The union
members of the staff of a construction company are negotiating a pay rise of 25%
to maintain a minimum wage level in the industry.
The
management of the company offers to grant the increment but to reduce workforce
by 12% to maintain the
current production level. If the union accepts this offer, what is the
company’s percentage increase in wages?
Increase in
wages = 25%
New wage
expenditure will be
(100+25)% = 125%
Decrease in
staff number = 12%
New staff
number will be (100-12)% = 88%
wages expenditure =
no of staff * wage rate.
Wages
expenditure = 125% x 88%
=1.1
This means
that wages expenditure will only increase by
0.1 x 100% = 10%.
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