NEW JERSEY INSTITUTE OF TECHNOLOGY
SCHOOL OF MANAGEMENT

HRM 303 Human Resource Management
Dr. Naomi Rotter
Session 18: Performance Based Pay

Objectives:

1. To understand the strategic importance of pay for performance
2. To examine the assumptions of incentives plans
3. To detail a variety of individual and group incentives
4. To understand issues of managing merit pay systems

I. Strategic implications of pay for performance

    A. The global need to positively push employee behavior

    B. Rewarding the right behaviors

II. Assumptions of incentive plans

    A. Why pay individual differently

1. Pay ranges

2. Broad banding

    B. Ability, expectancy, and instrumentality

    C. Sufficient performance variation

    D. Performance measurement

    E. Employee trust

III. Individual and group incentive plans

    A. Individual plans

1. Merit pay

2. Performance awards & bonuses

3. Piece rates

4. Commissions

    B. Group Plans

1. Profit sharing

2, Gain sharing

3. Employee stock options

IV. The application of incentive plans

    A. Management of incentives

    B. Pay for performance and its impact

1. Fairness

2. Negatives

3. Efficiency

V. Administrative control

    A. Communication of pay and benefits

    B. Pay secrecy

    C. Satisfaction with pay