Incentive Pay
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Incentive Pay: Understanding Compensation Plans and Executive Rewards, Slides of Human Resource Management
An overview of incentive pay, discussing the basic issues, types of incentives, and executive incentives as a special case. It covers payment for time worked, payment for outcomes, and equity theory, goal setting, and behavior modification. The document also includes examples of pay for various employees and ceos, raising questions about fairness and effectiveness.
Typology: Slides
2012/2013
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Incentive Pay
Incentive Pay
• Basic issues
• Types of incentives
• Executive incentives...a special case
A Good Incentive Plan...
- Perceived as fair (not a reward for sucking up !)
- Aimed toward controllable behaviors
- Understandable to the user
- Challenging but realistic
- Clear objectives on front end
- Reward desired behaviors (easier said than done...)
Equity Theory
Goal Setting
Behavior Modification
Payment for Time Worked
• Overtime
– Some legally required, but a reward nevertheless
– Some not required by law, but by market
– Can pay more OT than required by law
• Shift differentials
• Holiday pay
Executive Incentives
- Very dependent on tax laws; idea is to get maximum tax
advantage for firm and employee
- Basis of reward
- Profits
- Stock price
- Other (service, growth)
- Issues
- Timing
- Investment needed?
- Amounts
- Link to performance ??? (^) Carl Icahn
Is It Too Much????
Employee Annual Pay
James A. Skinner (CEO, McDonald’s) $9,443,486 *
Fast food cook $16, Food service manager $48, Maids and housekeeping cleaners $19, Police, fire and ambulance dispatchers $34, Chemical engineer $84, Accountants and auditors $63, Plumbers, pipefitters, and steamfitters $47,
- 2007 pay and incentives. All other numbers from DoL, May 2007 U.S. average