Question 1
How does merit pay differ from a bonus?
◦ Merit pay becomes part of an employee's base pay, but a bonus does not.
◦ Merit pay is linked to individual performance, while a bonus is linked to profits.
◦ A bonus is linked to individual performance, while merit pay is linked to profits.
◦ A bonus becomes part of an employee's base pay, but merit pay does not.
Question 2
Ryobi is a large, international power tool manufacturer that develops affordable, high-quality products such as drills, circular saws, and routers for both homeowners and craftspeople. As the company continues to grow, its top executives want to ensure that employees are appropriately paid for their performance and that financial incentives are both fair and effective. Currently, the firm provides merit raises based on performance appraisals; however, executives are considering changing the current incentive plan.
Which of the following, if TRUE, best supports the argument that Ryobi should eliminate all merit raises?
◦ Motivation among Ryobi engineers has been improved through social recognition programs.
◦ Ryobi uses an enterprise incentive management system to automate compensation.
◦ Performance appraisals at Ryobi occur annually, and standards vary from manager to manager.
◦ The commission percentage for Ryobi sales people is based on the ability to meet monthly quotas.
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