Human Resources Certification Institute (HRCI) Practice Exam

The president of the company you work for wants to embark on a cost savings initiative throughout all departments. All employees will receive a percentage of the savings at the end of the year. This is an example of what type of compensation program?

1. Deferred compensation

2. Gain-sharing

3. Discretionary bonus

4. Commission

The correct answer is: Gain-sharing

This is an example of a gain-sharing compensation program, where all employees will receive a percentage of the cost savings at the end of the year. This is different from deferred compensation, which is when an employee receives compensation at a later date, such as through a retirement plan. Discretionary bonuses are typically a one-time, non-guaranteed payment based on the employer's discretion, while commissions are typically based on sales or performance targets. In this scenario, the employees are not receiving a set or variable commission, but rather a portion of the overall cost savings achieved by the company. Therefore, gain-sharing is the most appropriate type of compensation program being described.