Question

QXR Financial Services has decided to phase out its competency-based pay plan because it has become too difficult to maintain. Which of the following is most likely to increase?

Option 1: Training
Option 2: Grievances
Option 3: Salary
Option 4: Absenteeism

Answer 1

With the phase-out of a competency-based pay plan, QXR Financial Services is most likely to see an increase in salaries, as the company may adopt a more uniform pay structure to retain talent and avoid losing its best workers.

Step-by-step explanation:

When QXR Financial Services decides to phase out its competency-based pay plan, which has become too difficult to maintain, it is likely that Option 3: Salary is most likely to increase. Competency-based plans typically reward employees for their specific skills and how they apply them to their work. Without this system, QXR Financial Services may transition to a more traditional pay structure, which could make salaries more uniform and possibly higher, particularly if they aim to retain talent and avoid the adverse selection of wage cuts, in which the best workers with the best employment alternatives leave the company due to wage reductions.

Furthermore, a change in the pay structure could potentially affect other aspects of the business, but based on existing theory and evidence, a straightforward answer would indicate that salaries are the most directly impacted component when shifting away from competency-based compensation.