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
These include: basis for pay, skill-based pay, pay-for-knowledge programs or differential pay within a specific job, seniority based pay, performance based pay, or pay rates relative to market rates (market rate, above market rate, or below market rate). These strategies carry significant financial costs as well as employee morale, motivation, and productivity costs (DeNisi etal, 2008, pp. 288-290). In order to develop an effective and competitive pay system four basic tools are needed; updated job descriptions, a job evaluation method, pay surveys, and pay structure. Having an updated job description gives key tools in the design of pay systems to identify important characteristics of each job to determine worth to identify, define, and weigh compensable factors. The job evaluation method allows organizations to rate the worth of all jobs using a predetermined system. Pay surveys identify and survey pay rates in relevant labor markets to obtain the fair market value. Lastly, a pay structure establishes pay grades or ranges characterized by a point spread from minimum to maximum for each grade (Cascio, 2006, pp. 424-430).
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.
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).
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
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
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.,
Performance-Related Pay Performance- related pay (PRP) links reward or salary progression to some form of performance rating. This could be part of a performance management or appraisal system, or it could be based on an entirely separate appraisal of performance exclusively for pay purposes (Armstrong 2001). PRP often requires a number of procedures in order to work including: regular target-setting (establishing specific objectives for the individual), annual appraisals of the worker’s performance against pre-set targets and paying each worker a bonus according to the degree to which the targets have been exceeded (Stimpson 2014). PRP has been used for a long time in the private sector, traditionally being used as a more of a reward for
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).
For and against distribution of bonuses based on self-performance basis Advantages and disadvantages of distributing bonuses to individuals are broad, but just basing on statistics won’t reveal the sustainability of performances from employees in the long run. Firstly, organisations such as the food industry tend to reward their individuals PRP, Performance-related Pay, especially to roles such as sales and marketing (Wilkinson 2015). By giving bonuses for individuals unlocks a counterproductive spectrum inside the employee, hence making the workplace to a much more competitive environment. However after further research done by “Journal of Business Research”, it concludes with an opposite result. Distributing bonuses in Groups has a higher chance to product more cooperative, team-work mindset imbedded into their employees compared to individual performances (Wilkinson 2015). Should every organisation change the way of distributing bonuses? No, Performance-related pay plans are essentially ubiquitous, but they come with a price. Organisations (e.g. Motorola) ended up spending millions of dollars in PRP plans, and the outcome viewed like investment is increasing. With the
Several pay and reward strategies can be adopted by organisations. However, each of the strategies involves issues that must be considered as it could affect the employees and the organisation. Therefore, it is vital that each organisation implement and develop certain pay and reward strategies, which are aligned with its own business strategies. This will ensure that perspectives of employees, employers and the costs are all considered in the course of the application of each strategy. The aim of this essay is to explain and evaluate the main pay and reward strategies adopted by organisations as well as the benefits and disadvantages of each. Graded pay, broad-banding graded-pay, labour-market-related pay, performance related pay and total reward which includes financial and non-financial rewards will all be explained in detail and evaluated as well as the benefits and drawbacks of each.
1. Introduction Performance related pay (PRP) is a financial rewarding system which is directly associated with the work accomplishment of employees. It seems that the basis of this process is cash or bonus payment: employees will be awarded cash or bonus when they achieve a greater performance. In the late 1980s and early 1990s, the system of payment by performance was widely applied in both private and public sectors in many organizations in the United Kingdom. Brown and Armstrong (1999) claimed that there are more than 50 percent of the UK companies had implemented this method to motivate their employees during that time.
1. Basic of performance-related pay (PRP) The popular reward system, performance-related pay (PRP) is defined as ¡¥a method of payment where an individual employee receives increases in pay based wholly or partly on the regular and systematic assessment of job performance¡¦ (Lewis, 1998). It is based on the expectancy theory that employees
Introduction to Management Essay (Assessment Task 1) ‘Remuneration is the only real motivator in today’s workplace.’ In this day and age, performance in the workplace is paramount and all businesses strive to improve it. Whether strong or weak, employee performance is determined by a variety of factors. Of these factors, workers ability, the environment they work in and the workers motivation play the most significant roles. But while ability can be trained and environment can be altered, motivation to do and to perform well is often difficult to capture. To address this, many businesses focus on remuneration in the hopes of improving employee satisfaction and motivation and often apply ‘variable performance-related pay’ (better known as