Page 343 - F1 - AB Integrated Workbook STUDENT 2018-19

Motivating individuals and groups

3.2 Reward systems

Reward systems should be carefully designed in order to ensure that they:

 are fair and consistent for all employees

 are sufficient to attract and retain staff

 maintain and improve levels of employee performance

 reward progression and promotion

 comply with legislation and regulation (i.e. minimum wage laws)

 control salary costs

There are three main types of incentive scheme:

Performance related pay (PRP)

Piecework – reward related to the pace of work or amount of effort.

Management by objectives (MBO) – key results are identified for which
rewards will be paid on top of salary.

Points system – this is an extension to MBO reward systems, where a range
of rewards is available based on a point system derived from the scale of
improvement made, such as the cost reduction achieved.

Commission – paid on the performance of an individual and typically paid to
salaried staff in sales functions, where the commission earned is a proportion

of total sales made.

Bonus schemes – usually a one off as opposed to PRP schemes which are

usually a continual management policy.

Profit sharing – usually available to a wide group of employees where
payments are made in the light of the overall profitability of the company. Share
issues may be part of the scheme.

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