Page 83 - Cambridge IGCSE Business Studies

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6: Motiva
5: Business objectives and stakeholder objectivess
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Commission
KEY TERM
With commission, pay is based on the value of sales made by staff . This method is

Commission: payment to sales only ever used to reward sales staff .

staff based on the value of the The main advantage of this method is that pay is linked to the value of goods

items they sell.
sold. The main disadvantage of this payment method to workers is that they are

never certain about how much they will earn. This may mean that they leave as

they cannot guarantee that they will earn enough to pay for their basic needs.

This might then become a disadvantage to the business because they will have to
spend more time and money on recruiting and training new workers.
KEY TERMS Bonus scheme
A bonus scheme is a method of performance-related pay. Workers receive an
Bonus: an additional reward additional payment for achieving a target set by managers. This method can be

paid to workers for achieving
used to reward any individual worker or group of workers where a performance
targets set by managers.
target can be set by managers. If the targets set by managers are realistic then they
Performance-related pay:
can motivate workers to work harder because they know they will receive a bonus.
a bonus scheme used to reward

staff for performing to the The main advantage to businesses of this method is that it is linked to
required standard. performance targets. Workers are only awarded a bonus if they increase their
productivity. An increase in productivity will reduce average costs. Th e main
disadvantage is that if the targets set are unrealistic then workers could become
demotivated. Also, if the target is group-based and the target is reached, all workers
in the group will receive the bonus even if some have worked harder than others to

achieve the target. This could lead to conflict between members of the group.

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ACTIVITY 6.4

The table below shows how the pay and average weekly output of workers at three different companies is calculated.

Company A Company B Company C
Hourly rate $4.75 – $4.50
Piece-rate – $0.10 –

Bonus based on producing more $5 – $15
than 1,900 units per week
Hours worked 40 40 40

Average weekly output per worker 1,850 2,000 1,950

1 Calculate the average weekly wage for a worker in each of the three companies. Show your workings.
2 Based on your results to question 1, which company would you choose to work for? Justify your answer.

Fringe benefits
KEY TERM

Fringe benefi ts are an alternative to cash payments. They include discounts on
Fringe benefits: non-cash company products, company cars, health insurance and pensions received by the
rewards often used to recruit or

workers in a business.
retain workers and to recognise the

status of certain employees. All workers could receive fringe benefits. It is more usual for diff erent types
of fringe benefits to be linked to the individual’s status within the business.