Compensation System Redesign

Your manager wants you to redesign the compensation system for your new division by shifting overall pay from salary to bonuses. Your manager believes that people do not work hard if they know they will get a certain salary, and that the productivity will increase with a high bonus coupled with a much lower pay. Your manager believes that money is the only thing employees care about. You manager tells you that they looked at comparable firms and the average salary at other places is $50,000 and people do not earn bonuses more than $3,000. Your manager wants to have a base salary that is only $40,000 in your new division. However, your manager wants to put in a bonus system where the top bonus would be $20,000. Your  manager is convinced this will attract the best talent, increase productivity, and  motivate employees.  What do you tell your manager?  Do you agree with your manager’s ideas? Do you think this is the best means to  attract the best talent, increase productivity, and  motivate employees? What “proof” do you show your manager to back up what you are saying?

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