VARIABLE PAY

Tying pay to some measure of individual, group, or organizational performance.

Types of Incentive Plans

INDIVIDUAL Piecework Standard hour Bonuses Merit pay Sales incentives GROUP Team Plan Gainsharing ENTERPRISE Profit sharing Stock options

Conditions Under Which IndividualBased Plans Are Most Likely to Succeed

When the contributions of individual employees can be accurately isolated.

When the job demands autonomy.

When cooperation is less critical to successful performance or when competition is to be encouraged.

Conditions Under Which TeamBased Plans Are Most Likely to Succeed

When work tasks are so intertwined that it is difficult to single out who did what.
When the firms structure and systems facilitate the implementation of teambased incentives. When the objective is to foster entrepreneurship in self-managed work groups.

 Gainsharing is most appropriate in situations where the demand for the firms product or service is relatively stable. If a firm has multiple plants with varying levels of efficiency, the plan must take this variance into account so that efficient plants are not penalized and inefficient plants rewarded. Less likely to work well when technology limits improvements in efficiency.

Conditions Favoring Gainsharing Plans

Conditions Favoring Profit sharing Plans

Most attractive to firms facing highly cyclical ups and downs in the demand for their product. When used in conjunction with other incentives, corporatewide programs can promote greater commitment to the organization by creating common goals and a sense of partnership among managers and workers.

Pay for Performance: The Challenges

The Do Only What You Get Paid For Syndrome Negative Effects on the Spirit of Cooperation Difficulties in Measuring Performance The Credibility Gap Job Dissatisfaction and Stress Potential Reduction of Intrinsic Drives

Meeting the Challenges of Pay for Performance Systems

Link Pay and Performance Appropriately Use Pay for Performance as Part of a Broader HRM System Build Employee Trust Use Multiple Layers of Rewards Increase Employee Involvement Use Motivation and Nonfinancial Incentives

FRINGE BENEFITS

FEATURES OF FRINGE BENEFITS

An employee enjoys them in addition to the salary he/she receives. They are not given for specific jobs performed but to make jobs more attractive. They are not linked to productivity so do not reward performance in any way, criteria used is other than performance. They have an indirect impact on workers efficiency. If impact is direct, it is not a fringe benefit.

Types of Fringe Benefits

Pay for time not worked Employee security Safety and health Welfare and recreation Old age and retirement

Flexible Benefits Plans (Cafeteria Plans)

Benefit plans that enable individual employees to choose the benefits that are best suited to their particular needs

Flexible Benefit (Cafeteria) Plans

Advantages
more appreciation of benefits offered better match between benefits and employee preference increased design and administrative costs

Disadvantages