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• Motivational Value of a Bonus Is Higher When:
- Salary levels are unrelated to current performance.
- Changes in other compensation items (cost of living, seniority) are not having a large effect in increasing compensation.
- Salaries rarely change and performance does.
• Benefits of Using Bonuses
- Do not become permanent part of compensation
- Are more directly tied to current performance
- Provide more flexibility in distributing rewards
• Employee Share Option
- A financial instrument that entitles the bearer to buy shares of an
organization’s stock at a certain price during a certain period of time or under certain conditions.
o To attract high-level managers
o To motivate employee performance through ownership in the firm