From the course: Rewarding Employee Performance

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Discretionary vs. nondiscretionary rewards

Discretionary vs. nondiscretionary rewards

From the course: Rewarding Employee Performance

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Discretionary vs. nondiscretionary rewards

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- There are two basic types of rewards: discretionary and non-discretionary. So, let's talk about what they are and exactly how they differ. Non-discretionary rewards are paid out based on a predetermined formula. Not paying out a non-discretionary reward can result in a breach of contract claim. A discretionary award, on the other hand, is just the opposite. Management can decide if it feels like rewarding an employee or not. There's no contractual obligation. It's at their discretion. Now, non-discretionary rewards are often incentives tied to specific benchmarks. They're often used with sales personnel who meet certain quotas. A company-wide profit plan is another form of non-discretionary reward. Other non-discretionary rewards include hiring bonuses, attendance bonuses, individual or group production bonuses, safety bonuses, or even length of service and retention bonuses. Once a reward is earned, the employer is obligated to pay it out as promised. Employers may place conditions…

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