TREX Base Pay Structure & Grades 3 — Questions and Answers
Question 1: A compa-ratio of 0.85 indicates that an employee's pay is:
- 15% above the midpoint
- 85% of the range maximum
- 15% below the midpoint (Correct answer)
- At the range minimum
Correct answer: 15% below the midpoint
Compa-ratio = actual pay / midpoint; a ratio of 0.85 means the employee earns 85% of the midpoint, or 15% below it.
Question 2: Which pay structure element is adjusted annually to maintain market competitiveness without changing the individual employee's pay?
- Compa-ratio
- Pay range (Correct answer)
- Merit increase budget
- Step increment
Correct answer: Pay range
Organizations conduct annual salary structure reviews and adjust pay ranges upward to reflect market movement, independent of individual pay changes.
Question 3: In a step-rate pay structure, advancement from one step to the next is PRIMARILY based on:
- Performance ratings
- Seniority or time in grade (Correct answer)
- Manager discretion
- Skill acquisition
Correct answer: Seniority or time in grade
Step-rate structures, common in public sector and union environments, advance employees automatically based on length of service in a role.
Question 4: What is the PRIMARY purpose of establishing pay grade minimums?
- To set the target competitive pay level
- To define the lowest acceptable pay for a given job level (Correct answer)
- To determine merit increase eligibility
- To cap total compensation costs
Correct answer: To define the lowest acceptable pay for a given job level
The grade minimum defines the floor—the lowest rate an organization will pay someone in that grade, ensuring pay doesn't fall below an acceptable threshold.
Question 5: An organization's pay ranges have not been updated for three years while market rates rose 5% annually. What is the MOST likely result?
- Employees become green-circled
- New hire offers must exceed midpoints, causing compression (Correct answer)
- Red-circle situations increase
- Compa-ratios rise above 1.0 for most staff
Correct answer: New hire offers must exceed midpoints, causing compression
Stale pay ranges force employers to offer competitive market pay above stagnant midpoints, compressing the gap between new hires and tenured employees.
Question 6: Which method is used to assign jobs to pay grades based on whole-job comparison rather than factor analysis?
- Point-factor evaluation
- Job ranking
- Market pricing
- Classification/grading (Correct answer)
Correct answer: Classification/grading
The classification (grading) method pre-defines grade descriptions and slots whole jobs into the grade that best matches—no factor analysis required.
Question 7: A company uses market pricing to set pay grades. Which data source is MOST critical for this approach?
- Internal job evaluation scores
- Salary survey benchmark data (Correct answer)
- Seniority records
- Performance rating distributions
Correct answer: Salary survey benchmark data
Market pricing relies on external salary survey data to anchor pay ranges to what competitors pay for comparable roles.
TREX Base Pay Structure & Grades 3
A compa-ratio of 0.85 indicates that an employee's pay is: