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30 Cards in this Set
- Front
- Back
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Variable Pay |
Compensation tied to performance- individual, group, organizational |
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Reasons for pay for performance plans |
link strategic goals and employee performance, reward and recognize employee performance, promote achievement of HR objectives, enhance results and rewards employees financially |
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examples of individual incentives |
piece-rate systems, bonuses, non-monetary incentives (trips, merchandise, rewards), commissions |
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examples of group/team incentives |
group/team results, gainsharing/goal-sharing, quality improvement, cost reduction |
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organizational incentives |
profit sharing, employee stock plans, executive stock options, deferred compensation |
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piece rate systems - straight |
Wages are determined by multiplying thenumber of units produced by the piece rate for one unit |
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Differential piece-rate system |
Pays employees one piece-rate wage forunits produced up to a standard output and a higher piece-rate wage for unitsproduced over the standard |
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bonus Massive kinked bonuses Spot bonuses |
One-time payment that does not becomepart of the employee’s base pay Very large all or nothing bonus rewarded whenever |
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Commissions |
percentage of money taken in from sales |
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purpose of non monetary incentives |
recognize performance, expand customer service, increase sales, increase employee morale, increase employee loyalty/retention, improve safety and attendance |
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reasons for using group/team incentives |
increase retention, improve quality, improve productivity, may be easier to measure group output than individual, group cohesiveness |
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free riders |
members of the group who contribute little |
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team size |
Individual efforts of employees havelittle effect on the total performance of the group in large groups |
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group work is necessary when |
cooperation is necessary, individual performance can't be recognized, management wants teamwork, the reward system is viewed fairly, employees have input into incentive design |
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team work results in |
group production, increased savings, quality improvement |
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Gainsharing |
Sharing withemployees of greater-than-expected gains in productivity through increaseddiscretionary efforts |
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drawbacks of profit sharing |
disclosure of financial information, variability of profits from year to year, profit results not stingily tied to employee efforts |
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Employee stock option plan |
Employees canbuy fixed number of shares of company stock at a specified price for a limited periodof time |
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Employee stock ownership plan (ESOP) |
Gives employees significant stock ownership in the organization they work |
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advantages of employee stock ownership plan |
Favorable tax treatment for ESOP earnings, Employees motivated by their ownershipstake in the firm |
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disadvantage of employee stock ownership plan |
Retirement benefit tied to the firm’sfuture performance |
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sales compensation plan- salary only |
All compensation is paidas a base wage with no incentives |
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sales compensation plan- Straight commission |
Compensation is computedas a percentage of sales in units or dollar, Draw system makes advance paymentsagainst future commissions to the salesperson |
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Sales compensation plan- Salary-plus-commission or bonuses |
Compensation is part salary for incomestability and part commission for incentive |
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Straight commission system |
Percentage of the value of the sales isgiven to the sales person |
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Say on Pay |
Publically listed companies must allowshare holders to vote on executive compensation |
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Clawbacks |
Allows a company to recover any incentivebased pay that was paid out during the prior 3 years if it would not have beenpaid under restated financial statements |
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components of executive compensation packages |
long-term incentives, annual incentives and bonuses, perks, supplemental benefits, base salaries, regular benefits |
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Compensation committee |
Subgroup ofthe board of directors that is composed of directors who are not officers ofthe firm |
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who is the major policy setting entity and also approves of executive compensation packages? |
board of directors |
