Final answer:
The two key questions in designing a compensation system focus on the role and mix of compensation components and the total level of compensation provided, which is true. This includes aligning effort with rewards and considering the total compensation package, which may include negotiations for adjustments in compensation based on performance or market changes.
Step-by-step explanation:
The statement that the two key questions that must be addressed in designing any compensation system are a) what role should each of the three compensation components play in the compensation mix? and b) what total level of compensation should be provided is true. When designing a compensation system, organizations must consider not just the base pay, but also the blend of the three compensation components: base, benefits, and incentives.
It's essential to align the effort an employee puts into the work activity with appropriate rewards to motivate and retain good employees. Likewise, compensation should also be fair in terms of the costs an employee incurs, which can include various factors such as time, skill level, and responsibility.
Regarding total compensation, it must be competitive in the market to ensure employee satisfaction and to mitigate the risks associated with low pay. If the base salary is not consistent with industry standards, a comprehensive compensation package that includes health benefits, retirement plans, or bonuses may compensate for the lower wage. The possibility of renegotiation of compensation depends on the policies of the organization; however, it's not uncommon for salary discussions to occur after 6-12 months of employment, particularly if the employee has demonstrated a high level of performance or if the market conditions have changed significantly.