...Pay systems Introduction Pay is a key factor affecting relationships at work. The level and distribution of pay and benefits can have a considerable effect on the efficiency of any organisation, and on the morale and productivity of the workforce. It is therefore vital that organisations develop pay systems that are appropriate for them, that provide value for money, and that reward workers fairly for the work they perform. Pay systems are methods of rewarding people for their contribution to the organisation. Ideally, systems should be clear and simple to follow so that workers can easily know how they are affected. In considering rewards it should be borne in mind that pay and financial benefits are not the only motivator for worker performance. Other important motivators for individuals may include job security, the intrinsic satisfaction in the job itself, recognition that they are doing their job well, and suitable training to enable them to develop potential. What are pay systems? Key Points: Pay systems provide the foundation for financial reward systems There are basic rate systems, where the worker receives a fixed rate per hour/week/month with no additional payment There are systems related in whole or part to individual or group performance or profit There are systems based in part on the worker gaining and using additional skills or competencies Pay systems provide the bases on which an organisation rewards workers for their individual contribution, skill and...
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...Historically the view was that salaries were what attracted a person to an organisation, benefits kept them there, while bonus and incentive schemes motivated them. Reward was regarded as consisting of three distinctive parts: Remuneration - covering such aspects as job evaluation, salary structures and incentive schemes. Benefits - which tend to be offered to all employees irrespective of their grade, such as paid leave, employee assistance programmes or Christmas parties. Perquisites - which are benefits that tend to provided to discrete categories of employees, such as a company car/car allowance, private healthcare or concierge service. 2 Reward Today More recently, this divide between which parts of reward are best suited for attraction and recruitment, retention and motivation has broken down. Modern research shows that individuals are attracted, retained and engaged by a whole range of financial and non-financial rewards and that these can change over time depending on their personal circumstances. The financial elements of a package are not considered particularly important by individuals in some situations. For instance, people at the beginning of their career may be more interested in getting access to training and career development. People at the end of their career are more concerned with job satisfaction rathe than pay necessarily; those with childcare responsibilities are more concerned about work life balance policies and flexibility. It is crucial when...
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...Pay enough, don’t pay too much or don’t pay at all? An empirical study of the non-monotonic impact of incentives on job satisfaction Pouliakas, K1 Centre for European Labour Market Research (CELMR), University of Aberdeen Business School, Scotland Keywords: Incentives, intensity, job satisfaction, non-monotonic JEL- Code: C23, J28, J33. Abstract This paper attempts to test the non-monotonic effect of monetary incentives on job satisfaction. Specifically, 8 waves (1998-2005) of the British Household Panel Survey (BHPS) are used to investigate the ceteris paribus association between the intensity of bonus/profit-sharing payments and the utility derived from work. After controlling for individual heterogeneity biases, it is shown that relatively ‘small’ bonuses exert a significant negative effect on worker satisfaction. In contrast, job utility is found to rise only in response to ‘large’ bonus payments, primarily in skilled, non-unionized private sector jobs. The empirical evidence of the paper is therefore consistent with a ‘V-effect’ of incentives, suggesting that employers wishing to motivate their staff should indeed “pay enough or don’t pay at all”. 1 Research Fellow, Address: CELMR, University of Aberdeen Business School, Edward Wright Building, Dunbar Street, Old Aberdeen AB24 3QY, UK; Tel: ++44 01224 272172; e-mail: k.pouliakas@abdn.ac.uk. 1. Introduction The principal-agent model, with its convincing illustration of the trade-off that arises between risk...
