Performance Based Ewards

Performance-Based Rewards

Individual Rewards – Many employees receive individual bonuses or other rewards for accomplishing a specific task or exceeding annual performance goals

• Awards and bonuses -- achieving a performance goal or for individual task accomplishment

• Commissions – Real-estate agents and other sales people typically earn commissions, in which their pay increases with sales volume. (earnings based on sales volume)

• Piece rate pay – Housekeeping staff in many hotels are paid a piece rate-a specific amount earned for each room cleaned. Other hotels pay an hourly-rate plus a per-room bonus. (pay per number of units produced)

Team Rewards -- For an increasing number of organizations, implementing a compensation plan that rewards employees for successful teamwork provides great synergy with their organizational model. Companies that have such plans take various approaches to structuring team-based rewards, including programs such as incentive pay/bonus and gainsharing plans. Human resources professionals that use these plans indicate they can be an effective way to reward team performance, but “must be carefully structured to avoid unintended consequences that could undermine individual initiative and business goals”

• Bonuses – A team of employees receives money based on increased performance against predetermined targets.

Advantages: (1) Can combine a focus on individual and team performance. (2) Team can be given opportunity to allocate.

Disadvantages: (1) Employees averse to thinking of selves as team members. (2) Risky if base pay is reduced. (3) Guided by upper management and corporate initiative.

• Gainsharing plans – A percentage of the value of increased productivity is given to workers under a prearranged formula (driven by operational factors (e.g., quality, productivity, customer satisfaction)). Calculates bonuses from the work’s unit’s cost savings and productivity improvement. For example: The Whole Foods Market uses...