Compensation and Benefits

We’ve compiled a list of the most common and frequently asked Compensation and Benefits (HR) interview questions. If you want to ace your HR interview, then make sure you master the answers to these questions below. The questions are perfect for anyone interviewing for a HR Executive/Manager job.

Q.1 Bonuses are very effective for
Directing sales efforts to short term goals
Q.2 A sales person’s compensation plan is typically made up of
A variable amount
Q.3 Which steps in Maslow’s Hierarchy of Needs theory deals with achieving ones potential
Self – Actualization
Q.4 Which benefits is covered under social security system
Retirement Benefits and Medical Benefits
Q.5 Which theory based on internal thought processes and perceptions about motivation, states that by establishing goals employees are motivated to work harder to achieve these goals
Locke’s Goal Setting Theory
Q.6 Which theory based on internal thought processes and perceptions about motivation, states that employees are motivated by performances and the expected outcomes of their own behavior
Vroom’s Expectancy Theory
Q.7 Which theory based on internal thought processes and perceptions about motivation, states that employees are motivated when they feel that they are equitably in comparison to others in the organization
Adam’s Equity Theory
Q.8 Which need as per Maslow’s Hierarchy of need, includes status, recognition and positive regard
Q.9 Total compensation includes
Wages and salaries and public (legally mandated) fringe benefits only
Q.10 Paying workers a fixed sum for each unit of production completed is called
Piece rate
Q.11 How will you manage conflict amongst employees over compensation in the company?
Conflicts regarding compensation in a company need to be analyzed for its root cause and meeting with conflicting party or individual needs to be taken based on facts and figures for resolution. Depending upon their concerns, future compensation can be negotiated and clarified. Clear communication to employees regarding compensation, perquisites, and benefits should be developed by sending details on joining or promotion of the employee.
Q.12 How will manage a difficult employee?
Managing a difficult employee involves connecting with them to addressing their issue, listening to them and having clear communication without bias.
Q.13 How will you address high pressure delivery due to financial year closure?
A financial year closure is a yearly exercise and pressure can be reduced by reconciling every three months. Further, bank and tax reconciliation be done every month end.
Q.14 How will you address under performance by the team?
Under performance by the team can be addressed by analyzing the reasons for under performance, understanding and listening to the team members for problem being faced, creating an encouraging and motivated environment to achieve the desired performance and continuously monitoring to address any event or factor of underperformance.
Q.15 What is Compensation and Benefits (C&B)?
C&B refers to the total rewards system, including pay, benefits, and perks.
Q.16 Why is compensation important for employees?
Compensation directly impacts employee motivation and satisfaction.
Q.17 Explain the difference between compensation and benefits.
Compensation is monetary, while benefits are non-monetary rewards.
Q.18 What are direct compensation components?
Direct compensation includes base salary, bonuses, and incentives.
Q.19 Define indirect compensation components.
Indirect compensation includes benefits like healthcare and retirement plans.
Q.20 What is a salary structure?
A salary structure sets pay ranges for different job roles within an organization.
Q.21 Describe the concept of "total rewards."
Total rewards encompass all the ways an employee is compensated and valued.
Q.22 What is job evaluation in compensation?
Job evaluation assesses the relative worth of different jobs in the organization.
Q.23 Explain the term "market pricing" in compensation.
Market pricing involves comparing your organization's pay rates to those in the market.
Q.24 What is a compensation philosophy?
A compensation philosophy outlines an organization's approach to pay and rewards.
Q.25 Describe the concept of "pay equity."
Pay equity ensures that employees are paid fairly for equal work.
Q.26 What is a merit-based pay system?
Merit-based pay rewards employees based on their performance.
Q.27 What are job grades in compensation?
Job grades group similar jobs together for pay and organizational purposes.
Q.28 Explain the concept of "compensation surveys."
Compensation surveys provide data on pay rates in the industry or region.
Q.29 What is a compensation benchmark job?
A benchmark job is a standard job used as a reference for pay comparisons.
Q.30 Describe the role of a compensation committee.
A compensation committee oversees and approves compensation policies.
Q.31 What is variable pay, and why is it important?
Variable pay is performance-based and motivates employees to excel.
Q.32 What are the different types of employee benefits?
Benefits can include healthcare, retirement plans, paid time off, and more.
Q.33 Explain the concept of "cafeteria-style benefits."
Cafeteria-style benefits allow employees to choose from a menu of options.
Q.34 Describe the concept of "vesting" in retirement plans.
Vesting determines when employees fully own their retirement plan contributions.
Q.35 Explain the term "employee stock options."
Stock options give employees the right to purchase company stock at a predetermined price.
Q.36 What are wellness programs in employee benefits?
Wellness programs promote employee health and well-being.
Q.37 Describe the role of HR in administering benefits.
HR is responsible for managing benefit programs and assisting employees with inquiries.
Q.38 What is a benefits enrollment period?
An enrollment period is the time frame during which employees can select their benefits.
Q.39 What are non-monetary benefits, and why are they important?
