Hrm 531 Week 4 Individual Incentive Pay

How this system works is employees are paid a standardized salary which entitles extra benefits and or bonuses on the side. The main focus of benefits is to focus on stability, health, wellness, and lifestyle. These benefits are there to make the employees life’s more comfortable and enjoyable, not necessarily cash incentives. However, there are cash incentives offered as-well. Incentives are the drivers of employee performance, as short term incentives are cash bonus based on performance, or rather long term incentives being stocks in the company you work for. How we will implement this is through transferring your average paycheck to a salary. Meaning a 40-hour work week at 11.40 is $456 a week before deductions. The math equates to a base salary of 21,888. From there employees will be able to receive benefits or incentives based upon work efficiency. We will have assigned goals to achieve by set deadlines to determine employee efficiency. All employees in this system are inclined to do more work at a more efficient rate since they are now being rewarded further than their salary or prior their hourly wage. This business function being salary based with incentives and bonuses will take a greater toll on management. Management will be deemed in charge of bonuses and benefits. It will be their responsibility to determine whether said employee deserves certain benefits or certain incentives based on their work efficiency. As management takes on a heavier role in the company it is better for the greater good and is a sacrifice they will have to be willing to

Each employee will be paid based on their capabilities rather than on the characteristics of their job. This will provide an incentive for employees to develop their skills and move into other roles.

Pay for performance systems have further been proven to have two advantages for organizations: attracting more high-quality employees and motivating employees to exert more effort at their jobs. (Gordon, Kaswin) This paper will show the positive benefits of performance pay as

Three advantages of offering a piece-rate pay plan for Metropolitan Furniture is employee motivation, cost effectiveness, and quantity produced. Paying employees on a piece rate plan allows the employee to determine how hard they will work on a daily basis. If the employee know that their pay will be directly affected by how hard they work then they are more likely to always give a hundred and ten percent. Niemesh explains “others value a high income over leisure time and are willing to work more hours to achieve it (Niemesh, 2006). “More than three-quarters of employers (76%) say pay helps to motivate staff, according to the exclusive Employee Benefits/Lorica 100 Club research, published in June 2014 (Bettelley, 2014)”. The incentive of making

O’Neil (1998) suggests six minimal criteria for the design of a performance based pay system. The first of these criteria is that the reward system should be self-funding, that is, the performance increases should as a minimum offset the cost of the rewards provided. The second criterion is that the distribution of the rewards must be consistent, fair and justifiable. In addition reward plans must be transparent and clearly communicated. The third criterion

This would not only be advantageous for the employer but also the employee since it would result in higher wages. Due to this, the worker’s level of motivation and drive to do better would escalate leading to overall productivity of the organization (Salimath and Jones, 2011, p.88).

A survey report for publicly traded companies administered by WorldatWork found that 99 percent of the 350 companies had some form of short term incentive pay system in place (Miller, 2014). Short term incentive pay compensates employees for achieving short term business goals that are typically a year or less. These goals can depend on factors such as the type of business, its specific strategy, and market conditions to name a few. Metrics for short term incentive plans can include financial metrics like revenue growth and profit maximization as well as non-financial metrics specific to the company, such as safety or quality assurance, customer satisfaction, and more (Fotsch & Case, 2015). Short term incentives normally reflect a percentage of the employee’s salary or wage; there are threshold, target, and maximum levels that can be achieved providing different levels of compensation based on outcome. Short term incentive pay can involve individual employee performance, or group & company wide performance. Some examples of short term incentive pay include merit pay, bonus pay, and profit/gain sharing. Understanding the specific processes and benefits of these types of short term incentives allows employers to choose which plan saves the company the most money in terms of productivity and reduction of turnover.

It can be said that performance related pay has been motivating employees who works in companies/organisations from small to big, hence the distribution of bonuses definitely need to be taken into account. A bonus is an extra compensation given to an employee above his/her normal wage. A bonus also could be used as a reward for accomplishing specific goals set by the company, or for devotion to the company. However Performance related pay methods has broaden up into different topics, Individual-performance pay and group-performance pay being the most common methods. This essay will therefore discuss not only just identifying both distribution methods, but its relationship between one and another. Also, preferred ideals which

The second objective of keeping employees by rewarding them by coming up with a performance based on the pay scheme translates to the employees being motivated to put extra efforts in their duties. Achieving an extra payment on top of their payment is the key aim of this strategy. The scheme of payment was made up of the base payment, merit pay and bonuses. Each of the workers in the organization gets a certain base payment awhile being in a position to earn

Incentives are paid in addition to wages and salaries and are also called ‘payments by results’. Incentives depend upon productivity, sales, profit, or cost reduction efforts. There are: (a) Individual incentive schemes, and (b) Group incentive programmes. Individual incentives are applicable to specific employee performance. Where a given task demands group efforts for completion, incentives are paid to the group as a whole. The amount is later divided among group members on an equitable basis.

First, it gives the arms and legs a stake in the companies fortune. If everyone works as a team and production is up you get more money. Are you more likely to work harder if you know it will make a difference in your pay? GM is willing to put money on it being the case. Second, GM is trying assist in creating more jobs for the people of America. They can do this by paying less hourly with performance based incentives plus possible bonuses. This has the potential to save the company money on under performing personnel. “Manufacturers in general are primed for this compensation system because they can use very specific performance metrics: producing more units in less time for less money spells positive business results”("Why automakers are adopting pay for

It is important for the HR department to be proficient in understanding the employee’s education, experiences and skills as the base pay is considered for positions. Base pay compensation is what the employees can expect to receive for the work provided for to the company; which could hourly rate of pay, salary basis, monthly or yearly. However; major incentives are also vital when encouraging employees become necessary. Employee incentives describe a system of rewarding success and effort in the workplace by allowing employees to earn prizes or recognition. The company will also offer additional base incentives for example, after working for the company ninety days healthcare benefits, and five years, stock options, profit sharing, an employee stock ownership plan (ESOP) will be implemented.,

The primary determinant of rate of pay is the kind of job an employee performs. Different job require different kinds and level of skills and these skills have varying levels of value to the organization. Typically, the higher the skill levels the higher the pay. Because, employees’ levels of skills tend to affect work efficiency and effectiveness. Many organizations have implemented skill-based pay systems which reward employees for their job skills and competencies they can demonstrate. In skill based pay system, an employee’s job title doesn’t define his or her pay category, skills do. The more skills a worker has, the higher the wage. Skill-based pay systems seems to mean nicely with the changing nature of jobs and the new world of work, Henderson (2004).

Secondly, it is an effective method of distinguishing good employees from the bad. By rewarding them accordingly, it sends the ¡¥right messages¡¦ to both types of workers, telling the good ones that the organisation thinks they are valuable and wants to keep them, and informing the bad ones that the organisation are happy to lose them. By sending the ¡¥right messages¡¦, it has a positive effect on the motivation of good employees, and forces the bad ones leave. Both effects are good for the organisation. (Kessler & Purcell, 1992)

Incentive compensation is a form of compensation that is based solely on the performance of an employee. Payment is usually contingent upon performance of the company, the employee's department, the employee, or combinations thereof, hence the term “incentive”. What this means is the employee has an incentive to perform at a high level, and be rewarded for the effort. In most cases, incentive compensation plans are designed in such a way as to attract and retain key employees, identify with shareholders, and align interests of employees and the company. For example, in the United States, executives and employees are given incentive bonuses based on multiple performance measures. A typical plan for a executive employee can include: a base salary, annual bonus plan, stock options, and additional compensation such as long term incentive plans, retirement plans and restricted stock. Compensation plans often follow the net income and stock prices of the company.