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Bonus Vs Individual Incentive Plan Essay

1068 words - 5 pages

Group Bonus Incentive Plan
Advantages
* Help to build a unity amongst the workers, therefore a more work friendly environment.
* Eliminates the segregation between high bonus earners and low bonus earners. This helps to reduce the uncertainty of future bonus payouts.
* Helps individuals of different ages to learn new skill sets from their peers through group bonding.
* Improves the overall morality of the workers.
* Help to create a brand image that may be attractive to potential new employees.
* Team competition will drive the members in the group to reach deeper into their skill sets to make the group succeed.
* Paying bonus’ as a team encourages them ...view middle of the document...

* The ability to work for the prestige of an individual bonus granted disappears with the team / group bonus schedule
* With group bonus schedules allow people to take advantage of a free ride to the bonus granted to the group. Slacking will prevail in less motivated people

Individual Bonus Incentive Plan
Advantages
* Reflects the actual amount of individual performance.
* Helps to motivate individuals when a high level of competitive nature.
* Easier to evaluate the individuals based on performance.
* Allows for higher payouts to top performing employees.
* Employees who do perform at the top-level will feel more satisfied about their rewards and will be motivated to continue to perform in the future.
* Do not need to rely on others for better bonus.
* Company can use it as a punishment for a bad employee ex. No bonus for missing too much work.
Disadvantages
* Certain employees could feel left out if they’re getting a lesser bonus, even though they are performing, at what they feel, is an adequate level of output.
* Can have a negative effect in which all the employee cares about is obtaining a bonus, not actually caring about the company’s corporate culture.
* Employees could neglect the quality of the product if only focused on reaching a production goal.
* Payments can fluctuate by up to 70% from one period to the next.
* Time consuming and expensive for the company.
* Monitor bias, might not receive the proper bonus.
* Company can increase production standards and the employee will receive a lesser bonus than expected.
* Company can use it as a punishment for a bad employee, rather than addressing that particular employee’s problems.
* May have to hire a full-time employee to be in charge of employee evaluations.

Which system should prevail?
Each system has its own set of advantages and disadvantages. Having goals set for performance will help employees function more efficiently on a personal level. With the team bonus structure, the employees will feel more important to the company and not feeling left out if the goals are not met. However, the team bonus structure can cause a sort of laziness in people with weaker work ethic, under the belief that they will receive the bonus...

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