Incentive pay as a way of compensating employees Essay

Incentive pay as a way of compensating employees - Essay Example According to the Vision Link advisory group, intrinsic rewards also allow employees to obtain a certain level of autonomy, provides opportunities for mastery in which employees may feel and see their progress, and it can establish purpose in their work so that they can feel that they are doing something good not only for themselves but also for the company. On the other hand, extrinsic compensation may include monetary and nonmonetary rewards. Examples of extrinsic compensation can be discretionary benefits such as paid time off and protection programs (Martocchio 86). Generally, â€Å"Incentive pay may come in the form of bonuses, profit sharing, or commission† (Business Dictionary). It is a monetary reward given to employees based on individual or group performances. This type of pay can reflect the way employees continue to pursue positive results in the workplace. In addition, incentive plans can inspire loyalty, commitment, and hard work. This type of plan will allow for recognition of outstanding workers and at the same time keeping track of the organizational goals (â€Å"Employee Incentive†). A company can decide on how they will design their incentive pay plans and on what criteria depending on what industry and type of the company. The most common types of incentive pay plans are individual incentive plans, group incentive plans, and companywide incentives. In many occasions, â€Å"Individual incentive plans reward employees for meeting such work-related performance standards as quality, productivity, customer satisfaction, safety, or attendance† (Martocchio 85). Organizations use individual incentive plans to motivate their employees by granting them the opportunity to receive additional income. These additional incomes can be given in forms of bonuses or commission (Joseph). There are different types of individual incentives the most common are piecework plans, management incentive plans, behavioral encouragement plans, and refe rral plans (Joseph). Piecework plans reward their employees for increases in productivity. It consists of the quantity and the quality of work produced. This criterion is based upon the supervisor’ or managers’ interpretation on the performance of the employee. Piecework plans can be used in industrial and production settings (Joseph). In contrast, management incentive plans involve several intricate objectives. This type of incentive only allows managers to receive their award when they reach objectives depending on sales, profit, production, or other criteria in the company (Martocchio 86). In addition, many companies may compensate their employees for referrals. Some companies use referrals to motivate their workers to recruit new employees into the company the employee will then be rewarded after the new employees has been in the company for a certain period (Joseph). Lastly there are behavioral encouragement plans where employees are given cash for specific behavi oral accomplishments. In addition to individual incentive plans, some companies choose to compensate or reward their employees as a group, in other words, based on collective performance. Group incentive plans are measured depending on customer satisfaction, labor cost savings, material cost savings, reduction in accidents, and services cost savings (Joseph). It is said that â€Å"well designed group incentive plans ultimately reinforce teamwork, cultivate loyalty to the company, and increase