Chapter 11 has continued the discussion of compensation by presenting some important issues: individual pay determination, methods of payment, variable pay, incentive forms of pay, new pay innovations, executive pay, and compensation administration issues. Chapter 12 will complete the discussion of the compensation system by covering all forms of indirect compensation (both mandatory and voluntary benefits).

1. Determining individual pay involved asking the question, "How should one employee be paid relative to another doing the same job?"
2. Methods of payment include
   1. Flat rates
   2. Pay for time worked (wages and salaries)
3. There is a growing realization that traditional pay systems do not effectively link pay to performance. The trend is toward a total compensation approach made up of base pay, variable pay, and indirect pay or benefits.
4. Flexibility is an essential ingredient in any compensation plan and can be built using a variable pay approach.
5. Methods for paying employees on the basis of output are usually referred to as incentive forms of pay. These include merit pay, individual incentives, team incentives, and organizationwide incentives.
6. The most widely used plan for managing individual performance is merit pay.
7. Individual incentives pay the employee on the basis of units produced or dollar value of sales. Methods include straight piecework, standard-hour plan, differential piece rate (Taylor plan), commission, and production bonus systems.
8. Team incentives are used to build a team culture, with rewards provided on a group basis.
9. Organizationwide incentives, where rewards are based on shared profits generated through employees' efforts or on money saved as a result of employees' efforts to reduce costs, are the most common incentive pay systems.
10. Suggestion systems can improve employee relations, foster high-quality products, reduce costs, and increase revenue.
11. Gainsharing incentive plans, including the Lincoln Electric plan, Scanlon plan, Rucker plan, ImproShare, business plan gainsharing, and winsharing, are companywide group incentive plans that unite employees to improve organizational effectiveness through a financial formula for distributing organizationwide gains.
12. Spot gainsharing plans focus on a specific problem in a specific department rather than on improving performance throughout the whole organization.
13. The most critical factor in the success of any gainsharing plan is employees' involvement.
14. Profit-sharing plans distribute a fixed percentage of total organizational profit to employees in the form of cash or deferred bonuses.
15. Person-based pay designs like skilled-based, knowledge-based, credential-based, feedback, and competency-based pay are alternatives to job-based pay that set pay levels on the basis of how many skills an employee has, how much knowledge an employee acquires, and the like.
16. CEO pay is a very important consideration in designing comparative-performance reward packages that are fair to all employees.
17. Managers make policy decisions on three compensation administration issues: pay secrecy, pay security, and pay compression.