incentives

Presented byNamami Borthakur &K. Gayatri

agenda

• What are incentives• Types of incentives• Individual incentives• Group incentives• Case Study

incentives

• In the words of Burack & Smith,“An incentive scheme is a plan or program to motivate individual or group performance. An incentive program is most frequently built on monetary rewards (incentive pay or a monetary bonus), but may also include a variety of non-monetary rewards or prizes”.

• On the other hand, French says, the term “incentive system” has a limited meaning that excludes many kinds of inducements offered to people to perform work, or to work up to or beyond acceptable standards.

features of an incentive plan

• Consists of both ‘monetary’ & ‘non-monetary’ elements.

• Timing, accuracy & frequency of incentives

• Proper communication of the incentive plan to the employees

determinants of incentives

1. The Individual

2. The Work situation

• Technology

• Satisfying job assignments

• Feedback

• Equity

Performance Related Pay (PRP)

"Performance Related Pay" is the formalizing of the link between personal performance and remuneration. It is an attempt to bring the traditions of "piece-work" associated with the Agricultural Age to the late stages of the Industrial Age and the early stages of the Information Age.

Objectives of PRP:

• Control over income

• Engagement/Role ownership

• Stimulation

• Performance Management

types of incentive scheme

• Individual incentives

• Group incentives

individual incentive schemes

• Individual payment schemes include payment by results, piecework and bonuses, work measurement (including measured day work) and appraisal and performance related pay

• Many sectors of employment use pay systems that contain direct links to individual performance and results. On an individual basis this may be via:

1. payment by results (PBR) e.g. bonus, piecework, commission

2. work-measured schemes and pre-determined motion time systems

3. measured day work (MDW)

4. appraisal/performance related pay

5. market-based pay

6. competency and skills based pay.

some important Wage Incentive Plans

The chief incentive plans are:

1. Halsey Premium Plan

2. Halsey-Weir Premium Plan

3. Rowan Premium Plan

4. The 100 percent Premium Plan

5. The Bedeaux Point Plan

6. Taylor’s Differential Piece Rate Plan

7. Emerson Efficiency Plan

8. Co-Partnership System

9. Accelerating Premium Systems

10.Profit Sharing

Halsey Premium Plan

• This is a time-saved bonus plan which is ordinarily used when accurate performance standards have not been established.

• Under this plan, it is optional for a workman to work on the premium plan or not.

• His day’s wage is assured to him whether he earns a premium or not, provided he is not so incompetent as to be useless.

• A standard output within a standard time is fixed on the basis of previous experience.

• The bonus is based on the amount of time saved by the worker. He is entitled to a bonus calculated on the basis of 33.33% of the time saved. He thus gets wages on the time rate basis.

• This plan is a combination of the day wage & the piece wage in a modified rate.

EXAMPLE : If 8 hours is the standard time of a job, & Re. 0.50 is the guaranteed wage per hour, the worker, if he takes 8 hours to perform the work, receives Rs. 4.00. If he performs the task in less than 8 hours, he receives an extra premium on the time saved.

Formula: Bonus = ½ of Time saved *Daily Wage

Time taken

PREMIUM(half of the time saved)

TOTAL WAGES(Rs)

If the work is completed in 6 hours 0.66 4.66

in 4 hours 2.00 6.00

in 2 hours 6.00 10.00

in 1 hour 14.00 18.00

Halsey-Weir Premium Plan

This plan is similar to the Halsey Premium Plan except that 50 per cent of thee time saved is given as premium to worker.

Formula : Bonus = ½ * Time saved * Hourly rate

Rowan Premium Plan

In the Rowan Plan, the time saved is expressed as a percentage of the time allowed, and the hourly rate of pay is increased by that percentage so that total earnings of the worker are the total number of hours multiplied by the increased hourly wages. The plan aims at ensuring the permanence of the premium rate, which is often cut by the employer when the worker’s efficiency increase beyond a certain limit.

EXAMPLE : If 8 hours is the standard time for doing a job & Rs.4.00 the daily wage, the premium & total wages would be as follows:

Formula : Bonus = Time Saved * Time taken * Hourly rate

Time Allowed

PREMIUM(half of the time saved)

TOTAL WAGES(Rs)

If the work is completed

In 5 hours 1.00 5.00

In 4 hours 2.00 6.00

In 3 hours 3.00 7.00

In 1 hour 3.50 7.50

benefits

To business• retain existing employees

• increase their motivation, morale and loyalty

• boost productivity

• link individual and business performance

• focus employees on achieving targets

• build teamwork

• Indirect benefit, e g free health assessments may reduce absences.

To employees• enhance the quality of

working life

• reward employee efforts

• add value to the employment contract

Group Incentives

Compensation system which links pay to a group's combined performance measured by reduction in costs, increase in productivity, progress in attaining firm's objectives, etc.

advantages & disadvantages

advantages• Better co-operation among workers

• Less supervision

• Reduced Absenteeism

• Leads to improved communication and employee relations.

• Shorter training time

Disadvantages• Weakens relationship b/w individuals effort and performance.

• Intra-group conflict

• The incentive may not be strong enough to serve its purpose

designing a Group Incentive

• Performance targets, standards, planning.

• Systematic funding of rewards.

• Consistent and acceptable method for allocating reward

reward determination

• Timing

• Amount

• Non-financial reward

Perks

• occupational pensions

• more holidays than the statutory minimum .

• gifts

• health benefits

• flexible working 

• subsidized staff canteens, tea/coffee-making facilities or goods/services

• loans

• social events & work outings

• membership of social clubs

• extra training, which goes beyond skills needed for the job

case study-Excel award Scheme in BHELObjective: recognize, reward and place on

record any direct or indirect, outstanding or exemplary contribution

Categories: USD 1000 (individual) USD 10,000 ( group or team)

• An award for– All round excellence

– Excellence in Quality

– Timeliness, Speed and Response

– Productivity

– Technical Paper

– Research and development

– Creativity and Innovation

– Customer service

– Outstanding contribution to Environment, Culture and Society

– Appreciation of good health

• Benefits attached:– Cash prize, medallion and a scroll

– To and Fro journey fare to the capital, with travelling expenses and hotel accommodation as per entitlement

– Dinner hosted by Chief Executive in their honor

Effective Schemes

• Affordable

• Transparent

• Appropriate to the business

Thank You