Discussion1
Concept of Seniority Pay
In a seniority pay environment, employees are paid a base salary and awarded the same increase at regularly scheduled intervals. No differentiation is made based on how well a person performs a job. Increases are based solely on how long the person has worked for the organization. “Seniority pay offers a number of advantages to both employees and employers” (Martocchio, 2017, chap.3, 3.1). These increases are predetermined, therefore do not show favoritism among employees. Seniority-based incentives demonstrate to newly hired employees the gratitude of employers for employee commitment and longevity. An advantage for the employees is knowing that they will receive an increase regardless of their work performance. Although there are advantages, seniority-based pay increases have a few disadvantages. Disadvantages include the absence of effective performance, employees will receive this increase without any changes to their work behavior. Employees do not have to improve their skills or knowledge of their job because the increase is only based on their tenure, therefore employees are not motivated to work toward any type of performance improvements. Seniority-based pay scales are used in many different industries and often seen with unionized employees.
Concept of Merit Pay
Merit pay, or pay-for-performance, is an incentive where an employee is offered a bonus, or increase based on work performance as determined by particular criteria set by the organization. It is an approach to compensate higher performing employees with additional pay which can be used to make sure that their best performing employees feel like their work is appreciated. Merit pay is a percentage of an employee’s salary and will differ based on the level of performance of each employee. Merit pay is also based on the level of knowledge and skill that an employee obtains in order to perform their job more efficiently. Merit pay has advantages and disadvantages to both employees and employers. Merit pay sends a message to employees regarding how they want them to perform and contribute. Merit pay allows organizations to recognize individual performance, as it lets employees know where they stand. When employees are aware of the merit pay ranges and they receive less than the top increase, they can work toward improving their performance to qualify the next time around. There are also disadvantages with merit pay, which can include favoritism. Other employees may feel that the supervisor has given the higher percentage to an employee based on their relationship instead of that employee’s work performance. Merit pay must be measured by performance, therefore time must be taken to develop competencies, measurements, and baselines for performance. Communicating the measurements used for each employee’s performance may not be well received by the employee receiving the lower percentage rate. Merit pay scales are used in all industries and often include exempt, non-exempt, union, and non-union employees, they mostly occur in private for-profit organizations.
Martocchio, J. J. (2017). Strategic compensation: A human resource management approach (9th ed.)
Discussion 2
It can be difficult to establish maintain a pay system for any company. Most companies go with a system that suggests they will pay their employees based on compensation. Regardless of how the business concludes, it is important to remember that implementing an unsuitable pay system can cause a higher turnover rate, leaving the business short of top talent (DeGarmo, n.d.).
Define Seniority Pay Plan and the Advantages
Martocchio (2017) describes Seniority pay plans as something that could disappear in the future for companies as competition in the markets increases. However, this pay plan’s principle is to reward those employees that have been around the longest. This also determines the pay and any future increase based on how hard they work and their job performance (Martocchio, 2017). This pay scale gives employees the sense they are being paid per their seniority instead of primarily their performance. And Martocchio (2017) explains that this pay scale should have employees working better together. The benefit of this payment plan for the business is seniority pay is set in advance, and pay increases are already determined, so performance is not a priority. This way of paying employees will stop any feelings that one employee favors (Martocchio, 2017).
Define Merit Pay Plan
Merit pay is mostly determined by how well an employee performs their job. Paying the staff with this method can create motivation in the workforce to perform even better and take on more responsibility (Martocchio, 2017). This type of payment system is common in business. When a company pays employees with the Merit pay system, the staff assumes they are paid per their outstanding performance and reaching their goals. For this system to truly be successful, the job requirements must be reachable, and employees should have the skills and knowledge to reach said goals (Martocchio, 2017).
Seniority Pay Plan vs. Merit Pay Plan
The primary basis for each payment plan would be seniority focuses on being paid due to your time span with the business and Merit pays per performance. Although, the Merit pay system will take into account time spent on the job and with the business and performance when determining pay and pay increase (DeGarmo, n.d.). With Seniority pay, long-term employees are loyal and stable, and with Merit Pay, employees tend to work harder to meet maximum performance. However, this payment system can lead to the lower performing employees leaving the company or becoming discouraged (DeGarmo, n.d.). Regardless of which pay system a company chooses, the key is to communicate how they get paid and receive pay increases to prevent negative feelings in the future.
Linda Cleven
References
DeGarmo, D. D. (n.d.). Performance Management. Degarmo.com. Retrieved from https://www.degarmo.com/seniority-versus-performan…
Discussion 3
Individual incentive pay plans were created for the purpose of motivating employees to higher achievement levels. Incentive pay provides encouragement to employees and gives them something to aim for. Incentive pay helps to increase levels of productivity and employees tend to be happier when they are rewarded for going above and beyond their everyday work tasks. Employees who have the ability to positively impact their earning potential through incentive pay plans are more likely to be loyal to the organization. Employees often look for new employment opportunities when they feel they are not compensated according to their performance or feel unappreciated. Incentive plans are a way of rewarding employees and showing them that they are appreciated. This is an advantage to the employer because this reduces turnover, which also results in saving time and money on recruitment.
