Class Notes (837,023)
Canada (510,044)
Human Resources (1,155)
MHR 749 (40)
Lecture 11

MHR 749 Lecture 11: CHAPTER 11

3 Pages
Unlock Document

Human Resources
MHR 749
Margaret Yap

CHAPTER 11 Pay for performance plans are popular because of competition from foreign competitors, fast-paced business environment and it’s a signal away from entitlements - They have a proven track record of motivating better performance and helping cut costs Why variable pay? For employer: - Motivate better employee performance and can attract/motivate employees - Manage total compensation costs - Align business and individual goals For employees: Performance is rewarded accordingly Short-term performance plans: - Merit pay: increase in base pay related to past performance , subjective and expensive and doesn’t improve employee and corporate performance - Lump sum bonuses: end-of-year bonuses that do not build into base pay o Viewed as less of an entitlement than merit pay, less expensive than merit pay over long run - Individual spot awards: awarding employees for exceptional performance on a special project - Individual incentive payment plan: a pay for some objective, pre- established level of performance. Disadvantage is that it creates a level of mistrust between managers and workers o Advantages ▪ Substantial contribution that raises productivity, lowers production costs and increases earnings of workers ▪ Less direct supervision is required to maintain reasonable levels of output than under payment by time ▪ Helps costing and budgetary control o Disadvantages: ▪ Greater conflict may emerge between employees seeking to maximize output and managers concerned about deteriorating quality levels ▪ Attempts to introduce new technology may be resisted by employees concerned about the impact on production standards ▪ Reduced willingness of employees to suggest new production methods ▪ Increased complaints that equipment is poorly maintained ▪ Increased turnover among new employees discouraged by the unwillingness of experienced workers to cooperate in on-the- job training ▪ Elevated levels of mistrust between workers and management Straight piecework plan: wages are determined by how much products you make Standard hour plan: wages are predetermined, based on hours it takes to complete task multiplied by rate Types of GIP: Gainsharing, Profit Sharing, Earnings at risk Group incentive plans: incentive pay for meeting or exceeding team performance standards. Historically, financial measures have been the most widely used for these plans. They do however suffer from the “free-rider” problem where one person of the group does not carry their share of the work. This is a huge problem with group compensation systems - It is also difficult to set equitable targets for all teams Gainsharing plans: GIP where employees share in cost savings. This does also help increase employees knowledge of business Using a historical standard to calculate whether employees will receive an incentive payout is a key element in designing a gain-sharing plan Differe
More Less

Related notes for MHR 749

Log In


Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.