Employees receive a fixed amount for each hour, day or week they work. Think of it like a school lunch allowance that you get every day you attend class.
Exam tip: Remember that time‑based pay is not tied to output, so it can be used when tasks are unpredictable or safety‑critical.
A fixed amount paid at regular intervals (usually monthly). It’s like receiving a monthly allowance from your parents regardless of how many chores you do.
Exam tip: Salaries are usually used for stable, routine work where output is consistent.
Pay is based on the number of units produced. For example, a factory worker might earn $0.50 for each toy assembled.
Formula: \$P = p \times q\$ where \$p\$ = price per unit, \$q\$ = quantity.
Exam tip: Piece rates motivate high productivity but can lead to quality issues if workers rush.
Employees earn a percentage of sales they generate. Think of a salesperson getting 5% of every book sold.
Exam tip: Commission aligns employee interests with company sales goals.
Extra payments for meeting targets or exceptional performance. It’s like getting a surprise gift for doing a great job on a school project.
Exam tip: Bonuses can be fixed or variable; note the difference when answering questions about motivation.
Employees receive a share of the company’s profits. Imagine a pizza shop where each staff member gets a slice of the profits each year.
Exam tip: Profit sharing encourages long‑term commitment and teamwork.
Pay is linked to performance metrics (KPIs). It’s like earning points in a video game for completing levels.
Exam tip: Highlight how performance pay can be both motivating and stressful.
Non‑cash perks such as health insurance, gym memberships, or flexible hours. Think of it as a school club offering free snacks and extra recess time.
Exam tip: Fringe benefits can be a key part of the total rewards package and may influence job choice.
| Method | Example | Key Feature |
|---|---|---|
| Time‑Based Pay | Hourly wage for a cashier | Fixed per hour, no output link |
| Salary | Monthly salary for a teacher | Fixed monthly amount |
| Piece Rates | $0.50 per toy assembled | Pay tied to units produced |
| Commission | 5% of book sales | Pay linked to sales volume |
| Bonuses | Year‑end bonus for exceeding targets | Extra reward for achievement |
| Profit Sharing | Share of annual profits | Aligns interests with company success |
| Performance‑Related Pay | Pay based on KPI scores | Motivates high performance |
| Fringe Benefits | Health insurance, gym access | Non‑cash perks enhancing job appeal |