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Employee Benefits: A Primer For Human Resource Professionals by Joseph Martocchio - 5e, TEST BANK 0078029481
Employee Benefits: A Primer For Human Resource Professionals by Joseph Martocchio - 5e, TEST BANK 0078029481
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0078029481
ch2 Key
1. Employee benefits act as a tool for recruiting and retaining desired employees for companies. (How
Employee Benefits Constitute Social Exchange)
TRUE
Martocchio - Chapter 02 #1
2. Social exchange is one where the nature of exchange has been specified at the time of employment.
(How Employee Benefits Constitute Social Exchange)
FALSE
Martocchio - Chapter 02 #2
3. Once the social exchange is set between employer and employee, it does not change over time. (How
Employee Benefits Constitute Social Exchange)
FALSE
Martocchio - Chapter 02 #3
4. Employee benefits need to be considered as economic exchange between employer and employee rather
than social exchange relationship. (How Employee Benefits Constitute Social Exchange)
FALSE
Martocchio - Chapter 02 #4
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5. Despite increasingly diverse workforce in the US workplace, traditional benefits practices assuming
similarity among workers can still work well for today's organizations. (Workforce Changes and the
Employment Relationship)
FALSE
Martocchio - Chapter 02 #5
6. Relational psychological contracts can often be understood with an example of an independent
contractor or consultant hired by a firm. (Psychological Contracts)
FALSE
Martocchio - Chapter 02 #6
7. Long term relationship between employer and employee pertains to transactional psychological
contracts. (Psychological Contracts)
FALSE
Martocchio - Chapter 02 #7
8. Job security, recognition, and support in exchange for commitment and loyalty to the employer more
pertain to relational psychological contracts. (Psychological Contracts)
TRUE
Martocchio - Chapter 02 #8
9. Employee benefits practices can fulfill either transactional or relational psychological contracts.
(Psychological Contracts)
FALSE
Martocchio - Chapter 02 #9
10. Health insurance or other legally required benefits would form a part of employees' transactional
expectation. (Psychological Contracts)
TRUE
Martocchio - Chapter 02 #10
11. Retirement plans is a good example of benefits that fulfill both transactional and relational expectations.
(Psychological Contracts)
TRUE
Martocchio - Chapter 02 #11
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12. Psychological contracts do not develop and change over time. (Psychological Contracts)
FALSE
Martocchio - Chapter 02 #12
13. Violations of psychological contracts are basically the same as unmet expectations. (Psychological
Contract Violation)
FALSE
Martocchio - Chapter 02 #13
14. Violations of psychological contracts are likely to be more intense than unmet expectations because of
feelings of betrayal and loss of trust. (Psychological Contract Violation)
TRUE
Martocchio - Chapter 02 #14
15. Employer's expectation of the employee is not as important as employee's expectation about the
employer. (Employee Benefits as Constituting Psychological Contracts)
FALSE
Martocchio - Chapter 02 #15
16. Tax incentives are the only reason employers offer benefits to employees. (Why Do Employers Offer
Benefits)
FALSE
Martocchio - Chapter 02 #16
17. One reason for employer-provided health insurance is to avoid adverse selection. (Cost Advantage)
TRUE
Martocchio - Chapter 02 #17
18. As the size of the insured group increases, so does the difficulty for the insurance companies to predict
the total medical expenses of the group. (Cost Advantage)
FALSE
Martocchio - Chapter 02 #18
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19. Economies of scale refers to the lower amount of co-pay required of employees in a large company as
opposed to those in a small company. (Cost Advantage)
FALSE
Martocchio - Chapter 02 #19
20. Economies of scale refers to the lower amount of co-pay required of employees in a large company as
opposed to those in a small company. (Cost Advantage)
FALSE
Martocchio - Chapter 02 #20
21. The degree to which employers will decrease their hiring, if the market compensation level increases,
can affect how much of a benefit's increase cost will be passed on to the employees. (Who Pays For
Benefits?)
