MHR 523 Chapter 12: MHR523 - Chapter 12: Pay-the-Performance and Financial Incentives (Textbook Notes)

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Mhr523 chapter 12: pay-the-performance and financial incentives (textbook notes) Toda(cid:455)"s effo(cid:396)ts to a(cid:272)hie(cid:448)e the o(cid:396)ga(cid:374)izatio(cid:374)"s st(cid:396)ateg(cid:455) th(cid:396)ough (cid:373)oti(cid:448)ated e(cid:373)plo(cid:455)ees i(cid:374)(cid:272)lude fi(cid:454)ed and variable compensation plans: fixed pay represents compensation that is independent of the performance level of the individual, group, or organization. Fixed compensation includes base pay and other forms of relatively consistent compensation (for example, allowances) that satisfy the need for income stability. In contrast, variable pay represents any plan that links pay with productivity, profitability, or some other measure of organizational performance. Employers continue to increase their use of variable pay plans while holding salary increases or fixed compensation at modest levels. Variable pay facilitates management of total compensation by keeping base pay inflation controlled. The fundamental premise of variable pay plans is that top performers must get top pay to secure their commitment to the organization. Thus, accurate performance appraisal or measurable outcomes is a precondition of effective pay-for-performance plans.

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