profit sharing & gainsharing - hr.com
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Copyright © 2015 by HRCP, L.C.www.hrcp.com
Profit Sharing & Gainsharing
Pay based on the performance of the entire organization.
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Discussion Question:
What are the advantages and disadvantages of "cash" profit-sharing plans and "deferred" profit-sharing plans?
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Gainsharing
Scanlon Plans
Rucker Plans
Improshare
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Employee Stock Ownership Plans
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Strategic Alignment of Base Pay & Incentive Pay
What factors should be considered in balancing base pay and incentive pay?
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Job AClerical position in a credit union
Job BMetal worker in a metal shop
Job CSales supervisor at a used car lot
Profit sharing
Individual incentive
Base pay
10%
5%
85%
Group bonus
Base pay (determined partly by individual performance)
20%
80%
Profit sharing
Group incentive
Individual incentive
Base pay
15%
15%
40%
30%
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Discussion Question:
In fine tuning an incentive system, what problems would occur if excessive weight were placed on individual incentives? on group incentives? on profit sharing? on base salary?
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Executive Compensation
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Average Annual Pay of Factory Workers, High School Teachers,Engineers, and Chief Executive Officers: 1990-2000
1960 1970 1980 1990 2000 2010
Worker $4,665 6,933 15,008 20,862 28,600 32,840
Teacher 4,995 8,626 15,970 29,143 40,350 54,390
Engineer 9,828 14,695 28,486 49,772 62,760 89,086
CEO* 190,383 548,787 624,996 1.95 mil 12.4 mil 10.9 mil
*Total compensation, including salary, bonus, and stock options.
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Stock Options
A stock option is the right to buy a company’s stock at a certain price over a certain period of time, usually ten years.
What rules govern stock options?
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Discussion Question:
What are the implications of reporting executive stock options as an expense?
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Employee BenefitPrograms
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Required Benefits
Employers are required to provide three benefits that are intended to protect employees’ incomes.
What are the three benefits required by law?
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Social Security Benefits
1. Old age or disability benefits
2. Benefits for dependents of retired, disabled, or deceased workers
3. Lump-sum death benefits
4. Medicare
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Pension Plans
Defined Benefit Pension Plan
Defined Contribution Pension Plan
What are the differences between these two plans?
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Individual Savings Plans
Deferred accounts that are approved by the IRS, called qualified plans, enjoy special
tax considerations.
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Pension Protection Act
Allows employers to automatically enroll employees in a 401(k) plan.
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Health & Accident Insurance
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Income Replacement
Life insurance and income-continuation plans help to
alleviate difficulties.
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Paid holidays Paid vacations Paid personal leave Union activities Reporting time Sabbatical leaves Paid funeral leave Jury duty Military Leave
Pay for Time Not Worked
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Recognition & Achievement Awards
Organizations use a variety of recognition programs to
influence the attitudes and behaviors of employees.
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Health Care Benefits
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Maximum freedom of choiceMinimum cost control
Minimum freedom of choiceMaximum cost control
Fee for Service
Preferred Provider
organizationPoint of service
Health maintenance organization
Group health
cooperatives
Managed Health Care OptionsFreedom of Choice versus Cost Control
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