Which of the following statements is TRUE of back-loaded contracts?
A) A back-loaded contract provides wage increments according to the changes in the consumer price index (CPI).
B) A company enters into a back-loaded contract only when it is facing a financial crisis.
C) A back-loaded contract provides a lower wage adjustment in the first year with higher increases in later years of a multiyear contract.
D) A company provides a back-loaded contract only when it cannot provide cost of living adjustments every year.

Question

Quizplus · Accepted Answer

A back-loaded contract provides a lower wage adjustment in the first year with higher increases in later years of a multiyear contract. This allows a company to manage its cash flow better and allocate funds to more critical areas during the early years. It is not necessarily tied to changes in CPI or a financial crisis and can be a strategic decision made by the company.

Which of the Following Statements Is TRUE of Back-Loaded Contracts