financial rewards

• time rate - employees receive a fixed amount of pay per hour and work an agreed number of hours er week
• time rate advantages = easy for the employer to calculate
• piece rate - the employee is paid per item produced or job completed
• piece rate advantages = motivates employees to work faster, because the quicker they work the more pay they receive
• salary - employees are paid a fixe sum regardless of the number of hours worked
• salary advantages = the employer can accurately plan future expenditure as it knows how much the firm's wage bill will cost
• salary disadvantages = no incentive for the employees to work harder, as they know they will receive the same payment regardless of effort
• commission - employees earn a percentage of the total sales they have achieved - sales staff are likely to earn commission
• commission advantages = motivates employees to work harder to reach a target
• commissions disadvantages - expensive for the firm to pay out to staff, especially if business profits have fallen
• employee profit-sharing - a percentage of the firm's annual profits is shared amoung employees
• employee profit-sharing advantages - motivates staff to work together as a team to achieve business goals as they know that if the business is profitable, they will earn a share in the profits
• employee profit-sharing disadvantages = hard-working employees may resent the fact that less production staff earn the same share of the profit - can cause dissatisfaction and demotivate staff
• employee share purchase plan (ESPP) - employees can buy shares in the business, often at a discounted price
• ESPP advantages = makes employees feel that they are an important part of the business and motivates them to work harder to make the business a success
• ESPP disadvantages = can be expensive for a business to manage an employee share purchase plan
• time rate disadvantages = employees may complete their work slowly to obtain more overtime hours at higher pay
• piece rate disadvantages = it can lead to poor-quality products as employees hurry to complete work