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These
rewards
include
flexible
work
hours,
training
Employee Recognition
Employees who receive recognition for their work accomplishments tend to
have
increased
morale
and
positive
workplace
attitudes.
Employee
long-term staff retention, and thereby increase the stability and performance
of the organisation over time.
The first point Id make here is that any incentive program needs to be
achievable. This may seem obvious, but too often Ive seen otherwise well
managed, well-structured incentive programs fail because they were or at
least were perceived to be unattainable.
Incentive programs should also be equitable. Staff know that if they do well,
theyll be rewarded, but also that bonuses and incentives are not a given;
they need to be earned. This should be the case whether youre a rep or a
manager.
A key feature of any successful incentive program is clarity on what an
employee needs to do to qualify, and which factors are in or out of an
employees control. For example, while an employee can and should be
able to control his or her own sales performance and execute their activity
plans, other factors, such as total company performance, can be a partial
determinant of the final incentive outcome.
Sometimes these external factors can account for 15% or more of the
outcome, and so, no matter what your position in the organisation, you want
to know what is directly within your control as well as indirect factors (such
as subjective individual performance assessments and total company
performance) that the whole organisation is striving to achieve.
In doing so, an equitable incentive program will seek to find the right balance
between
objective
(results)
and
subjective
(appraisal)
factors.
Often
subjective factors can have a significant effect on the final reward, so its
vital that employees understand how these subjective factors are measured,
who measures them, and what their direct relationship is to that person or
persons.
For new starters there is always some trepidation regarding what type of
territory they have inherited, often referred to as the carry-over effect,
where a new employee joins a company in a territory or market thats either
over-performing or under-performing. An employee may have inherited a role
where momentum is already in place and performance all but assured
whereas others may face market share saturation with limited opportunities
for growth. This is often considered a factor outside the employees control,
but at the same time can work to his advantage or disadvantage and may
result in discretionary incentive adjustments.
Remember that people are not looking for the same target, but a fair target
that reflects the opportunity within their sphere of influence. An incentive
goal should be based on logic and be auditable and explainable by both the
rep and management.
Communication is key to managing a fair and equitable incentive program,
as is transparency. People need to know that if theyve had a bad quarter
or cycle, that catch-up programs are available.
In summary, an incentive scheme that doesnt take any of these factors into
account and does not motivate personnel to achieve their best is likely to
result in unhappy staff, and a company with high staff turnover. Conversely,
a fair, equitable, transparent and achievable incentive scheme is critical to
motivating and retaining employees and driving business growth.
Incentive Differential Plan
An incentive is something that motivates an individual to perform an
action. The study of incentive structures is central to the study of all
economic activities (both in terms of individual decision-making and in
terms
larger
institutional
characterizing
the
differences
in incentive
structures faced
by
before they can earn a living as surgeons, while retail salespeople can
get a job right of the high school, or even while they are still in school.
Education and training limit the supply of labor in that they take a certain
amount of time to complete and require a certain level of skill. In many
cases, people who attend college or training school do not have the time
to work a full-time job. Therefore, they also incur an opportunity cost
which is equal to the amount of money that they could have earned had
it not been for the educational or training requirement.
Another primary factor that determines wages is the demand for the
worker, which is a derived demand for the product or service that the
worker provides. If the worker provides a product or service that is highly
desirable, then a higher wage will prevail for a given supply of workers
who could do that job.
Sometimes, ability makes a very large difference in wage potential that
far outweighs the differences in ability. The winning horse earns a lot
more than the one that comes in 2nd even though it is only a little faster.
There are only so many jobs for professional athletes, so only the very
best are going to be chosen for those high-paying jobs. Likewise, only the
best musicians or those producing the most desirable music will become
wealthy. People only have so much time and money for entertainment,
so they tend to select entertainment performed by the best people,
especially entertainment package for mass consumption.
Compensating Differentials
Some jobs pay more because they are less desirable. They may be
hazardous, dirty, and employment may be sporadic or seasonal. For
instance,
construction
pays
more
than
retail
sales
because
of
differences in the desirability of the job itself. Most retail jobs take place
in air-conditioned or heated stores where the worker can wear nice
clothing, stay clean, engage in friendly conversations with customers,
and expend little physical effort. By contrast, construction workers may
perform hazardous work, will become dirty during the job requiring them
to spend additional time cleaning up afterwards, and will often have to
work long hours to get the job finished, and they may not get work
during the winter months. Hence, to attract enough workers to
construction, the industry has to pay more.
In many cases, status or power, or the lack thereof, may also be a
compensating differential. After all, you never hear a kid saying I want to
grow up to be a garbage collector. On the other hand, much more money
is spent to elect someone to the presidency of the United States than
they will ever earn at the job, and many lawyers make more than
Supreme
Court
justices,
yet
few
lawyers
would
turn
down
an
There are various types of performance pay. Piece rates are paid
according to the amount of work accomplished. Many factories use piece
rates to prevent dawdling.
