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Payment Systems

Payment Systems






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    Payment Systems Payment Systems Presentation Transcript

    • Higher Business Management Labour Payment Systems
    • Payment Systems
      • Piece Rate
      • Hourly (Time) Rate
      • Flat Rate (Salary)
      • Commission
      • Overtime
      • Bonus Rate
    • Piece Rate
      • Workers are paid per item they produce
      • Often used in factories
      • The more a worker produces the higher the rate of pay
      • Often acts as an incentive for employees to work hard
      • Supervision is required so that workers do not sacrifice quality for quantity
    • Time Rate
      • Workers are paid by the hour (e.g. £5 per hour)
      • Often used in the service sector
      • It is simple to calculate for the employer and rewards the employee for the time spent at work
      • No incentive to produce quality work
    • Flat Rate
      • Workers are paid a set salary per annum
      • This is split into 12 equal payments
      • Managers, supervisors and office staff are usually paid this method (and teachers)
      • It gives employees a guaranteed monthly income – security
      • Doesn’t reward staff for an increased high level of effort
    • Commission
      • Workers are paid a percentage of the products’ sales value
      • Car salespersons and double-glazing sales representatives usually use this method
      • Either added on to a basic pay or as the sole income
      • Used as an incentive to motivate staff to sell more
      • Supervisors must ensure everything is sold by the book…
    • Overtime
      • When employees work a set amount of hours, overtime may be offered
      • Employees will be paid more for this overtime
      • Time and a half
      • Double time
      • Bank holidays, Sundays…
    • Bonus Rate
      • Workers are paid a basic rate with additional payments for targets being met
      • This could be for agreed time-keeping, productivity or efficiency
      • A bonus is added on to their normal pay
    • Questions
      • Some organisations use a flat rate system to pay employees. Describe 2 other types of payment systems.
      • (4 marks)
      • Distinguish between the following:
        • Piece rate and time rate
        • Flat rate and overtime
        • Bonus rate and commission
        • (3 marks)
    • Other Payment Methods
      • Performance Related Pay
      • - directly related to the output of each worker, usually in achievement of targets
      • Profit Sharing Schemes
      • - staff are given a share of the annual profits
      • - in some cases the share of profits is paid in the form of free shares which gives the employees part-ownership of the organisation
      • Share Save/Options Schemes
      • - employees save a regular amount each month for a set period (usually 5 years) which they then turn their savings into shares to keep or sell at a profit
      • - a successful method of payment which creates loyalty and motivation
      • Fringe Benefits
      • - any payments other than wages and salaries
      • - includes private medical insurance, subsidised meals, company cars…
    • Employee Objectives
      • Employees want their pay to:
      • Reward them for the work done
      • To be seen as a recognition of their value to the organisation
      • To give them purchasing power
      • Be achieved through basic earnings rather than relying on overtime, etc
    • Employer Objectives
      • Employers have a number of objectives they want to achieve when devising payment systems for their employees:
      • Motivation
      • - many believe that workers are motivated by money, and this is reflected in the number of employers who use performance related methods of payment
      • Cost
      • - employers want to keep the cost of labour as low as possible
      • Prestige
      • - employers want a good reputation of ‘good payers’. This improves their ability to recruit and retain staff
    • Questions
      • Arnold Clark are considering ways of financially rewarding sales staff. Explain 3 payment methods which they could implement.
      • (3 marks)
      • Describe possible objectives an employee might have regarding pay.
      • (3 marks)
      • 2b. Compare these objectives with those of an employer.
      • (2 marks)
    • Solution
      • Arnold Clark are considering ways of financially rewarding sales staff. Explain 3 payment methods which they could implement.
      • (3 marks )
      • They could use Commission . Workers are paid a percentage of the products’ sales value This would be suitable as it would motivate staff to sell more as they rely on commission to earn money.
      • They could use a bonus scheme. Workers must achieve pre-agreed sales targets to earn the bonus. This would encourage staff to sell more which would increase the company’s turnover and profits.
      • They could offer sales staff a salary (flat rate). This would provide staff with financial security. However, it may not motivate staff to sell more are the same amount is pay each month regardless of performance.