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ovid-19 has caused a human resources problem for your firm. Your employees are harder to monitor remotely and are less productive. The issue is whether
ovid-19 has caused a human resources problem for your firm. Your employees are harder to monitor remotely and are less productive. The issue is whether you should respond to this by introducing incentive pay. Before Covid-19, your workers were in the office and were producing average revenues of $80,000 a year. However, some workers were better than others, and revenues were uniformly distributed between $30,000 and $130,000 a year. You are currently paying all workers $55,000 a year, which is their market wage. The problem is that with workers at home, productivity has reduced for all workers by 10%. You cannot change salaries to your workers, but you could transition to offering incentive pay. You are considering offering a base salary of $40,000 per annum, plus 20% of revenue. By offering incentive pay, productivity increases from that reduced level for all workers by 20% (from that lower base). Assume that if any workers quit, you can't replace them (so we are doing a short run calculation here). Sho
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