Name: Haris Bilal

Department: Management Sciences

Program: BBA‘3rd’
Presented to: Sir Touseef Ahmed
Subject: Human Resource Management
“Special
Cases
Of Compensation”
Definition:
 Compensation management is an integral part of human resource management and
helps in motivating the employees and improving organizational
effectiveness. Compensation is a comprehensive term which includes everything
an employee receives in return for his work such as wages, salaries, allowances,
benefits and services.
Incentive Compensation Plans:
 Incentives are bonuses or benefits added to the direct salary of an employee to
provide rewards for his/her performance through out the month. Incentive
compensation management is the strategic use of incentives to drive better
business outcomes and more closely align sales rep behavior with the
organization’s goals.
Types of Plans:
 There are tow types of Incentive plans,
 Individual incentive plan.
 Group incentive plan.

(Individual Incentive) (Group Incentive)

Individual Incentive:
Individual incentive is the type of plan which applies on single employee. Individual employee incentive plans
are compensation programs that focus on targets and rewards for just one team member. It gives the advantage of
recognizing the efforts of a single individual in a team. There are two sub individual incentive plans given
below :

‘Merit pay plans’ ‘Piecework Plans’

 Merit pay is a salary increase given to reward
individual performance. Merit pay is a type of
pay for performance (PFP), which is used more
broadly to describe any pay based on employee
performance.
 Rewards high performers.
 Connects work to results.
 Enhances performance.
 Piecework is the oldest and still most
popular individual incentive plan. It is a system
of pay based on the number of items processed
by each individual worker in a unit of time,
such as items per hour or items per day.
 Time Saving Bonuses.
 Work done in specific time.
Group Incentives:
 Group incentives programs reward employees for their collective performance,
rather than for each employee’s individual performance. Group incentives
programs are most effective when all group members have some impact on
achieving the goal, even through individual contributes might not be equal.
 Plant-wide Incentives:
An incentive system that reward all members of the plant
based on how well the entire group performed.
 Scanlon Plan:
The Scanlon plan is remarkably progressive, considering that is
now more than 70 years old.
 It is an incentive plan developed in 1937 by Joseph Scanlon and designed to 
encourage cooperation, involvement, and sharing of benefits.
 Improshare:
A special type of incentive plan using a specific mathematical formula
for determining employee bonuses and to calculate labor cost savings.
Paying for Performance:
Paying for performance means, paying an individual
for his/her performance in a corporation.
Some common performance factors are:

> Piece-rate plans.

> Gain sharing.
> Wage incentive plans.
> Profit sharing.
> Lump sum bonus.
There are three special cases in Paying for performance,
 Competency-Based compensation.
 Broad-Banding.
 Team-Based compensation
 Competence-based compensation:
In this kind of compensation, individuals
are awarded on their skills set. There way of handling things, leading other people, solving
the problems and many more.

 Broad Banding:
Individuals are paid on the type of levels of competencies
they possess.

 Team Based Compensation:

Team based compensation means the type of
compensation awarded to a team for their co-operation with each other.
 Clarity of team purpose and goals.
 Ability of the team to obtain needed resources.
 Effective team communication skills and trust.