Hrm240 Incentive Plans

Incentive Plan

How important a job is to a said company, has a great impact in determining
the rate of pay for that job. It has been successfully argued that pay based
solely on what a job is perceived to be worth, is not enough to motivate a worker to give his all, most times. Thus many companies find it appropriate
to offer some form of incentive which are linked closely to employee
performance and company??™s objectives. These incentives plans take
three basic forms individual, group or enterprise incentive plans.

Individual Incentive Plans: An individual incentive plan could come in may varieties such as Piecework, Standard Hour Plan, Bonuses, and Merit
pay. Under piecework one of the oldest plans, employee receive a certain
rate for every job completed. There are benefits to that plan where the
wage payments are easy to compute and the company can predict labor cost
very accurately. With piecework and employee can earn up to 35 percent than their base pay, a good motivational aspect. The problem with piecework
is that, the employer may change the rate for a particular job, if the employees are consistently beating the given rate by large amounts. So
employees may not want to put the pedal to the metal at all times so as not to be termed ???rate busters???. Some employees may stay away from jobs they
think has a poor rate.

Bonuses: A bonus as explained in the text book is an incentive payment outside of the normal base pay. It is usually given at the end of the year
and they have the advantage of giving the employee more pay for excellent
performance numbers. Bonus payments which were usually doled out to managers and executive employees are being routinely given out to the
rank and file.

Merit pay: Merit Pay or merit raise links salary increases to how productive an employee is or how well he does hid job. Merit raises seem to do a good job of motivating employees if they think it is because of how they do their
jobs. Merit unlike a bonus can be self defeating because merit raises are
usually given out each year nonetheless, so employees may take it as an
entitlement.

Group Incentive Plans: Because of lower costs and total quality management
many companies implemented a variety of group incentive plans. These plans
let companies enjoy the increased benefits of team work by encouraging
cooperation rather than individualistic achievements. These types of plans
are extremely useful where individual performances are difficult to ascertain.

Team Incentive Plan: The knowledge that teamwork and cooperation is
a very important component for increasing productivity has made team
incentive plans very popular. Team incentive plans serve to reward the
members of a team with an incentive bonus when specific performance
goals are met or surpassed. This type of incentive will create a psychological
environment within the team which should serve to solidify increased
cooperation among team members. There are issues with this type of
incentive plan because as humans we are all different so what may
please this team may not please that team so it is not a one size fit
all mentality. For a particular team to perform at it??™s best the pay
structure may have to be tailor made.

Leave a Reply

Your email address will not be published. Required fields are marked *