What type of performance-based pay awards employees a percentage of financial gains from department performance improvements?

Gainsharing is a performance-based pay system that rewards employees with a percentage of financial gains resulting from specific improvements in departmental performance. This approach emphasizes collaboration and team efforts, encouraging employees to enhance productivity and efficiency, which ultimately contributes to increased financial outcomes for the department or organization. When a team meets or exceeds performance targets, the financial gains are shared among the employees, thereby aligning their interests with the organization's goals.

Unlike bonuses, which are typically one-time payments awarded for achieving certain milestones or overall performance, gainsharing continually incentivizes teams to work together towards ongoing improvements. Profit sharing, on the other hand, distributes a portion of a company's profits to employees based on the overall financial performance of the organization, rather than specific departmental contributions. Commission is a payment structure usually related to sales, where employees earn a percentage of the sales they generate, rather than focusing on overall department performance improvements. Thus, gainsharing specifically links financial rewards to team-based performance outcomes, making it the correct choice in this context.