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...to motivate labor. Companies are learning that they can no longer cling only to individual incentive pay plans. Just as an artist relies on a whole pallet of colors, the future success of incentives is having and using many different pay plans, each tailored to achieve a desired effect. There are many incentive plans for you to consider. Some even de-emphasize money and appeal to employees higher needs. I even discussed one plan, Merit Pay, in a previous Industry Advisor article. Now I will compare individual to group incentives – in certain key areas and provide highlights of the differences. Be aware that I am an advocate of group incentives. PERFORMANCE Individual Incentives Since each direct labor employee – who is motivated by money – is theoretically in "business for him/her self" there should be a strong inducement for high performance. A piece work operator could care less about a fellow operator’s performance. The relative productivity of each individual can be readily determined. Likewise, actual time spent on specific jobs is also easily determined and standards set. Individual incentives work best on singularity of product and long runs. They lose their effectiveness and are usually costly to maintain in a high style, fast in-process turnover environment. Group Incentives Groups attempt to empower people and tend to have a leveling effect on labor’s performance. Rather than restrict production, the group pressures the superior producer to handle more job assignments...
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...literature: premium incentives. While premium incentives, just like xed-prize tournaments, are based on relative performance, the prize to be awarded is not set in advance but is a function of the rm's success: the prize is high if the rm is successful and low if it is not successful. Relying on a simple model of cost minimization, we are able to show that premium incentives outperform xed-prize tournaments as well as piece rates. Our theoretical result is qualitatively con rmed by a controlled laboratory experiment and has important practical implications for the design of organizational incentive systems. JEL Classi cation: C72, C91, J33 Keywords: Tournaments, Incentives, Economic experiments Max Planck Institute for Economics, Kahlaische Strasse 10, 07745 Jena, Germany. yEberhard Karls Universitat Tubingen, Faculty of Economics and Business Administration, Nauklerstrasse 47, 72074 Tubingen, Germany. zThe Hebrew University, Center for the Study of Rationality, Giv'at Ram, Jerusalem 91904, Israel. 1 1 Introduction and Motivation As documented by Orrison et al. (2004) or Bothner et al. (2007), tournament incentives have developed into an increasingly important component of compensation systems; they are `pervasive in organizations' (Casas-Arce and Martnez-Jerez, 2009). Unlike piece rates, which are awarded according to absolute performance, tournament incentives are awarded...
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...Pay for Performance: It’s Effect on Employee Motivation Name Course Title Professor’s Name Date Pay for Performance: The Effect on Employee Motivation Managers are continuously looking for ways to motivate their employees. Many methods have been tried and many methods have failed. Consequentially, human resource professionals and managers continue to work to develop effective performance management systems which serve to motivate employees, with an end result of improved morale and increased productivity. Designing an effective performance management program, combined with the appropriate compensation methods, can serve as tools to inspire and motivate employees to improve and/or maintain the highest levels of performance. Compensation administrators are encouraging the use of pay-for-performance plans to meet this goal. Pay-for-performance plans motivate employees to be productive and perform at higher levels by linking their pay directly to their pay. The idea behind pay-for-performance plans is that money serves to motivate employees to perform. Maslow’s theory of motivation “suggests that employee needs are arranged in priority order such that lower-order needs must be satisfied before higher-order needs become motivating” (Leonard, 2010, p. 121) with the lowest level of needs being basic biological needs and the highest level being self-fulfillment. When an individual is on the lower levels of the spectrum and trying to fulfill his/her basic...
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...labor productivity. Its innovative management style and incentive based pay system has been at the core of Lincoln’s strategy. The company’s success relied heavily on the culture in which it created. The founder was focused on erasing any heirarchical distinctions and creating an environment that fostered production and innovation through trust, openness and shared control. To gain the employees trust, Lincoln sought to gurantee the workers employment by instituting policy prohibiting lay-offs. They did this by producing invnetory and if demand didn’t pick-up would scale back employee hours. This was not only an efficient model, but reduced overhead costs otherwise endured by competitors. Lincoln was not faced with the costs associated to recruiting and the retraining of its workers. The company fostered creativity with its open-door policy by allowing its experienced production workers to openly share complaints and ideas for improvement with management. An Advisory Board elected employee representatives to share feedback, which was later posted on bulletin boards throughout the facility. Many of the company’s workers are hired straight from high school and trained to perform in many roles. To further gain loyalty from its workforce, many of Lincoln’s executives were employees that were promoted from within. This created a culture in Lincoln that was unmatched by its competitors. The company’s pay system incentivized its production workers to work not only harder, but...
