BHRM625

Topic: Traditional pay and Incentive pay

Spring 2019_2020

Instructor: Dr. Ibrahim Baghdadi

Students name ID
Jihan Alsheleh 71530462
Sari Shaib 81830664
Zahraa Farhat 81330141
Zeinab Al Moussawi 81530470
Introduction:

Money is part of human history for at least 3,000 years. Before that time, most
research assumes that in those times, commercial exchange between individuals
were carried out under stone trade contracts. Which were later known as barter
acts, where the good were also the price, so selling on a commodity and paying its
value for another good or service, thus the buyer has paid the price, and what is
barter is that it is a direct trade in goods or services.
Moreover, with a wide range of developments in this field, humankind reached
money as a barter. They started exchanging money for obtaining a goods or
services and for performing a job. There was the traditional pay that is a financial
salary for your work. Therefore, with development that take the worldwide, and the
increasing needs of humans and their interests, the salary gradually develops to
include several types, like intensive pay.
In our project, we will discuss the traditional pay, the intensive pay and the
difference between it.
Traditional pay :
This system provides compensation for employees based on fixed hours at work
or on an annual salary , and then this system includes an increase in wages based
on factors : seniority and performance .
This system assigns a grade level to each position in light of education and
experience that is required to perform the job .

There are several advantages and disadvantages we can mention here :

 Advantages :
- Protect against the perception of discrimination and favoritism
- It's easy , and therefore the ease of managing the wage program
- Employees feel that the organization treats them fairly
- Job security : The employee feels protected and feels stable
- It may suit some cultures that do not accept the presence of a smaller person in
power.
 Disadvantages :
- Demotivate the employee to work actively : when an employee ensures that the
increase in pay is related to the time period, the incentive is less incentive to work
- The system rewards the job description excessively, resulting in overpayments
- Administrative expenses associated with reviewing annual wage grades are
disadvantages in the system
- reinforce bureaucracy in that they assign value to the relative position of
individual jobs in the corporate hierarchy “Strategic Compensation”; Joseph J.
Martocchio; 1998
“Employee Reward” Michael Armstrong; 2002
Incentive Pay:
Organization pioneers are continually searching for better approaches to build
deals and acquire benefits. What numerous frequently ignore, nevertheless, is the
connection between specialist joy, commitment and deals numbers. Luckily for
officials, there are a few projects that will handle these issues on the double:
incentive pay programs. (ICONIXX, 2013)
Incentive pay is budgetary award for execution as opposed to pay for the quantity
of hours worked. The thought is the possibility of budgetary pay will propel the
representative to hit certain exhibition figures or money related targets. A typical
type of incentive pay is commission for deals staff where they get a level of every
deal they make. (Benstead, 2018)
In addition, incentive pay indicates frequently to cash, a few organizations do offer
different motivators, especially when part of a bigger, progressively complex
incentive force plot. Non-money related incentive, or those where the business has
as of now borne the cost, (for example, meals or gifts), are regularly known as
“casual incentive”; It could likewise include giving workers the choice to purchase
partakes in an organization. (Anon., 2020)

Advantages:
1. Higher sales:
Improving deals numbers is maybe the most widely recognized explanation
administrators search out motivation pay the executive’s plans. It is nothing
unexpected, either - ICM plans have been demonstrated repeatedly to expand deals
numbers and, accordingly, organization benefits. (ICONIXX, 2013)
2. Motivate Your Staff:
The conspicuous favorable position of motivations is that they put forth a valiant
effort. A few workers need not bother with an additional push to be remarkable.
Others may have the ability however no drive to utilize it. In the event that they
know putting forth a concentrated effort creates genuine prizes, underachievers can
transform into star entertainers (Sherman, 2018)
3. Places Employees in Control:
Individuals like to feel they are in charge of their professions. Allowing
representatives the chance to acquire more on the off chance that they accomplish
more can give them that feeling. Occupation fulfillment expands, which urges
them to remain with the organization (Sherman, 2018)
4. Healthy competition:
Competitiveness is a piece of human instinct. You can see that in even the most
youthful youngsters, with their not exactly humble gloating. In any case, this drive
toward rivalry never stops, which is clear in the immense pay rates paid to
proficient competitors. Employee incentive essentially exploit the human want to
“win” (Rubin, 2016)
5. Increased employee retention:
Incentive projects give workers a feeling of power over their wages. At the point
when they work more enthusiastically and more brilliant, they see better outcomes
(Rubin, 2016)

Disadvantage:
1. Resentment:
Incentives that are viewed as out of line can prompt hatred, and subvert
collaboration. Representatives may hate associates who accomplish objectives with
less exertion (and less hours). Concerning group based motivations; workers may
dislike associates who are viewed as doing not exactly a considerable amount.
Impetuses can likewise spur representatives to subvert each other’s endeavors as
opposed to fill in as a gathering to accomplish organization objectives. (Rubin,
2016)
2. Manipulation:
There are many different metrics companies can use to measure “success”: sales,
revenue, profit margin, ROI, etc. The metric that has the most impact on incentive
pay will be the metric that gets the most attention – and that may or may not be in
the best interest of the company. If sales are rewarded, employees may cut profit
margins to drive sales. (Rubin, 2016)
3. A lot of Focus on Financial Reward:
An undeniable drawback to motivating force based compensation and one that
reverberates through different burdens is that there is a lot of spotlight on money
related prize and insufficient spotlight on different parts of work. An excess of
concentrating on money related prize can dominate the formative needs of a
worker. At the point when a business assesses a worker’s presentation exclusively
on their motivating force based compensation execution, different parts of their
improvement as a productive representative can be ignored, which, finally, can be
impeding to the business. (Young, 2018)
4. Unfair Evaluation of Work Performance:
In specific circumstances where motivator based compensation is executed,
assessing a worker’s exhibition can be abstract as opposed to objective. A model
could be a circumstance where a line director or individual manager is the person
who evaluates a worker’s work execution for motivating force pay.
In this circumstance, the compensation assessment could be dependent upon the
nature of or the assessment of the manager. This could open an entryway for
preference, charges of segregation and a swarm of different predicaments
(Young, 2018)
Anon., 2020. HRZONE. [Online]
Available at: https://www.hrzone.com/hr-glossary/what-is-incentive-pay
[Accessed 17 may 2020].
Benstead, S., 2018. Breathe. [Online]
Available at: https://www.breathehr.com/blog/what-is-incentive-pay
[Accessed 17 May 2020].
ICONIXX, 2013. 5 Important benefits of incentive compensation plans. 18 August. Available at:
https://iconixx.com/blog/5-important-benefits-of-incentive-compensation-plans

Rubin, G., 2016. Advantages & Disadvantages of Employee Incentives. Tuesday 21 June.
Available at: https://www.i-admin.com/blog/advantages-disadvantages-employee-incentives/

Sherman, F., 2018. Advantages & Disadvantages of Employee Incentives. 28 January.

Available at: https://smallbusiness.chron.com/advantages-disadvantages-employee-incentives-
21220.html

Young, P., 2018. The Disadvantages of Incentive-Based Pay. 13 December. Available at:
https://careertrend.com/info-8111201-disadvantages-incentivebased-pay.html