Compensation and Rewards TEST Flashcards
Piece Rates
An employee receives a specified sum of money for each unit of output produced or processed.
Straight piece rate
The same specified sum of money is paid for each piece produced regardless of how many are produced.
Differential piece rate
A lower sum of money per piece is paid if employee production does not meet standard, higher sum is paid if standard is met.
Advantages of piece rate
- motivational in producing task behaviour
- reduce need for supervision
- link compensation to output
- provide info about production standard
Disadvantages of piece rate
- limited application
- jobs where tasks are constantly changing
- not accurate
- do not motivate max effort
- create conflict
- lower potential quality output
- expensive if needed machinery
- loss of safety focus
Sales commissions
Pay geared to dollar volume of sales or transactions (percentage of gross sales)
Straight commission
Pay geared toward volume of sales/transactions without base pay.
Advantages of commission
- easy to set and measure
- employee output is distinct
- no limit to sales employee can make
- reduce need for control mechanisms
- serve as feedback
- reduce employer risk
- increases sales
Disadvantages of commission
- income is variable
- need to attract top performers
- recessions may bring on drops in income at no fault to salesperson
- little initial income
- resist work not related to sales
- cause aggressive sales approaches
- competition
- credit for sale may be given away
Maintenance selling
selling established products to existing customers
Conversion selling
selling established products to new customers
Leverage selling
selling new products to existing customers
New market selling
selling new products to new customers
Merit pay
used to recognize and encourage continuing good performance by individual employees. Always used in combination with base pay and is an overall indicator of performance.
Merit raises
a permanent increase to an employee’s base pay in recognition of good performance.
Merit bonuses
A cash payment provided to recognize good performance that does not increase base pay.
Special purpose incentives
An incentive designed to motivate a specific type of employee behaviour.
Suggestion system
An incentive plan through which employees receive cash bonuses for submitting money-saving suggestions.
Gain sharing plans
Group performance pay plan that shares cost savings or productivity gains generated by a work group with all members of that group.
Advantages of gain sharing
- self funding
- generate productivity
- positive work group norms
- increased commitment
- awareness of the business and improved communication
- can be applied to non-for-profit
Disadvantages of gain sharing
- extra costs
- not amendable
- personal focus on maximizing bonuses
- provides additional matters to argue about
- free riding
- not often effective
Goal-sharing plan
Group performance pay plan in which a work group receives a bonus when it meets pre specified performance goals.
Advantages of goal-sharing
- simple and flexible
- less costly
- amendable
- motivational
- positive group norms
Disadvantages of goal-sharing
- arbitrary
- no established basis for judging value
- difficult to set goals
- situational factors affect goals
- dissatisfaction when goal isn’t reached
- conflict
- high discontinuation