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What is an important design question when a firm sets up a bonus or profit-share plan?
AWhether the plan replaces the grievance procedure entirely
BWhether the share is the same for all employees or varies
CWhether the plan is approved by an outside arbitrator first
DWhether the share is paid before the job analysis is done
Answer & Solution
Correct answer: B. Whether the share is the same for all employees or varies
1. Once a firm decides to pay a bonus or a profit share, it still has to decide how to split it.
2. The key question is whether every employee receives the same amount or whether the amount is differentiated.
3. Differentiation can be by level in the organization, by base pay, or by some other criterion the firm chooses.
4. Some firms deliberately pay everyone the same share, so that the president receives exactly what the lowest-paid employee receives.
5. Grievance procedures belong to labor agreements and have no connection with incentive design, which rules option A out.
6. Option D is impossible in sequence, because job analysis sits at the start of the human resource process and pay design comes much later.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 8 "Managing Human Resources and Labor Relations", section Types of Compensation or Pay_
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