Compensation, Benefits, and Total Rewards
This section covers Compensation, Benefits, and Total Rewards. The exam tests pay structures, market pricing, job evaluation, pay equity, variable pay, and benefit compliance. Expect calculations and compliance scenarios.
Core rules
- Total rewards = pay, incentives, benefits, development, and work experience.
- Job evaluation, such as point-factor, sizes jobs internally; market pricing uses survey data by percentile and ages data to the effective date.
- A pay range has min, midpoint, and max. Midpoint is the competitive reference; ranges overlap by grade.
- Compa-ratio = base salary / range midpoint. Range penetration = (salary − min) / (max − min). They answer different questions.
- Pay compression occurs when new hires approach or exceed experienced pay; inversion occurs when a subordinate earns more than the manager.
- FLSA status depends on salary basis and duties tests, not title alone. Nonexempt employees get overtime at 1.5× the regular rate over 40 hours in a workweek.
- Benefit compliance: ERISA fiduciary and reporting rules; HIPAA privacy and portability; COBRA continuation (generally 18 or 36 months); ACA employer shared responsibility at 50+ FTEs; 401(k) nondiscrimination testing and vesting.
Worked example
A grade is $50,000 min, $60,000 midpoint, $70,000 max. An employee at $57,000 has compa-ratio 57/60 = 95% and range penetration (57−50)/(70−50) = 35%. A second employee at $66,000 has compa-ratio 110% and range penetration 80%. If the market midpoint is $62,000, the first is below market and the second above. A $72,000 offer exceeds the max; do not ignore it-red-circle, adjust the range, or justify a market exception.
Traps
Confusing compa-ratio with range penetration; using the mean on skewed survey data; ignoring survey aging; classifying exempt by title; and treating benefits as outside total rewards.