Incentives payments

Incentives Programme
Wage incentives include all the plans that
provide extra pay for extra performance In
addition to regular wages for the job.

It implies monetary inducements offered to

employees to perform beyond acceptance
standards.
Different Types of Variable Pay
Plans
Cash Profit Sharing
Stock Ownership or
Options

Balanced Scorecard

Productivity / Gain-
Sharing
Team / Group
Incentives
Short Term Pay-for-Performance
Plans
Merit Pay
Lump-Sum Bonuses
Individual Spot Awards
Individual Incentives
Long-Term Incentive Plans

Employee Stock Ownership Plans

(ESOPs)

Performance Plans (Performance

Share and Performance Unit)

Broad-Based Option Plans (BBOP)

 Individual Incentives

Under a system of individual incentives, all

or a portion of an individuals pay is tied to
their performance.
 Group Incentives
Improve Organizational Performance
Organizational Measures
Measured Periodically
 Team / Group Incentive Plans
Gain-Sharing Plans
Profit Sharing Plans
Earnings-at-Risk Plans
 Individual Incentive Plans
Method of Rate Determination
Units of production per Time period per unit of
time period production
(1) (2)
Pay constant function of Straight piecework plan Standard hour plan
production level
Bedeaux plan
Relationship
between
production level (3) (4)
and pay
Taylor differential piece Halsey 50 - 50 method
Pay varies as function rate system
Rowan plan
of production level
Merrick multiple piece
Gantt plan
rate system
 Types of Incentives Plans
The ILO classifies all the schemes of payment by results into
four categories:
Earnings vary Earnings differ
Earnings vary
Earning vary in Proportionately at different levels
less
the same proportion More than outputs of output
proportionately
as output
than output

Straight Piece Work High Piece Rate

Taylors Differential
Standard Hour High Standard Hour Piece Rate
Merrick Differential
Halsey Plan
Piece Rate
Rowan Plan
Gantt Task System
Barth Scheme
Emersons Efficiency
Bedaux Plan
plan
Halsey Plan
Rowan Plan
Barth Plan Time - Based
Bedaux Plan

Taylors Differential Piece Rate

Merrick Differential Piece Rate Output - Based
Gantt Task System
Emersons Efficiency plan
 Halsey Plan
Total earning = R*T+(S-T)*R/2
R=hour rate, S=std time, T=actual time taken
Std Time= 10 Hrs
Rate per hr= Re 1
Case 1 time taken= 10 Hrs
Earnings = 10* 1 = 10

Case 2 Time taken = 12 Hrs

earnings = 12* 1 = 12

Case 3 Time taken = 8 Hrs

earnings = 8*1
Bonus = *2*1 = Rs 1.00
Total earning = Rs 9.00
 Rowan Plan
Total earning = R*T+{(S-T)/S }*R
Std Time= 10 Hrs
Rate per Hr= Re 1
Case 1 time taken= 10 Hrs
Earnings = 10* 1
Case 2 Time taken = 12 Hrs
earnings = 12* 1
Case 3 Time taken = 8 Hrs
earnings = 8*1
Bonus = 2/10*8 = Rs 1.60
Total earning = Rs 9.60
 Barth Plan
Std Time= 10 Hrs
Rate per Hr= Re 1
Case 1 time taken= 10 Hrs
Earnings = 10 * 10
= 10*1= Rs 10.00
Case 2 Time taken = 12 Hrs
earnings = 12* 10
= 10.95*1 = 10.95
Case 3 Time taken = 8 Hrs
earnings = 8*10
= 8.94 * 1 = 8.94
 Bedaux Plan
Total earning = R*T+ 0.75*(S-T)*R
Std Time= 10 Hrs
Rate per Hr= Re 1
Case 1 time taken= 12 Hrs
Earnings = 12 * 1
= 12.00
Case 2 Time taken = 8 Hrs
earnings = 8*1
= 8.00
Bonus:
Std Bs = 10*60 = 600
Actual Bs = 8*60 = 480
Bs saved = 120
Bonus 75 * 120*1 = Rs 1.50
100 60
Total earnings = 8+1.50
 Taylors Differential Piece-Rate
Standard outputs: 100 Units
Rate per Unit: 10 paise
Differential to be applied:
120% of piece-rate at or above the standards
80% of piece-rate when below the standards
Case 1: Outputs = 120 units
Earnings = 120* 120 * 0.10 = Rs 14.40
100
Case 2: Outputs = 90 units
Earnings = 90* 80* 0.10 = Rs 7.20
100
 Merrick Differential piece-rate
Straight piece-rates less than 83% of the Std outputs
110% of the base-piece rate for 83%-100% of the Std outputs
120% of the base-piece rate for more than 100% of the Std outputs
Case 1 Output = 80 units
Efficiency = 80 *100 = 80%
100
Earnings: As the efficiency is less than 83%, only the base pie-rate applies:
80*0.10 = 8.00
Case 2 Output = 90 units
Efficiency = 90 *100 = 90%of
100
Earnings: As the efficiency is 83% but less than 100%, 110% the base pie-rate applies:
90*110*0.10 = 9.90
100
Case 3 Output = 110 units
Efficiency = 110 *100 = 110%
100
Earnings: As the efficiency exceeds 100%, 120% of the base piece-rate applies:
110*120*0.10 = 13.20
Rate per Hr =Re 0.50
High piece-rate = Re 0.10 Gantt Task System
Std Outputs = 80 units
Time taken = 8 Hrs
Std Bonus = 20%

Case 1 Output = 70 units

Earnings
As the output is less than the standard only time wages are paid to the worker

=8*0.50=Rs 4.00
Case 2 Output =80 units
Earnings
As the output is equal to the standard, the worker is entitled to time wage plus
20% bonus
Time wages =8*0.50= Rs 4.00
Bonus =20*4 = Re 0.80
100
Total earnings = Rs 4.80
Case 3 Output =110 units
As the output is more than th Std, the worker is entitled to a high piece rate
10*0.10= Rs 11.00
 Emersons Plan
Up to 67% of efficiency, the workr is determined by dividing the time taken by the Std
Time-rate
Up to 100% efficiency, 20% bonus is paid to workers
An additional bonus of Rs 1% is added for each additional 1% eficiency
Case 1 Output in 10 Hrs: 50 units
Efficiency: 50%( below 67%, the worker is eligible for 50% of the time wae as bonus)
Case 2 Output in 10 Hrs : 100 units
Efficiency : 100% (time-wage + 20% bonus)
Case 3 : Output in 10 Hrs : 130 units
Efficiency : 130%
At the rate of 20% at 100% efficiency and 1% increase for every 1% increase in
Efficiency, the worker is eligible for 50% of the time wage as bonus:
Time wag =10*1 Rs 10.00
Bonus =50*10.00 Rs 5.00
100
Rs 15.00
Conditions for Effective Incentives Plans

Plan is clearly communicated

Plan is understood
Rewards are easy to calculate
Employees participate in administering the plan
Employees believe they are being treated fairly
Employees believe they can trust the company
and that they have security
Rewards are awarded as soon as possible after the
desired performance.