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An earnings-at-risk plan is a plan to boosts effort directed to higher performance. The rewards to the incentive pay are by giving a less-than-enough base pay. On the other hand, a typical gain-sharing plan encourages effort by predefining a plan for sharing the resulting profits or gains of a company between the employer and employee such that the higher the profits the higher the benefit to both parties.
An earnings-at-risk plan may discourage potential employees as new ones will always be at a disadvantage as to how much they can do. Continuing employees are likely to stick to the company since all they need to do is up their performance behavior and their incentive pay increases. Therefore, many employees will choose a profit-sharing plan to earnings-at-risk at risk as their income has a direct relation to what they managed to achieve as a team.
With the 2008-2010 recession, the viability of earnings-at-risk plans is a leading compromise because while the employer holds the base wage at the same level as before. The performance level of the employee face challenges from external factors. The resulting incentive pay results in just enough total income in view of the economic situation resulting from the recession.
When managers want to motivate team members to work together as the resultant remuneration, they base them on what they will accomplish as a team or a group rather than individual achievement. When there are no clear individual goals to serve as a basis for an individual plan incentive, it is better rather than to use a group incentive. The nature of the organization will also determine which plan to adopt. In one such as a film industry where individuals and, scenes highly inter-depend on each other it is preferable to adopt a group incentive plan.
It begins with a tentative agreement between the manager and, the employees. Goals set at the end of the forum are realistic to both parties and achievable. On the other hand, common goals, give the whole team a sense of direction. Therefore, the employees will work towards achieving them with clear knowledge of the expectations and the manager may gain insights into possibilities for the individual employees out of the session.
Rating scales would be most appropriate, reason being that the performance of an individual can be clearly accessed based on how many targets he or she meets or exceeds. Timeliness of meeting those predefined targets and also how many times they fail to meet them. I do require personal comments about various factors that might have effects leading to the inadequacy on the ratings scale.