MHR 523 Lecture Notes - Lecture 9: Merit Pay, E-Commerce, Performance Appraisal
27 Jan 2017
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Fixed pay: compensation independent of performance level. Variable pay: any plan that ties pay to productivity or profitability, may be in addition to base pay. Advantages: simple, appears equitable, directly tied to performance. Disadvantages: some employers arbitrarily raise standards, difficult to adjust for changes in hourly rates, resistance to revising the standard, quality may be compromised. Incentives for operations employees team or group incentives. Production standard is set for a specific work group. Set standards for each member of the group. Incentives paid if the group exceeds the standard: members paid based on highest performer, members paid based on lowest performer, members paid based on average performance. Set standards for the group as a whole: all members paid equally. Long term incentives capital accumulation: stock options, performance share units plan, appropriate link to strategy. Define internal and external issues facing the company. Group executive compensation components into a whole plan. Check plan for legal compliance and tax effectiveness.
