Question 58

Piece-rate compensation rewards individuals based on the quantity of output.

Piece-rate compensation plans directly link an individual's earnings to the amount of work they produce, making it a clear incentive for higher output.

A) Piece-rate

This option is correct because piece-rate compensation specifically pays workers a fixed rate for each unit of output they produce. This model incentivizes productivity, as the more an employee produces, the more they earn.

B) Standard salary

Standard salary compensation provides employees with a fixed payment regardless of their output. This approach does not directly reward increased productivity, as individuals receive the same pay regardless of the quantity of work completed.

C) Skill-based

Skill-based compensation rewards employees based on their skills and competencies rather than the quantity of output. While it may encourage skill development, it does not incentivize higher production levels directly related to output.

D) Profit sharing

Profit sharing involves distributing a portion of a company's profits to employees, which can motivate overall performance but does not specifically reward individuals based on their output levels. It is more about shared success than direct output measurement.

Conclusion

The piece-rate compensation plan is the only option that directly ties earnings to the quantity of output produced, making it the most effective choice for rewarding high productivity. In contrast, standard salary, skill-based, and profit-sharing plans do not provide the same level of direct incentive for increased output, making them less suitable for this specific purpose.