Question

A 10 percent three-year wage increase is provided as a 2 percent increase in the first year, 3 percent in the second year, and 5 percent in the third year. This is an example of a ________ contract.

Answer 1

Back-loaded

Step-by-step explanation:

A back-loaded contract can be defined as a contractual arrangement between two or more parties, in which higher costs are levied or higher benefits are accrued to a project towards the end of its term (duration) as against lower costs or benefits at its beginning.

This ultimately implies that, a back-loaded contract allows lower wage adjustment in the first year with a consequent higher increase towards the end of a contract.

In this scenario, a 10 percent three-year wage increase is provided as a 2 percent increase in the first year, 3 percent in the second year, and 5 percent in the third year. This is an example of a back-loaded contract.