Final answer:
A compensation budget is a forecast of what a firm expects to spend on compensation in the coming year, taking into account various factors. It helps allocate funds for salaries, bonuses, benefits, and other forms of compensation.
Step-by-step explanation:
A compensation budget is a forecast of what a firm expects to spend on compensation in the coming year. It helps the firm plan and allocate funds for employee salaries, bonuses, benefits, and other forms of compensation.
The budget takes into account factors such as company growth, inflation, market trends, and employee performance.
For example, if a company anticipates an increase in sales and productivity, they may allocate more funds for performance-based bonuses. On the other hand, if they anticipate a slowdown in the business or economic downturn, they may exercise caution and trim down the compensation budget.
Therefore, the statement is true. A compensation budget is indeed a forecast of what a firm expects to spend on compensation in the coming year.