COMMERCE 2BC3 Lecture Notes - Lecture 29: Merit Pay, Piece Work, Profit Sharing
19 Oct 2020
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Document Summary
Pay-for-performance: any financial reward given out to employees is because of specified performance that occurs, this is to incentivize, motivate and reward good performance. Better option: giving out a bonus instead of a % increase. Straight piecework: employees receive a certain amount of money per unit produced, differential piece rate, you receive a certain amount per unit up to a certain level of units. Some benefit plans are based on salary so this makes benefits variable too. Some jobs do not have tangible output measures. Setting standards can be difficult or controversy(ie. for the differential piece rate, from what point does a higher pay per piece kick in?: may undermine teamwork, quality may be sacrificed for quantity, may incentivize negative behaviour. Pay at risk: organization will not increase base pay, only give out bonuses when profits. Labour costs vary as a function of profitability (sharing profit in good times, keeping expenses lower in bad times: reduces the need for layoffs.
