Incentive pay: productivity's own reward

Article Abstract:

Employers seeking to control costs and reward productive employees often move away from fixed-pay plans toward incentive systems: bonuses, commissions, or group incentives. These approaches require careful determination of: objectives, eligibility criteria, performance standards, award system, funding formulas, and payment vehicles. Administrative concerns also come into play, including the timing of payments and whether to include awards in benefit calculations. Bonus plans provide incentive and their administration is flexible, but there is an imprecise performance-reward relationship. Commission plans seem fair, but require frequent monitoring and can undermine teamwork. Group incentive arrangements offer a middle ground, with pooled rewards encouraging teamwork. They can be expensive, however, and allow mediocre employees to be "carried" by their peers.

Management, Human resource management, Profit sharing

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A management rewards system for the long and short terms

Article Abstract:

Firms need management reward systems to ensure corporate loyalty, promote long- and short-term productivity, and facilitate recruiting efforts. Studies indicate that many companies have middle management and executive reward programs, most of which reflect the corporations' annual profit levels. Some of the more innovative management reward systems tie executive bonuses to shareholder gains, marking a shift from manager performance to salary equity. Management reward systems must be redesigned to emphasize long-term benefits. A multi-year reward system to build company loyalty is described and demonstrated by examples. This kind of system encourages both high performance and years of service.

Methods, Middle managers

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Cash emerges as compensation hero

Article Abstract:

Cash bonuses are becoming preferable to incentive stock options and non-qualified stock options as an executive compensation technique. The new and permanent two-tier income tax rate aspect of the 1986 Tax Reform Act also eliminated the favorable capital gains tax, hurting non-qualified stock appreciation, and enhancing the appeal of cash incentives. Cash bonuses provide immediate compensation, and executives do not have to pay anything to their firms. The bonus is fully tax deductible by the corporation in the year given, while the individual is tax in full in the same year. Tax considerations of non-qualified stock options are also discussed.

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