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Dr. Maha Hafez: Supervised by

This document discusses various types of performance-based pay or variable pay systems. It begins by defining performance-based pay as financial rewards provided contingent on meeting specified performance results. It then discusses several types of performance-based pay including merit pay, incentive pay, profit sharing, and ownership programs. The document provides details on each type, such as how they are measured and calculated. It also discusses challenges that can arise with different performance-based pay approaches.

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80 views18 pages

Dr. Maha Hafez: Supervised by

This document discusses various types of performance-based pay or variable pay systems. It begins by defining performance-based pay as financial rewards provided contingent on meeting specified performance results. It then discusses several types of performance-based pay including merit pay, incentive pay, profit sharing, and ownership programs. The document provides details on each type, such as how they are measured and calculated. It also discusses challenges that can arise with different performance-based pay approaches.

Uploaded by

shumailkhan
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Supervised by:

Dr. Maha Hafez

Introduced by :
Abeer F. Agami
Amira M. Ali
Hanan Seif
It is any type of financial reward that is provided
only when certain specified performance results
occur.

AKA : “Variable Pay” or “Contingent Pay”.


Motivation.

Increase the commitment.

Reinforce cultures and values.

Alignment with company performance.

Discriminate equitably between


employees based on performance.
Payment method

Frequency of payout

Ways of measuring performance

Choice of which employees are covered


Pay based on individual performance
differences.

Ability to finance performance reward.

Use “SMART” performance standards.

Communicate the payout formula.

Keep administrative costs reasonable.


Individual

Group

Organizational
Merit pay

Incentive pay

Profit sharing

Ownership

Gain sharing
Annual pay increases are usually linked to
performance appraisal ratings.

Merit increase grid combines an employee’s


performance rating with his/her position in a pay
range, to determine the size and frequency of
his/her pay increases.
Develop employee confidence and trust in
performance appraisal.
Establish job-related performance criteria.
Separate merit pay from regular pay.
Distinguish merit raises from cost-of-living
raises.
Withhold merit payments when performance
declines.
Depends on reliable and accepted performance
measures.
Cause poor relationships between supervisors
and their subordinates, and among
subordinates.
Not suitable for work depending on
collaboration and cooperation.
Setting the total available bonus pool is an
arbitrary decision by top management and can
cause dissatisfaction.
How to define behavior that will be rewarded?
is a tough question.
Straight piece-work
 Payment of a uniform price / unit of production.
 Forms:
Money piecework
Time piecework

Sales Commissions
 Basic commission on sales volume
 One-third of salary
 Satisfy all the criteria listed for bonus schemes
Gainsharing 
A form of group compensation based on group or plant
performance (rather than organisation-wide profits) that
does not become part of the employee’s base salary.

Group incentives
Tend to measure performance in terms of physical output.
Profit Sharing
Any procedure by which an employer pays, or
makes available to all regular employees, in
addition to their base pay, current or deferred
sums based upon the profits of the enterprise.

Challenges:
Agreement over division of profits
between company and employees.
Possibility of no payout due to financial
condition of company.
Ownership
Stock option
An employee ownership plan that gives
employees the opportunity to buy
the company’s stock at a previously fixed
price.

Employee stock ownership plan (ESOP). 


An employee ownership plan that provides
employers certain tax and financial
advantages when stock is granted to
employees.
Thank U

Questions???

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