Question

With some organizations and jobs, pay is primarily wages or salaries, and with others, incentive pay is more important. For each of the following jobs, state whether you think the pay should emphasize base pay (wages and salaries) or incentive pay (bonuses, profit sharing, and so on). Give detailed reasoning and research for each. 1. An accountant at a manufacturing company. 2. A salesperson for a software company. 3. A chief executive officer. 4. A physician in a health clinic.

Answer 1

1. An accountant at a manufacturing company has to make ensure that the company is operating efficiently. They do it by analyzing the company's data, its finance reports, budgets, tax returns, and accounting returns. Since, the company's performance is not directly linked with the accountant's job, his pay should be more emphasized on base pay. He/she does not have much incentive to misreport the company's financials and hence a good base pay will make him work efficiently.

2. A salesperson for a software company has the direct influence on the company's revenue. It means greater the sales that he/she can deliver to the company, the greater is the company's revenue, and hence its profit. So his/her pay should be emphasized on incentive pay. He/she should be incentivized for the number of sales they make in a quarter.

3. A CEO's compensation should be based on pay-for-performance criteria. The CEO is directly responsible for almost all aspects of the business. The CEO can be made to work hard and in favor of the stockholders if their bonuses are linked with the company's performances.

4. A physician at a health clinic should have their compensation emphasized on base pay. Healthcare professionals have to work under extreme pressure. If they are paid on the basis of patients they see in a day, it would be unfair if they have fewer patients on a given day, but they are in the clinic for longer hours. A base pay will make them better off as they know they have some money in their bank balance and they can focus on treating people more efficiently.