What type of incentive plan ties employee pay to the amount of output they produce?Profit sharingGain sharingPiece-rate payMerit-based pay

Answer Breakdown

1. Definition of Terms

   • Profit Sharing: Employees receive a share of the company's profits, usually given as a bonus.
   • Gain Sharing: Similar to profit sharing but focuses on productivity increases and cost savings, sharing the gains with employees.
   • Piece-Rate Pay: Employees are paid a fixed rate for each unit they produce or sell, directly linking pay to output.
   • Merit-Based Pay: Compensation based on employee performance, often evaluated through reviews and performance metrics.

2. Analysis of Options

   • Profit sharing and gain sharing are tied to overall company performance rather than individual output.
   • Piece-rate pay explicitly connects an individual’s earnings to their output level, incentivizing productivity.

Conclusion

The type of incentive plan that directly ties employee pay to the amount of output they produce is Piece-rate pay. This system motivates employees to increase their productivity, as their compensation is directly proportional to the quantity of work produced.