TRUE
Martocchio - Chapter 02 #21
22. Offering some benefits in a compensation package can attract qualified, but undesirable job applicants.
(Recruiting Certain Types of Workers)
TRUE
Martocchio - Chapter 02 #22
23. When health benefit costs rise for a single employer in a market, the employer will likely be able to pass
along the benefit costs to workers, even if the workers valuation of the benefit has NOT changed. (Who
Pays for Benefits?)
FALSE
Martocchio - Chapter 02 #23
24. The IRS offers tax benefits to companies that offer retirement plans. (Tax Incentives)
TRUE
Martocchio - Chapter 02 #24
25. According to insurance statistics, women have higher average medical expenses than men. (Cost
Advantage)
TRUE
Martocchio - Chapter 02 #25
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26. If health insurance premiums rise because of advances in medical care technology, employees would
probably perceive that the increase added value to their insurance. (Cost Advantage)
TRUE
Martocchio - Chapter 02 #26
27. Employees in a large company are less likely to be subject to medical underwriting than those in a small
company. (Cost Advantage)
TRUE
Martocchio - Chapter 02 #27
28. Most small group health insurance policies are based on experience ratings. (Cost Advantage)
TRUE
Martocchio - Chapter 02 #28
29. Even if increased health insurance costs are NOT accompanied by an increase in employees' valuation
of the insurance, cash wages will probably be adjusted downward anyway. (Who Pays for Benefits?)
FALSE
Martocchio - Chapter 02 #29
30. One of the drawbacks of Medicare and Social Security insurance, is that neither program can avoid
adverse selection. (Cost Advantage)
FALSE
Martocchio - Chapter 02 #30
31. Offering benefits to employees can be cost effective for employees, but NOT for employers. (Cost
Advantage)
FALSE
Martocchio - Chapter 02 #31
32. According to insurance statistics, medical expenses run higher for minority groups than whites. (Cost
Advantage)
FALSE
Martocchio - Chapter 02 #32
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33. The 2009 average total medical expenditure was lowest for adults aged 18 to 44. (Cost Advantage)
FALSE
Martocchio - Chapter 02 #33
34. Medical expenses are higher for people with new medical histories. (Cost Advantage)
FALSE
Martocchio - Chapter 02 #34
35. Experience rating is the process of gathering information about employees' risk profiles. (Cost
Advantage)
TRUE
Martocchio - Chapter 02 #35
36. Benefits administration costs are usually miniscule and not considered when measuring economies of
scale. (Cost Advantage)
FALSE
Martocchio - Chapter 02 #36
37. Offering certain types of benefits in combination with reduced compensation is one way of recruiting
desirable workers. (Recruiting Certain Types of Workers)
TRUE
Martocchio - Chapter 02 #37
38. An insurance pool refers to all employees who fall into an insured category. (Cost Advantage)
TRUE
Martocchio - Chapter 02 #38
39. Individuals don't know more about their health than insurance companies. (Cost Advantage)
FALSE
Martocchio - Chapter 02 #39
40. Large companies are more likely to be subject to medical underwriting because more risk involved than
smaller companies or individuals. (Cost Advantage)
FALSE
Martocchio - Chapter 02 #40
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41. In most cases employees do not give up anything to get benefits because they are "free-add-ons" in a
compensation package. (Who Pays for Benefits?)
FALSE
Martocchio - Chapter 02 #41
42. The greater value employees place on a benefit, the larger reduction in cash wages they will accept if
the benefit is introduced into a compensation package. (Who Pays for Benefits?)
TRUE
Martocchio - Chapter 02 #42
43. If workers are willing to leave the labor market when compensation falls and employers have relatively
inflexible staffing needs, employees will tend to pay for benefit cost increases. (Who Pays for
Benefits?)
