Chapter 10 Flashcards
Pay that varies with some measure of individual or organizational performance, such as merit pay, lump-sum bonus plans, skill-based pay, incentive plans, variable pay plans, risk sharing, and success sharing.
pay for performance
Incentive compensation that is tied directly to objective measures of
individual production
incentive plan
Pay tied to productivity or some measure that can vary with the firm’s
profitability.
variable pay plan
An incentive plan in which employees’ base wages are set below a specified level
(e.g., 80 percent of the market wage) and incentive earnings are used to raise wages above the bas
compensation at risk
An incentive plan (e.g., profit sharing or gain sharing) in which an employee’s
base wage matches the market wage and variable pay adds on during
successful years. Because base pay is not reduced in bad years, employees
bear little risk
success sharing
A reward that recognizes outstanding past performance. It can be given in
the form of lump-sum payments or as increments to the base pay.
merit pay
Payment of entire increase (typically merit-based) at one time. Because
amount is not factored into base pay, any benefits tied to base pay do not
increase
lump-sum bonus
One-time award for exceptional performance
spot awards
Individual incentive plan in which rate determination is based on units of
production per time period; wages vary directly as a constant function of
production level
straight piecework system
Individual incentive plan that provides a variation on straight
piecework and standard hour plans. Instead of timing an entire task, plan requires the determination of the time required to complete each simple action of a task. Workers receive a wage incentive for completing a task in less than the standard time.
bedeaux plans
Individual incentive plan in which rate determination is based on time period
per unit of production and wages vary directly as a constant function of product level. In this context, the incentive rate in standard hour plans is set
based on completion of a task in some expected time period
standard hour plans
Individual incentive plan that provides for variable incentives as a function of
units of production per time period. It provides two piecework rates that are established for production above and below standard, and these rates are higher and lower than the regular wage incentive level.
taylor plan
Individual incentive plan that provides for variable incentives as a function
of units of production per time period. It works like the Taylor plan, but
three piecework rates are set: (1) high— for production exceeding 100
percent of standard; (2) medium—for production between 83 and 100
percent of standard; and (3) low—for production less than 83 percent of
standard
merrick plan
Individual incentive method that provides for variable incentives as a function
of a standard expressed as time period per unit of production. This plan
derives its name from the shared split between worker and employer of any
savings in direct costs
halsey 50-50 method
Individual incentive plan that provides for variable incentives as a function of a
standard expressed as time period per unit of production. It is similar to the Halsey
plan, but in this plan a worker’s bonus increases as the time required to complete the
task decreases.
rowan plan
Individual incentive plan that provides for variable incentives as a function of
a standard expressed as time period per unit of production. Under this plan, a
standard time for a task is purposely set at a level requiring high effort to
complete.
gantt plan
When we move away from individual incentive systems and start focusing on people
working together
group incentive plans
Incentive plans that are based on some measure of group performance rather than individual performance.
gain sharing plan
Employees share in long-term company successes/failures in the form of…
employee stock ownership plan
A group cost-savings plan designed to lower labor costs without lowering the
level of a firm’s activity. Incentives are derived as the ratio between labor costs
and sales value of production (SVOP).
scanlon plans
includes sales revenue and the value of goods in inventory
value of production
A group cost savings plan in which cost reductions due to employee efforts are shared with the employees. It involves a somewhat more complex formula than a Scanlon plan for determining employee incentive bonuses.
rucker plan
A gain-sharing plan in which a standard is developed to identify the
expected hours required to produce an acceptable level of output. Any
savings arising from production of agreed-upon output in fewer-than-
expected hours are shared by the firm and the worker.
improshare
Inducements offered in advance to influence longer-rate (multiyear)
results. Usually offered to top managers and professionals to get them to
focus on long-term organization objectives
long term incentives
These plans specify that payouts only occur after the company reaches a certain
profit target. Then variable payouts for individual, team, and company
performance are triggered.
self-funding plan
A plan where there is penalty for poor performance rather than reward for good.
reverse incentive plan
