Rewarding employees

Using rewards to motivate employees. How to pay: rewarding individual employees to variable pay programs

Types of pay programs

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Piece-rate pay
Merit based pay
Bonuses
Skill based pay
Profit sharing plans
Gain sharing
Employee stock ownership plans
Evaluation of variable pay

Piece rate pay
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Provides no base salary and pays the employees only for what the one produces. E.g. ball park workers
Limitations are that they are not feasible for many jobs

Profit sharing plans
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This plan distributes compensation based on some established formula designed around the company's profitability. e.g. Particularly for top managers
Positive impacts: on employee attitude feeling of psychological honourship

Merit based pay plan
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Pays for individual performance based on performance appraisal ratings.
E.g. IBM
Advantage:
people thought to be high performers can get bigger rewards.

Evaluation of variable pay
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Do variable pay programs increase motivation and productivity?
Gainsharing has been found to increase productivity and has a positive impact on employee attitudes
Workers responds to prices

bonuses
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An annual bonus is a significant component of total compensation for many jobs.
When times are bad firms can cut bonuses to reduce compensation cost.
E.g. Steel company nucer.

Skill based pay
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It is an alternative to job based pay that bases pay levels on how many skills employees have.
It is also facilitating the communication across the organization
Downsides : people can top out

Gain sharing
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It is a formula based group incentive plan that uses improvements in group productivity from one period to another to find the total amount of money allocated Positive aspect: employees can receive incentive awards even when the organization is in profitable

Employee stock ownership plan 

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It is a company established benefit plan in which employees acquire stock often at below market prices as part of
their