Commissions are often paid as a percentage of sales, in such industries
as real estate, insurance, securities, and retail sales.Royalties are paid
to artists who actually create a product and, like commissions, is usually
a percentage of the sales price of the product. For instance, authors may
receive 10% of the price of a book for each book that they sell.
Bonuses and stock options are often paid to executives of the company
so
that
they
work
harder
to
ensure
that
the
company
will
succeed. Bonuses are lump sum payments which are often paid at the
end
of
the
year
after
the
employee's
performance
can
be
which
can
result
in
more
experienced
workforce.
Piece rates may result in sloppy work as workers rush to make more
money.
Equitable promotion policies, and relatively high fringe benefits fall in this
category of incentives. Benefits of such plans tend to decrease with the
passage of time employees take for granted the incentives given to them
and fail to recognize the importance of productivity in continuance of such
schemes.
2. Non Financial Plans:
These plans are generally connected with emotions of individuals. They
include things like spirit of competition, feeling of inclusion, gratitude, shame
of poor performance and some other factors which tend to encourage good
performance. However these incentives can only help to make the financial
incentive more effective.
Employee Incentive Programs reward exceptional employees for reaching
work goals, achieving milestones or simply doing a good job. These types of
programs
are
designed
to
offer
incentive
and
rewards
to
valued
Mutual
Rewards
bottom
line
increases
as
#2
the
employees
productivity
Increased
peaks.
motivation
these
Increased
incentives.
company
morale
absenteeism
and
Increase
overall
company
company
costs.
loyalty
Company loyalty is not something you can buy. However incentives for good
work and rewards for hard work go along way to securing commitment from
employees. Employee incentive programs show employees the company
values their input and their work. If an employee feels valued and
appreciated they are more likely to form an allegiance to the company.
#5
Increased
productivity
are offered incentives for reaching targets or for good work in general. These
incentives vary but the main aim is to encourage employees to work towards
company goals. With the promise of incentives and clearly defined targets
employees
are
#6
more
productive
Increase
and
objective
motivated.
achievement
Incentive Programs are a great way to reach targets and company objectives.
Using an Incentive Program employers can set realistic goals and reward
employees when the reach them. This is a great way to boost productivity
and
morale
while
#7
at
the
same
Reduced
time
achieving
company
company
goals.
costs
click
#8
on
the
link
to
receive
Reduced
quotes.
Absenteeism
The bottom line with incentive programs comes down to the very simple fact
that people like being rewarded for hard work and a job well done. The
rewards are only part of the equation. Incentive schemes show employees
the company cares and appreciates the work they are outputting. If an
employee feels appreciated and has clear targets that result in rewards then
they
are
more
likely
to
want
to
come
to
work.
#9
Team
Work
harmony
#10
Incentive
within
the
workplace.
Decreased
Programs
foster
happy,
productive
Turnover
working
environments.
Employees enjoying this kind of environment will be more likely to stay long
term. This means incentive programs reduce the amount of turnovers within
the company. The advantage of consistent staffing is that you are not
spending money on recruiting or training new staff. You are also able to
retain loyal committed employees with a vested company interest.
the population of firms over time is necessary in order to resolve the issues.
The article utilizes a comprehensive range of data, including several national
surveys and a longitudinal database of all larger private-sector firms in
Australia during the 1990s. The results indicate that the myth of managerial
downsizing must be rejected. There were dramatic effects on managers
through the course of the 1990s in larger Australian firms. The dynamics of
the process are analysed, tracking 4,153 firms across the decade and the
paradox explained. The theoretical implications are discussed.
voluntary retirement scheme
This mode has come about in India as labour laws do not permit direct
retrenchment of unionized employees.
Definition: Voluntary retirement scheme is a method used by companies to
reduce surplus staff. This mode has come about in India as labour laws do
not permit direct retrenchment of unionized employees.
Description: VRS applies to an employee who has completed 10 years of
service or is above 40 years of age. ?It should apply to all employees (by
whatever name called), including workers and executives of a company or of
an authority or of a co-operative society, excepting directors of a company or
a
co-operative
society.
the last salary drawn which is to form the basis for computing the amount of
payment.
Most large public and private sector companies have implemented VRS in
recent years.
Pay For Performance (PFP) Systems
Pay-for-performance is by far one of the most popular forms of compensation
that employees can offer their workforce. But even with its popularity, the
question of whether or not it is the best way to compensate employees
remains. There are many ways to do it, but essentially pay-for-performance
compensation means that a form of measurement is established and goals
are set, then when employees meet a goal, they are compensated
accordingly. This could be a number based on the amount of sales during a
period of time, annual revenue, performance reviews or any number of other
measurements. In fact, one of the most significant considerations in whether
or not pay-for-performance compensation is the best idea for your business
is the type of incentive payment youre using.
The devil is in the details
The saying the devil is in the details has never been truer than when it
comes to pay-for-performance. While some companies have seen enormous
success, others have wasted time, energy and money trying to make it work,
and the difference almost always lies in the details. There are a number of
things to consider and they all play a part in how you formulate and execute
a pay-for-performance system, including the decision of whether or not its
the best option for your situation.
