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ch 5 - perf pay choices

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McMaster University
Ying Hong

MT 2 Chapters 5 913 Chapter 5 Performance Pay Choices Individual Performance PayOutputrelated pay 1 Piece rates a pay system under which individuals receive a specified sum of money for ea unit of output they produce or process 10 usedused more in the service sector rather than manuf sector a Advantagesi highly motivational in producing task behave ii Link comp to output iii Reduce need for external control b Disadvantages i Can be applied to limited jobs ii Jobs must be consistent iii Dont motivate max effort 2 Sales commission pay that is generated to the dollar volume of sales or ndtransactions conducted 2 largest used 35 of firms a Advantages i Easy to set and measureii Unlimited opp For sales iii Reduces need for empl control b Disadvantages i Uncertain empl incometurnover ii Low earnings for new empl iii Aggressive sales staffIndividual incentives 13 used 3 Merit pay recognizesencourages continuing good perf by individual empl can be broken up into merit raises base paymerit bonusdont base paymost common form 80 of large firmsMerit Raises an increase to an employees base pay in recognition of good job performance a Advantages i Focuses attention on overall perf ii Provides feedback to empl iii Advancement through pay range b Disadvantages i Expensive ii Ensure diff in pay iii Empl will top outMerit Bonuses a cash payment provided o recognize good empl perf that does not increase base paya Advantages i More flexible bc not permanent
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