financial rewards Flashcards
What are the most common payment systems
commission bonus Performance related pay profit sharing Piece rate wages salary Fringe benefits share options
(All are financial motivators)
What is commission (advantages and disadvantages)
Commission: a payment to a sales person for each sale made.
Advantages:
- Targets are easy to calculate as you know what you get as you sell
Disadvantages:
- Once personal targets are reached people may not try
What is bonus (advantages and disadvantages)
Bonus: A payment made in addition to the agreed wage or salary, normally for high achievement.
Advantages:
- May make employees work harder
Disadvantages:
- Different bonus rates between employees can cause resentment.
What is performance related pay (advantages and disadvantages)
Performance-related pay: A bonus scheme set by an employer providing targets for employees to work towards.
Advantages:
- Give targets to staff in line with the company goals
Disadvantages:
- Some workers may become inappropriate (to get on the managers ‘good’ side)
What is profit sharing (advantages and disadvantages)
Profit sharing: Profits of the business distributed evenly as a proportion of basic salary.
Advantages:
- Everyone gets a share of the profit – encourages them to do well for the business.
Disadvantages:
- If business is unprofitable the staff will be aware
What is piece rate (advantages and disadvantages)
Piece rate: A payment to a worker for each unit produced.
Advantages:
- Encourages greater effort and faster working, they must produce or they will not get paid.
Disadvantages:
- May lead to low quality output
What is wages (advantages and disadvantages)
Wages: Where staff are paid each week for the amount of hours worked.
Advantages:
- Ensures that people turn up for work, they are paid for their hours
Disadvantages:
- Not directly linked to the output achieved or effort
What is salary (advantages and disadvantages)
Salary: fixed level of income that is usually paid monthly.
Advantages:
- People are secure when working as they know they will be paid
Disadvantages:
- Not related to effort/ productivity no desire to so additional work.
What is fringe benefits (advantages and disadvantages)
Fringe Benefits: Non-cash rewards given to staff separate to pay, by an employer.
Advantages:
- Money spent can also benefit the Company in increasing performance (e.g healthcare)
Disadvantages:
- May have Tax implications
What is share options (advantages and disadvantages)
Share options: Employee is offered shares in the company
Advantages:
- Staff feel like they are valued in the company/part of the company.
Disadvantages:
- Worker share-ownership can increase the number of shares, decreasing their value.
