Business Studies Financial and non-Financial Rewards

Learning Objectives: To understand the various ways that workers that workers can be financially and non-financially rewarded To discuss, compare and evaluate different reward systems in different business contexts

Business Studies Financial and non-Financial Rewards

Make a list of the different ways that people can be financially rewarded (paid) for the work that they do? Is one method of financially rewarding (paying) for the work an employee does better than another? Why?

Business Studies Financial and non-Financial Rewards

What are the different ways that workers can be financially rewarded for their work?
WAGES Reward for a regular amount of time a worker spends at work for example weekly wages Wages are not linked to the level of productivity Wages guarantee the income for the worker but do not offer a financial incentive to work harder. Extra hours worked can be paid as overtime

Business Studies Financial and non-Financial Rewards

Business Studies Financial and non-Financial Rewards

What are the different ways that workers can be financially rewarded for their work?
1. TIME RATES Reward for the amount of time a worker spends at work eg. an hourly rate Time rates are not linked to the level of productivity. Used where ir is difficult to measure the output of a worker Time rates guarantee the income for the worker but do not offer a financial incentive to work harder.

Business Studies Financial and non-Financial Rewards

What are the different ways that workers can be financially rewarded for their work?
2. PIECE RATES Workers are paid an agreed rate for every item produced (this is payment by results system) Piece rates are linked to productivity and provide a financial incentive to worker harder and produce more. Targets are often set for workers to try to achieve.

Business Studies Financial and non-Financial Rewards

What are the different ways that workers can be financially rewarded for their work?
SALARIES Normally paid monthly, based on an annual amount divided into 12 payments Usually a standard rate and no extra is paid for overtime. Can be linked to rewards such as commission, bonus and profit-sharing

Business Studies Financial and non-Financial Rewards

What are the different ways that workers can be financially rewarded for their work?
COMMISSION Workers are paid a percentage of the value of the goods or service provided Some workers on commission also receive a guaranteed base salary. The commission then becomes an incentive earn more money. Eg. Real estate salesperson

Business Studies Financial and non-Financial Rewards

Business Studies Financial and non-Financial Rewards

What are the different ways that workers can be financially rewarded for their work?
PROFIT-SHARING In addition to a basic salary, workers receive a share of the annual profits of the company BONUS A lump sum paid to workers if they have done a good job

Business Studies Financial and non-Financial Rewards

Business Studies Financial and non-Financial Rewards

What are the different ways that workers can be financially rewarded for their work?
FEES Fees are a payment made to person for a specific task the amount of the fee may depend on the time taken or the level of difficulty Fees are usually paid to service providers. Eg. Solicitors

Business Studies Financial and non-Financial Rewards

Should one employee be paid more than another if they are doing a similar job?
PERFORMANCE RELATED PAY This is an incentive scheme that links the annual salary of an employee to their performance in the job.

The best employees receive the highest financial reward salary, bonus, profit-share

Business Studies Financial and non-Financial Rewards

PERFORMANCE RELATED PAY: A method of payment where an individual employee receives an increase in pay based wholly or partly on the regular and systematic assessment of individual performance. The payment of salary increments, bonus and other incentives is determined by a process of systematic performance appraisal . The performance measures may concern inputs or outputs but generally focus on the achievement of specific individual objectives. There has been a growth of interest in such schemes. How do you accurately measure performance? What could be some of the problems with this type of financial incentive scheme?

Business Studies Financial and non-Financial Rewards

Business Studies Financial and non-Financial Rewards

PERFORMANCE RELATED PAY: A number of organizations have experienced difficulties in setting performance criteria, assessing performance objectively and in linking pay to performance, particularly where budget constraints limit the potential size of any reward. Individual performance related pay systems have also been found to undermine team working . Some organizations have abandoned or modified their PRP systems but others are still moving towards this approach to pay .

Business Studies Financial and non-Financial Rewards

In 2005, the average CEO of a Standard & Poor's 500 company received $13.51 million in total compensation, according to an analysis by The Corporate Library. This represents a 16.14 percent increase in CEO pay over 2004. A reasonable and fair compensation system for executives and workers is fundamental to the creation of long-term corporate value. However, the past two decades have seen an unprecedented growth in compensation only for top executives and a dramatic increase in the ratio between the compensation of executives and their employees.

Business Studies Financial and non-Financial Rewards

CEO Pay Up 298%, Average Worker's? 4.3% (1995-2005)

Business Studies Financial and non-Financial Rewards

Business Studies Financial and non-Financial Rewards

Performance related pay Commission Bonus

METHODS OF PAYMENT

Wages Time rate Piece rate Profit-sharing

Salaries

Business Studies Financial and non-Financial Rewards

Brainstorm a list of the different ways that a worker may be rewarded that does directly involve paying them money directly such as in the form of wages or salaries

What makes a difference to an employees satisfaction at work? An employee is happy and is satisfied with their work if

Business Studies Financial and non-Financial Rewards

JOB SATISFACTION
can be increased by

Job Rotation Job Enlargement

What do we understand by: Job Rotation Job Enlargement Job Enrichment

Job Enrichment