Hrm240_Incentive_Plans

Incentive Plan How important a job is to a said company, has a great impact in determining the rate of pay for that job. It has been successfully argued that pay based solely on what a job is perceived to be worth, is not enough to motivate a worker to give his all, most times. Thus many companies find it appropriate to offer some form of incentive which are linked closely to employee performance and company’s objectives. These incentives plans take three basic forms individual, group or enterprise incentive plans. Individual Incentive Plans: An individual incentive plan could come in may varieties such as Piecework, Standard Hour Plan, Bonuses, and Merit pay. Under piecework one of the oldest plans, employee receive a certain rate for every job completed. There are benefits to that plan where the wage payments are easy to compute and the company can predict labor cost very accurately. With piecework and employee can earn up to 35 percent than their base pay, a good motivational aspect. The problem with piecework is that, the employer may change the rate for a particular job, if the employees are consistently beating the given rate by large amounts. So employees may not want to put the pedal to the metal at all times so as not to be termed “rate busters”. Some employees may stay away from jobs they think has a poor rate. Bonuses: A bonus as explained in the text book is an incentive payment outside of the normal base pay. It is usually given at the end of the year and they have the advantage of giving the employee more pay for excellent performance numbers. Bonus payments which were usually doled out to managers and executive employees are being routinely given out to the rank and file. Merit pay: Merit Pay or merit raise links salary increases to how productive an employee is or how well he does hid job. Merit raises seem to do a good job of motivating employees if they think it is because of how they do their jobs. Merit unlike a bonus can be self defeating because merit raises are usually given out each year nonetheless, so employees may take it as an entitlement. Group Incentive Plans: Because of lower costs and total quality management many companies implemented a variety of group incentive plans. These plans let companies enjoy the increased benefits of team work by encouraging cooperation rather than individualistic achievements. These types of plans are extremely useful where individual performances are difficult to ascertain. Team Incentive Plan: The knowledge that teamwork and cooperation is a very important component for increasing productivity has made team incentive plans very popular. Team incentive plans serve to reward the members of a team with an incentive bonus when specific performance goals are met or surpassed. This type of incentive will create a psychological environment within the team which should serve to solidify increased cooperation among team members. There are issues with this type of incentive plan because as humans we are all different so what may please this team may not please that team so it is not a one size fit all mentality. For a particular team to perform at it’s best the pay structure may have to be tailor made.