Discussion post Assignment Please review lecture notes to assist with questions Week 2 Lecture In Week 2, this course will discuss the uses of incentive pay plans including the pros and cons of the various employee pay plans. This week will also discuss the relationship between performance management and compensation. Employee incentive compensation programs grew from the philosophy that employees will be driven by rewards. As a result, organizations use incentive compensation programs to produce their targeted results. Organizations reward employees who produce. Organizations need to improve or keep employee motivation and the key is finding out what employees want and value as incentives. There are a variety of incentive pay plans. A few such plans are discretionary bonus plans, annual pay increase plan, profit sharing, retention bonusses and project-based bonus. A common compensation plan is based on the employee’s seniority and hence called “seniority pay.” An employee under this plan receives compensation due to the length of time he/she has been with the organization or tenure with the organization. Many times, this type of plan is found in unionized workforces, however it can be found in many different types of organizations as well. The one issue with this type of plan is the increase in compensation may not be appropriate, especially if the employee is not performing and as a result, it may have a negative impact on the organization.  The employee may have an expectation of an increase regardless of performance or organizational productivity.  If the organization doesn’t produce, the employee will expect an increase regardless. Another incentive plan is the “merit plan” where employees are paid based on past performance usually during a specific period. The merit plan pays employees for meeting standards or performance goals and can be utilized in conjunction with annual performance evaluations. For this type of pay plan to work, the organization needs to set goals that are obtainable and realistic. Some organizations utilize SMART goals. SMART goals are goals that are set that are specific, measurable, attainable, relevant and time framed. Additionally, employees need to be made aware of the terms of the merit pay plan so they know how and when to reach their goals. Goals should be aligned with the organizational mission, vision and guiding principles. Merit pay programs are not appropriate for all companies and for the plan to be successful, top management must agree to reward the top performers with meaningful pay differentials that match the levels of the employee performance (Martocchio, 2017). Another incentive plan is the “person-centered pay” which is a plan that rewards employees for acquiring job related knowledge, skills or competencies (Martocchio, 2017).  The person-centered play plan is not based on job performance. This plan is a means of rewarding employees for their actions acquiring skills. Furthermore, person-ce.

1. Discussion post Assignment
Please review lecture notes to assist with questions
Week 2 Lecture
In Week 2, this course will discuss the uses of incentive pay
plans including the pros and cons of the various employee pay
plans. This week will also discuss the relationship between
performance management and compensation.
Employee incentive compensation programs grew from the
philosophy that employees will be driven by rewards. As a
result, organizations use incentive compensation programs to
produce their targeted results. Organizations reward employees
who produce. Organizations need to improve or keep employee
motivation and the key is finding out what employees want and
value as incentives. There are a variety of incentive pay plans.
A few such plans are discretionary bonus plans, annual pay
increase plan, profit sharing, retention bonusses and project-
based bonus. A common compensation plan is based on the
employee’s seniority and hence called “seniority pay.” An
employee under this plan receives compensation due to the
length of time he/she has been with the organization or tenure
with the organization. Many times, this type of plan is found in
unionized workforces, however it can be found in many
different types of organizations as well. The one issue with this
type of plan is the increase in compensation may not be
appropriate, especially if the employee is not performing and as
a result, it may have a negative impact on the organization. The
employee may have an expectation of an increase regardless of
performance or organizational productivity. If the organization
doesn’t produce, the employee will expect an increase
regardless. Another incentive plan is the “merit plan” where
employees are paid based on past performance usually during a

2. specific period. The merit plan pays employees for meeting
standards or performance goals and can be utilized in
conjunction with annual performance evaluations. For this type
of pay plan to work, the organization needs to set goals that are
obtainable and realistic. Some organizations utilize SMART
goals. SMART goals are goals that are set that are specific,
measurable, attainable, relevant and time framed. Additionally,
employees need to be made aware of the terms of the merit pay
plan so they know how and when to reach their goals. Goals
should be aligned with the organizational mission, vision and
guiding principles. Merit pay programs are not appropriate for
all companies and for the plan to be successful, top management
must agree to reward the top performers with meaningful pay
differentials that match the levels of the employee performance
(Martocchio, 2017). Another incentive plan is the “person-
centered pay” which is a plan that rewards employees for
acquiring job related knowledge, skills or competencies
(Martocchio, 2017). The person-centered play plan is not based
on job performance. This plan is a means of rewarding
employees for their actions acquiring skills. Furthermore,
person-centered pay rewards employees for the promise of
performance in the future based on the employee acquiring
certain job-related skill sets.
As with most strategies and plans, there will be pros and cons.
The advantages of an employee incentive plan are that it can
motivate employees to be more productive and reduce turnover
by creating loyalty. It can also reward employee performance.
However, a disadvantage is that it could cause employee
competition along with resentment among the employees.
Students need to keep in mind that there is not a single
incentive plan that will be appropriate for all employees within
in an organization since employees may be motivated by
different methods. Many times, an organization will use various
compensation plans to achieve their organizational goals. The
design and implementation of the compensation plans need to be
most effective for the organization and the employee.

