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ADMS 2600 - 10.docx

6 Pages

Human Resources Management
Course Code
HRM 2600
Ron Ophir

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Ch. 10 – pay-for-performance: incentive rewards Incentive – rewards after performing job Strategic Reasons for Incentive Plans Variable Pay – tying pay to some measure of individual, group or organizational performance Incentive Pay Programs – establish a performance “threshold” to qualify for incentive payments - Emphasize a shared focus on organization objective - Create shared commitment in that every individual contributes to organizational performance and success Individual - Piecework - Standard hour plan - Bonuses - Merit pay - Lump-sum merit pay - Incentive awards – attendance (i.e. Alice Fazooli’s gift card as Christmas gift) - Sales incentives – money - Incentives for professional employees - Executive compensation Group - Team compensation - Scanlon plan - Improshare Enterprise - Profit sharing - Stock option - Employee stock ownership plans (ESOPs) Successful incentive plans (many new employees would know the incentive plans) - Employees have a desire for an incentive plan – do not have the desire in the beginning - Employees are encouraged to participate - Employees see a clear connection between the incentive payments they receive and their job performance - Employees are committed to meeting the standards - Standards are challenging but achievable - Payout formulas are simple and understandable - Payouts are a separate, distinct part of compensation - For incentives to work – they need to seen as separate then your package pay Individual Incentive Plans Straight Piecework - An incentive plan under which employees receive a certain rate for each unit produced. Differential Piece Rate - A compensation rate under which employees whose production exceeds the standard amount of output receive a higher rate for all of their work than the rate paid to those who do not exceed the standard amount. Standard Hour Plan - An incentive plan that sets pay rates based on the completion of a job in a predetermined “standard time.” - If employees finish the work in less than the expected time, their pay is still based on the standard time for the job multiplied by their hourly rate. Bonuses Bonus – incentive payment that is supplemental to the base wage for cost reduction, quality improvement, or other performance criteria Spot Bonus – unplanned bonus given for employee effort unrelated to an established performance measure Merit Pay Merit pay program (merit raise) – links an increase in base pay to how successfully an employee achieved some objective performance standard Merit Guidelines – guidelines for awarding merit raises that are tied to performance objectives Problems with Merit Raises - Money available for merit increases may be inadequate to satisfactorily raise all employee’s base pay - Managers may have no guidance in how to define and measure performance; there may be vagueness regarding merit award criteria - Employees may not believe that their compensation is tied to effort and performance; they may be unable to differentiate between merit pay and other types of pay increases - The performance appraisals objectives of employees and their managers are often at odds Motivation through Merit Raises - Develop employee confidence and trust in performance appraisal - Establish job-related performance criteria - Separate merit pay from regular pay - Distinguish merit raises from cost-of-living raises Sales Incentives Straight Salary Plan - Compensation plan that permits salespeople to be paid for performing various duties that are not reflected immediately in their sales volume. - Encourages building customer relationships. - Provides compensation during periods of poor sales. - May not provide sufficient motivation for maximizing sales volume. Straight Commission Plan - - Compensation plan based upon a perc
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