Alignment of the pay strategy includes three elements

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Alignment of the pay strategy includes three elements: Align it with the business strategy. Align it externally with the economic and sociopolitical conditions. Align it internally with the overall HR systems. Rising cost of living is an economic condition. Hence options 1, 2, 3, and 4 are incorrect. 12 “I don’t work for the money, I do this work because I enjoy it and find it interesting.” In terms of employee compensation this is an example of _____________________. 1 direct compensation 2 nonfinancial rewards 3 intrinsic rewards 4 indirect compensation 5 extrinsic rewards The correct answer is 3. See figure 1.1 in the study guide and “Relational returns from work” in the prescribed book. Compensation of employees consists of intrinsic rewards (relational returns) and extrinsic rewards. Intrinsic rewards are intangible rewards that have a substantial effect on employee behaviour. 13 Gugu is a marketing consultant at a large marketing firm. She has received a once-off bonus as a reward for managing a large advertising campaign successfully. This is a(n) _____________. 1 merit increase 2 employee benefit 3 long-term incentive 4 short-term incentive 5 profit-sharing scheme The correct answer is 4. See “Forms of pay” in the prescribed book and the overview of topic 1 in the study guide. A bonus or merit pay is a variable or temporary form of compensation that is a once-off payment or payment that may vary from month to month (in the case of people who earn a commission). This focuses the employee’s attention on the short term and not the long term and is therefore a short-term incentive. Profit- sharing is also a short-term incentive in that it focuses employee attention on the profits made in a specific financial year. A merit increase is an increment that is added to the basic salary in recognition of past work behaviour. This increases the basic salary. Long-term incentives are intended to focus employee efforts on multiyear results and are typically in the form of stock (share) ownership or the option to buy stock (shares) at specified, advantageous prices. Employee benefits are indirect forms of pay that employees receive as part of their compensation package. Some benefits are legally required while others are offered voluntarily by the employer. Please note that there is a difference between benefits and incentives. Options 1, 2, 3 and 5 are therefore incorrect.
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8 MNH306K/201 14 In terms of compensation, fairness means the following: (a) conforming to laws and regulations (b) paying for performance not presence (c) salaries that equal those of competitors (d) recognising employee needs and contributions (e) fair processes for making compensation decisions The correct alternative is 1 a, c 2 b, c 3 c, e 4 d, e 5 b, e The correct answer is 4. See “Compensation objectives” in the prescribed book. The fairness objective calls for fair treatment for all employees by recognising both employee contributions and employee needs. Procedural fairness refers to the process used to make pay decisions. Hence options 1, 2, 3 and 5 are incorrect.
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