3. Please review the Incentive Pay (Links to an external site.)
video which will provide an overview of incentive pay plans for
employees.
References
Gregg Learning. (2016). Incentive pay (Links to an external
site.) [Video file]. Retrieved from
https://www.youtube.com/watch?v=cr5IdfWUpxc
Martocchio, J. (2017). Strategic compensation: A human
resource management approach (9th ed.). New York, New York:
Pearson.
DISCUSSION QUESTION NUMBER ONE:
Define the concept of seniority and merit pay plans, including
the strengths and limitations of such plans within an
organization. Discuss the job, organizational and/or other
factors that should be considered when deciding between the
two. Respond to at least two of your fellow students’ postings.
RESPOND TO CLASSMATE ONE:
The seniority pay plan is where the employees experience is
measured by the working habits of the employee and what they
have accomplish for the organization. Some organizations are
paying the same increase for all employees. For example,
recently in the organization that I am employed at all the
employees received an four percent raise. The seniority pay
plan also pays the old employees more than they would new
hires. Many organizations assumes that the longer an employee
has been with the organization has more value than those are
just hired. Martocchio (2011), states that "the employee will
remain with the company because he knows that every year
another increase in his pay". In the seniority pay plan many
organizations will often reward their employees for the
experience that they have on their job and for establishing their
career though the organization.
The merit pay plan often provides the motivation leading to the
increased productivity of the employees. The merit pay plan

4. also recognizes the employees that are putting forth the efforts
that will help them to receive a promotion from the
organization. In this plan employees are often rewarded for
their efforts that will help the organization in the long run
The factors that should be considered in deciding which plan is
best for the organization we should look at the future. In the
seniority plan they are only concerned with how many years and
the experience that an employee has. Whereas the merit pay
plan is concerned about the long run effects that an employee
has for the organization. The merit pay plan has benefits for the
organization and the employees. They are concerned about the
employees whether old employees or new new employees which
offer the most in the long run.
Reference
Martocchio, J.J. (2017). Strategic compensation: A human
resource management approach (9th ed.). Retrieved
from https://content.ashford.edu
RESPOND TO CLASSMATE TWO:
Week 2 Discussion 1
Seniority and Merit Pay
Define the concept of seniority and merit pay plans, including
the strengths and limitations of such plans within an
organization. Discuss the job, organizational and/or other
factors that should be considered when deciding between the
two.
Seniority pay rewards employees by adding to their base pay
based on the amount of time that the employee has been with a
particular company. Employees that are knowledgeable and
productive want to know that they are appreciated by their
organization and seniority plans can do that. When employees
continue to improve by training on new skills and making sure
they are up to date on old skills, this is when the seniority pay
should be offered. One strength is If organizations continue to
offer seniority pay to good employees, they will continue to be
productive and If new employees know that seniority pay is an

