FORHRMEXAM

1. Summarize the goals of compensation plans in at least 100 words.
A compensation package is an essential component of the company's strategic

HRM plan. That is why it is crucial to create objectives that will steer the company's
performance toward goal-related activities and away from unrelated ones. First and
foremost, the salary package should be positive enough to attract the top candidates for
the job. It has a significant impact on potential applicants' desire to consider the
organization and contribute to high performance during the recruiting and selection
procedures. Once they join the organization, compensation must be competitive enough
to encourage people to stay with the organization. Some of the employees may start to
use this as their extrinsic motivator. Pay systems can also be utilized to recognize
employees' accomplishments and motivate them to perform at their very best. By
achieving this goal, it may help to facilitate the growth and expansion of the organization.
2. Discuss the internal and external pay factor in determining compensation. At least
150 words.
The internal and external pay factors are significant to offering a fair
compensation package for the employees. Internal factors exist within the organization
and influence the company's compensation structure. It takes into account an employer's
ability to pay. It is determined by the nature of the firm. This includes the company's
compensation strategy. If a corporation wants talented workers to outperform the
competition, it will pay more than others. Alternatively, if the corporation wishes to keep
operations running efficiently with the available staff, it will pay less or the same as
others. It also includes the market compensation philosophy, which pays the current
market wage for a job. Other businesses may opt for a market-plus philosophy, which
pays more than the average. A corporation company may decide that its pay philosophy
is a market minus philosophy, which pays less than the market rate. For example, a
company may elect to pay lower wages while providing more benefits. While external
factors are those outside forces such as demand and supply of human resources,
employees with uncommon skill sets and knowledge earned through experience often
seek greater pay and salaries than employees with standard capabilities widely available
in the job market. Likewise, economic conditions and the expense of living. There is a
compensation adjustment based on the consumer price index, which estimates the
average change in the price of basic goods.
3. Discuss the other considerations included in the pay system, at least 150 words
There are things that the organization needs to consider in the pay system. First,
the size of the organization and the expected expansion of the organization will be
factors. There are times when the firm still has a limited number of employees, in which
case a going rate or management fit model is most commonly used. While this works for
the company right now, it could be a good idea to develop a more formal pay system as
the company grows. Another factor is the currency in which employees will be paid.
Most US businesses pay their foreign employees in US dollars rather than the local
currency of the country where they are employed. Changes in currency value may cause
difficulties in this regard. To improve the incentive that may be produced by a fair and
equitable payment, another factor to take into account is how to convey your pay
structure. Additionally, if feasible, including the workforce in the compensation process,
for instance, by using pay attitude surveys, can result in more productive workers by
fostering transparency in the compensation system.
4. What are the types of pay and explain it in your own words
The total pay system is divided into three categories: pay, incentives, and other types of
compensation.
The following are the types of pay:
o Salary - these are considered fixed payments, which are calculated based on their
timeframe. It can be weekly, biweekly, or monthly.
o Hourly Wage - employees are compensated based on the number of hours worked.
o Piecework System - workers are compensated according to the amount of product
they produce.
The following are the types of Incentive Plans:
o Commission Plans - an employee will be compensated extra whether or not they are
given a wage.
o Bonus Plans - a bonus for achieving or surpassing a predetermined objective. Bonus
schemes can offer rewards in cash as well as other forms like vacation time or gift
cards.
o Profit-Sharing Plans - employees receive annual incentives based on how much
money the company made.
o Stock Options - when an employee is granted the right to acquire company shares at
a specific time and price.
The following are the other types of compensation:
o Fringe Benefits - this might encompass a wide range of alternatives. Sick leave, paid
vacation time, health club memberships, and daycare services are all available.
o Health Benefits - the majority of employers provide their staff with health and
dental benefits. There are also rewards for life insurance and disability.
o 401(k) Plans - for their workers, several companies provide retirement plans. In
order for them to save money, the firm would set up a plan with a financial
institution. Frequently, businesses complement a portion of what employees pay into
the plan.
5. What are the other types of compensation and explain each.
 Mandated: Social Security and Medicare

- Employers are required by the Social Security Act of 1935 to deduct funds from
employees' paychecks to pay for retirement benefits. This is known as a payroll tax.
Employees must work forty quarters and earn a minimum of $1,000 every quarter to
be covered. If this money is saved, anybody born after 1960 will be eligible for
payments at the age of 67.
 Mandated: Unemployment Insurance and Workers’ Compensation

- The aims of this program include providing some lost income for employees during
involuntary unemployment, assisting workers in finding new jobs, motivating
companies to retain employment, and enhancing worker skills if they are laid off.
Employees would not be entitled for these perks if they leave their jobs voluntarily.
 Mandated: COBRA
- The Consolidated Omnibus Budget Reconciliation Act (COBRA) mandates
employers to enable employees to prolong their group coverage for up to 36 months.
The constraints for this plan include the necessity of a qualifying event that would
result in a loss of benefits, such as termination or a reduction in hours.
 Voluntary: Incentive Pay Systems

- Commissions are often set as a percentage and received depending on the completion
of specified goals agreed upon by the employee and company. There are numerous
types of incentive compensation schemes that can be closely linked to business
objectives and workers' capacity to assist the firm accomplish those objectives. They
include commissions, bonuses, profit sharing, stock options, team pay, and merit pay.
 Voluntary: Medical Insurance

- It establishes federal safeguards for personal health information handled by covered
businesses, including employers. In other words, businesses are prohibited from
disclosing or sharing any health-care information they may have about an employee.
 Voluntary: 401(k) Plans

- A 401(k) plan is a company-created plan in which employees deposit money directly
from their paychecks. The monies are tax-deferred until the employee retires. If an
employee quits, their 401(k) plan goes with them. As an added incentive, many
companies will match what the employee contributes to the plan, generally on a
percentage basis.
 Paid Vacation
- Many businesses provide a specific number of paid holidays each year, such as New
Year's Day, Memorial Day, Christmas, Independence Day, and Thanksgiving.
 Sick Time
- Employees can file for sick leave on the day they return to work. If an employee stays
more than three days or files in advance, the SL must be accompanied by a medical
certificate.
 Paid Time Off

- As previously stated, companies are not required by law to provide their employees
with vacation time. So, it's a wonderful thing that employers have finally realized that
we all have lives outside of work and how vital family and personal time is.
Employees may use vacation time for personal reasons. However, this is subject to
the approval of the supervisor or manager.

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FORHRMEXAM

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1. Summarize the goals of compensation plans in at least 100 words.

A compensation package is an essential component of the company's strategic

The following are the types of pay:

The following are the types of Incentive Plans:

The following are the other types of compensation:

 Mandated: Social Security and Medicare

 Mandated: Unemployment Insurance and Workers’ Compensation

 Voluntary: Incentive Pay Systems

 Voluntary: Medical Insurance

 Voluntary: 401(k) Plans

 Paid Time Off

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