Unit 2: Financial Rewards and Methods

Question 1

What are the financial rewards?

Answer 1

• Hourly wage rate
• Salary
• Piece-rate
• Commission
• Bonus schemes
• Fringe benefits
• Profit sharing

Question 2

Hourly wage rate

Answer 2

Payment to workers based on a fixed amount of time.

Question 3

Advantage and disadvantage: Hourly wage rate

Answer 3

• More hours, more money (overtime often paid at a higher rate)
• No link to effort or quantity of work produced.

Question 4

Salary

Answer 4

Fixed annual payment to staff not based on hours worked or output.

Question 5

Advantage and disadvantage: Salary

Answer 5

• Consistency is appreciated by employees - best for professional roles not linked to production output. No extra cost to business if longer hours are required.
• No link to quantity or quality of production - just money for showing up.

Question 6

Piece-rate

Answer 6

Payment to workers based on number of units produced.

Question 7

Advantage and disadvantage: Piece-rate

Answer 7

• Paid only for the number of items produced, regardless of time involved.
• Encourages rushed work at a lower quality as output is the priority.

Question 8

Commission

Answer 8

Payment to sales staff based on value of items they sell.

Question 9

Advantage and disadvantage: Commission

Answer 9

• Pay is linked to the value of goods sold, encouraging focus on high sales and/or high value items.
• Only guaranteed basic pay rate, which may not be enough to meet employees needs. High staff turnover creates extra recruitment costs for business.

Question 10

Bonus

Answer 10

An additional reward paid to workers for achieving targets set by managers.

Question 11

Advantage and disadvantage: Bonus

Answer 11

• Payment only made if productivity rises, which also reduces average costs for the business.
• Targets must be realistic or a very discouraging system. Group bonus rewards all equally, regardless of input - potential for conflict.

Question 12

Performance-related pay

Answer 12

A bonus scheme used to reward staff for performing to the required standard.

Question 13

Fringe benefits

Answer 13

Non-cash rewards often used to recruit or retain employees and to recognise the status of certain employees.

Question 14

Advantage and disadvantage: Fringe benefits

Answer 14

• Help recruit or retain staff in a competitive recruitment market.
• Linked to status not performance, so limited impact on productivity.

Question 15

Profit-sharing

Answer 15

An additional payment to workers based on profits of the business.

Question 16

Advantage and disadvantage: Profit-sharing

Answer 16

• Directly linked to performance of the business, rewarding all staff - even lowest level staff feel their indirect contributions have been recognised.
• Reduces dividends to shareholders or amount available for reinvestment in the business to aid further growth.