Benefits typically encompass health coverage, income protection, savings, and retirement programs, all of which offer security for employees and their families.
The basic element of guaranteed pay is base salary which is paid on an hourly, daily, weekly, bi-weekly, semi-monthly or monthly rate.
By focusing on participation and teamwork, gainsharing motivates individuals to contribute beyond their standard responsibilities, resulting in enhanced problem-solving, cost reduction, timely delivery, and higher-quality outcomes.
Unlike STIs, which focus on past achievements, LTIs are forward-looking, encouraging sustained performance and aligning employees' goals with the long-term objectives of the organization.
This approach helps ensure the organization's long-term sustainability by discouraging executives from prioritizing short-term gains at the expense of the company's future.
According to Bussin (2019),[9] more and more companies are adopting incentive and bonus schemes to boost employee performance and align individual goals with organizational objectives.
These schemes offer several key benefits: - Improved Performance: Incentivizing employees can drive superior individual, team, and organizational results.
By implementing variable pay, companies can create a more motivated and engaged workforce, ultimately leading to increased profitability and shareholder value.
Tournament theory states individuals are best motivated to perform well when any prizes available to be won are based on winning or failing, rather than just a monetary value.
The article highlights that large pay gaps, as suggested by Tournament Theory, may be perceived as unfair by employees, leading to reduce trust and organizational commitment.
Therefore, in public sector settings, there is a need to balance the motivating effects of pay differentials with the importance of fairness and distributive justice (Keppeler and Papenfuß, 2021, p.
However, cognitive dissonance theory suggests that when faced with seemingly unachievable rewards (like very high executive salaries), employees might engage in a “sour grapes” rationalization.
This suggests that employees who perceive top positions as unattainable might devalue the importance of higher pay and instead focus on intrinsic aspects of their current roles.
Organizations implementing tournament-style structures should be aware of this potential “sour grapes” effect and consider ways to maintain motivation across all levels of the hierarchy.
Employees may cognitively adjust their reported levels of intrinsic and prosocial motivation as a coping mechanism when faced with low expectations of extrinsic rewards in tournament-like structures (Kroll & Porumbescu, 2017, p. 478).
Expectations of low extrinsic rewards in tournament settings can lead to higher reported levels of intrinsic motivation, as employees seek to justify the value of their work (Kroll & Porumbescu, 2017, p. 480).
[32] Equity theory is based on the idea that individuals will evaluate the perceived fairness of their workplace or job by assessing the ratio of their work inputs to the outcomes they receive.
Access to training programs, mentorship, opportunities to travel or to meet other people in the same field, and similar experiences are all intangible benefits that may appeal to some employees.
[36] Furthermore, research by Kroll and Porumbescu (2017) provides additional insight into the relationship between extrinsic rewards and intrinsic motivation in public sector settings.
The study discovered that when people were told they might expect limited extrinsic benefits in a public sector career, they reported higher levels of intrinsic drive.
Effective motivation strategies take into account the individual's unique needs and preferences, while also recognizing the role that both types of rewards play in influencing behaviour.
Total direct pay includes all the elements that may be negotiated by a job candidate, especially for senior executive positions where annual and long-term incentives are more substantial.
As this comparison is always made within the company, problems with internal equity can result in conflict among employees, mistrust, low morale, anger and even the adoption of legal actions.
The classic objectives of equity based compensation plans are retention, attraction of new hires and aligning employees’ and shareholders’ interests with the long-term success of the company.
With the aim of achieving enhanced pay, benefits and working environments, unions on behalf of the employees negotiate and manipulate the company’s compensation plans.
The main aim of internal equity is to improve morale as well as decrease turnover by making the employees feel appreciated comparative to their coworkers.
Similarly, a competitive employment landscape is created with decreased unemployment figures, compelling organizations to propose higher compensation packages in order to entice and preserve high qualified applicants.
Labor Law: often the baseline compensation policies and practices are shaped by the legislations related to employee benefits, minimum wage rates and the overtime pay.
Using the concept of Operant Conditioning, Skinner claimed that an organism (animal, human being) is shaping his/her voluntary behavior based on its extrinsic environmental consequences – i.e. reinforcement or punishment.
This concept captured the hearts of many, and indeed most bonus plans nowadays are designed based on it, yet since the late 1940s a growing body of empirical evidence has suggested that these if-then rewards do not work in a variety of settings common to the modern workplace.