Question

Question 4 - Which of the following is a reason why using incentive pay to reward workers generally results in an increase in worker output and compensation?

	Incentive pay creates an incentive for existing workers to work harder.
	Incentive pay allows a firm to attract workers who are willing to work harder.
	All the above.
	None of the above.

Answer 1

The incentive to pay to reward workers generally results in an increase in worker output and compensation because it creates an incentive for existing workers to work harder as the workers know that , the harder they work, the more they would be rewarded and everybody would like to be rewarded more, which will hence result in an increase in worker output. Incentive pay also allows a firm to attract workers who are willing to work harder. There may be workers in the other company, who are not rewarded for the extra efforts made by them when compared with the efforts of their colleagues, and are paid the same. Due to this , the hard working workers will be dissatisfied with the company and would like to join a company which rewards its workers according to their efforts. This will again increase the worker output. So both the reasons justify that incentive pay to reward workers generally results in an increase in worker output and compensation. So option 3 is the correct answer.