sharing plans distribute a portion of company profits to employees, aligning employee rewards with overall organizational financial performance.

Under ERISA, what is the primary obligation imposed on employers that sponsor retirement plans?

Answer: To act as fiduciaries and manage plan assets solely in participants' interest

ERISA imposes fiduciary duties on plan sponsors and administrators, requiring them to act prudently and exclusively in the interest of plan participants and beneficiaries.

What is 'pay compression' in a compensation context?

Answer: A situation where pay differences between job levels become very small

Pay compression occurs when the difference in pay between experienced employees and new hires, or between supervisors and subordinates, narrows significantly.

Which WorldatWork total rewards element encompasses an employee's sense of purpose, achievement, and belonging at work?

Answer: Employee well-being

Employee well-being in the WorldatWork total rewards model addresses physical, emotional, financial, and social dimensions of workplace satisfaction and engagement.

Which IRS provision allows employees to defer pre-tax salary into a retirement savings account sponsored by a private-sector employer?

Answer: Section 401(k)

Section 401(k) plans allow private-sector employees to make pre-tax salary deferrals into employer-sponsored retirement accounts.

What is the purpose of a 'salary survey' in compensation management?

Answer: To gather external market data on pay rates for benchmark jobs

Salary surveys collect pay data from multiple employers for comparable jobs, enabling organizations to make informed market-competitive pay decisions.