172 Principles of Cost Accounting Employer\'s payroll taxes (13% 01 tta! wages,

Question

172 Principles of Cost Accounting Employer's payroll taxes (13% 01 tta! wages, assum no employee has exceeded the wage basesor I unemployment insurance taxes). th and the 5, The be acc MINI-CASE 1 the tive 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 hourlv 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's concerns? 2. Does the compensation have to be all hourly rate or all incentive? 3. Can incentive compensation also apply to service businesses? MINI-CASE 2

Explanation / Answer

1. Incentives are given to boost employee performance . But care should be taken to improve his productivity also. That can be achieved only when the worker participates in the formulation of larger goals , instead of being handed over just the number of units expected of him. In short, it has to be understood that man does not work for money alone. He cherishes recognition & being the architect of some concrete goal, after the formulation of which, he willingly comes forward to achieve the target, at the same time, increasing his earnings. At this point, the organisation would do well ,to conduct brain-storming sessions between management & the workers--and establish quality norms pro-actively.This exercise is 100% sure to take care of the quality angle, while achieving targets. The workers are sure to work on accepted & agreed lines, in both achieving quantity & quality. It is this simple humane approach towards setting the target, for both quality & quantity --all involving the workers right from the idea-conception stage , that will help Higgins accomplish his goals , very easily . The sincerity in the management's approch towards the workers , to create an atmosphere of goodwill, understanding along with a profit-sharing motive, works more than any incentive plan. The feeling of belonging-ness to the organisation, the workers get to have, is an important aspect of any plan concerning the workers. 2..Employee compensation should be a mix of the following: 1.some basic structured amount assured as per the company's established norms , as per its overall affordability-when viewed for the company as a whole. 2.a portion providing incentive to go that extra mile , in quantity or quality--appreciating his efforts ,to work for the company's progress. But,a good compensation plan must be such that it ensures a basic & decent living standard for the employee & his family rewards him for sincere & good above-average perfomances & last but not the least, makes him think mutiple times , before even attempting a change of employer--- ie. The one that attracts & retains real & loyal talent. 3..YES. There are a variety of incentive compensation for the service sector like: a. Performance bonuses --regular or once in a while b. Profit-sharing where all employees get s share in that period's profit c.Increments & promotions based on merit & performance d.stock options where the employees get a chance to own the company, on meeting some milestone set for issue of the same. e. Various non-monetaryshow-of appreciation like a vacation for the family,tickets for foreign trips for self & family & the like.

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