Souped Inc., a firm that manufactures ready-to-eat soups, offers incentives based on an employee's performance rating and the employee's compa-ratio. Which payment plan is exemplified in this scenario?

A) piecework plan
B) merit pay
C) standard hour plan
D) differential plan
E) skill-based plan

The scenario exemplifies a merit pay plan as it offers incentives based on an employee's performance rating. The compa-ratio (comparison of an employee's pay to the pay of others in similar positions) is used as a factor in determining the amount of the incentive, which is a common practice in merit pay plans. A piecework plan pays employees based on the number of units they produce, a standard hour plan pays employees based on the time they spend on the job, a differential plan pays employees based on their skills or job responsibilities, and a skill-based plan pays employees based on their level of skill or knowledge.