What type of compensation method directly ties rewards to the company's productivity?

Gainsharing is a compensation method that directly connects rewards to the company’s overall productivity and performance. This approach involves a collaborative effort where employees share in the gains resulting from improved efficiencies and cost savings within the organization. Unlike other compensation methods, gainsharing encourages teamwork and aligns employee interests with organizational goals, fostering a culture of collective achievement.

In gainsharing arrangements, employees are typically granted bonuses based on the company's performance metrics, such as increased profits or productivity benchmarks. As a result, when a company increases its profitability through improved operations or reduced costs, employees can see a direct correlation in their compensation, motivating them to contribute to the company’s success actively.

Base pay, while fundamental for employee compensation, does not vary with productivity. Commission typically applies to sales roles and ties pay to individual sales performance, rather than company-wide productivity. Bonus pay can sometimes be based on performance but is often set as part of the overall compensation package rather than being inherently tied to continuous productivity gains. Thus, gainsharing stands out as the most effective method for linking compensation directly to productivity at the company level.