Answer to Question #174320 in Management for Esther Gathenya

Question

Compensation is an important factor that organizations can use to motivate staff to perform well in their jobs. Identify and discuss the types of compensation that an organization can use to motivate employee performance. 

Answer 1

Employers who are savvy understand that retaining top talent necessitates offering a competitive salary and benefits package. Wages, salaries, incentives, and commission arrangements are all part of compensation. Employers should not overlook the benefits component of employee compensation and benefits because benefits sweeten employment contracts by aligning them with the priorities that the majority of workers need. The types of compensation to motivate employee performance include;

1.     Hourly wages. This is assigned to the unskilled or semi-skilled labor. It is also used to compensate temporary, part time or contract workers.

2.     Salary. The compensation is assigned to educated employees or human resources who occupy management positions. Salaries are common for employees that the company has in for a long period.

3.     Commission. In sales, commission-based compensation is most common, and it is calculated as a percentage of goals achieved (or quota). The amount of commission paid usually rises as the target rises. The commission's priorities may be focused on a number of factors. Some sales targets, for example, are focused on revenue. If a salesperson generates $100,000 in new revenue and earns a 5% commission, the salesperson can earn $5,000. Commissions can also be calculated based on gross income or profit margins, with the higher the price you charge for a product or service, the more money you receive. There might also be commission fees – called placement fees – that pay out fixed amounts for each unit sold. Commission may also be structured in a variety of forms as part of total compensation. Salary plus bonus, for example, is where an employee is paid both a salary and a commission as part of their overall compensation plan. Straight commission, where the employee earns just commission; residual commission, where the employee earns commission on ongoing accounts; graduated commission, where commission rises as sales volume increases; and variable commission, which is a combination of commission forms.

4.     Bonuses. These are applicable to more than salespeople. Year-end incentives are a common example, in which workers are paid a lump sum, or a percentage of a lump sum, depending on the company's success, the individual's achievement of set incentive-based targets, or at the discretion of the manager. Bonuses should be given out on a more regular basis, such as quarterly. Spot incentives are also available, which reward success based on management's discretion in relation to a particular timeframe, mission, or achievement. Bonuses may also be distributed through an office, department, area, venue, or team as a mutual reward.

 Job satisfaction improves when the correct incentive package is in place. Benefits, as well as all other incentives, are included with the correct incentive package. Employees sometimes brag about their holiday bonuses, or they keep a close eye on the company stock because they have stock options. When an organization succeeds, the best incentive package invests workers in the job they're doing, giving them a greater sense of satisfaction. They are aware that their contributions will be rewarded; everyone enjoys being praised.