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...Four Incentive Methods Comparison Introduction To motivate staff contribute more to the company, companies use their own incentive methods. British firms prefer share scheme, merit pay is often used in French companies (David & Richard, 2010) while In China, a large amount of corporations perform EVA-based scheme. (Yongjian, Lei &Donghua, 2015) For executives, formula-based arrangement is often used. (Robert, David & Richard, 1995). This leads to the question of what’s the advantage and disadvantage of the four payments. In the literature, I only discuss about individual incentives. Knowledge Gap The share scheme is extended rapidly these years. The incentive helps the employees perform as the shareholders do. When the company’s retained earnings increases, they are also benefited. Another advantage of this incentive is tax-avoiding. Merit pay is a traditional but effective motivating method. How much one earns depends on his performance. However, it is also difficult to determine what kind of expectation should be rewarded and how to reward. If the standard is not fair enough, it might lead to contradiction between the employees and executives. (David & Richard, 2010) EVA-based mechanism grantees the profit of the company. EVA defines company profit as the part of the return exceeds the capital cost. Under the mechanism, the more profit the company earns, the more incentive the staff will have. Also, when the company’s revenue is negative, the incentive...
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...Individual employee incentive and recognition programs Incentive payments for hourly employees may be determined by the number of units produced, by the achievement of specific performance goals, or by productivity improvements in the organization as a whole. In the majority of incentive plans, incentive payments serve to supplement the employee's basic wage. Piecework One of the oldest incentive plans is based on piecework. Under straight piecework, employees receive a certain rate for each unit produced. Their compensation is determined by the number of units they produce during a pay period. At Steelcase, an office furniture maker, employees can earn more than their base pay, often as much as 35 percent more, through piecework for each slab of metal they cut or chair they upholster. Under a differential piece rate, employees whose production exceeds the standard output receive a higher rate for all of their work than the rate paid to those who do not exceed the standard. Employers will include piecework in their compensation strategy for several reasons. The wage payment for each employee is simple to compute, and the plan permits an organization to predict its labor costs with considerable accuracy, since these costs are the same for each unit of output. The piecework system is more likely to succeed when units of output can be measured readily, when the quality of the product is less critical, when the job is fairly standardized, and when a constant flow of...
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...In order to help manager solve this problem, and improve productivity, we advise them to consider following advices. First, Company may give high performance temporary employee more incentives. It includes challenge position, bonus and chances to be long-term employee. Some temporary employees are very hard-working and they can get good performance. Because they know they are just temporary employee, if they haven’t got an outstanding performance, they may lose this job easily. So, they worked very hard, even better than some long-term employees. If company cannot recognize this condition, and not give them suitable incentive in time, temporary employee may lose their passion and think there is no need to work hard anymore. Then the productivity of them will lose and company also loses chances to got good employee. In other words, If company can give high performance temporary employee suitable incentives, they will maintain a good state of performance and give company more return. Then both parties can benefit from it. Second, Company should treat regular employee and temporary employee equally. That means Distribution of tasks and quantity of work should be based on the ability and time and other reasonable consition of all employees, rather than just the nature of employee’s job. So, temporary employee will feel more fair and would like to work harder instead of complain. Besides, Company may also provide chances to temporary employee to attend some company activities...
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... Based on this payment system the slope is positive for low performance, but there is no gain for superior performance. The employees have no incentive to go beyond the required minimum. This pay system was a disadvantage to the workers if they went beyond the expected the firm would have changed the rates against them. They would have to work harder for an even lesser pay. The easiest way to solve this problem is to introduce the performance pay plan. The switch would increase the workers performance and raise the competition level between the Employees. The incentive for moving from fixed rate to piece rate is the average output will rise. Output would be affected in a positive way, because this pay method would raise the standard and encourage speed and productivity. 2. Roy’s machine shop is facing many problems such as low production due to unmotivated employees. The employees have no incentive to cooperate with the firm because of its bad payment system. This firm lowers the money earned for over producing. It means that if a worker is going over his hourly limit, the management will have to pay workers more since earnings are relative to the amount of work completed. Thus the management will either reduce the pay rate or make the job harder. In the article it states that many workers deliberately slowed down, and reduced their efforts to the base rate level. If this firm maintains this pay system it will not improve in production or produce with high...
