Incentive Plans
Incentive Plans
Isabelle Alston
OMM 618: Human Resources Management
Companies’ presidents, CEOs, and managers for decades have used incentives to attract, reward, and retain employees. Dessler (2011) recognizes that most employees receive salary or hourly wage as well as other incentives (Dessler, 2011). Dessler (2011) reports a variety of incentive plans ranging from piecework plans to the earning at risk pay plans (Dessler, 2011). While there are many incentive plans that can be discussed, this paper will only highlight the advantages and disadvantages of merit pay as an incentive and profit sharing plans.
Merit Pay Dessler (2011) defines merit pay as a salary increase awarded based on performance and becomes part of the employees’ base pay salary (Dessler, 2011). Dessler (2011) asserts that merit pay has advocates who argues that rewards tied to performance can motivate performance and detractors claim that merit pay undermine teamwork and misconception of pay as a whole (Dessler, 2011). As Dessler (2011) defines merit pay with advocates and detractors other authors such as Longenecker and Goff (1992) uses the term performance appraisal instead of merit pay. Longenecker and Goff (1992) states that merit pay or performance appraisal is believed to be effective by managers and subordinates because it help clarify employee input about his or her job (Longenecker and Goff, 1992). At the same time, both managers and subordinates viewed merit plans as ineffective for linking pay to performance, ineffective for improving motivation and performance as well as ineffective for managers and subordinates working relationship (Longenecker and Goff, 1992).While Longenecker and Goff (1992) referred to merit pay more as performance appraisal others such as Hayes (1999) questions incentive programs altogether. In the article ‘Pros & Cons of Pay for Performance’ the author claims that no one really knows if incentive programs truly work (Hays,
Isabelle Alston
OMM 618: Human Resources Management
Companies’ presidents, CEOs, and managers for decades have used incentives to attract, reward, and retain employees. Dessler (2011) recognizes that most employees receive salary or hourly wage as well as other incentives (Dessler, 2011). Dessler (2011) reports a variety of incentive plans ranging from piecework plans to the earning at risk pay plans (Dessler, 2011). While there are many incentive plans that can be discussed, this paper will only highlight the advantages and disadvantages of merit pay as an incentive and profit sharing plans.
Merit Pay Dessler (2011) defines merit pay as a salary increase awarded based on performance and becomes part of the employees’ base pay salary (Dessler, 2011). Dessler (2011) asserts that merit pay has advocates who argues that rewards tied to performance can motivate performance and detractors claim that merit pay undermine teamwork and misconception of pay as a whole (Dessler, 2011). As Dessler (2011) defines merit pay with advocates and detractors other authors such as Longenecker and Goff (1992) uses the term performance appraisal instead of merit pay. Longenecker and Goff (1992) states that merit pay or performance appraisal is believed to be effective by managers and subordinates because it help clarify employee input about his or her job (Longenecker and Goff, 1992). At the same time, both managers and subordinates viewed merit plans as ineffective for linking pay to performance, ineffective for improving motivation and performance as well as ineffective for managers and subordinates working relationship (Longenecker and Goff, 1992).While Longenecker and Goff (1992) referred to merit pay more as performance appraisal others such as Hayes (1999) questions incentive programs altogether. In the article ‘Pros & Cons of Pay for Performance’ the author claims that no one really knows if incentive programs truly work (Hays,
References: Flesher, D. L. (1993). Retirement plans: What are the options? Management Accounting, 75(5), 52. Retrieved from http://search.proquest.com/docview/229739624?accountid=32521 Dessler, G. (2011) A framework for human resource management. Sixth Edition. Pearson Education, Inc. Upper Saddle River, New Jersey Hays, S. (1999). Pros & cons of pay for performance. Workforce, 78(2), 68-72. Retrieved from http://search.proquest.com/docview/219773244?accountid=32521 Longenecker, C. O., & Goff, S. J. (1992). Performance appraisal effectiveness: A matter of perspective. S.A.M.Advanced Management Journal, 57(2), 17. Retrieved from http://search.proquest.com/docview/231242032?accountid=32521 Profit-sharing plans work. (1988). Industry Week, 236(9), 19. Retrieved from http://search.proquest.com/docview/219725343?accountid=32521