5. option, they will work harder to become more successful in all
aspects of the organization (Martocchio, 2017).
Merit pay is based on performance and rewards employees that
perform at a high level with additional pay. Merit pay is a huge
motivation within organization because it isn’t necessarily
based on how long you have been with the company. A merit
increase for an employee can be determined by the managers
performance appraisal of that particular employee. A strength of
merit pay is that it sets the bar for current and future employees
letting them know how the company is expecting them to
perform. Organizations want employees to perform at a certain
level and most are willing to use the merit pay system to keep
the best employees in the industry (Martocchio, 2017).
When an organization decides between adding seniority pay or
merit pay for their employees, the decision should go along with
the goals and objectives of the particular organization. The
seniority pay option can remove any perception of favoritism
being shown in the workplace. Because the merit pay option is
usually based on managerial performance appraisals or reviews,
some employees may feel that managers show favoritism which
can cause problems in the workplace. However, merit pay plans
can assist in increasing motivation within the workplace
because this is based on performance, so most employees will
want to work harder to increase their compensation. Either one
an organization decides to implement will help ensure their
employees that working hard and being productive will increase
their compensation at some point (Joseph, n.d.).
Joseph, C. (n.d.). The Effects of Merit-Based Promotion Vs.
Seniority. Retrieved from Small Business:
https://smallbusiness.chron.com/effects-meritbased-promotion-
vs-seniority-11565.html
Martocchio, J. (2017). Strategic compensation: A human
resource management approach (9th ed.).
https://content.ashford.edu.
DISCUSSION QUESTION NUMBER TWO:

6. Discuss how incentive pay plans – both individual and group –
motivate employees to achieve high levels of performance.
Identify potential weaknesses of these plans and suggest steps
that can be taken to make these plans highly effective. Then,
choose one industry that either an individual or group incentive
pay plan would work best providing support for your reasoning
(using personal examples to illustrate your point if possible).
Explain your answer. Respond to at least two of your fellow
students’ postings.
RESPOND TO CLASSMATE ONE:
JULIE-
Incentive pay plans can be based on individual or group
performance. It is important for a company to understand what
metrics the pay will be based on, and whether it is reasonable to
tie the results to an individual or a group. For example, I work
in government contracting, and we will often give awards to
entire teams. When a new contract is won, the entire proposal
team will receive a cash bonus for their hard work. This is
usually about a dozen people. "Group incentive programs are
most suitable where the nature of the work is interdependent
and the individual contributions of employees are difficult to
measure" (Martocchio, 2017). On the other hand, if a single
Finance Analyst found a billing error that saved the company a
large sum of money, it would be more appropriate to give an
individual bonus.
These incentive plans can be used in place of a base salary, or
in conjunction with a base salary. Personally, I am risk-
adverse, so I prefer to have my entire paycheck come from
salary. This way I know exactly how much my paycheck will
be week after week. However, there are others who like to be in
control of their pay and may prefer to work long hours in
exchange for more pay. This would be common for
commission-based employees like realtors. While some
optimistic employees may see the endless opportunity of a
commission-based pay, others who are realists may see that

7. there is the potential to earn very little if the market is not
strong. Offering a combination of salary and commission may
help ease some employees an make the overall package more
appealing. In the case of realtors, a group incentive plan would
not make sense because each home is represented by a single
realtor whose level of effort is directly related to the sale of
that home. Another local realtor would not have an effect on
the other realtor's sales.
Martocchio, J.J. (2017). Strategic compensation: A human
resource management approach (9th ed.). Retrieved
from https://content.ashford.edu
RESPOND TO CLASSMATE TWO:
Ethel-
Week 2 Discussion 2
Incentive pay plan is a manner for which employers pay their
employees for a higher productivity by giving them a larger pay
or a bonus. Many employees are motivated to achieve high
levels of performance by the type of incentive that the
organization is offering them. The employees are motivated by
knowing that the more productivity that they produce the more
money we be put in their pocket, thus causing them to provide
more for their families.
Some of the potential weaknesses that the incentive pay plans
can display are: That some of the employees may care more
about the incentive more than they care about the productivity
and how the goal is completed and they may take the incentive
for granted. These weaknesses could cause a decrease in the
quality of the work and product that is put out by the
organization. Some steps that could help with making the
incentive plan more effective are: Lay out some goals for the
incentive to be paid out, Establish some guidelines for the
employees to follow, Communicate to the employees about the
specific goals and the incentives, and take action when it
comes to the employees and the incentives.
For me I would choose the cash payout incentive because the

8. organization that I am employed at offer this type if incentive
pay plan. The reason that I would choose this one is because it
would help me and my family financially and with the cost of
living going up this would truly help out with saving for the
future. The stock option would be good also but the stocks
could fall and we would have nothing.
References
Martocchio, J.J. (2017). "Strategic compensation: A human
resource management approach",
Retrieved from
https://ashford.instructure.com/53029/external_tools/retrieve?
Rowe, R. (2018). "Six Types of Incentive Plans",
Retrieved from https://bizfluent.com/list6557258-six-types-
incentive-plans.html