Public Employee Pensions: Investment Risk and Contribution Risk
Employee Contribution 7
-
Upload
pooja-demblani -
Category
Documents
-
view
216 -
download
0
Transcript of Employee Contribution 7
-
7/31/2019 Employee Contribution 7
1/27
Employee Contribution
Pay-for-performance
-
7/31/2019 Employee Contribution 7
2/27
Motivational theories
Maslows need hierarchy
Herzbergs two-factor theory
Expectancy Equity
Reinforcement
Goal setting Agency
-
7/31/2019 Employee Contribution 7
3/27
Total reward system
Compensation Benefits Social interaction Security
Status/recognition Work variety Work load Work importance Authority /autonomy
Advancement Feedback Work conditions Development opportunity
-
7/31/2019 Employee Contribution 7
4/27
Wage ComponentsWage Component Definition
Base Pay Guaranteed portion
Cost of living Change in cost of living
Merit pay Assessment of performance ,add on to base pay
Lump-sum bonus One time bonus ,does notadd to base
Individual incentives Measures of performance areobjective
Success-sharing Variable pay measure ofgroup performance
Gain sharing Exceeding some cost index
Profit sharing Exceeding financial goal
Risk sharing Penalized for poorerformance
-
7/31/2019 Employee Contribution 7
5/27
Importance for Retention
Type of Reward
Work variety
challenges
Dev opportunity
Social
Status recognition Work imp
Benefits
% who think it isimportant forretention
50% 38%
40%
23% 20%
22%
-
7/31/2019 Employee Contribution 7
6/27
Personality indicators for preferred
rewardsPerson characteristic Preferred Reward
Materialistic More concerned about paylevels
Low self-esteem Want decentralized ,largeorganization with little pay forperformance
Risk taker Want more pay based onperformance
Risk averse Want less performance basedpay
individualistic Want pay plans based onindividual performance on
team performance
-
7/31/2019 Employee Contribution 7
7/27
Overall preference for alternative
Reward plans
Type of plan % of companies who thinksuch reward systemmotivates employee
Short-term incentives 92Annual pay rise 84
Restricted stock grant 79
Health care Benefits 75
Spot awards 72
Non cash recognition 57
Profit sharing 49
-
7/31/2019 Employee Contribution 7
8/27
Designing a Pay-For-Performance Plan
1. Efficiency:
Strategy: Does this plan supportcorporate objectives
Structure: Is the structuresufficiently decentralized fordifferent operating units to create
flexible pay Standard: Objectives,
Measures,Eligibility , Funding
-
7/31/2019 Employee Contribution 7
9/27
Cont
2. Equity/Fairness
3. Compliance
-
7/31/2019 Employee Contribution 7
10/27
Pay For-Performance Plan
1. Specific plan
Merit Pay: It links increase in basepay to the rating on subjectiveperformance
Lump-sum Bonuses: End-ofyearbonus that does not build into base
pay Individual Spot Awards: Awarded
for exceptional performance
-
7/31/2019 Employee Contribution 7
11/27
Cont
Individual incentive plan: Pay for someobjective ,pre established level of performance
Straight piece work plan: Based on units of
production per time period Standard hour plan: Based on completion of a
task in some expected time period
Taylor differential piece rate/Merrick plan:
Based on unit of production per time period Halsey 50-50 method: Based on shared split
between worker and employer of any saving indirect cost
-
7/31/2019 Employee Contribution 7
12/27
Advantages
Raises productivity ,lowerproduction cost and increaseearning of workers
Less direct supervision needed
Helps costing and Budgetary control
-
7/31/2019 Employee Contribution 7
13/27
Disadvantages
Greater conflict between employees
New technology introduction will be
resisted New production method will be resisted
Increased turnover among employees
Elevated level of mistrust
-
7/31/2019 Employee Contribution 7
14/27
Team incentive plans
Plan type What it is Adv Disadv
Cash profit
sharing
Shares
percentage ofprofit
Simple, easy to
understand
Profit influenced
by number offactors,demotivational
Stockoptions
Stock shares Impact employeebehavior, tax
deferral