Non-monetary benefits enhance job satisfaction without increasing pay.
Q.40 What is a compensation survey participation rate?
The participation rate indicates the percentage of employees included in the survey data.
Q.41 What is the role of a compensation analyst?
A compensation analyst collects and analyzes data to determine pay structures.
Q.42 Describe the purpose of a salary review process.
A salary review process evaluates and adjusts employee pay as needed.
Q.43 What is the impact of inflation on compensation?
Inflation erodes the purchasing power of employee salaries.
Q.44 Explain the concept of "salary compression."
Salary compression occurs when new hires earn nearly as much as existing employees.
Q.45 Describe the concept of "executive compensation."
Executive compensation packages are tailored to top-level leaders.
Q.46 What is a job offer negotiation, and why is it important?
Negotiation allows candidates to secure competitive compensation packages.
Q.47 Explain the term "bonus structure."
A bonus structure outlines how bonuses are calculated and awarded.
Q.48 What is a compensation review board?
A review board assesses compensation plans and ensures fairness.
Q.49 Describe the concept of "salary surveys."
Salary surveys provide data on pay practices across organizations.
Q.50 What is the purpose of a compensation communication strategy?
Communication ensures employees understand their total rewards.
Q.51 Explain the concept of "employee recognition programs."
Recognition programs reward and acknowledge employee contributions.
Q.52 What is a benefits compliance audit?
An audit ensures that benefit programs adhere to legal requirements.
Q.53 Describe the role of HR in managing retirement benefits.
HR administers and communicates retirement plans to employees.
Q.54 What is a deferred compensation plan?
A deferred compensation plan allows employees to defer a portion of their pay.
Q.55 Explain the concept of "salary sacrifice" in benefits.
Salary sacrifice involves trading part of a salary for non-monetary benefits.
Q.56 What is the role of a compensation consultant?
A compensation consultant provides expert advice on compensation strategies.
Q.57 Describe the impact of market forces on compensation.
Market forces can influence pay rates and benefit offerings.
Q.58 What is a compensation budget, and why is it important?
A budget outlines the allocation of funds for employee compensation.
Q.59 Explain the term "equity-based compensation."
Equity-based compensation includes stock options, RSUs, and ESOPs.
Q.60 What is a variable pay plan, and how does it work?
A variable pay plan ties pay to individual or company performance metrics.
Q.61 Describe the concept of "job classification."
Job classification groups positions based on their duties and responsibilities.
Q.62 What are bonus pay types, and how do they differ?
Bonus types can include performance bonuses, sign-on bonuses, and retention bonuses.
Q.63 Explain the concept of "salary range."
A salary range sets the minimum and maximum pay for a specific job role.
Q.64 What is a compensation survey provider?
A survey provider collects and disseminates compensation data to subscribers.
Q.65 Describe the role of a benefits specialist.
A benefits specialist manages and administers employee benefits programs.
Q.66 What is a compensation strategy, and why is it essential?
A compensation strategy aligns pay practices with organizational goals.
Q.67 What are some common challenges in compensation and benefits?
Challenges include maintaining competitiveness and controlling costs.
Q.68 Explain the concept of "total cash compensation."
Total cash compensation includes base salary, bonuses, and incentives.
Q.69 What is the role of employee feedback in shaping compensation and benefits?
Employee feedback helps organizations tailor rewards to employee needs and preferences.
Q.70 What is EVA and how is it calculated ?
Economic Value Added or EVA, is a measure of a company's financial performance based on the residual wealth calculated by deducting cost of capital from its operating profit (adjusted for taxes on a cash basis). (Also referred to as "economic profit".). The formula for calculating EVA is - (Net investment) x (Actual return on investment – Percentage cost of capital)
Q.71 Which step in Maslow’s Hierarchy of Needs theory deals with achieving ones potential ?
Self Actualization needs deals with ones poyential, desire for achievement, personal growth and development and autonomy.
Q.72 What is MBO?
MBO or management by objective evaluation requires the supervisor and employee to agree upon a set of objectives before the process of evaluation. This method depends upon setting of goal and constructive feedback for success.
Q.73 What are supplementary benefits and services an employee receives in addition to the wages?
Fringe benefits are benefits provided by an employer to an employee, independent contractor or partner, some of which are tax-exempt when certain conditions are met. Recipients of taxable fringe benefits have to include the fair market value of the benefit in their taxable income for the year.
Q.74 How many levels of need are listed by Maslow’s Hierarchy of need?
In 1954, Maslow postulated a hierarchy of needs from the lowest subsistence level needs to the highest level of self awareness and actuality. It is said that once all these levels are met the employee will be motivated to work to satisfy a higher level of need. There are five levels in Maslow’s Hierarchy of need.
Q.75 Which approach to determine the international compensation package, relies on comparisons of survey of the local nationals? Explain the approach using example?
