incentive scheame

7/30/2019 incentive scheame

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Incentives payments

By:

Sheeba Rehman


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Incentives Programme

Wage incentives include all the plans thatprovide extra pay for extra performance Inaddition to regular wages for the job.

It implies monetary inducements offered toemployees to perform beyond acceptancestandards.


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Different Types of Variable Pay

PlansCash Profit Sharing Stock Ownership or

Options

Balanced Scorecard

Productivity / Gain-Sharing

Team / GroupIncentives


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Short Term Pay-for-PerformancePlans

Merit Pay

Lump-Sum BonusesIndividual Spot Awards

Individual Incentives


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Long-Term Incentive Plans

Employee Stock Ownership Plans(ESOPs)

Performance Plans (PerformanceShare and Performance Unit)

Broad-Based Option Plans (BBOP)


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Individual Incentives

Under a system of individual incentives, allor a portion of an individuals pay is tied totheir performance.


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Group Incentives

Improve Organizational PerformanceOrganizational MeasuresMeasured Periodically


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Team / Group Incentive Plans

Gain-Sharing Plans

Profit Sharing Plans

Earnings-at-Risk Plans


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Individual Incentive Plans

Method of Rate DeterminationUnits of production per

time period Time period per unit of

production

(1) (2)

(4)(3)

Straight piecework plan Standard hour plan

Bedeaux plan

Halsey 50 - 50 method

Rowan plan

Gantt plan

Taylor differential piecerate system

Merrick multiple piecerate system

Pay constant function of

production level

Pay varies as function of production level

Relationshipbetweenproduction leveland pay


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Types of Incentives PlansThe ILO classifies all the schemes of payment by results intofour categories:

Earning vary inthe same proportionas output

Straight Piece WorkStandard Hour

Earnings vary

lessproportionatelythan output

Halsey PlanRowan PlanBarth SchemeBedaux Plan

Earnings varyProportionatelyMore than outputs

High Piece RateHigh Standard Hour

Earnings differat different levelsof output

Taylors DifferentialPiece RateMerrick DifferentialPiece RateGantt Task SystemEmersons Efficiency plan


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Halsey PlanRowan PlanBarth PlanBedaux Plan

Time - Based

Output - Based

Taylors Differential Piece Rate Merrick Differential Piece RateGantt Task SystemEmersons Efficiency plan


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Halsey PlanStd Time= 10 HrsRate per hr= Re 1

Case 1 time taken= 10 HrsEarnings = 10* 1

Case 2 Time taken = 10 Hrsearnings = 12* 1

Case 3 Time taken = 8 Hrsearnings = 8*1Bonus = *2*1 = Rs 1.00

Rs 9.00


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Rowan PlanStd Time= 10 HrsRate per Hr= Re 1Case 1 time taken= 10 Hrs

Earnings = 10* 1Case 2 Time taken = 10 Hrs

earnings = 12* 1

Case 3 Time taken = 8 Hrsearnings = 8*1

Bonus = 2/10*8 = Rs 1.60

Rs 9.60


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Barth PlanStd Time= 10 HrsRate per Hr= Re 1Case 1 time taken= 10 Hrs

Earnings = 10 * 10

= 10*1= Rs 10.00Case 2 Time taken = 12 Hrs

earnings = 12* 10

= 10.95*1 = 10.95Case 3 Time taken = 8 Hrs

earnings = 8*10= 8.94 * 1 = 8.94


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Bedaux PlanStd Time= 10 Hrs

Rate per Hr= Re 1Case 1 time taken= 12 HrsEarnings = 12 * 1

= 12.00Case 2 Time taken = 8 Hrs

earnings = 8*1= 8.00

Bonus:Std Bs = 10*60 = 600Actual Bs = 8*60 = 480Bs saved = 120Bonus 75 * 120*1 = Rs 1.50

100 60

Total earnings = 8+1.50= Rs 9.50


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Taylors Differential Piece -Rate

Standard outputs: 100 UnitsRate per Unit: 10 paiseDifferential to be applied:120% of piece-rate at or above the standards

80% of piece-rate when below the standardsCase 1: Outputs = 120 units

Earnings = 120* 120 * 0.10 = Rs 14.40100

Case 2: Outputs = 90 unitsEarnings = 90* 80* 0.10 = Rs 7.20

100


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Merrick Differential piece-rateStraight piece-rates less than 83% of the Std outputs110% 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 outputsCase 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 = 8.00Case 2 Output = 90 unitsEfficiency = 90 *100 = 90%of

100Earnings: As the efficiency is 83% but less than 100%, 110% the base pie-rate applies:

90*110*0.10 = 9.90100

Case 3 Output = 110 unitsEfficiency = 110 *100 = 110%

100Earnings: As the efficiency exceeds 100%, 120% of the base piece-rate applies:

110*120*0.10 = 13.20


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Gantt Task SystemRate per Hr =Re 0.50High piece-rate = Re 0.10Std Outputs = 80 unitsTime taken = 8 Hrs

Std Bonus = 20%

Case 1 Output = 70 unitsEarningsAs the output is less than the standard only time wages are paid to the worker

=8*0.50=Rs 4.00Case 2 Output =80 unitsEarningsAs the output is equal to the standard, the worker is entitled to time wage plus20% bonusTime wages =8*0.50= Rs 4.00Bonus =20*4 = Re 0.80

100Total earnings = Rs 4.80Case 3 Output =110 unitsAs the output is more than th Std, the worker is entitled to a high piece rate

10*0.10= Rs 11.00


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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


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Conditions for Effective Incentives Plans

Plan is clearly communicatedPlan is understoodRewards are easy to calculateEmployees participate in administering the planEmployees believe they are being treated fairly

Employees believe they can trust the companyand that they have securityRewards are awarded as soon as possible after the

desired performance

incentive scheame

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