Which of the following statements about incentive pay plans is true?
A) Unlike merit pay plans, base pay is set at the market rate for incentive plans.
B) With incentive pay, high performers earn more but no permanent adjustment is made to an employee's base pay.
C) Once earned, the incentive pay becomes a part of the employee's base pay.
D) Caps are used to keep incentive pay levels even with the industry pay level.
E) There is no difference between how merit pay plans and how incentive pay plans are used to reward employee performance

Question

Quizplus · Accepted Answer

Incentive pay plans are designed to reward high performers with additional pay, but this additional pay is typically not permanent and does not become part of the employee's base pay. Unlike merit pay plans, which are used to adjust an employee's base pay for good performance, incentive pay plans are separate from the employee's base pay. Caps may be used to limit the amount of incentive pay that can be earned, but these caps are not specifically designed to keep pay levels even with the industry pay level.

Which of the Following Statements About Incentive Pay Plans Is