Human Resource Professionals : Design And Install Incentive Pay Systems

Individual incentive pay plans reward employees for meeting one or a combination of performance standards (e.g. productivity, safety, or attendance) set by the employer (Martocchio. 2013). Piece- rate pay is one of four individual incentive plans offered in the employment industry. Employers have two options to select from when choosing this incentive plan. The first option is compensating the employee hourly for each piece over the given production number. The second option is compensating employees based on established subjective (quality) and objective (quantity) performance standards. In both options the employee is, essentially, being compensated for the work he or she does and not what could have been completed (Gibbons. 1987).  Motivation,

A Performance-Based Pay system is an increasingly popular compensation method used by organizations to increase productivity. A goal for all companies is to try and remain competitive and control costs, this is a reason for performance-based pay systems becoming more popular. This type of system attempts to link compensation to performance. (Gena Richter, 2002) These systems are directly tied to organization or individual performance and are most effective when based on objective measures of quantity or quality of performance. If we wish to have a direct impact on work motivation, it must be linked directly to the performance of desired behaviors. In order for to put this type of system into place, performance evaluations must be conducted regularly , as well as training and development for those with performance that isn't quite up to par. These additional resources will be necessary for our organization if we implement a performance based pay system. (William B. Bernathy, Ph. D., 2004)

The right compensation program will depend on the organization’s business strategy and goals. To achieve these, an organization must recruit and select the best possible employees. To attract such employees, there must be an attractive compensation plan. Competitors will be offering different payment options, this may be based on pay rate or special perks, and a company’s stock options. Organizations must be aggressive yet reasonable to compete with competitors. Retaining and encouraging employees to perform at their best may be achieved through an immediate incentive award

A well-articulated compensation philosophy drives organizational success by aligning pay and other rewards with business strategy. It provides the foundation for plan design and administration and anchors current and future plans to the company's culture and values (Kaplan, 2006, p.32). Recognizing and rewarding achievement is the cornerstone of the company A’s compensation philosophy. The mission of the company is to attract, select, place and promote all individuals based on their qualifications. The company believes that performance-based compensation helps attract, develop and retain talented professionals. In addition to base pay which based upon local market conditions and targeted to be above market, the company provides the following types of potential compensation to reward performance:

To foster competitiveness and deliver better results, there is a program called STACK where employees are ranked based on the work done and their incentive is decided based on it. Better the rank, better the incentives.

The team-based incentive pay plan financially compensates employees for the goals they meet as a collective group, rather than as individuals (). Employers who use the team-based incentive pay plan find that the approach brings a sense of urgency to the group effort. The team-based incentive results in greater performance and goal reaching than when individuals work on their own. Individuals who work under the pay plan are also able to gain a greater sense of cohesiveness. In the team-based incentive pay plan if you do not perform well, you would not receive a pay check. The people in the team-based incentive plan all recognize that the greater performance they have together the greater the payday would be for each member of the team.

Organizations need to know who their best performers are.Within the context of formal performance appraisal requirements, rating means evaluating employee or group performance against the elements and standards in an employee 's performance plan and assigning a summary rating of record. The rating of record is assigned according to procedures included in the organization 's appraisal program. It is based on work performed during an entire appraisal period. The rating of record has a bearing on various other personnel actions, such as granting within-grade pay increases and determining additional retention service credit in a reduction in force.Note: Although group performance may have an impact on an employee 's summary rating, a rating of record is assigned only to an individual, not to a group.

