Final answer:
Productivity-based pay is a method of compensation where an employee's pay is determined by the quantity of work and outputs that can be accurately measured. It incentivizes employees to be more productive and efficient in their work. Measuring productivity at the individual level can be challenging in some modern jobs.
Step-by-step explanation:
Productivity-based pay is a method of compensation where an employee's pay is determined by the quantity of work and outputs that can be accurately measured. This means that the more work an employee produces, the greater their pay will be. For example, in a manufacturing company, employees who produce more goods will receive higher wages compared to those who produce less. This incentivizes employees to be more productive and efficient in their work.
One way to measure productivity is using the Input-Process-Output model. Inputs are the resources used in production, such as labor and capital. The process involves transforming these inputs into outputs, which are the final goods or services produced. By measuring the quantity of output produced for a given amount of inputs, employers can determine the productivity level of an employee or a team.
However, measuring productivity accurately in some modern jobs, especially at the individual level, can be challenging. For instance, it might be difficult to precisely measure the quantity produced by an accountant who is part of a larger team. In such cases, employers often base wage increases on recent productivity trends rather than individual performance.