FALSE
Martocchio - Chapter 02 #43
44. What are the two basic causes for psychological contract violations? (Psychological Contract Violation)
46. Which of the following employee benefits is more relevant for relational psychological contracts?
(Psychological Contracts)
A. Insurance pooling
B. Economies of scale
C. Economies of scope
D. Administrative underwriting
Martocchio - Chapter 02 #47
48. Which of the following employee benefit might fulfill both transactional and relational expectations of
employees? (Psychological Contracts)
A. Health insurance
B. Retirement
C. Legally required benefits
D. Accommodation and enhancement benefits
Martocchio - Chapter 02 #48
49. Prime-age workers are in what age group? (Who Pays for Benefits?)
A. 25 - 60
B. 40 - 65
C. 30 - 54
D. 35 - 65
Martocchio - Chapter 02 #49
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50. Which of the following can be avoided by using experience ratings? (Cost Advantage)
A. Adverse selection
B. Medical underwriting
C. Economies of sales
D. Insurance pooling
Martocchio - Chapter 02 #50
51. What is medical underwriting? (Cost Advantage)
A. A process where employers have to verify the medical history of their employees
B. A process where the employer has to pay the difference for insuring high-risk employees
C. A process where employees provide their past medical history to insurers
D. A process where one insurance company combines with another to insure a company
Martocchio - Chapter 02 #51
52. In insurance terms, what does adverse selection refer to? (Cost Advantage)
A. When employees choose an insurance plan they don't like, but are stuck with it for a year
B. When insurance companies use medical underwriting to choose who to insure
C. When employees are forced to choose between what they think are two inferior insurance programs
D. The tendency of an insurance pool to disproportionately attract "bad risk" employees and discourage
"good risk" employees
Martocchio - Chapter 02 #52
53. The degree to which an increase in benefit costs is passed along to employees in the form of lower cash
wages generally depends on the following factors? (Who Pays for Benefits?)
54. What are the three main reasons that employers offer discretionary benefits? (Why Do Employees Offer
Benefits?)
A. Employers have a cost advantage, the benefits help in recruiting and retaining workers and the
company gets tax incentives to offer them
B. It's required to by law, the company gets tax incentives to offer them, employers have a cost
advantage
C. The company gets tax incentives to offer them, the benefits help in recruiting and retaining workers,
it's required to by law
D. The benefits help in recruiting and retaining workers, employers have a cost advantage, it's required
to by law
Martocchio - Chapter 02 #54
55. What is an insurance pool? (Cost Advantage)
57. Why does health insurance become less expensive when the size of the insurance group increases? (Cost
Advantage)
A. Administrative costs are lower, more employees are contributing co-payments, the threat of high-risk
individuals driving out low-risk ones is less
B. Insurance is less risky to provide, the threat of high-risk individuals driving out low-risk ones is less,
administrative costs are lower
C. More employees are contributing co-payments, insurance is less risky to provide, administrative
costs are lower
D. Insurance is less risky to provide, more employees are contributing co-payments, the threat of high-
risk individuals driving out low-risk ones is less
Martocchio - Chapter 02 #57
58. Which of the following is not a reason why insurance rates decrease as group size increases? (Cost
Advantage)
● Jobs are no longer characterized by traditional job security, strong loyalty to the organization, or the
patriarchal role of the organization in the life of the employee. Instead, work arrangements and careers
have become more flexible.
● Apart from economic and market challenges, the workforce in America and other developed
economies is becoming increasingly diverse (see Table 2.1).
● Two strong contingencies are shaping the employment relationship in terms of employee benefits
today. The first is the economic challenges faced by the company. The second is the changing
composition of the workforce. Both of these will determine the emerging role of employee benefits
practices in the social exchange relationship between employers and employees.
Martocchio - Chapter 02 #59
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60. Discuss what psychological contracts mean in employee benefit practices and how psychological
contract develop. (Psychological Contracts)
● A psychological contract has been defined as an employee's subjective perceptions of the relationship
of mutual obligations with the employer/company.
● Employee benefits can be a part of the psychological contract employees hold about the employer's
obligations to them in exchange for their work efforts.
● Psychological contracts result in employees holding a range or continuum of expectations from the
employer, ranging from pay and promotions to career development and family welfare.