A profit sharing plan could be considered a group incentive because the employee has to work together, cooperate and share knowledge to receive individual bonuses. However, a group incentive program, such as gainsharing is measured by improvement in productivity and effectiveness. This is unlike the profit-sharing program in Bob’s Red Mill. In the profit-sharing program, employee’s bonuses depend on the company’s profits. If the company has increased profits, then employees get a percentage of these earnings. On the other hand, if the company performs poorly than employees receive nothing. Yes, this requires employees to work together as a group, but in general, the profits are dependent on the company’s success, not the group’s success. Likewise, the last incentive offered, the employee stock ownership program, is based on the company’s performance as well. Here, employee's incentive pay is solely based on the company’s performance. Yes, both the individual and group performance play into how the company performs. The individuals and teams must work together and perform sufficiently in order for the company to perform well. Yet, if an employee or team performance slacked, the direct result would be a hardship against the company. In which case, would cause the employee's stock to plummet. In general, how the company performs, as a whole, depends on the employee’s stock worth. Thus the stock ownership program is dependant on the

Traditionally, most employers compensated their employees based on a set hourly wage or annual salary (Martocchio, 2013). Today, there are many companies that utilize incentive pay programs to replace part or all of the base pay to manage payroll expenses and to connect pay to performance. Incentive pay, also referred to as pay-for-performance or variable pay, rewards individuals for partly or completely achieving a predetermined goal (Martocchio, 2013). Basically, incentive pay is compensation, outside of the employee’s regular wages, which can vary depending on whether or not the employee achieves predetermined goals (Martocchio, 2013).

In many cases different type of rewards has different type of effects on different organizations.

Reward Management (RM) has been defined as the distribution of monetary and non-monetary rewards to employees in an effort to align the interests of the employees, the organisation, and its shareholders (O’Neil, 1998). In addition O’Neil (1998) also suggests that a RM system can serve the purpose of attracting prospective job applicants, retaining valuable employees, motivating employees, ensuring legal requirements relating to direct and indirect rewards are not violated, assisting the company in achieving human resource and business objectives, and ultimately assisting the organisation in obtaining a competitive advantage.

Recognizing and rewarding high-performance is a key recommendation for any approach when managing any merit pay program (HRIS 2012). Merit pay is a compensation system where base pay increases and is determined by an individual’s performance. Using a merit pay plan is a good way for an organization to reward high performance is one benefit when using merit pay programs. The first step in implementing or improving a merit pay program is to have a solid performance management program, and this is another way a merit pay program is beneficial. Merit pay is a way to be successful and effectively implement merit pay with a uplift in salaries, and this is a third way using a merit pay program is beneficial to an organization. There are some drawbacks when using merit pay programs, such as paying some employees more than others. If you pay high-performing workers more than low- performing employees, the high- performers may stay, causing the low- performers to complain or leave the organization. A second drawback in using merit pay program is that employees become less motivated if not paid to their satisfaction. For example, if employees feel they should be making more money for their performance, this causes them to have low self esteem, and want to find employment at other organization. The last drawback associated with

A monetary incentive can be described as a fiscal price given to top performers in a company. It is a fact that these top performers are an asset to the business and should be treated well for them to stay longer. The prize is awarded in the form of project bonuses, health insurance agendas courtesy of the company, program bonuses, profit sharing and paid vacation time among others. The bottom line here is to ensure that the company’s objectives are observed. As an organization, you cannot expect a worker with financial problems to concentrate on his job but once you take care of the problem and the employee is happy, the employer will gain, and this can be evidenced in the profits the company receives. The purpose of the assignment would offer a persuasive debate on the pros and cons of Monetary incentive plan from employee motivation perspective. Additionally, the paper would discuss two companies that have implemented successful motivation plan that does not involve Monetary reward or compensation.

Team-based incentive programs are designed to motivate employees in addition to holding each other accountable for job responsibilities and activities, while working toward a common goal within an organization (McQuerrey, n.d.). When utilized, team-based incentive programs have the ability to improve the productivity and performance at all levels within an organization. Teams can be categorized into many groups and at any level, such as management teams, quality circle teams, problem-solving teams, and department teams (Bethel University, 2013). Therefore, teams can be studied and suggestions can be made on meeting criteria in order to qualify for customized pay plans.

Incentives are paid in addition to wages and salaries and are also called ‘payments by results’. Incentives depend upon productivity, sales, profit, or cost reduction efforts. There are: (a) Individual incentive schemes, and (b) Group incentive programmes. Individual incentives are applicable to specific employee performance. Where a given task demands group efforts for completion, incentives are paid to the group as a whole. The amount is later divided among group members on an equitable basis.