Ch 13 Rewarding for Business performance

Rewarding for Business performance

Here financial reward are given related to business or organizational performance.

Types of schemes
1. Profit sharing 2. Share ownership scheme 3. Gain sharing

1. Profit sharing
Used in special team, it provides direct or indirect payments to employees on companies profit. This would be an additional pay other than their regular salary and bonuses.

Meaning of Profit sharing

Is a scheme whereby certain percentage of the profit is distributed at fixed intervals usually annually or semi- annually in some definite ratio to all employees who have been the employees of the firm for a stated term.

Basis of calculation
1. Pre- determine formula : a fixed % of profit is distributed. 2. No predetermine formula : top management decides how much to distribute. 3. Threshold formula : a threshold is set below which no profits will be distributed and a maximum limit is defined.

Methods of profit sharing

1. Cash payment plan profit in cash 2. Deferred payment plan profit is held in trust for him , to be paid either in installments or as retirement benefits. 3. Combination payment plan : cash + deferred payment plan . 4. Stock ownership Plan : enables employees to acquire company stock at concessional rates.

Share ownership schemes / ESOP

Also called as employee stock ownership plan (ESOP) It allows employees to become owners of stock in the company they work for. Shareholder can sell stock tax free.

Forms of share ownership plan

1. Share Incentive schemes 2. Save as you earn ( SAYE)

1. Share Incentive schemes

It allows employees to buy share or company gives them directly to employees. It includes : 1. Free share 2. Partnership share 3. Matching shares : company gives 2 matching share for each partnership share an employee buys. 4. Dividend shares

2. Save as you earn ( SAYE)

Employees enter a special saving contract that deducts money from their pay to buy options that allow them to buy company share in 3, 5, or 7 years time at today's price or at a discount of up to 20 % of that price.

3. Gain sharing
An improvement or gain in company performance it distributes sharing of benefits with employees. Generally it is done in group or all employees.

Ch 14 Recognition Scheme
The scheme recognize the past performance. It is a non cash reward. It even includes Thank you or public recognition from leader or CEO.

Principles of Recognition
1. 2. 3. 4. It should be immediate Delivered personally Should be valuable Should be direct and not on phone.

Types of Recognition
1. Day to day Recognition 2. Public Recognition 3. Formal Recognition

Prepared by : Ms. Shirufi Daruwala