TREX Compensation & Benefits Fundamentals Rules 3 — Questions and Answers
Question 1: What does 'market pricing' as a job evaluation method primarily rely on?
- Internal job ranking by managers
- Comparison of jobs to external salary survey data (Correct answer)
- Point-factor analysis of job content
- Negotiation between HR and department heads
Correct answer: Comparison of jobs to external salary survey data
Market pricing establishes pay rates by matching jobs to external benchmark data from salary surveys rather than internal job evaluation factors.
Question 2: A 'flexible benefit plan' (cafeteria plan) is governed under which section of the Internal Revenue Code?
- Section 401(k)
- Section 125 (Correct answer)
- Section 403(b)
- Section 457
Correct answer: Section 125
Section 125 of the IRC allows employers to offer flexible benefit plans where employees choose among taxable and nontaxable benefits.
Question 3: Which concept describes the degree to which an organization's pay rates are above, below, or equal to the market?
- Pay equity
- Pay level (Correct answer)
- Pay structure
- Pay mix
Correct answer: Pay level
Pay level refers to the average pay of a job or pay structure relative to competitors in the external labor market.
Question 4: What is the primary purpose of conducting a job analysis in compensation management?
- To determine employee satisfaction levels
- To gather systematic information about job duties and requirements (Correct answer)
- To compare salaries across departments
- To establish performance rating criteria
Correct answer: To gather systematic information about job duties and requirements
Job analysis systematically collects data on job duties, responsibilities, and qualifications, which forms the foundation for job evaluation and pay decisions.
Question 5: Which benefit is required by federal law for employers with 50 or more employees?
- Dental insurance
- Life insurance
- Family and Medical Leave Act (FMLA) leave (Correct answer)
- Short-term disability coverage
Correct answer: Family and Medical Leave Act (FMLA) leave
The FMLA requires covered employers (50+ employees) to provide eligible employees up to 12 weeks of unpaid, job-protected leave annually.
Question 6: In a point-factor job evaluation system, 'compensable factors' are best described as:
- The salary ranges assigned to each job
- Job characteristics that the organization values and is willing to pay for (Correct answer)
- The monetary value of each benefit offered
- Performance metrics tied to incentive pay
Correct answer: Job characteristics that the organization values and is willing to pay for
Compensable factors are the dimensions of work—such as skill, effort, responsibility, and working conditions—that an organization uses to evaluate and price jobs.
Question 7: Which pay delivery approach ties an employee's pay increase directly to their performance rating?
- Seniority-based pay
- Merit pay (Correct answer)
- Cost-of-living adjustment
- Skill-based pay
Correct answer: Merit pay
Merit pay increases are awarded based on individual performance evaluations, linking pay progression to demonstrated results.
TREX Compensation & Benefits Fundamentals Rules 3
What does 'market pricing' as a job evaluation method primarily rely on?