Wage and Compensation Plans for Motivating Employees
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A new manager recently was given an assignment to create two possible wage schemes for a design firm. The manager came up with the following packages: (1) Each employee will start at $15 per hour and will work eight hours per day; (2) each employee will receive $8 per hour and one-tenth of 1 percent of profits (expected profits are $80,000 per day if everyone puts out maximum effort). Which program will motivate the employees more? Which program would you choose? Why?
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This solution discusses wage and compensation plans for motivating employees.
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Wage Plan 1: The employee will get $15*8=$120 per day assured wages. Irrespective of whether they are putting their maximum effort or not, they would get the same wage. This would create an agency conflict, if manager cannot assess whether the employee is putting maximum ...
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