Question

A mid-sized city introduced a reward system whereby employees would find ways to reduce costs and increase work efficiency. Every employee would receive a portion of the surplus budget resulting from these cost savings. Which of the following reward systems is this city using?

a. commission system.
b. a gain sharing plan.
c. a piece-rate plan.
d. team-based synergy.

Answer 1

b. a gain sharing plan.

Step-by-step explanation:

The reward system that the city is using is known as a gain sharing plan. This is a group incentive plan in which employees as a group earn bonuses (usually in cash) for cooperating with one another in order to improve plant performance. This is the case in this scenario as the employees worked together to find ways to reduce costs while also increasing efficiency which ultimately improved the company and increased their profits. In doing so they were paid bonuses from the surplus budget.