Three Major Types Of Individual Level Pay For Performance Plans Case Study

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Reading Assignment 1

1) The three major types of individual level pay for performance plans are traditional incentive systems, variable pay configurations, and merit pay plans. Traditional incentive systems include plans called piece-rate plans that provide payment for each unit produced or each service provided. It also includes the well-known traditional incentive plan called sales commission, that’s offers a percentage of sales dollars or gross profit margin.
The second major type of individual level pay for performance plan called variable pay provides performance-related compensation that does not permanently increase base pay and requires the compensation to be re-earned to be acquired again. Although both piece-rate and sales commission
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The plans could start positive relationships between employee perceptions of pay for performance and satisfaction with pay, which of course would increase retention. Several studies suggest that individuals are more attracted to organizations with pay systems that rewards the individual employee for his or her own merits rather than group efforts. With the increased attractiveness of the company the quality of potential employees would potentially increase.
4) To realize the effects of their efforts for the use of pay-for-performance plans a company must adhere to several conditions. The most important condition is defining performance. They must develop a business plan based on what drives the business and the set goals that determine what exactly what the employees will be rewarded for and at what level will compensation will be giving.
The company must also effectively communicate how the rewards program works, explaining exactly what is needed to trigger a payout. Without a proper explanation of the program employees might get discouraged and select not to fully participate. The program must also be set at the same knowledge level of the employees. The program will fail if the employee does not have the needed skills to receive the
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Achievement in the program must never conflict with their values. If an employee’s feels that in order to achieve the program goals, they must go against their values, they may choose to fail on purpose.
Although, most employers assume monetary rewards are they most effective motivator, it is unwise to ignore non-monetary rewards. Non-monetary rewards like public recognition and the choice to work on selected projects that actually captures the employee’s interest.
In conjunction with monetary rewards and use of intrinsic motivation can enhance the effects of the pay for performance plans by raising the personal attachment to the project matching employees to tasks based on skills and interest.
5) There are few exceptions to be followed in respect to the pay for performance

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