Chapter 10 - Pay for Performance: Incentive Rewards Flashcards
Variable pay
tying pay to some measure of individual, group, or organizational performance
Individual Incentive Plans
- Piecework
- Standard hour pay
- Bonuses
- Merit Pay
- Lump Sum Merit Pay
- Non Monetary Awards and Recognition
Straight piecework
an incentive plan under which employees receive a certain rate for each unit produced
Differential price rate
a compensation rate under which employees whose production exceeds the standard amount of output receive a higher rate for all their work than the rate paid to those who do not exceed the standard amount
Standard hour pay
an incentive plan that sets rates based on the completion of a job in predetermined standard time
Bonuses
an incentive payment that is supplemental to the base wage
Spot bonus
an unplanned bonus given for employee effort unrelated to an established performance measure
Merit pay
links an increase in base pay to how successfully an employee performs their job. Issues: managers have no guidance, different views about job success, can lead to pay inequity
Merit guidelines
guidelines for awarding merit raises that are tied to performance objectives
Lump-sum merit pay
program under which employees receive a year end merit payment, which is not added to their base pay
Non-monetary awards and recognition -
provide different benefits to the recipient, recognition can lead to an employees desire to be acknowledged and recognized by their supervisors and colleagues
Sales Incentives
- straight salary plan
- straight comission plan
- combined salary and comission plan
- salary plus bonus plan
Straight salary plan
a compensation plan that permits salespeople to be paid for performing various duties that are not reflected immediately in their sales volume
Straight commission plan -
- a compensation plan based on a percentage of sales
Combined salary and commission plan -
a compensation plan that includes a straight salary and commission
Salary plus bonus plan
- a compensation plan that pays a salary plus a bonus achieved by reaching targeted sales goals
Executive base salaries -
represent between 30 and 40% of total annual compensation
Executive short-term incentive
cash or stock
Executive long-term incentive
stock option, stock appreciation rights, stock purchase, restricted stock, performance stock, performance shares
Executive benefits -
health insurance, life insurance, retirement plans, vacation
Executive prerequisites/perks
special non-monetary rewards given to executives
Team compensation - Team incentive plan
a compensation plan in which all team members receive an incentive bonus payment when production or service standards are met or exceeded
Gainsharing Incentive Plans
Programs under which both employees and the organization share financial gains according to a predetermined formula that reflects improved productivity and profitability
Enterprise Incentive Plans
reward employees on the basis of the success of the organization over an extended period of time, seek to create a culture of ownership by fostering a philosophy of cooperation and teamwork among all organizational members
Common Enterprise Incentive Plans
- profit sharing
- stock options
- employee stock ownership
Profit sharing
Any procedure by which an employer pays, or makes available to all regular employees, in addition to base pay, special current or deferred sums based on the profits of enterprise
Employee Stock Ownership Plans (ESOP)
Stock plans in which an organization contributes shares of its stock to an establishment trust for the purpose of stock purchases by employees
Advantages
- increase employee pride
- incentive to increase productivity and help org grow
Disadvantages
- serve purpose in public over private company since can not dispose of shares on the public market
