INCENTIVE PLANS

HUMAN RESOURCE MANAGEMENT JOJIS P JOSEPH

INDIVIDUAL INCENTIVE PLANS
OBJECTIVES:
• Individual incentive plans are plans which provide
incentives (ie,either monetary benefits or non-monetary
facilities) to workers to stimulate them to improve their  To induce the workers to increase their efficiency &
performance or efficiency and earn more remuneration . productivity.
 To reduce the labour turnover.
 To provide additional remuneration to the workers for
their efforts and efficiency.
INDIVIDUAL  To keep the morale of the workers high.
INCENTIVE PLANS
 To have increased production from the improved
Based on time
Based on productivity or efficiency of the workers.
production

Halsey Rowan Emerso Bedeau Taylor Merrick Gantt

plan plan n plan x plan plan plan plan

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 Click icon to add picture
INCENTIVE
PLANS

Based on
Profit/gain
sharing ratio

Scanlon Plan Rucker Plan Kaiser plan

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 INDIVIDUAL INCENTIVE PLANS
BASED ON TIME :

HALSEY PLAN :
This plan was introduced by F.A. Halsey in 1891.Under Halsey plan
minimum wages are guaranteed to every worker. A standard time
is fixed for the workers. If the workers finish the work before
standard time they are given bonus. But no penalty if they fails to
do that.
The formula for calculation is :
Earnings = Time Taken x Time rate + 50 percent of time saved x
Time rate
Merits:
• It assures time wages to the average workers and offers extra
payments to the efficient and hard workers.
• It is simple in calculations.
Demerits:
• Management cannot force the worker to produce more after
finishing the standard output.
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 INDIVIDUAL INCENTIVE PLANS
BASED ON TIME : Rowan plan :

It is a modified form of Halsey plan. It is similar to Halsey plan except in

the calculation of premium.
• The premium is calculated as the ratio of the time saved to the
standard time multiplied by the time taken on the job.
• it also guarantees the minimum wages and does not penalize the
slow workers. Standard time is fixed and the bonus is paid on the
basis of time saved.
Formula for calculation is,
Earnings = Time taken x Time rate + Time taken x rate x time saved /
standard time
Merits:
The minimum wages are assured in Rowan plan also.
Employers are also benefitted when the efficient workers get bonus.
Demerits:
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 INDIVIDUAL INCENTIVE PLANS
BASED ON TIME :

Emerson plan :
In this plan minimum wages are guaranteed to the workers
efficiency is measured on the basis of the comparison of actual
performance with the standard fixed. Under this method if the
efficiency is 100% the bonus would be paid at 20% and above 100%
bonus at 30% would be paid. Thus efficient workers will be rewarded
at an increasing rate with the increase in saving time.
Merits:
• The workers minimum wages are assured.
• There is enough scope for earning more and more for the
efficient workers. The plan is therefore very beneficial to extra
ordinary workers.
Demerits:
• The drawback of this plan is that it offers bonus to the workers
who have efficiency less than 100 percent.

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 INDIVIDUAL INCENTIVE PLANS
BASED ON TIME :

Bedeaux plan :
Like other wage incentive plans the time wage is guaranteed in this
plan also. Under this plan the amount of work done by a worker per
minute is taken as standard work unit. This is known as Bedeaux
point ‘B’. The standard time for a job in the number of Bs allowed to
complete it. Generally the bonus paid to the worker is 75% of the
wages for time saved. The rest 25% goes to the foreman.
Merits:
• Minimum wages are guaranteed to the workers even though they
fail to complete the job within the standard time
• The plan is most suited to the industrial units.
Demerits:
• Calculations under this plan is complex and therefore is difficult
for workers to understand.

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 PRODUCTION BASED INCENTIVE

Under these plans, a standard of output is determined on scientific

basis. The payment of wages is made on the basis of number of units
are produced. Efficient workers are benefitted because they get
wages at higher rates.