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...able to work with one client, though, so everyone in your team must agree on which client to work with. I need you to develop some compensation and benefit recommendations for the client. Don't forget to check the Client Communications link to see a copy of my communications with the client regarding this issue. In your recommendation, make sure you do the following: Conduct a market evaluation by researching what companies in the relevant market are providing to employees from a total compensation perspective. Recommend a compensation structure. Recommend the position in the market. Create a total compensation and benefits strategy. Consider the use of performance incentives and merit pay to recognize and engage employees. Identify laws related to the benefits and pay program. Your recommendation should be no more than 1,750 words. Please have this to me by the end of the week. Download 100% accurate A++ and most economical answer from here http://www.homeworkmarket.com/content/hrm531-hrm531-compensation-and-benefits-strategies-recommendations-week-3-1 http://www.homeworkmarket.com/content/hrm531-hrm531-compensation-and-benefits-strategies-recommendations-week-3-1 http://www.homeworkmarket.com/content/hrm531-hrm531-compensation-and-benefits-strategies-recommendations-week-3-1...
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...| TINASHE CHANI | | ASSIGNMENTtinashe | Incentives and Culture at Lincoln Electric INTERNATIONAL BUSINESS 2015/04/13 | | Incentives and Culture at Lincoln Electric -1 To what extent are the organization culture and incentives systems of Lincoln Electric aligned with the firms strategy? To a greater extent the organizational culture of LINCOLN was not aligned with the firm’s strategy, because when the company entered in the international market their culture did not align with their long-term strategy of expansion. The culture was not welcomed in other countries due to culture and managed difference, labor laws and unions. The local managers of Lincoln’s subsidiaries’ had little or no working knowledge of its strong culture, some of them were unwilling or unable to impose the incentive system on their units, because they had their own established organizational cultures. Also when they tried to impose the culture they faced legal and cultural barriers. The difference in labor laws did not went well with the Lincoln’s culture of incentives. For example in Germany the incentives system is illegal. Also in Brazil a bonus paid for more than two years it becomes a legal entitlement. While in other countries managers and the employees opposed the culture of incentives. Also many companies the Lincoln had acquired were unionized , and the local unions were in vote against the introduction of the piecework system. Cultural difference did not align the Lincoln’s...
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...1. Level I Incentives: Level I incentives are geared towards increasing employee productivity, but usually for a short amount of time. I have personally never been given these kinds of incentives in my internships, but it is similar to being given extra credit on coursework if you do the extra problems. If I were working in sales, an incentive to sell a certain amount (i.e. 5% of the sale) would have motivated me to work harder to achieve a greater sale. Level II Incentives: Level II incentives give employees motivation to find a better or smarter way of getting work done. At GE, engineers were encouraged to find a problem in the process of gas turbine manufacturing by awarding the best innovative idea/improvement with a cash award. The most beneficial aspect of this option for the company was the submission of several good improvements, but only the loss of one cash prize. Level III Incentives: Level III incentives last the longest, because it pertains to an overall improvement in work culture. Whether it’s the encouragement of employee recognition, friendly competition, openness of management, any of these cultural aspects could foster greater productivity. At GE, it was generally understood that if you shared responsibilities/shadowed your manager consistently for a year or two, you would be entitled to the next level managerial position. Knowing there is always room to move up, as long as you achieve the best results, keeps employees working harder or better for a longer...
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... | |CHAPTER | |T Twelve | | | | | |Pay for Performance |12 | | |And Financial | | | |Incentives | | | |Lecture Outline | | | |Strategic Overview |In Brief: This chapter gives an overview of money | | |Money and Motivation: An Introduction |and motivation, and then outlines different | | |Performance and Pay |incentive programs that are used for different | | |Individual Differences |types of employees. It also discusses | | |Psychological Needs and Intrinsic vs. Extrinsic...
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