SHRM-CP Total Rewards & Compensation 2 — Questions and Answers
Question 1: Which type of variable pay plan distributes a portion of company profits to eligible employees?
- Profit-sharing plan (Correct answer)
- Gain-sharing plan
- Stock option plan
- Base pay merit increase
Correct answer: Profit-sharing plan
Profit-sharing plans distribute a percentage of organizational profits to employees, linking their reward to company-wide financial success.
Question 2: Job evaluation using the point-factor method assigns value to jobs based on:
- Compensable factors such as skill, effort, responsibility, and working conditions (Correct answer)
- Market pay surveys exclusively
- Manager subjective ratings of job importance
- Employee tenure and performance history
Correct answer: Compensable factors such as skill, effort, responsibility, and working conditions
The point-factor method identifies compensable factors, weights each factor, and assigns point values to quantify and rank job worth.
Question 3: Total compensation cost per employee includes which components?
- Base pay, variable pay, benefits, retirement contributions, and payroll taxes paid by the employer (Correct answer)
- Base salary and annual bonus only
- Salary plus health insurance premium
- All direct pay components before taxes
Correct answer: Base pay, variable pay, benefits, retirement contributions, and payroll taxes paid by the employer
Total compensation cost encompasses all direct and indirect compensation, including employer-paid taxes, benefits, and retirement contributions.
Question 4: Which benefit is REQUIRED for employers under federal law in the United States?
- Social Security and Medicare (FICA) contributions (Correct answer)
- Health insurance for all full-time employees
- Paid vacation time
- Life insurance coverage
Correct answer: Social Security and Medicare (FICA) contributions
FICA requires employers to withhold and match employee Social Security and Medicare taxes — this is a mandatory federal employer obligation.
Question 5: A non-qualified deferred compensation plan differs from a qualified plan primarily because it:
- Does not receive favorable tax treatment and is not subject to ERISA contribution limits (Correct answer)
- Offers higher contribution limits than 401(k) plans
- Must be available to all employees equally
- Is funded through employee stock ownership
Correct answer: Does not receive favorable tax treatment and is not subject to ERISA contribution limits
Non-qualified deferred compensation plans offer flexibility for key executives but lack the tax advantages and ERISA protections of qualified plans.
Question 6: Which pay equity analysis technique compares compensation across demographic groups after controlling for legitimate pay factors?
- Regression analysis (Correct answer)
- Compa-ratio analysis
- Pay range penetration
- Market pricing
Correct answer: Regression analysis
Regression analysis isolates unexplained pay gaps by statistically controlling for factors like tenure, performance, and job level to detect potential pay discrimination.
SHRM-CP Total Rewards & Compensation 2
Which type of variable pay plan distributes a portion of company profits to eligible employees?