es of Cost Accounting Employer\'s payroll taxes (13% of total no employee has ex
ID: 2808914 • Letter: E
Question
es of Cost Accounting Employer's payroll taxes (13% of total no employee has exceeded the wage bases for FICA and the unemployment insurance taxes). 5, wages, assuming that MINI-CASE 1 Incentive wage plan Sean Higgins is considering the implementation of an incentive wage plan to increase productivity in his small manufacturing plant. The plant is nonunion, and employees have been compensated with only an hourly rate plan. Anne Trasker, Vice President-Manufacturing, is concerned that the move to an incentive compensation plan will cause direct laborers to speed up production and, thus, compromise quality. LO1 Required 1. How might Higgins accomplish his goals while alleviating Trasker concerns? 2. Does the compensation have to be all hourly rate or all incentive 3. Can incentive compensation also apply to service businesses?Explanation / Answer
Incentive wage plan is a system of remuneration where payment is linked to the performance of the workers. This is used as a tool to motivate employees to work harder and earn more.
1. Trasker's concern of quality standards can be taken care by higgins by adopting following measures:-
a) Total quality management should be ensured.
b) Standardisation is effective way to minimize the quality-compromise. Time standards, quality standards, material standards, size standards must be fixed.
c) Incentives can be provided for innovative approach and best quality products. Workers will be motivated to incraese the productivity as well as quality of production by this way.
d) Workers can be directly held responsible of poor quality and can be penalised for such activities. This will motivate workers to ensure proper quality.
2. Compensation should not be all incentive. Minimum guaranteed payment should be included in the remuneration for the following reasons:
a) The minimum payment ensures the sense of security among workers. Workers tend to work more effectively when their minimum financial requirements are met by fixed hourly wages.
b) The gap between income of workers may increase when all incentive compensation plan is adopted. This will create an unhealthy interpersonal relationships in the plant. Workers will loose focus on prodi]uctivity due to jealousy and unhelthy competition.
c) The enforced disruptions in production like machine failure or power shortages can negatively impact workers' remuneration.
Thus, mixed remuneration should be adopted. Incentive can be provided with minimum wages.
3. Incentive compensation can be applied in service business as well. The incentive is a remuneration which is provided to employees for their extra efforts that has been put in a particular project or growth of the company. This can be applied in following ways:-
a) Employees can be paid bonus or incentive for the extra working hours.
b) Incentives can be provided when the project is delivered with extraordinary quality and less time.
c) Incentives as part of profits can be provided for an innovative approach of an employee which makes the project more profitable.
Thus, incentives can be appllied to service businesses but the calculation is not as easy as manufacturing plants. It is more complicated to link the performnace of an employee with the productivity of the service business.
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