Salary gives status and flexibility. Image credit blogspot.com
ZIMSEC O Level Business Studies Notes: Productivity Agreements, Commissions, Salary
- A commision -is a form of remuneration that is based on total sales
- It is a common form of payment with sales agents, insurance brokers etc
- It is paid upon the sale being completed
- It is usually expressed in the form of a percentage
- The formula can be given as:
- \text{Commision} = \text{Percentage \% x Piece Rate}
- It can also be given for facilitating and not just making the sale
Advantages
- It has the advantage of being a performance related form of payment
Disadvantages
- It has the disadvantages that are common to performance related payment systems
- In addition it reduces the employee’s security as they earn nothing/have no base pay
Productivity agreement
- the process of reaching an agreement (productivity agreement) through collective bargaining whereby the employees of an organization agree to changes which are intended to improve productivity in return for an increase in pay or other benefits
- Under these agreements employees increase productivity in return for an increase in pay/benefits
- It is also known as gains sharing
- It is not used as a primary means of remuneration
Salary and Wages
- a fixed regular payment, typically paid on a monthly basis but often expressed as an annual sum paid to an employee
- Salaries are usually paid to professional or white-collar workers.
- It is one of the most common and popular methods of payment
- Wages are given once every week and are typically paid to casual workers
Advantages
- It gives security of income
- It gives status compared to the time rate/piece rate methods of payment
- It makes planning easier as the salary is usually known in advance
- It makes cost allocation easier during the costing process
- Allows for time off such as during maternity and paternity leave without complicating the payment process
Disadvantages
- There is no clear link between performance and pay
- It may lead to complacency
- The business ends up paying even for idle time and periods of absence e.g. maternity leave
To access more topics go to the O Level Business Notes page
