Executive compensation plans usually consist of four elements--the base salary, short-term incentives, long-term incentives and perquisites . Perquisites are special incentives, commonly referred to as perks. These may include country club memberships, a company car and insurance plans. Short-term incentives in an executive pay plan normally consist of bonuses that are tied to the company’s profits whereas the most common long-term incentive offered are stock options . Stock options are believed to give top management a direct incentive for the company to perform well since the higher the price of the stock, the greater their financial gain. Group incentive plans reward teams with a bonus when they perform well, whereas enterprise incentive plans such as profit -sharing are meant to reward the members of the organization as a whole.
A profit-sharing plan is a common enterprise incentive. It makes available to all employees or pays to employees a share in the company’s profits, a special sum now or at a later date, in addition to the base salary. All employees can participate in the bonus incentive Scanlon Plan that encourages employees to make suggestions to improve productivity, who are in turn rewarded through this scheme. Under the Scanlon Plan, employee suggestions are passed through various management committees that evaluate the idea to determine if it should be implemented. The Scanlon Plan is a member of the family of gainsharing plans where the organization and employees share financial success gained from increased productivity and reduced costs through a predetermined formula. Employee stock ownership plans (ESOPs) allow for the employer to contribute shares of its own stock into a trust for the benefit of employees, with the amount allocated depending on the seniority or wage level of the employee. The purpose of using an ESOP trust is to take advantage of the tax-exempt status of such trusts in accordance with the Internal Revenue Code. Employee benefits are meant as indirect compensation to improve the work and personal lives of employees. Employee benefits include such things as paid sick leave and health insurance. Benefits, on average, account for about 40% of the The main purposes of an employee benefits program are to improve worker satisfaction, meet health and safety rules, attract and motivate workers, retain workers and secure the competitive edge. In order to attract the best workers, employers need to offer a good range of benefits to make their jobs desirable to potential employees. In order to accommodate for the wide range of employee needs, many employers are offering flexible benefits. This is also known as the cafeteria plan. This gives the workers greater choice in selecting the benefits that they want to suit their requirements. Employers provide employees with certain core benefits such as sick leave and health insurance and let them select the rest of the benefits. Employees are given a certain number of credits from which to ‘buy’ the other benefits they want.
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