Incentive Pay Plans
Incentive Pay Plans
Employee motivation is an issue of utmost importance to existing and potential employers. However, the query of how to inspire workers sufficiently is what has resulted to the immense interest among management scholars and economists. Employers have opted for different approaches to motivate their employees. In this regard, some have developed incentive plans to ensure their employees perform their level best. There are two broad categories of incentive pay plans. They are an individual and group incentive pay plans. The individual incentives pay each of the employees based on his or her performance level. The group incentive plans pays or rewards a department, or the whole organization’s staff for the attainment of strategic organizational goals.
The two categories comprise of different pay plans, which are central to the type of objective that the organization, either set for the employee or department to achieve. Group and individual incentive pay plans have proven effective for organizations to achieve strategic goals (Caruth, & Handlogten, 2001). The group incentive plans often feature the most in organizations because it is sometimes a difficult task measuring the individual performance levels. In fact, it is a strategic pay plan because it enhances the growth of teamwork, which is essential in the development of organizations.
Straight piecework is the most common form of individual incentive pay plan. It is the simplest in terms of development, and employees can understand it easily. In this plan, the employer pays the employee a fixed amount in relation to the unit of output for every production above the normal level of production. Empirical evidence comments that this plan is advantageous to both the employees and the organization. It is so because as the employee is working above the normal production level, they get incentives and the firm...