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Imagine that you are a consultant asked by the Human Resource Manager of the Recovery Insurance Group to suggest alternative, more flexible pay systems to motivate the workforce.

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Imagine that you are a consultant asked by the Human Resource Manager of the Recovery Insurance Group to suggest alternative, more flexible pay systems to motivate the workforce. At present the whole organisation is paid on an incremental system with employees gaining an extra increment for every year of service, up to a maximum of seven years, on top of their annual award. Write a report to the Human Resource Manager in which you outline the pros and cons of various systems and make recommendations for a suitable system for Recovery Insurance group. There are various payment systems from which one can choose to pay the employees, namely: * time rates; * individual payment by results; * work-measured schemes; * measured day work; * group incentives; * individual bonuses; * performance-related pay or merit rating; * cafeteria-style payments or flexible pay; * profit sharing. By using time rates, employees are paid according to the time they spend at work. This will be based on an hourly rate, a weekly rate or an annual salary. This is a very popular payment system and is used in many jobs. This system has many advantages. Some of its advantages are that it is very simple and easy to understand, very easy to calculate and pay does not vary much. ...read more.


The levels of performance are agreed by using work-study techniques. This payment system encourages a high and steady rate of output. Its disadvantages are that there are no direct individual incentives for high performance and there is little encouragement for innovation. Another disadvantage is that there is no direct relationship between the individual effort made and rewards obtained. Group incentives are based on the same principles as the individual payment by results system. It rewards the group with a cash payment for production output that meets the agreed target. This has many advantages namely, employees are usually encouraged to find ways to improve performance and productivity and employees become more interested in how the organisation is managed. It is cheaper to install plant of enterprise-wide payment by results schemes than individual payment by results schemes. Its disadvantages are that there is a weaker link in employees' minds between the bonus and the level of their effort, so it may not be a strong incentive. Schemes can be difficult to understand and bonus payments could be affected by factors such as inflation, which the workforce can do nothing about. Also, output can be restricted by the group because it is individual employees who determine what level of earnings they wish to earn. ...read more.


Gainsharing is a profit-sharing plan that calculates the contribution of specific groups. When employees make labor-saving suggestions and increase productivity, they share in the gains by receiving a bonus. Its advantage is that it encourages teamwork and cooperation. It also allows employees to have control over their work. Recovery insurance group could pay its employees by group incentives. This system makes use of the same principles of the individual payment system. But by implementing group incentives, one would be encouraging more teamwork. If effective teams are build, one would have better outcomes and results. New ideas can arise and the company will better off. And to this, the team will be paid extra bonuses. Although wages may not be the main motivators, the extra pay should still help to motivate the workers more. As said before this method of payment has many benefits. The differences between this suggested system and the present system used by the company are many. One of them is that an employee that has been working for only three years with the company may be giving better results than the one working for the company for seven years. Because of this, with the present system, the latter is having a higher wage because of the extra increment for every year of service. Also the present system is not a good motivator. ...read more.

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