● The continuum of expectations that employees hold from an employer can be seen as having two
poles: transactional psychological contracts and relational psychological contracts
• Toward the transactional end of the continuum, employees' expectations from the employer are more
economic and extrinsic in nature. Thus, employees' expectations of high pay and promotions or career
advancement in exchange for hard work would represent transactional types of expectations in the
psychological contract.
• On the other hand, toward the relational end of employees' expectations from the employer that might
be either economic or non-economic, but are also emotional, subjective, and intrinsic in nature. Thus,
employees' expectations of job security in exchange for loyalty to the employer would represent
relational types of expectations in the psychological contract.
● Employee benefits practices can be seen to fulfill both transactional and relational expectations of
employees.
• Health insurance and other legally required benefits would form a part of employees' transactional
expectations from the employer.
• Employee benefits such as the paid time off and accommodation and enhancement benefits examined
in the previous chapter might help fulfill employees' relational expectations.
• Retirement plans would be a good example of employee benefits that fulfill both transactional and
relational expectations; similarly, educational assistance benefits aimed at rewarding continued
employment as well as career development would help fulfill both transactional and relational
expectations.
● Most psychological contracts take shape in the pre-employment phase, when people seek information
during recruitment and selection. Employees might seek information about both transactional and
relational expectations from their potential employer.
● Ultimately, what the employee learns about employer's benefits practices will form a part of the
employee's expectations from this exchange relationship along this transactional-relational continuum.
● Employees can form expectations that comprise their psychological contracts from two sources: their
interactions with other members of the company and their perceptions of the company's culture.
● Psychological contracts are flexible in nature, undergoing constant change based on the interactions
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employees have with the company and with other employees. This flexibility allows employees to adapt
to changes in the company's practices.
• If employees hold relatively stable expectations from employers, any changes in the policies and
practices of the company will lead to the employee feeling betrayed unless changes entail offering more
rather less.
• However, if the employees have flexible expectations, they are more likely to change their
psychological contracts to adjust for the changes the employer is compelled to make.
Martocchio - Chapter 02 #60
61. Briefly discuss how employee benefits aid in recruiting certain types of workers. (Recruiting Certain
Types of Workers)
Main Points
● Tailor the benefits package with certain benefits to attract a certain type of workers
● Recent undergraduates might be attracted to a tuition reimbursement benefit
● Women 20-40 might be interested in company-paid health insurance
● Older workers might be attracted to stronger retirement plans
● Tailoring packages might have unintended consequences, like
● Offering strong mental health or substance abuse benefits might attract substance abusers
● Attracting older workers with strong retirement benefits, might increase health insurance costs
● Attracting younger women might increase the need for replacement workers due to maternity leaves
and FMLA time off
Martocchio - Chapter 02 #61
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62. Examine the reason why health insurance costs might rise. (Who Pays for Benefits?)
Main Points
● The rise reflects a general improvement in medical care technology and health care quality, but also
more expensive technology.
● Legal changes allow doctors to unionize and thereby charge higher prices for the existing services
they provide.
● Health insurance costs rose by 10% at only this employer because the company workforce is a year
older and is at an increased likelihood of contracting additional medical conditions and hence generating
additional medical costs.
● Health insurance costs rose by 10% at only this employer because the employer decided to layoff a
significant portion of their employees, thereby reducing the size of the insured group.
Martocchio - Chapter 02 #62
63. Discuss the issue of who pays for employee benefits. (Who Pays for Benefits?)
Main Points
● Most workers with employer-sponsored health insurance pay a token monthly contribution towards
their insurance premium.
● The typical monthly contribution ranged between $32.50 to $127.74 for people with single coverage
and $126.00 to $768.87 for people with family coverage.
● The monthly contributions allow employers to charge employees different rates, depending on
insurance needs, like family size and different levels of coverage.
● Monthly contributions make it easier for employers to pass along benefit cost increases to employees.
● Instead of lowering income employers may also
Martocchio - Chapter 02 #63
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ch2 Summary
Category # of Questions
Martocchio - Chapter 02 63