BU354 Chapter Notes - Chapter 12: Merit Pay, Piece Work
Document Summary
Financial incentives was popularized by frederick taylor in the late 1800s. Fixed pay: compensation that is independent of the performance level of the individual, group or organization. Variable pay: any plan that ties pay to productivity and profitability: organizations spend approximately 11% of total pay related spending on variable pay, cash bonus, profit sharing, gain sharing, term based incentives. It is similar to piecework payment but is based on a percentage premium. All members receive pay earned by highest producer. All members receive pay earned by lowest producer. Annual bonus (short term: eligibility- use three ways to decide: key position, salary cut off level, or salary grade to determine if eligible for bonus, fund size. Deductible formula (only accumulate after firm has hit specified earnings: individual awards. Usually tied with overall corporate results or divisional results for lower level employees and individual results for management. Split-award method: breaks bonus into 2 parts, individual effort and organization performance.