A significant portion of the success or failure of this compensation system
lies with who will be receiving the incentive pay. After all, the premise of payfor-performance is that employees are motivated to help the company
achieve success because they in turn are positively impacted. So the big
question is, will this new system motivate your employees? As you can
imagine, it all depends on how much an employee stands to gain, and those
whose base compensation is higher will naturally have the potential to make
more as a bonus. For those who only have the potential to earn an
insignificant amount, there is little motivation to go above and beyond.
Knowing this, its easy to see why those in management or executive roles
are more motivated to outperform than those in lower-level roles. However,
according
to
Towers
Watsons
Using
Targeted
Incentives
to
Drive
2.Commissions
Sales commission plans vary greatly from company to company, but are
generally based on the dollar amount of sales made during a payroll period.
Commission income is considered the same as wages or salaries for
withholding and reporting purposes. Commissions are usually computed on a
certain percentage or commission rate. Some commissioned employees may
not be exempt from the minimum wage requirement. The employer must
determine the regular, hourly rate for each non-exempt salesperson during
the week and make sure this rate is at least equal to the current minimum
wage.
3.Piece-Rate Plan
Workers paid on a piece-rate plan receive a certain amount for each item
produced. Gross earnings equal the rate per item multiplied by the number
of items produced during the payroll period.
4.Combination Plan
Many businesses pay sales people both a salary and a commission. Such a
combination plan provides some regular income and offers an incentive for
superior sales.
5.Draws
Draws are often given to salespeople who work only for commission. A draw
is an advance given to a salesperson that will be collected when future sales
transactions are closed. Draws will be subtracted from a salespersons
commissions after any applicable taxes and deductions have been withheld.
The draw is subject to all payroll withholding taxes.
Other Types of Earnings
6.Bonuses
Businesses offer bonuses in many different ways. Some bonuses are based
on profitable operations of the business and are paid at year-end. A common
type of bonus may be offered to salespeople for selling a specific item.
Another type of bonus plan, one that may be part of an employment
agreement, pays managers if the yearly sales or profits reach a certain level.
taxable
fringe
benefits,
awards
and
vacation
pay
on
Q.5: The Concept of Wage Levels and wage Rate, The Concept of Wage Structure,
Determinants of the Wage Structure?
Wage levels result from individual and collective negotiations between the
employees (and their representatives) with the management (and the
owners) of firms.
In public bodies, laws and negotiations decide wages. A government wanting
to cut public expenditure might try to freeze or reduce public wages,
whereas a stimulus-oriented policy might include increases.
Firms and organizations pay wages to employees usually depending on
working time and/or on results (production made or objectives reached).
Individual wage often depends on occupied position in the organization as
well as on education, cumulated experience and seniority. Wages for the
same job outside the firm may serve as a (conventional or mandatory)
reference point in wage-setting routines.
Wage differentiation is a widespread phenomenon: different occupations
and different industries pay working time at uneven rates. Even wage
segregation is common: certain jobs are "socially" attributed to a certain
gender or ethnicity, which in turn might strive to widen the jobs it is
"allowed" to perform.
Wage structure for occupations, industries and regions is subject to very
slow long-term change. Imitation of wage increase in other parts of the
country is a common force in action.
Wage rates for the same position can be different between "normal hours"
(e.g. 40 hours a week) and overtime, i.e. the hours exceeding regular
working hours. Usually overtime are paid better, as it occurs when the work
is performed during the night or festivities (e.g. Sundays). A part of the
previous
mobilization;
and
current profitability of
3.
4.
employers;
external
conditions
exert
only
marginal
role
in
internal
be
characterised
by
much
lower
wage
expectations than the employees and they are prone to more flexible
working conditions, but they lack competence and are often characterised by
lower productivity.
This analysis explains on the one hand, why a higher unemployment may
brake wages but also, on the other hand, why wages can grow even if there
exists unemployment.
wages
mean
higher income in
most
families;
thus
a better one, or even to emigrate if the situation is too bad in the whole
domestic economy.
In
short,
wages
are
moderately
pro-cyclical.
If
labour
is
weak, recovery periods may only unevenly impact wages. If, on the contrary,
labour is strong, higher productivity and profits and will be reflected in higher
wages. This may spread expansionary forces and allow the system to enter
in a booming phase. In this moment, an increase in minimum wages is very
effective in raising domestic demand (and tax revenue) without inflationary
pressures, as there is still room in the production capacity and investments
ramp up to widen it.
Weighted wage rates will go up as the expansion continues, since
overtime become more common (and they are better paid), to give place to
employment increases as the firm is sure that there will be demand for its
products for the foreseeable future (or at least the duration of the work
contract).
If wage pressures are too strong, inflation may rise. In a context lacking
different instruments, the central bank may decide to adopt a restrictive
monetary policy, possibly with a "soft landing" idea in mind. "Hard landing" is
a distinctive possible outcome, instead, with its recessionary developments.
THE END