Final answer:
Incentive pay refers to additional compensation awarded for performance that exceeds normal expectations, which promotes higher productivity and aligns with the efficiency wage theory.
Step-by-step explanation:
The form of direct compensation where employers pay for performance beyond normal expectations to motivate higher performance is known as incentive pay. This type of compensation is popular with both economists and the general public because it increases the payment received for work, aligning well with the efficiency wage theory.
According to the efficiency wage theory, workers' productivity depends on their pay. Employers may provide incentive pay because it encourages employees to work harder and stay with the company, as they would risk a salary decline if they were to lose their job. This approach is also beneficial for employers as it minimizes costs associated with training and hiring new workers.
Supplemental pay, such as insurance, health benefits, retirement and savings, including defined benefit and defined contribution plans, and legally required benefits are part of the total compensation package but are separate from incentive pay, which directly rewards exceptional performance.
The complete question is: content loaded
Form of direct compensation where employers pay for performance beyond normal expectations to motivate higher performance.
Incentive pay
Geographic Differential Pay
Overtime pay is: