Employee incentive programs are a very powerful concept when employees can understand and see the connection between their performance and their rewards.

Which motivate employees to exceed expectations and grow the business. Such plans promote exceptional behavior during a specific period.

In addition, they attract potential employees to an organization and encourage company’s loyalty.

Incentive Program

Profit sharingProfit sharing

Co-partnershipCo-partnership

Gain-sharingGain-sharing

ESOPsESOPs

Incentives plansIncentives plans

Output-basedOutput-based

IndividualIndividual

Time-basedTime-based

Organization- wideOrganization- wide GroupGroup

Time-basedTime-based

Classification of Incentives PlansClassification of Incentives Plans

Why Incentives are Important?

Incentives are considered beneficial to both employers as well as employees in following ways.

Workers are likely to work at their best when they are offered monetary rewards for good performance.

Provide opportunity for hard-working & ambitious employees to earn more.

To improve work-flow, work methods & man – machine relation ship.

To bring employee involvement to make employee innovative.

Incentives are the sound technique of improving productivity.

Help to improve discipline and industrial relation.

The cost of supervision are reduced.

To obtain desired result.

Employee Eligibility: Incentive plan allows for an incentive to be paid to eligible staff based on the following factors:

Achievement of personal goals Achievement of Divisional goals The profit achievement of the organization in which they work. Medium of Payment: How the bonus should be paid ? Such as Money Fringe benefits , Recognition/Appreciation Flexibility at work Holidays, etc. Frequency of payment: How often should we pay. Incentive level : The on target incentive payment will be confirmed after approval of the

budget and salary figures for the forthcoming year. Target Setting : Individual goals will be set by each employee, in conjunction with their manager. Divisional goals will be agreed between the General Manager of each Division and the

Managing Director. Organization operating profit targets will be set by the Board.

Design IssuesDesign Issues

Merit Pay Merit Pay Lump-Sum BonusesLump-Sum Bonuses Individual Spot AwardsIndividual Spot Awards Individual IncentivesIndividual Incentives

Merit Pay Merit Pay Lump-Sum BonusesLump-Sum Bonuses Individual Spot AwardsIndividual Spot Awards Individual IncentivesIndividual Incentives

Short Term Pay-for-Performance PlansShort Term Pay-for-Performance Plans

Employee Stock Ownership Plans Employee Stock Ownership Plans (ESOPs)(ESOPs)

Performance Plans Performance Plans (Performance (Performance Share and Performance Unit)Share and Performance Unit)

Broad-Based Option Plans (BBOP)Broad-Based Option Plans (BBOP)

Long-Term Incentive PlansLong-Term Incentive Plans

Improve Organizational PerformanceImprove Organizational Performance Organizational MeasuresOrganizational Measures Measured PeriodicallyMeasured Periodically

Group IncentivesGroup Incentives

In the absence of mutual trust between management & workers, an incentives may be viewed as an attempt to improve production/ profit only.

Incentive plan should be installed in consultation with workers & union. As well as Review by labor consultant/attorney .

Payment of incentives should be free from bias & established through scientific/ proper work study.

To implement incentives plane effectively minimum wages should be guaranteed to every workers.

It should be easy to understand & simple to operate so that employee can calculate their own earnings.

It should provide equal opportunity to all workers to earn incentives pay. Plan should not be very costly in operation. Plan should be flexible to adopt any changes later on. Payment of incentives should be prompt i.e. as early as possible. It should be adequate to motivate each employees. Every plan should be reviewed periodically.

What makes an Incentives plan effective?

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