HRM/324T – Total Compensation Practice Test 2025: Your Comprehensive All-in-One Guide to Exam Success!

Question: 1 / 510

Without a variable pay component, what remains unchanged even when revenues drop?

Employee morale

Labor costs

Labor costs remain unchanged even when revenues drop because they are typically fixed costs associated with employing staff. These costs include salaries, wages, and benefits that are not directly tied to performance or sales. Unlike variable pay components, such as commissions or performance bonuses, labor costs are usually predetermined and contracted, meaning that employers still owe certain amounts to their employees irrespective of the company's revenue fluctuations.

In contrast, operational budgets can be adjusted based on changing circumstances, and employee morale may fluctuate in response to revenue changes and job security concerns. Sales commissions, being a variable pay component, are directly linked to sales performance and would decrease if revenues drop. Hence, labor costs are the only element that remains unchanged during such economic shifts.

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Operational budgets

Sales commissions

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