PHR Total Rewards 2 — Questions and Answers
Question 1: Under the FLSA, which test is NOT one of the standard exemption tests for the executive exemption?
- Salary basis test
- Salary level test
- Duties test
- Tenure test (Correct answer)
Correct answer: Tenure test
The executive exemption requires meeting the salary basis, salary level, and duties tests, but there is no tenure test.
Question 2: A company pays employees a flat amount per geographic area regardless of role. This best describes which pay strategy component?
- Geographic differential (Correct answer)
- Pay compression
- Red circle rate
- Broadbanding
Correct answer: Geographic differential
A geographic differential adjusts pay based on the cost of labor or living in a specific location.
Question 3: Which type of benefit is mandated by federal law in the United States?
- Dental insurance
- Social Security contributions (Correct answer)
- Paid vacation
- Tuition reimbursement
Correct answer: Social Security contributions
Social Security (and Medicare) contributions are legally mandated, while the others are voluntary employer-provided benefits.
Question 4: An employee earns more than the maximum of their pay range due to a prior salary. What is this situation called?
- Green circle rate
- Red circle rate (Correct answer)
- Compa-ratio of 1.0
- Pay equity adjustment
Correct answer: Red circle rate
A red circle rate occurs when an employee's pay exceeds the maximum of the assigned range.
Question 5: What does a compa-ratio of 0.85 indicate about an employee's pay?
- Pay is 85% of the range midpoint (Correct answer)
- Pay is 15% above midpoint
- Pay equals the range maximum
- Pay is below minimum wage
Correct answer: Pay is 85% of the range midpoint
A compa-ratio of 0.85 means the employee is paid 85% of the range midpoint.
Question 6: Which equity vehicle gives employees the right to buy company stock at a set price in the future?
- Restricted stock units
- Stock options (Correct answer)
- Phantom stock
- Employee stock purchase plan
Correct answer: Stock options
Stock options grant the right to purchase shares at a predetermined exercise price.
Question 7: What is the primary purpose of a salary survey in total rewards?
- To calculate payroll taxes
- To benchmark external market competitiveness (Correct answer)
- To track internal promotions
- To measure employee engagement
Correct answer: To benchmark external market competitiveness
Salary surveys help organizations benchmark their pay against the external labor market.
PHR Total Rewards 2
Under the FLSA, which test is NOT one of the standard exemption tests for the executive exemption?