Despite evidence that companies will find it more profitable to use a commission system of compensation rather than a salary system, many companies continue to pay their workers salaries.Which of the following is one reason why firms choose a salary system?
A)Most business owners and managers are not trained economists; therefore, they are unaware of the research that shows a commission system is more profitable than a salary system.
B)Firms often use salary systems to overcome their principal-agent problems.
C)Firms that have salary systems do not have to use compensating differentials to attract employees to do hazardous jobs.
D)Many workers dislike risk and prefer to be paid a salary rather than to be paid by commission.

Question

Quizplus · Accepted Answer

Many workers may prefer the security of a fixed salary over the uncertainty of being paid by commission. Some workers may also feel that they have more job security and stability when they receive a regular, consistent pay regardless of their performance. This can be especially true for workers in industries with unpredictable demand or markets. Therefore, firms may choose to use a salary system to attract and retain employees who value stability and predictability in their compensation.

Despite Evidence That Companies Will Find It More Profitable to Use