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This is a "thought experiment" kind of thread - no need to take it too seriously. I was just reading about hiring contract workers to complete a project, and it got me thinking about different methods of compensation and what motivates people. From an employer's point of view, what type of pay system do you think encourages a worker to do his or her best work? By "pay system" I mean the basic types compensation, such as hourly wage, flat rate/salary, or tips/commission. Imagine you are an employer and can set this up any way you want. Let me briefly mention my point of view before hearing yours.
Paying an hourly rate, to me, is an incentive for a worker to spend a longer time doing a job. This may or may not result in a better job, but just a job that takes longer. Since the worker knows he will make X dollars an hour on this project (and possibly overtime rates), the incentive is to not finish the project in a timely manner, but to take as long as possible to complete it. Again, this may result in superior work, but it also may not.
Paying a fixed rate or salary seems like it would have the opposite effect. The employee knows she will make X amount of money no matter what (assuming the job is done, of course), so the incentive would be to finish the work as quickly as possible, likely with as little effort as possible. Why spend any more time or effort working when you know that the bare minimum will result in the same pay? So this approach would seem to encourage faster completion of the project, but there's a good chance the work will be inferior.
Basing the compensation on commission (or tips, depending on the industry), in whole or in part, would seem to be the best way of ensuring quality work. It's the only system I know of where compensation is directly tied to productivity or merit. If a worker knows, for example, that his paycheck will be a percentage of the overall revenue generated by the project, the incentive would be to make sure his part is done as well as he possibly can. Even a waitress knows she will get better tips if she provides superior service. I don't think this system necessarily encourages more or less time being spent on a project, just that the end result is quality work.
So what do you think? Which of these systems do you think provides an incentive for an employee to do his or her best work? Perhaps there's one I didn't think of, or perhaps you're thinking of some combination of these. Let us know your thoughts.
I'm a hard worker and want to keep working if there is something to do. When I was hourly I was always offering OT but denied OT since I was getting my work done in time. Then busy season came around and Tadah I was flipped over to salary. So I worked the more hours but not any additional pay (effectively a pay decrease).
Now I always just get the work I need to do done first thing in the morning. Barely do anything at all in the afternoon. The department I am in is pretty much impossible to measure and give commissions on, everything we do is Loooong term benefits, but any mistake can also come back to haunt your years later.
I definitely want to be in a position where there is no ceiling. Oh I would work so hard and be top employee every day if I could make as much money as I was willing to work for! The numbers are your boss too, top producers usually aren't bothered by any human bosses.
There is no one best system. How would you pay "commission" on something that can't be measured? Some jobs just take time and no amount of hard work is going to make it happen any faster. Say for example a chemical process. Or what about the job where your workload and pace is set by either the process before you so you have to wait on product, of whatever quality you might get, or where backed up because the next in line can't take it any faster.
I'd suggest some sort of hybrid system, that's designed specifically to the job at hand, consisting of a good base, with a quality bonus and a productivity bonus so the incentive is to maximize both quality and productivity.
I prefer to stay in hourly positions. When I was salaried I worked so many hours that my hourly rate was always far less than what the hourly workers were making. Once I worked over my paid time in salary I pretty much lost all motivation.
I like being a salaried employee. I have internal motivation to do a good job since it's my name and reputation. But it's also nice to know I will still get paid if I am sick or have to leave early for a doctor's appt or for something at my kid's school, etc. I don't mind working extra sometimes without getting paid more money because I know it balances out the times that I leave early.
In order for that system to work, the measures of "quality" have to be objective. If the work doesn't directly produce an output of some sort, like sales or products, it's difficult to fairly base pay on it.
In order for that system to work, the measures of "quality" have to be objective.
And that is a big problem. We have a lot of quality = managers likes to hang out with them issues in the work force today [work = social club]. We really need to get back to the quality = does a good job, is dependable, and hard working as the current system is toxic to good workers.
I really like my current pay system which is base salary plus performance bonus. My base salary covers all of my needs, expenses, payments, 401k and other savings. I know how much money I will make every other week so I easily make my financial plans. Yes, I work overtime a lot average 25 hours overtime per week but I do not mind. I also know that my overtime and hard work will pay off end of the year with the performance bonus. It gives me the perfect balance. I feel secure with my base salary and my performance bonus motivates to work hard everyday.
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