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Ch 13 Rewarding for Businessperformance
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Rewarding for Business performance
Here financial reward are given related tobusiness or organizational performance.
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Types of schemes
1. Profit sharing
2. Share ownership scheme
3. Gain sharing
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Meaning of Profit sharing
Is a scheme whereby certain percentage of theprofit is distributed at fixed intervals usuallyannually or semi- annually in some definite ratioto all employees who have been the employees ofthe firm for a stated term.
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Basis of calculation
1. Pre- determine formula : a fixed % of profit isdistributed.
2. No predetermine formula : top managementdecides how much to distribute.
3. Threshold formula : a threshold is set below
which no profits will be distributed and amaximum limit is defined.
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Methods of profit sharing
1. Cash payment plan profit in cash
2. Deferred payment plan profit is held in trustfor him , to be paid either in installments or asretirement benefits.
3. Combination payment plan : cash + deferred
payment plan .4. Stock ownership Plan : enables employees to
acquire company stock at concessional rates.
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Share ownership schemes / ESOP
Also called as employee stock ownership plan(ESOP)
It allows employees to become owners of stockin the company they work for.
Shareholder can sell stock tax free.
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Forms of share ownership plan
1. Share Incentive schemes
2. Save as you earn ( SAYE)
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1. Share Incentive schemes
It allows employees to buy share or companygives them directly to employees.
It includes :
1. Free share
2. Partnership share
3. Matching shares : company gives 2matching share for each partnership share anemployee buys.
4. Dividend shares
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2. Save as you earn ( SAYE)
Employees enter a special saving contract thatdeducts money from their pay to buy optionsthat allow them to buy company share in 3, 5, or7 years time at today's price or at a discount ofup to 20 % of that price.
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3. Gain sharing
An improvement or gain in companyperformance it distributes sharing of benefitswith employees.
Generally it is done in group or all employees.
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Ch 14 Recognition Scheme
The scheme recognize the past performance.
It is a non cash reward.
It even includes Thank you or public recognitionfrom leader or CEO.
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Principles of Recognition
1. It should be immediate
2. Delivered personally
3. Should be valuable
4. Should be direct and not on phone.
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Types of Recognition
1. Day to day Recognition
2. Public Recognition
3. Formal Recognition
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Prepared by : Ms. Shirufi Daruwala