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Wage Payments

INSY 3021
Auburn University
Spring 2007

Fringe Benefits

Retirement plans, 401K plans, paid

time off (vacation, holiday, personal,
bereavement), insurance's (medical,
dental, vision, life, disability),
educational benefits, Jury, FMLA, and
other perks.
Can be up to about 40% of the direct
labor cost

Day Work Plans

Compensate the employee on the # of

hours worked times an established
hourly pay rate
Advantages include: guaranteed
wage, not production based, fringe
benefits,and high base rates
Disadvantage: allow to broad a gap
between employee benefits and
productivity. Benefits get taken for

Flexible Compensation
Plans (related to output)
Piecework and standard
labor hour plan
Gainsharing plans
Employee stock ownership
plans (ESOP)
Profit-sharing plans

Pays employee strictly by the output
generated during the pay period
Outlawed in the United States
All employees receive a guaranteed
minimum wage

Federal Labor Standards Act



Standard Hour Plan

Workers operate on a daywork
plan up to 100% productivity,
then piecework beyond 100%
Guaranteed base rate, established
by job evaluation

Productivity (Gain) Sharing


Rewards are paid to employees in

the form of bonuses (immediate or
deferred) based on the the
following: Quality improvement,
lower costs, beneficial suggestions,
reduced labor content, etc

Productivity (Gain) Sharing

Plans (cont)
Typically shared either 50% - 50%
(or 33% -66%) with the company
Scanlon, Rucker & IMPROSHARE
plans are mentioned in the text.
Many types and varieties exist

Employee Stock Ownership

Involve a trust that holds company
stock for the employees
Many companies participate in this
type of plan
Some entire companies are totally
employee owned (AVIS, Southwest
Airlines, etc.)

Profit Sharing

An employer pays employees special pay

based on the prosperity of the company
Can be in the form of cash plans, deferred
plans, or a combination of the two
Payment can be spread to all employees
equally, or prorated based on their annual
base salary

Non-financial Performance
Motivation Plans
Include rewards that have no relation
to pay
Conferences, picnics, afternoon off,
recognition, committee involvement,
Treat all employees the way that you
expect to be treated

Job Evaluation
Determination of the basic worth of
a job.

Benefit to the company

Demands of the work on the employee

Four Formal Approaches

Job Classification (civil service
grades): Not quantitative.
Job Ranking (pair-wise comparison
of jobs):Not quantitative.
Job Factor Comparison
Job Point Plans

Job Factor Analysis

Factors should be related to the job
(not the worker)
Factors must be non-discriminatory
Should measure aspects of difficulty
and value to the organization
Rarely takes more than ten (10).

Key Jobs
Create families of related jobs that
encompass similar factors.
Be consistent.
Committee structure works best for
these plans.
attempt to do this!

Questions & Comments