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PART2- Pay for performance

and Financial incentives

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 Learning Objectives

1. Discuss the main incentives for individual

employees.
2. Describe the main incentives for managers
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and executives.

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3P PAY STRUCTURE

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 Discuss the main
incentives for individual
employees.
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 Four main types of Payment for jobs:

Wages

Piece-work plan

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Salary

Commission

Often the type of payment depends on the job type.

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 Four main types of Payment for jobs:

Wages (Tiền công)

• Payment by wages involves a fixed Hourly Rate of Pay

for a standard set number4-of hours.
• Hours worked beyond these set hours, or beyond set
times of the day (eg. Night shift), are paid as
“Overtime” at a higher than normal daily rate.

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 4-

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 4-

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 Four main types of Payment for jobs:
Wages:

Payment based on time cards

Susan works for a retail store in the mall. The
company pays overtime hours over 40 per week at
time and one-half. Add up Susan’s regular hours,
determine the number of overtime
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hours, and then
calculate her gross pay.
Assume that her regular workday is from 8:00 – 12:00
am, she gets a one hour lunch break then her
afternoon hours are 1:00 to 5:00. Any hours worked
over 8 in a day are overtime hours as well as any
hours she works on weekends and are paid at time
and a half.
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 4-

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 Four main types of Payment for jobs:

Wages

• Types of jobs
• where people are paid Wages are Trades Jobs
(Plumber, Carpenter, Electrician,
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Welder, Mechanic,
Hairdresser, etc).
• Wages are also generally paid for Retail Jobs (Shop
Assistant, Shelf Stacker, Cleaner, Fast Food worker,
etc)
• Wages are also often paid for Factory Jobs
(Assembly Line Worker, Fork Lift Driver, etc)

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 Piecework Plans
(Trả lương theo khối lượng công việc)

Piecework - Piecework involves paying the

worker a sum (piece rate) for each unit he/she
produces.
• Straight piecework
4- entails a strict
proportionality between results and rewards
regardless of output (pay based amount of
units produced)

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 PIECEWORK PAY-
STRAIGHT PIECE WORK
• Tuan works in a dress factory. He is paid
$85 per dress that is produced. Yesterday,
he made 3 dresses. How much did he earn?
 PIECEWORK PAY-
STRAIGHT PIECE WORK
• Tung picks strawberries and gets paid 45 cents
per container for the first 200 containers. He
receives 65 cents per container for all
containers over 200. Last week, he picked 270
containers. How much did he earn?
 PIECEWORK PAY-
STRAIGHT PIECE WORK
• Shauna has a job assembling phone packages into
boxes. She has to insert the phone, the cords, and the
power supply. Then the box is closed and sent down
the line for shipping. She is paid $0.75 for each box
packaged, and has $0.50 deducted for any faulty
packaging. Find her weekly gross pay if she packaged
580 boxes, but had 96 returned.
 Piecework Plans
(Trả lương theo khối lượng công việc)

- Types of jobs

- Where people can be paid by “Piece Work”

are in manufacturing
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+ Dress maker, furniture maker, fruit and
vegetable picker, footwear maker, hand bag or
hat maker, dog groomer, dog walker, etc.
+ Couriers and Truck Drivers can also be paid
by “Piece Work” based on how many items
they transport or deliver.
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Salary

• This type of Income involves Weekly,

Fortnightly, Monthly, or Annual rates of pay.
• Workers are often required to work
overtime, but it is rarely paid. Instead time
off may be given (if you are lucky enough to
have it written into 4- your employment
conditions).

• Types of jobs
• People who work on Salary are often
Professionals such as Doctors, Lawyers,
Engineers, Scientists, Accountants,
Politicians, andCopyright
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 Merit pay as an incentive
(Trả lương khuyến khích)
• Merit pay as an incentive
• Merit pay or a merit raise is any salary increase the
firm awards to an employee based on his/her
individual performance.
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• It is different from a bonus in that it usually becomes
part of the employee’s base salary, whereas a bonus
is a one-time payment.

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Salary Plans

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 Commission Plan

Commission Plan
- People are paid for results, thus, such plans
tend to attract high-performing people who
see that effort clearly leads to rewards.
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 CALCULATING COMMISSION
• Hung is paid a straight commission of 6% on his sales.
During February, his sales were $38,000. What was his
commission?

Find his commission rate:

Convert the percent to a decimal:

Multiply the decimal by the amount of sales

 CALCULATING COMMISSION
• Trang earned 15% commission on her monthly sales of
$2,870, $3,150, and $3,940. What was her total commission
for all three months.

First Month:

Second Month:

Third Month:

Total Commission:
 CALCULATING COMMISSION

• Lee receives a weekly salary of $200, plus 3%

commission on her sales. Last week, she sold
$29,700 of computer equipment. How much
did she earn?

Earnings = Commission + weekly Salary

Commission =
Weekly Salary =

Earnings =
 Commission Plan

- Type of jobs

- Jobs which have Commission pay are usually

Sales jobs such as
- Real Estate,
- Car Sales, 4-

- Sales Reps for Manufacturing companies,

- Book Sellers,
- Mortgage Brokers, and
- Insurance Consultants.

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 Individual Employee Incentive and
Recognition Programs
• Incentives for professional employees
- Professional employees are those whose work involves
the application of learned knowledge to the solution of
the employer’s problems,4-such as lawyers, doctors,
economists, and engineers.
- Making incentive pay decisions for professional
employees can be challenging because such
employees are usually paid well anyway.

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 Describe the main
incentives for managers
4-
and executives.

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 4-

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 Incentives for Managers and Executives
Short-Term Incentives: The Annual Bonus – Is aimed
at motivating the short-term performance of managers
and executives.
1. Eligibility usually includes both top and lower-level
managers.
2. Fund size refers to the total amount of bonus
money the firm makes available. 4- A nondeductible
formula is where employers use a straight percentage
(usually of the company’s net income) to create the
short-term incentive fund. A deductible formula
assumes that the fund should start to accumulate only
after the firm has met a specified level of earnings.
3. Individual Rewards – Typically, a target bonus (as
well as maximum amount) is set for each eligible
position, and the actual award reflects the person’s
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 Incentives for Managers
and Executives
• Strategic long-term incentives
o Stock options
o Other stock plans4-
o Ethics and incentives
• Other executive incentives

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Financial Pay and Incentive

Base salary

Merit incentive

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Bonuses

Stock options

Profit sharing
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 Individual Employee Incentive and
Recognition Programs
Nonfinancial and recognition-based awards
• Recognition programs usually refer to formal programs
such as employee-of-the-month programs.

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 Individual Employee Incentive and
Recognition Programs
Nonfinancial and recognition-based awards
• Social recognition programs are more informal manager-
employee exchanges, including praise and approval.
• Performance feedback is similar but provides quantitative
or qualitative information on 4-
performance in order to change
the performance or maintain it.
• Most employers combine both financial and non-financial
incentives to motivate employees.

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