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Which set of factors determines the overall level of a firm's compensation?
AUnion size, strike history, and the number of grievances
BProfitability, efficiency, productivity, and market rates
CPlant layout, machine age, and the cost of raw materials
DAdvertising spend, brand age, and the number of outlets
Answer & Solution
Correct answer: B. Profitability, efficiency, productivity, and market rates
1. How much a firm can afford to pay depends first on its own financial condition, or profitability.
2. It also depends on the firm's efficiency and on employee productivity, because both determine what the payroll buys.
3. The going rates paid by competitors set the external reference point.
4. Plant layout and advertising spend affect costs and revenue but are not what compensation level is derived from.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 8 "Managing Human Resources and Labor Relations", section 8.6 Employee Compensation and Benefits_
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