Question

popular incentive compensation plans hourly wages and weekly/monthly salaries are fairly standard and easy for organizations to administer. but these plans alone do not generate a great deal of employee incentive to work hard. this is where incentive compensation plans come in. these plans use various methods to boost employee motivation and overall performance. this activity is important because managers need to understand the characteristics of the best incentive plans if they are to use these plans to generate employee motivation and performance. the goal of this activity is to challenge your understanding of the different types of popular incentive compensation plans. determine which incentive compensation plan each scenario best represents.

Answer 1

Incentive compensation plans like efficiency wages and piece-rate systems aim to boost productivity by aligning employee earnings with output. Efficiency wages pay more than market rates to increase job value for employees and reduce turnover for the employer, while piece-rate systems pay employees based on production volume.

Step-by-step explanation:

The discussion primarily revolves around various incentive compensation plans which serve to enhance employee motivation beyond what is achieved through standard hourly wages and salaries. One method of incentive compensation is through efficiency wages, which suggests that paying employees more than the market rate can boost productivity by increasing the cost of job loss for the employee and reducing turnover costs for the employer. Additionally, responding to union demands by investing in more machinery can make union workers more productive, but may lead to hiring fewer workers.

Another popular plan is the piece-rate system, where employees are paid based on the number of units produced or tasks completed. This system aligns compensation directly with output, creating a clear incentive for employees to work more efficiently. The table showing average hourly compensation demonstrates that a significant portion of compensation also comes from health insurance, vacation pay, and other benefits, which can also impact productivity and employee motivation.