Indirect pay/performance link,
Put moneyBalancedscore card
Combine financialand operating,quality measures
Communicateorganizationpriorities
Can be complex
Gain
sharing
Share economic
benefit ofimprovedproductivity ,quality
Clear
performancereward ,Fosterteam work
Can be
administrativecomplex
Team
incentive
Based on team
and group
Reinforce
teamwork
May create team
competition
-
7/31/2019 Employee Contribution 7
15/27
Advantages
Positive impact on employees
Easier to develop performance
measures Employee support
Increase employee participation indecision making
-
7/31/2019 Employee Contribution 7
16/27
Disadvantages
Individual performance may not beemphasized
Increased turnover among employee Increases compensation risk to
employee because of lower incomestability
-
7/31/2019 Employee Contribution 7
17/27
Comparison between Individual and Group plansCharacteristics Individual plan Group plan
Performance Measure Task accomplishmentnot dependent onperformance of others
Output is groupcollaborative
OrganizationalAdaptability
Individualperformance standardsare stable , Production
methods and labor mixconstant
Individualperformance standardschanges , Production
methods and labor mixmust adapt tochanging pressure
OrganizationalCommitment Superior viewed as unbiased andperformance standardsclearly stated
High commitment toorganization objectives
Union status Non union or union
treat everyone equal
Non Union or Union
less opposed to groupincentives
-
7/31/2019 Employee Contribution 7
18/27
Key Elements in Gain Sharing
Plan
Strength of reinforcement
Productivity standards
Sharing the gains between managementand workers
Scope of the formula
Perceived fairness of the formula Ease of administration
Production variability
-
7/31/2019 Employee Contribution 7
19/27
Various Gain sharing plansScanlon plan Rucker plan Improshare
Input factor Payroll costs Labor cost Actual hoursworked
Output factor Net sales Value added Total standard
value hours
-
7/31/2019 Employee Contribution 7
20/27
Cont
Scanlon plan :Incentives arederived as function of the ratiobetween labor costs and salesrevenue and the value of goods ininventory.
Rucker Plan : Incentives are derived
as function of the ratio betweenlabor costs and value added ofproduction.
-
7/31/2019 Employee Contribution 7
21/27
Difference between Scanlon and
Rucker Plan
Rucker plan ,tie incentive to a widevariety of savings ,not just laborsavings.
Rucker plan provide better flexibility
-
7/31/2019 Employee Contribution 7
22/27
Improshare
Improved Productivity Through sharing(Improshare) decides the standard thatidentifies the expected hours required toproduce an acceptable level of output .Any savings arising from production ofthe agreed-upon output in fewer than
expected hours is shared by the firm andby workers.
-
7/31/2019 Employee Contribution 7
23/27
Long term incentive plans
Focus on performance beyond oneyear
Motivates long-term value creation Increases internal growth
Create ownership
-
7/31/2019 Employee Contribution 7
24/27
Employee stock ownership
plans(ESOPs)
Effects are generally longterm
What effect stock price is difficult to
judge Performance measures are too
complex to understand
Sudden fall in stock price may leadto demotivation
-
7/31/2019 Employee Contribution 7
25/27
Performance plans
They features corporateperformance objectives for nextthree years
They are given for exceeding goalsrelated to financial earning or returnmeasure
-
7/31/2019 Employee Contribution 7
26/27
Broad based plans(BBOPs)
Shares of stock over a designatedtime period.
They show lot of versatility Create culture of ownership
Reinforce a strong performanceculture
Rewarding all employees(broadbased participation)
-
7/31/2019 Employee Contribution 7
27/27
Cont
Starbuck uses beanstock plan for thoseemployee who work for more than 500hrs per year, of 10 to 14 % of theirearning and expiring 10 years after thegrant date.
Microsoft BBOP is given to all
permanent employees starting 12month after the stock grant date,12.5% is vested every six month