Group incentive play plans were created to motivate employees to reach goals collectively. Group incentives can be in the form of bonuses, a department lunch, or an outing for the group, depending on the organization. Employees are often motivated by the fear of letting down their team members. Top performers in the group will often see where they can help their colleagues and provide assistance to ensure the goal is reached. When an incentive is dependent on the collective efforts of several individuals, there is a sense of camaraderie that develops and team members feed off one another. One team member’s weakness may be another’s strength, which creates an overall balance. Knowing that performance is tied to payment, team members are more likely to find ways to work together effectively toward the best outcome.
Weakness with Incentive Pay Plans
Individual and group incentive pay plans are often created to improve performance. But they can also lead to unethical behavior, cause turnover, and foster envy and discontent. Since the individual incentive is provided with additional output, employees tend to increase their output as far as possible and pay less attention to the importance of the quality of the output. Performance not rewarded might be overlooked, barriers that employees cannot control might impact the outcome. Creating performance standards is time-consuming, and unrealistic standards can hamper motivation. The downside to group incentives is that some team members may contribute or feel they contribute more than their peers, leading to resentment towards one another and may cause top performers to see opportunities elsewhere. In order to make plans effective, organizations should concentrate more on the intrinsic rewards that provide opportunities for employees to develop skills and knowledge and build on their career growth. Employee development can be more of a motivation factor in some cases than monetary compensation.
Industry use of Incentive Pay Plan
The healthcare industry is an industry that would support group incentive pay plans. The finance department of my healthcare organization uses group incentive plans to motivate employees to bring in the most money. Each department is given the task of billing out claims to the insurance companies. The team that bills out the most claims and brings in the most money for that month will be allowed to leave ½ day early on that following Friday. The group that comes in second will receive a catered lunch from a restaurant of their choice (before COVID). Every month there are different goals set for the different billing teams to accomplish. This is not a monetary incentive but it gets the employees motivated and increases productivity.
Discussion 4
Motivation of Incentive plans
Incentive plans are rewarding an employer gives to their employees for the work they complete that has been set in advance for them to complete (Martocchio, 2017). In other words, this is also the wages an employee gets from the employer for the job they were hired to do. Incentive pay is like getting a bonus at the end of the quarter or company-paid tuition. Compensations such as these can help keep the workforce motivated and top-performing in their area. Martocchio (2017) explains that many companies use incentive pay plans and the wages the employees earn to keep the workers interested, encouraged, and inspired. However, incentive plans are not limited to just production or to employees that are not in a management position; incentives are created to be rewarded to individuals, teams, and anyone within the corporation (Martocchio, 2017). Cash and non-monetary incentives help keep employees motivated and considerably increase performance, productivity, and potential profits (Corcione, 2019). The key is to know what the employees desire and will get excited about.
Possible Weaknesses of Incentive Plans
With individual incentive plans, a negative is that since the employee’s manager determines an individual’s performance, the incentive plan can seem unbendable. In other words, since the supervisor sets the goals once the goals are met, the individual may not reach any further (Martocchio, 2017) and begin to feel stuck. Another limit to individual incentive plans is if the work or duties change and the employee is learning something new, then it isn’t easy to meet the criteria of incentive plans due to the tasks being too new, and a business may not know or have changed how to achieve the incentive reward. And lastly, incentive plans could incite poor or undesirable work behavior. Employees get focused on one thing, and other areas they perform in could become neglected (Martocchio, 2017).
As for group incentive plans, Martocchio (2017) explains that this plan’s greatest weakness is employee turnover. As with any group function, there always seems to be that one or two people who do not put forth the same effort as the rest of the team but receive the same reward, which can cause frustration for the other team members that put forth all the effort. Another negative of the group incentive plan is that individuals may feel less comfortable knowing that their reward depends on others. If all group members are not putting forth the needed effort to accomplish the goals, then the reward could be much smaller or nothing, which can become irritating and discouraging to others (Martocchio, 2017).
Example
The company I work for has several different incentive plans in each department. When I started with the company, I worked in the technical support department, and it was based on my merits. My ability and how I performed. Several criteria had to be met, but, in a nutshell, l any quarterly bonus was based on me. The department I work in now is based on a group incentive. I do not care for this as much because, as Martocchio (2017) points out, some sit back and let others take the lead and do as little as possible but get the same as those who worked harder, longer, and more diligently. On the other hand, the group incentive has its benefits aside from the slackers. In our department, everyone counts the days down until quarterly bonus week. Because everyone enjoys the benefits of the extra money, the majority tend to work hard and do the job to the best of their ability and are willing to go above and beyond to get the job done, and this benefits all of us. However, not all our bonuses are the same because even though they are judged as a group, the matrix looks at our individual performance to see if there are added benefits that may be added to that person’s bonus. It is almost like getting two bonuses in one lump sum.
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