EMPLOYEE

COMPENSATION
(Cont)

Incentives
Financial rewards paid to workers whose
production exceeds a predetermined standard.

Frederick Taylor
Popularized scientific management and the use of
financial incentives in the early 1900s.
Systematic soldiering: the tendency of employees to
work at the slowest pace possible and to produce at
the minimum acceptable level.

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Law of individual differences

The fact that people differ in personality, abilities,
values, and needs.
Different people react to different incentives in
different ways.
Managers should be aware of employee needs
and fine-tune the incentives offered to meets their
needs.
Money is not the only motivator.

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Pay-for-performance plans
Individual incentive/recognition programs
Sales compensation programs
Team/group-based variable pay programs
Organizationwide incentive programs
Executive incentive compensation programs

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Piecework Plans
The worker is paid a sum (called a piece rate) for
each unit he or she produces.
Straight piecework: A fixed sum is paid for each
unit the worker produces under an established piece
rate standard. An incentive may be paid for
exceeding the piece rate standard.
Standard hour plan: The worker gets a premium
equal to the percent by which his or her work
performance exceeds the established standard.

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Recognition-based awards
Recognition has a positive impact on
performance, either alone or in conjunction with
financial rewards.
Combining financial rewards with nonfinancial ones
produced performance improvement in service firms
almost twice the effect of using each reward alone.

Day-to-day recognition from supervisors, peers,

and team members is important.

Video: CEO, PRET A MANGER

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Team or group incentive plan

A plan in which a production standard is set for a
specific work group, and its members are paid
incentives if the group exceeds the production
standard.

If the firm reaches its goal, the employees share

in a percentage of the improvement (in labor
costs saved).

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Benefits
Indirect financial and nonfinancial payments
employees receive for continuing their
employment with the company.

Types of employee benefit plans

Supplemental pay: sick leave and vacation pay

Insurance: workers compensation
Retirement: Pensions
Employee services: child-care facilities

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Pay for time not worked

Insurance benefits
Retirement benefits
Services

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Unemployment insurance
Provides for benefits if a person is unable to work
through no fault of his or her own.

Vacations and holidays

Number of paid vacation days varies by employer.
Number of holidays varies by employer.
Premium pay for work on holidays.

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Sick leave

Provides pay to an employee when he or she is

out of work because of illness.
Costs for misuse of sick leave

Parental leave
Up to 12 weeks of unpaid leave within a one-year
period
Employees must take unused paid leave first.
Employees on leave retain their health benefits.
Employees have the right to return to their job or
equivalent position.

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Severance pay
A one-time payment when terminating an
employee.
Reasons for granting severance pay:
Acts as a humanitarian gesture and good public
relations.
Mirrors employees two week quit notice.
Avoids litigation from disgruntled former employees.

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Workers compensation
Provides income and medical benefits to workrelated accident victims or their dependents,
regardless of fault.
Death or disability: a cash benefit based on earnings
per week of employment.

Controlling worker compensation costs

Screen out accident-prone workers.

Make the workplace safer.
Thoroughly investigate accident claims.
Use case management to return injured employees
to work as soon as possible.

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Job sharing
Allowing two or more people to share a single fulltime job.

Work sharing
A temporary reduction in work hours by a group
of employees during economic downturns as a
way to prevent layoffs.

Telecommuting
Employees work at home using telephones and
the Internet to transmit letters, data, and
completed work to the home office.

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Compressed workweeks
Increase productivity
Less disruption from shift changes
Longer time-off-work periods
Reduced absenteeism

Longer workdays; fewer workdays:

Four-day workweeks, with four 10-hour days.
Two days on, two days off, three days on, then two
days off, two days on, and so forth.
Three 12-hour shifts, and then off for the next four
days.

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Clarifying and communicating the goals and

mission of the organization.

Guaranteeing organizational justice.

Creating a sense of community by emphasizing

teamwork and encouraging employees to interact.

Supporting employee development by emphasizing

promotion from within, developmental activities,
and career-enhancing activities.

Generally committing to people-first values.

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