Incentive Plans

Check Point: Incentive Plans

Select three different incentive plans. You may select individual plans, group plans, or a combination. List the pros and cons for each plan. For a position that you envision for yourself in 5 years, which of these three plans would be most appropriate? Explain your answer.

Bonuses Pros

There are many advantages of the incentive of receiving a bonus. One of the top advantages of a bonus is that it is based on your hourly wage and is also based on the employee’s effort in performing daily responsibilities; the greater the effort the higher the bonus is likely to be. Furthermore, if an employee continues to receive bonuses then they stand on firmer ground to ask for a salary/hourly increase in pay.

Bonuses Cons

The disadvantages of using bonuses as incentives are that all workplace performance will affect the bonus amount paid to the employee. Additionally, may employers use bonuses as a way to avoid salary increases to employees; thus, employers are allowed to make less of a commitment to their employees.

Merit Pay Pros

The advantages of a merit pay incentive are that it is based on a particular goal achieved or performed accurately. This can be considered a pro because as long as employees are already accurately performing their duties then the merit pay will be given.

Merit Pay Cons

The disadvantages of the merit pay is that performance based incentives can often cause rivalry between employees instead of teamwork. Moreover, the companies ‘standard’ performance rate will most likely be based off of the highest performing employee and may be unrealistic. Finally, merit pay incentives are often given to those in favoritism or those who have seniority, instead of those who truly deserve them.

Lump Sum Merit Pay Pros

The advantages of Lump Sum Merit Pay are that it allows the employee to see the actual increase in pay from their original salary at one time. For example if a merit pay increase would...