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Elements of Compensation
Elements of Compensation
Amity Business School
Base Compensation
Pay-Incentive
Micro Level
Macro Level
Individual
Team
Merit Pay
Bonuses
Gain-sharing
Profit Sharing
Bonuses
Awards
Bonuses
Stock plans
Awards
Gainsharing
Concept of gain-sharing
Amity Business School
Gainsharing is an incentive plan that engages many or all employees in a common effort to achieve a companys productivity objectives, with any resulting cost savings gains shared among employees and the company.
This type of bonus program is most common in manufacturing plants and is designed to reward productivity and improved product quality. It works best when company performance levels can be easily quantified. Gainsharing is used in more than a quarter of the Fortune 1000 companies, as well as many smaller firms and public sector organisations.
to determine how employees will be grouped under the program to determine what measures of performance are necessary to meet the stated objectives to design the key elements of the program
to implement the plan and get employees actively involved in a team approach to performance improvement.
Choose specific performance measures e.g. labor hours per unit produced, return on net assets to measure employee performance
Decide on funding formula. What portion of gains will employee receive? Decide on a method for dividing and distributing the employees share of the gains Choose the form of payment cash or common stock Decide how often to pay bonuses? Develop the involvement system. E.g. steering committee, update meetings, suggestion systems. Implement the plan
Advantages
Attain specific objectives, Increase credibility Stimulate teamwork, Reduce resistance Reduce costs, Sustained increases in productivity. Enhances commitment to organizational goals. Favor the knowledge of the performance of units or branches, Increase the demand from employees for improvement systems, Improvements in product quality, lower rates of absenteeism, defects, and "downtime." Employees become more involved the productivity gains made by the employer. Employees can share in the benefits of employee sponsored improvements.
Disadvantages
Time consuming to design, implement and administer
Requires employee orientation, education and training
Rucker Plan
Imposhare
Payroll costs
Labor Cost
Value added
Perquisites
Perquisites
Perks Form of Indirect Compensation Competitive package Taxable in hands of employees Develops favorable attitude towards company Increased long term commitment
Sweeper, Gardner, watchman etc. Benefits resulting from supply of gas , electric energy for household consumption Fee or concessional education facilities in own institution Medical facilities Free meals during office hours or through vouchers at eating joints Gift vouchers Expense for credit card
Refreshment provided by employer during working hours of office premises Subsidized lunch or dinner in canteen Recreational facilities Subsidized transport from office to residence Goods manufactured by Company sold at subsidized rates to employees etc. Laptops and computers etc. Expenses on telephone, including mobile phone
BONUS
Payment of Bonus Act,1965 Act is applicable to factories and other establishments employing 20 or more employees Minimum rate of 8.33 percent of salary earned Maximum is fixed at 20 percent
Social Security
Introduced in 1937 Social Security Act Old Age or disability benefits Death payments
What is a Team
Team Definition (By Katzenbach & Smith, 1993) Group of employees whose members are mutually accountable to each other for common goals. Team members interact on a regular basis. There is the possibility of synergy between team members. Size of team is between 2 and 25 members.
Mutual Monitoring
Provide performance feedback to team members.
Team Bonus - Cash payment to tied to achieving major team performance outcome and allocated on non-recurring basis. Team Merit Pay - Cash adjustment to salary tied to achieving team behavioral and performance outcomes. Skill-based Pay - Adjustment to base pay rate of team members tied to team competence level.
Gain sharing - Share gains of unit/department with interdependent teams. Spot Cash Rewards - Discretionary basis.
Team Recognition Reward - Public ceremony or announcement in company newsletter. Team Celebration - Celebrate team win; includes special dinner, ticket to sports event, etc.
Travel - Team members (and possibly spouses) travel to resort for relaxation and fun - often used for sales teams after successful marketing push.
Definition Of A salesperson
An individual acting for a company by performing one or more of the following activities: prospecting, communicating, servicing, and information gathering.
Compensation plans should direct the sales force toward activities that are consistent with overall marketing objectives. Gain market share Solidify market leadership Maximize profitability
Role Of Supervision
Effective supervisors provide direction to the sales force. Effective supervisors also motivate the sales force.