Chapter 12

Question 1

Fixed pay

Answer 1

Compensation that is independent of the performance level of the individual, group or organization

Question 2

Variable Pay

Answer 2

Any plan that ties pay to productivity or profitability

Question 3

Piecework

Answer 3

A system of pay based on the number of items processed by each individual worker in a unit of time, such as items per hour or per day

Question 4

Straight piecework plan

Answer 4

A set payment for each piece produced or processed in a factory or shop

Question 5

Guaranteed Piecework plan

Answer 5

The minimum hourly wage plus an incentive for each piece produced above a set number of pieceds per hour

Question 6

Differential Piece-rate plan

Answer 6

A plan by which a worker is paid a basic hourly rate plus an extra percentage of his or her base rate for production exceeding the standard per hour or per day. Similar to piecework payment but is based on a percentage premium

Question 7

What are some disadvantages of piecework incentive plans

Answer 7

• somewhat unsavoury reputation among many employees based on some employers raising production standars
• ## have to revise piecework plan if adjusting wages

Question 8

Team or group incentive plan

Answer 8

A plan in which a production standard is set for a specific work group and its members are paid incentives if the group exceeds the production standard

Question 9

How is eligibility for short term incentives decided?

Answer 9

one of three ways

1. Key position - job by job review
2. Salary level cut off point - all employees making over salary level are entitled to short term benefits
3. Salary grade - refinement of the salary cut off approach and assumes that all employees at a certain grade or above should be eligible for the short term incentive program

Question 10

Capital Accumulation programs

Answer 10

Long-Term incentives most often reserved for senior executives

Question 11

Stock option

Answer 11

The right to purchase a stated number of a company stock at today’s price at sometime in the future

Question 12

Profit-Sharing plan

Answer 12

A plan whereby most or all employees share in the company’s profits

Question 13

Employee share purchases/stock ownership plan

Answer 13

A plan whereby a trust is established to hold shares of company stock purchased for or issued to employees. The trust distributes the stock to employees on retirement, seperation from service or as otherwise prescribed by the plan

Question 14

Gainsharing plan

Answer 14

An incentive plan that engages employees in a common effort to achieve productivity objectives and share the gains

Question 15

When are the 5 case points about incentives?

Answer 15

1. Performance pay cannot replace good management
2. Firms get what they pay for
3. Pay is not a motivator
4. Rewards repture relationships
5. Rewards may undermine responsiveness