Going rate is based on the local market rates. It relies on comparisons of survey of the local nationals, expatriates of same nationality and expatriates of all nationalities’ pay packages. In this approach, the compensation is based on the selected survey comparison. The base pay and benefits may be supplemented by additional payments for low pay countries. For example: If a Pakistani bank operating in London uses local British salaries, the salaries that other Pakistani competitor banks in London or the average salary offered by all foreign banks operating in London will be the reference point for the base salary offered.
Q.76 Which employee evaluation system surveys colleagues, supervisors, subordinates and even customers about the actions of each employee ?
In 360-degree feedback, the employer surveys colleagues, supervisors, subordinates and even customers about the actions of each employee. The multiple channels of feedback offer objective perspectives of behavioral traits and actions. From this kind of feedback, the employee is able to set goals for personal development that allow them to make progress in their career and benefit the organization.
Q.77 What is base salary?
The base salary refers to the salary which an employee gets in their home-country.
Q.78 How to calculate compensation for a job?
Compensation is influenced by various factors and primary ones are: the cost of living, taxation and healthcare costs.
Q.79 How will you determine senior management or executive compensation?
Senior management or executive compensation is determined by education and work experience of the candidate and the level of hierarchy for the executive.
Q.80 What will you do if the process of collective bargaining fails with the employees?
We will engage a third party to break the deadlock under conciliation/mediation
Q.81 How does the pensionable salary calculated in India?
The pensionable salary in India is the average of last 12 months pay
Q.82 ESI Fund is administered by
ESI Corporation
Q.83 Who is not covered under Payment Of Gratuity Act in India?
Teacher is not covered under Payment Of Gratuity Act
Q.84 When should you avoid a 3rd-party intervention during a negotiation?
During negotiation if progress is occurring or likely to occur then, avoid a 3rd-party intervention
Q.85 Why should we have an employee exit policy?
An employee exit policy is useful as it explains the steps and completes the separation of employee for full and final settlement of the employee and ensures the handover process addresses company's interests
Q.86 What is usually included in an exit policy?
An exit policy usually includes process for separation of all of the employee types and conditions during the notice period.
Q.87 What is golden handshake?
The term golden handshake refers to specific condition in an employment agreement about employer giving a significant severance package on the event of the employee losing their job.
Q.88 List various involuntary termination of employment?
Involuntary termination of employment includes: Layoffs, downsizing and getting fired due to unsatisfactory work performance.
Q.89 Calculate the bonus to pay in a 500-employee company with fixed standard output at 1000 tonnes per month. Employees get productivity bonus for percentage increase in production and this month output was 1200 tonnes with 550 employees.
The bonus to pay is 8.34%
Q.90 What motivates employees in a team to volunteer for the achievement of the assigned goals?
A team-based compensation plan motivates team members
Q.91 What is involved while performing job evaluation to ascertain salary structure?
Job evaluation involves, having good understanding of the job role with clearly defined job details and its evaluation as per approved evaluation scheme.
Q.92 Does job analysis and evaluation are same or not?
No, both are different as job analysis collects data on the job with focus on the job's worth and it is the first step for job evaluation. Job evaluation on other hand is wider and it provides the basis for a balanced wage structure by measuring the job's value to the company and using the job analysis data.
Q.93 What does UAN refers to, in a salary structure in India?
UAN refers to Universal Account Number used for EPF or Employee PF. It is an identification for employee enrolled under the EPF scheme and links different member Ids allotted by different companies in his or her career.
Q.94 List the EPF forms a company in India needs to submit for a new joinee or an employee leaving the company.
The EPF forms to be filed are: Form 5 (for new employees joined that month) and Form 10 (for employees leaving that month).
Q.95 How will you determine compensation based on competency of the employee?
Competency refers to ability of an individual to apply knowledge and skills for performing specific work. Competency based compensation need to factor in complexity and difficulty in completing the job, the variation in the job and the relevance of the job for the company.
Q.96 What do understand by fringe benefits?
Fringe benefits refer to various monetary benefits being provided to the employee and usually include: Medical care, canteen facilities and recreational facilities.
Q.97 What are perquisites for an employee?
The perquisites for an employee are special benefits offered to executives for retaining them and usually include: Company car, Club membership, paid holidays, and furnished house or accommodation and Stock option schemes.
Q.98 Describe Non-monetary benefits
Non-monetary benefits are benefits which provide psychological satisfaction to employees and usually include: recognition of merit through certificate, offering challenging job responsibilities, Promoting growth prospects, Comfortable working conditions and Job sharing and flexi-time.
Q.99 The advantages of the Balance Sheet Approach for calculating international compensation package includes
Equality with local nationals
Q.100 Reverse culture shock is the
Occurs when expatriates return to their own country
Q.101 What is a payment system which rewards groups of employees with incentive payments when they put in place initiatives which reduce costs
Gain sharing
Q.102 Income paid to an annuitant under life annuity is comprised of all except
Insurer expenses
Q.103 Variable pay depends on performance and is not added to
Employee’s pay base
Q.104 Which component is not necessary to solve EVA
Q.105 What is the salary received by an individual, paid to the employee at the time of his retirement or to his legal heir in the case of death of the employee?
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