Under the production based incentive plan a standard

output is fixed and the workers are paid on the basis of
the production. They are given incentive if they
produced more number of units than the standard fixed.
it includes the
• a) Taylor plan
• b) Merrick plan
• c) Gantt plan

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 INDIVIDUAL INCENTIVE PLANS
BASED ON PRODUCTION
: Taylor’s plan :
In this plan, Taylor did not give minimum guarantee to each
worker. As per his statement it is possible to calculate standard
workload for every worker on the basis of time and motion
studies. He gave two piece rates for the workers. The lower rate
for average and less efficient workers who produce less than the
standard production and the higher piece rate for the above
average or efficient workers. So the efficient workers are paid
more than the inefficient workers.
Merits:
• This incentive plan provides more earnings to efficient and
penalize less efficient workers. This differential in wage may
enthuse less efficient workers to work more.
• Total output goes up because every worker wants to improve
his efficiency thereby increasing their own earnings and output.
Demerits:
• Minimum wages are not assured by this plan.
• The penalty for low efficiency is very high for those
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 INDIVIDUAL INCENTIVE PLANS
BASED ON PRODUCTION Merrick’s plan :
:
Under this plan the workers are paid according to their efficiency in
performance of jobs. Three different piece rates are offered to the
workers with different efficiencies thus dividing them into three
different categories.
The workers having efficiency less than 80 percent of the standard
are paid as per basic piece rate prescribed. The workers having
efficiency more than 80 percent but less than 100 percent of the
standard gets wages at higher rate by 10 percent. The workers
having 100 percent efficiency get wages at the highest rate of 20
percent in addition. These systems enable the less efficient lot to
improve their efficiency to increase their earning.
Merits:
• It is a liberal plan giving further chance for workers to increase
their efficiency and to enhance their earnings. It is a morale
booster for hard working and efficient workers.
Demerits:
• Each worker working below 80 percent of performance gets
wages at the same rate. This creates dissatisfaction among
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 INDIVIDUAL INCENTIVE PLANS
BASED ON PRODUCTION
:
Gantt plan :
Under this method minimum wages are guaranteed. If the worker
fails to complete the task within the standard time he receives only
the wages for actual time spent at the specified rate. But if he
completes the task within time he gets extra wages.
Merits:
• The workers with less ability get minimum wages and with more
ability benefit more.
• It leads to increase production and lowers costs.
Demerits:
• Every worker is assured of wages at the rate of time rate. So less
efficient workers also get wages at time rate. It discourages
efficient workers.

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 PROFIT/GAINSHARINGINCENTIVE
PLANS
under this method increased profit is shared among the workers
and management as agreed between both the parties. Include:

 Scanlon Plan
 Rucker Plan
 Kaiser Plan

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 INCENTIVE PLANS
BASED ON PROFIT/ GAIN
SHARING :
Scanlon plan :
Under this plan workers are involved in decision making. They are
encouraged to make suggestions regarding cost reduction and
increasing productivity.
In this method bonus is paid in proportion to the production 1%
bonus if 1% increases in production.
Periodical meetings of these committees are held to discuss the
problems faced by the workers. They recommend measures to
increase production. It promotes healthy labour relations, minimizes
supervision, increases efficiency and sense of partnership among
workers.
This plan suffers from certain drawbacks such as the inefficient
worker gets rewarded because of better performance of the group.
It is also true that the suggestions of the employees are not given
due consideration by the management.

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 INCENTIVE PLANS
BASED ON PROFIT/ GAIN
SHARING :
Rucker Plan :
The Rucker plan is another gainsharing program that aims to reduce
production costs by correlating labour costs to a share of cost of
production.
It differs from the Scanlon plan in that its primary focus is an
appraisal of quality and not quantity of output. Such an approach is
especially suitable for industries with negligible variance in
productivity figures, since it offers appraisal of other variables in
order to measure performance.
Rucker plans often consider parameters such as the ratio of waste
to production volume or the number of defective parts per
notation.
The objective of a Rucker plan is to ensure optimal performance and
cost savings. As such, Rucker plans incentivise high quality of work
and reduction of production costs.

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 INCENTIVE PLANS
BASED ON PROFIT/ GAIN
SHARING :
Kaiser Plan :

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What we have discussed?

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ThankYou
JOJIS P JOSEPH
+1 23 987 6554
april@treyresearch.com
Trey Research

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