7/30/2019 2010919174751526

1/17

Copyright 2002 by Harcourt, Inc. All rights reserved.

Topic 17 :

HR management: Financial Rewards

Lecturer: Zhu Wenzhong

7/30/2019 2010919174751526

2/17

Copyright 2002 by Harcourt, Inc. All rights reserved.

Define the term financial rewards Explain the five payment schemes for

rewarding employees

Explain the five types of incentive schemesused by businesses to motivate workers Explain the incentive schemes for

employees and those for managers and

directors State some problems with these incentiveschemes

LEARNING GOALS

7/30/2019 2010919174751526

3/17

Copyright 2002 by Harcourt, Inc. All rights reserved.

Compensation

Financial rewards:

Wagecompensation based on an hourlypay rate or the amount of output produced.

Salarycompensation calculated on a

periodic basis, such as weekly or monthly. Benefits

7/30/2019 2010919174751526

4/17

Copyright 2002 by Harcourt, Inc. All rights reserved.

Compensation

Most firms base their compensation policieson five factors:

Salaries and wages paid by others Government legislation Cost of living Firms ability to pay Worker productivity

7/30/2019 2010919174751526

5/17

Copyright 2002 by Harcourt, Inc. All rights reserved.

Payment schemes

Time rates: paid for the time spent at work , weekly ormonthly

Annualized hours: paid on the basis of certain hours ayear

Piece rates: paid for each item produced Commission:paid by a percentage of the value of

each good sold

Fringe benefits: extra pay for insurance, car ortraining

PhotoDisc

7/30/2019 2010919174751526

6/17

Copyright 2002 by Harcourt, Inc. All rights reserved.

Question for critical thinking

What are the objectives ofemployees for the payment they

receive?

PhotoDisc

7/30/2019 2010919174751526

7/17Copyright 2002 by Harcourt, Inc. All rights reserved.

Types of incentive scheme

Piece rate Profit sharing

Profit-related pay Share-related pay Performance-related pay

7/30/2019 2010919174751526

8/17Copyright 2002 by Harcourt, Inc. All rights reserved.

Types of incentive scheme

Each unit produced over the target isrewarded with a bonus orcommission payment.

Piece rate scheme

7/30/2019 2010919174751526

9/17Copyright 2002 by Harcourt, Inc. All rights reserved.

Types of incentive scheme

Profits are sharedequally or as agreed bypartners.

Piece rate

Profit-sharing

7/30/2019 2010919174751526

10/17Copyright 2002 by Harcourt, Inc. All rights reserved.

Employees are paid abonus as a percentage

of the profit amountmade by a company.

Piece rate

Profit-sharing

Profit-related pay

PhotoDisc

Types of incentive scheme

7/30/2019 2010919174751526

11/17Copyright 2002 by Harcourt, Inc. All rights reserved.

Employees are offeredsome shares or thepossibility ofpurchasing someshares as an incentive

Piece rate

Profit sharing

Profit-related pay

Share-ownership

PhotoDisc

Types of incentive scheme

7/30/2019 2010919174751526

12/17Copyright 2002 by Harcourt, Inc. All rights reserved.

Types of incentive scheme

Employees annualsalary is linked to their

performance in the job.The size of payment isdetermined by theachievement of the set

target.

Piece rate

PhotoDisc

Profit sharing

Profit-related pay

Share-ownership

Performance-related pay

7/30/2019 2010919174751526

13/17Copyright 2002 by Harcourt, Inc. All rights reserved.

Question for critical thinking

Why do companies encourage the use ofshare ownership as an incentive scheme?

Incentive schemes may differ foremployees and managers and directors.What are the different incentive schemesbetween them?

PhotoDisc

7/30/2019 2010919174751526

14/17Copyright 2002 by Harcourt, Inc. All rights reserved.

Problems with the incentive

schemes in practice Operating problems Product quality problems

Quality of working life Jealous problems

PhotoDisc

7/30/2019 2010919174751526

15/17Copyright 2002 by Harcourt, Inc. All rights reserved.

Four Forms of Incentive Compensation

7/30/2019 2010919174751526

16/17Copyright 2002 by Harcourt, Inc. All rights reserved.

Compensation

Employee Benefitsrewards such asretirement plans, health insurance, vacation,

and tuition reimbursement provided foremployees either entirely or in part at thecompanys expense.

Some benefits, e.g. Social Securitycontributions, are required by law

7/30/2019 2010919174751526

17/17C i ht 2002 b H t I All i ht d

Compensation

Flexible benefit plan (cafeteria plan) benefitsystem that offers employees a range of optionsfrom which they can choose they types of benefitsthey receive

Flexible work planemployment that allowspersonnel to adjust their working hours and placesof work to accommodate their personal lives

Flextime Compressed workweek Job Sharing Home-based work program