Question 1

What is a compa-ratio, and what does a value of 1.0 indicate?

Accepted Answer

A compa-ratio compares an employee's actual pay to the midpoint of their pay grade (actual pay ÷ midpoint). A value of 1.0 means the employee is paid exactly at the midpoint.

Question 2

What is the difference between a broadband pay structure and a traditional graded pay structure?

Accepted Answer

Broadbanding consolidates many narrow pay grades into a few wide salary bands, allowing greater flexibility in pay decisions and lateral career moves. Traditional graded structures have more grades with narrower ranges and stricter movement rules.

Question 3

What does a pay range 'spread' of 50% mean?

Accepted Answer

A 50% spread means the maximum of the pay range is 50% higher than the minimum (maximum = minimum × 1.50).

Question 4

What is the purpose of a job evaluation, and what method ranks jobs by comparing them against predetermined factor levels?

Accepted Answer

Job evaluation establishes the relative worth of jobs within an organization to create an equitable pay structure. The point-factor method ranks jobs by scoring them against predetermined compensable factors such as skill, effort, and responsibility.

Question 5

What is 'red-circled' pay, and how is it typically managed?

Accepted Answer

Red-circled pay occurs when an employee's salary exceeds the maximum of their pay grade. It is typically managed by freezing the employee's base pay increases until the pay grade catches up or until the employee is promoted.

PHR Exam: Compensation & Benefits

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