In the video, Peter Wallbridge mentions a potential company HR policy regarding incentives that can only be paid out when certain company metrics are achieved. If a company decides to share those annual profits with its employees, which of the following variable pay plans could this policy be referring to?
A) Team incentive
B) Profit-sharing
C) Annual bonus
D) Gainsharing
E) Scanlon
Answer (2)
The policy described in the question likely refers to B) Profit-sharing , as it involves distributing a portion of the company's profits to employees based on achieving certain financial metrics. This incentivizes employees by aligning their performance with the company's success. Profit-sharing is designed to motivate teamwork and enhance overall job satisfaction.
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The question addresses a policy where company incentives are tied to the achievement of certain metrics, specifically in the context of sharing annual profits with employees. This situation best describes a Profit-sharing plan.
Profit-sharing is a type of variable pay plan where companies distribute a portion of their annual profits to their employees. This distribution is usually done when certain predefined financial or company performance metrics are met. Companies use profit-sharing plans to align the interests of their employees with the company by rewarding them financially when the company performs well.
Here's why profit-sharing fits the context of this question:
Purpose : It motivates employees to work towards the company's profitability, as they benefit directly from its success.
Metrics-based : Payments are made based on specific company objectives or financial goals being met.
Annual profits : The plan typically involves sharing annual profits rather than periodic bonuses based on short-term achievements, making it distinct from other incentive methods like annual bonuses or gainsharing.
Thus, from the given options, the policy mentioned in the question would be best represented by option B) Profit-sharing.
