PHR Total Rewards and Compensation 2 — Questions and Answers
Question 1: Under the FLSA, what is the primary requirement for an employee to qualify for the executive exemption?
- Earning a salary above the threshold and primarily managing the enterprise or a department (Correct answer)
- Working more than 40 hours per week regularly
- Holding a job title containing the word 'manager'
- Being paid on an hourly basis above minimum wage
Correct answer: Earning a salary above the threshold and primarily managing the enterprise or a department
The executive exemption requires meeting the salary basis/level test plus a duties test centered on managing and directing the work of others.
Question 2: A pay structure with a single broad range covering many job levels is known as what?
- Broadbanding (Correct answer)
- Pay compression
- Step rate system
- Market pricing
Correct answer: Broadbanding
Broadbanding consolidates many grades into a few wide bands to allow flexibility in pay movement.
Question 3: Pay compression most commonly occurs when:
- New hires are paid nearly as much as long-tenured employees (Correct answer)
- Bonuses exceed base salary
- Benefits costs rise faster than wages
- Overtime is heavily restricted
Correct answer: New hires are paid nearly as much as long-tenured employees
Compression arises when market rates push new-hire pay close to or above that of experienced incumbents.
Question 4: Which compensation philosophy aims to set pay at the market median?
- Match (meet) the market (Correct answer)
- Lead the market
- Lag the market
- Pay for time
Correct answer: Match (meet) the market
A match strategy targets the 50th percentile to stay competitive without overpaying.
Question 5: The difference between an employee's pay and the midpoint of their pay range, expressed as a ratio, is called the:
- Compa-ratio (Correct answer)
- Range spread
- Pay differential
- Wage index
Correct answer: Compa-ratio
A compa-ratio of 1.0 means the employee is paid exactly at the range midpoint.
Question 6: Which type of benefit is legally mandated for most U.S. employers?
- Social Security and Medicare contributions (Correct answer)
- Dental insurance
- Paid vacation
- Tuition reimbursement
Correct answer: Social Security and Medicare contributions
Social Security, Medicare, unemployment, and workers' compensation are legally required benefits.
Question 7: A discretionary bonus paid at year-end with no advance promise of amount is best described as:
- Excludable from the regular rate for overtime purposes (Correct answer)
- Always included in overtime calculations
- A guaranteed incentive
- A form of deferred compensation
Correct answer: Excludable from the regular rate for overtime purposes
Truly discretionary bonuses can be excluded from the regular rate used to compute overtime pay.
PHR Total Rewards and Compensation 2
Under the FLSA, what is the primary requirement for an employee to qualify for the executive exemption?