Exam 11: Designing Performance Pay Plans

The authors identified eight major issues that should be considered when designing a gain-sharing plan.Which potential issue is NOT identified by the authors of the textbook?

Gain sharing is not a viable plan to use if no valid historical benchmark can be set.

A phantom stock plan ties an employee's bonus to the performance of company stock,but that employee never actually receives any stock.

Which statement does NOT accurately describe employee share purchase plans?

Which statement best explains a phantom stock plan?

As a medium-sized company owner,you believe that it is morally just that employees receive a portion of the profits they help generate,and you want to provide them with some form of pension plan.Which type of plans should you consider using?

Identify and briefly comment on the key issues in designing profit-sharing plans.

Your company has decided to distribute a goal-sharing bonus according to the salary levels of employees.What is likely to be a natural outcome of this decision?

Goal-sharing plans have increased in popularity over the last decade.

Which of the following is NOT an example of a nonmonetary award?

A management report identified the following labour usage ratios for a window manufacturer in Richmond,British Columbia: 1.4 hours of labour per window in 2015; 1.25 hours of labour per window in 2016.Management makes the arbitrary decision to set next year's gain-sharing cutoff at 1.325 labour hours per window (the average of the 2015 and 2016 figures).Which gain-sharing plan is management using?

Working as a human resources compensation specialist for a manufacturing company,you become concerned employees will attempt to reduce labour costs "by any means" so as to enhance available bonuses via the company's gain-sharing plan.This behaviour may potentially lead to more work-related accidents or dissatisfied customers.What would you do to mitigate this reduction in labour costs due to "by any means" mentality?

Deferred profit-sharing plans are often used as quasi pension plans,particularly in medium-sized companies.

ABC Ltd.generated one million Canadian dollars in profits this year.ABC Ltd.decides to place 200,000 Canadian dollars (20 percent of pre-tax profits)in a bonus pool.In previous years,this figure has ranged from zero to 50 percent of pre-tax profits.What type of formula is ABC Ltd.using to determine contributions into the pool?

The Scanlon Plan helps in the development of a cooperative relationship among workers,unions,and management.

Identify the fundamental ways in which gain-sharing and goal-sharing plans differ.

Financially funded plans combine at least two criteria in establishing goal-sharing bonuses.Often,one of those variables is organizational profitability,making such plans highly motivational to employees.

Management decides to allocate 1,000 shares to a particular employee at a market value of $50.00 per share under a share appreciation rights plan.One year later,the value of these shares has increased to $65.00.How many shares would this employee actually receive as a bonus at the end of the year?

Which statement does NOT accurately describe a profit-sharing plan?

Research supports the notion that if adequate monetary compensation is in place,coupled with an open and supportive management-employee environment,nonmonetary-based recognition tends to offer little value to stakeholders.