Human Resource Management

Incentive Plans
Unit-III

Individual Wage Plans Based on Time

Halsey Plan
The slow worker is paid time wages and efficient worker is paid some bonus in addition to the time wages (normally 50% of wages for the time saved.) Std Time (S) : 10 Hrs

Rate (R)
Time taken (T)

: Rs. 4 per hr
: 6 hrs : 50% of time saved

Rate of bonus (P) Total wages

3

: T*R+(S-T)*50%*4 : Rs. 32 %

Rowan Plan

It is similar to Halsey plan except the calculation of

bonus. Here bonus is calculated by taking

proportion of time saved Wages = (T * R) + (Time saved / std time * T*R) Wages = (6*4)+(4/10 * 6 * 4) = Rs 33.6

Bedeaux Plan

In this plan std time is expressed in minutes and are known as Bs. Bonus is paid to worker at the rate of 75% of the wages for the time saved, the rest 25% goes to the foreman. For Example Std Time (S) Actual Time (T) Rate of wages (R) = 300 Bs. (5 Hrs) = 240 Bs. (4 Hrs) = Rs 6 Per hours

Value of time saved

Total Wages
5

= {(300-240)/60}*6 = Rs 6
= S*R+75% of time saved = 5*6+(75/100*6) = 34.50

Emerson Plan

A minimum wage is guaranteed to workers. Conditions of work are standardized and std output if fixed which is to be completed with in the specified period of time. The pattern of incentive under this plan is as under

Less than 66.67 % of Std, worker gets time wages

66.67% to 80% of Std, Bonus payable is 4%

more than 80% to 90%, Bonus is 20%

Between 90% to 100%, Bonus is 20%
6

Individual Wage Plans

Based on Productivity

Taylor Plan

Std task is established. Two piece rates are laid down. The lower rate for those workers who fail to complete the standard task within the allotted time and higher rate for those who complete the task with in or less than std time. For e.g. If std output is 50units per day. The piece rates fixed are Rs. 2 and Rs 1.50 per unit. Three

workers A,B and C produces 40, 50 and 60 units during the day.
Their total wages will be as follows

A : 40*1.50 = Rs. 60

B : 50*2.00 = Rs. 100

C : 60*2.00 = Rs 120

Merricks multiple Piece Rate Plan

Merrick introduced three piece rates as under :

Output (% of Task) Less than 83% From 83% to 100% Over 100%
9

Piece Rate Wage Basic Piece Rate 110% of Basic Piece Rate 120% of Basic Piece Rate

Gantt Task and Bonus Wage Plan

Under it standard time is fixed through time and motion study. Minimum time wage is guaranteed to all workers. A worker who fails to complete the task within the standard time receives wages for actual time spent at the specified rate. Worker who achieve or exceed the std get extra bonus varying between 20% to 50% of hourly rate for the time allotted for the task For Example If std time fixed for the job is 8hrs and the time rate is Rs 10per hour and the rate of bonus is 25%. A worker who completes the task in 10 hours he will get Rs. 80 (10*8) only. Whereas the worker who completes the task in 6 hrs will receive Rs 100 (80+25% of 80)
10

GROUP INCENTIVE PLANS

11

Priest man's Plan

Std output is laid down for the group. However, minimum wage is assured to each group member. The group members become entitled to the bonus if their output exceeds the standard. Bonus if paid in proportion to the excess of actual output over std output. For example if actual production is 20%

higher than the std output, the wage of each member

of group will rise by 20%. The additional wage of
12

each member is his bonus.

Gain Sharing Plan

Towne devised this plan, under this plan,

half of the savings in labor cost as a result

of output in excess of standard is

distributed among workers and foreman,

and bonus is paid half early. The

percentage of foreman is fixed in advance.

13

Goal Sharing Plan or Work Teams Results

It rewards employees for meeting specific goals

in terms of quality, services and job performance.

For e.g. an employee may be paid Rs 20 extra for each one percent improvement over baseline. E.g. The baseline is 90% and group achieves 93% performance, this would mean each group member would receive Rs 60 bonus based on group performance
14

Organization wide Plans

15

Scanlon Plan

It is a organization-wide scheme designed to involve workers in making suggestions for reducing the cost of operations and improving work

methods by showing the gains of increased productivity. It has two basic

features

Financial incentives are used to increase productivity and to reduce costs.

Departmental screening committee are set up to evaluate employee suggestions

If a suggestion is implemented successfully, all employees share the gains in productivity

16

Scanlon Plan

The conditions needed for the success of the plans are:

The no of workers should be small preferably less than 1000

Product lines and cost are stable Healthy industrial relations and good supervision Strong commitment to the plan on the part of management

17

Profit sharing Plan

Profit-sharing Plans: In this plan the employees receive or earn a share of the companys profit, which is calculated as a % of the total profit.

Distributive Plan: Annual or quarterly cash bonus is paid according to a pre-determined formula. Based on company

profits.

Deferred Plan: Employees earn profit-sharing credits instead of cash payment, which is distributed when the employee parts with

the organization.

Combination Plan: Combination of distributive & deferred Plan.

Co-partnership

In this employees are made part-owners of the enterprise and are allowed to participate in the decision-making process. The employees are converted in to co-partners or co-workers of the company. Thus, employees get higher status and naturally they

take more interest in the management of their company. It can

be introduced in the following forms:

Offering new shares to employees Through employee stock option plans.

19

Employee Stock Option Plan

ESOP provides a mechanism through which certain eligible employees may purchase the stock of the company at a reduced rate. Eligibility is usually determined by wage level or length of service or both. There are various ways in which ESOP is implemented: The stock is offered at the market rate The stock is offered at a price which is 10 to 20 % less than the market price The employee is given the option to purchase a certain amount of stock at a stated price in future within a specified period of time.
20

Questions ???

21