Strategic Compensation: A Human Resource Management Approach, 9/e

Individual Incentives

1. 3 Summarize five types of individual incentive pay plans.

Individual incentive pay plans are most appropriate under three conditions. First, employees’ performance can be measured objectively. Examples of objective performance measures include:

• Number of units produced—an automobile parts production worker’s completion of a turn signal lighting assembly

• Sales amount—a Mary Kay Cosmetics sales professional’s monthly sales revenue

• Reduction in error rate—a word processor’s reduction in typing errors

Second, individual incentive plans are appropriate when employees have sufficient control over work outcomes. Factors such as frequent equipment breakdowns and delays in receipt of raw materials limit employees’ ability to control ...