Question

Assume Microsoft is considering either to pay all of its workers a fixed wage setting a minimum
performance level, or pay them proportional to their performance. Also, assume the manager of
Microsoft asked you the relative advantage of each payment method. What would be your answer? (It
is enough to write only one advantage of each method)

Answer 1

To pay all of its workers a fixed wage setting a minimum performance level is effective when it is difficult to distinguish individual contributions. By giving a fixed wage, the employer can benefit when the performance of the employee is more than that of the prevailing competitive level of performance.

When the contributions of individual employee can be distinguished clearly, payments can be made proportional to their performance. This type of payment method has an advantage. The company need to pay only according to the performance of the workers. They need to offer competitive pay for competitive level of performance,pay above the market for exceptional performance and can reduce the payment for poor performance . This method will help to retain the top performing employees and control costs.