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Chapter 13

This document discusses recognizing employee contributions with incentive pay. It outlines three broad categories of incentive pay: individual, group, and organizational performance. Effective incentive plans link rewards to measurable goals, give employees resources to meet goals, and are viewed as fair. Incentives can include piecework rates, commissions, profit sharing, and stock options. Communication and participation in decisions are important for incentive plans to work.

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2B MASIGLAT, CRIZEL JOY Y.
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20 views

Chapter 13

This document discusses recognizing employee contributions with incentive pay. It outlines three broad categories of incentive pay: individual, group, and organizational performance. Effective incentive plans link rewards to measurable goals, give employees resources to meet goals, and are viewed as fair. Incentives can include piecework rates, commissions, profit sharing, and stock options. Communication and participation in decisions are important for incentive plans to work.

Uploaded by

2B MASIGLAT, CRIZEL JOY Y.
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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CHAPTER 13

RECOGNIZING EMPLOYEE
CONTRIBUTIONS WITH
PAY

REGIE YEE
Incentive Pay

Forms of pay linked to an


employee’s performance
as an individual, group
member, or organization
member.
Effective Incentive Pay
1. Performance measures are linked
to the organization goals
2. Employees believe they can meet
performance standards
3. The organization gives employees
the resources they need to meet
their goals
4. Employees value the rewards given
5. Employees believe the reward system
is fair
6. The pay plan takes into account that
employees may ignore any goals that
are not rewarded..
3 BROAD CATEGORIES OF
INCENTIVE PAY

1. Individual
2. Group
3. Organizational
performance
PAY FOR INDIVIDUAL
Organizations may reward individual
performance with a variety of incentive:

1. Piecework rates - A wage base on the


amount workers produce.
2. Standard hour plans - an incentive
plan that pays workers extra for work
done in less than a present standard
time.
3. Merit pay - a system of linking pay
increases to ratings on performance
appraisal
4. Individual bonuses - set up to reward
employees individually in addition to fixed
salary.
5. Sales Commissions - employees can
receive commission payments when they
make a sale or accomplish a certain goals.
PAY FOR GROUP
PERFORMANCE

1. Gainsharing - group incentive program


that measures improvements in
productivity and effectiveness and
distribute a portion of each gain to
employees
Gainsharing organizational Conditions:

- Management Commitment
- Needs for change or strong commitment to
continuous improvement
- Management acceptance and encouragement
of employee input
- High levels of cooperation and interaction
- Employment security
- Information sharing on productivity and coast
- Goal Setting
- Commitment of all involved parties to the
process of change and improvement
- performance standard and calculation
that employees understand and consider
fair and that is closely related to
managerial objectives
- Employees who value working in groups
Scanlon Plan - a gainsharing
program in which employees
receive a bonus if the ratio of
labor cost to the sales value of
production is below a set
standard.
2. Bonuses - is a payment or extra amount
of money that is given to an employee
above and beyond their normal salary. It
may given as one time payment or as
percentage of the employee’s salary on
annual basis
3. Team Awards - one form of
recognition often offered by
organizations is a team awards that
usually given to a group of
employees working together as a
unit to accomplish specific business
objectives.
PAY FOR ORGANIZATIONAL PERFORMANCE

1. Profit Sharing - Incentive pay in which


payments are a percentage of
organization profit and do not become
part of that employees base salary.
2. Stocks options - an agreement between an
employer and employee that allows an
employee to buy a fixed number of shares of
company stock at a specific price, usually within
a set period of time.

3. Stock Ownership ( ESOP ) - an agreement in


which the organization distributes shares of
stocks to all its employees by placing it in a trust.
BALANCE SCORE CARD

- A combination of performance
measures directed toward the
company’s long and short term goals
and used as the basis for awarding
incentive pay.
PROCESSES THAT MAKE INCENTIVE
WORK

1. Participation in Decisions - is the


opportunity for an employee to provide
input into the decision making process
related to work.
2. Communication is a crucial part of
making sure that people understand
and receive incentive for their work and
successful communication also helps
ensure that the incentive plan meets the
needs and expectations of all parties.
INCENTIVE PAY FOR EXECUTIVES

To encourage executives to develop a


commitment to the organizations long
term success, executives
compensations often combines short
term and long term incentives.
- Short Term incentive include bonuses
based on the years profits, return on
investment, or others measures related to
the organizations goals.

- Long Term incentive include stock options


and stocks purchase plans.
PERFORMANCE MEASURES FOR
EXECUTIVE
- We can measure the performance thru
metrics such as the clarity and consistency
of your vision and strategy statement, the
alignment and engagement of your team
and stakeholders with your vision and
strategy. ( see attached example )
1. KPIs can include financial, and operational
metrics as well as relevant sales and marketing
data.

2. WPIs ( work performance indicators ) are mix,


capacity, velocity, quality and engagement.

3. Balance Score Card performance metric use


to identify and improve internal functions and
their resulting external outcomes
ETHICAL ISSUES

- Incentive needs to be seen as fair by


recipients and others in the organization,
and directly related to the company’s core
values. Incentive also need to be easily
understood by employees and incentive
should be proportionate in size to the
achievements being recognised.
Thank you!

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