Incentive Scheme
Incentive Scheme
Incentive Scheme
Wages are and have been the most important factor influencing the employer employee relations. A good
wage plan is the one which satisfies the workers and at the same time brings profit to management.
Wage payment plans may be classified into two groups:
Non-Incentive plans like time or day rate system, and
Incentive wage plans.
Incentive
Incentive is an inducement or reward which is given to a worker for his efficiency and hard work. Incentives
motivate and encourage a worker to produce more and better. Incentives are in addition to the job hourly rate
and are in some proportion to the workers contribution towards production.
Classification of Incentive Scheme
Incentives may be classified as direct & indirect incentives and financial & non-financial incentives.
Direct Incentives are those which are given to an individual worker for his own contribution whereas
Indirect Incentives are those which are paid to a group of workers.
Financial Incentive involves direct monetary payment or benefit while Non-Financial Incentives involve
good working conditions, amenities and social benefit in the organisation.
Financial Incentive: Besides incentives for the immediate work contribution, workers may receive
additional financial benefit in the form of
1. Bonus and
2. Profit Sharing
Non-Financial Incentive: Non-Financial Incentive include
1. Job Satisfaction
2. Better and Healthy working condition and environment
3. Chances of promotion
4. Job security
5. Helpful and cooperative management
6. Training and other employee improvement programmes
7. Housing, medical, recreational and educational facilities.
Semi Financial Incentives: Semi-financial incentive include
1. Provision of subsidized lunch, recreational and medical facilities to the employees and subsidized
educational facilities for their children
2. Pension and other benefits.
Wage Incentive Plans
Wage incentive plans reward an employee for his good job performance. The various aspects of Job
Performance is:
Product Quantity
Product Quality
Utilisation of materials, plant, tool and services and
Efficiency
Almost all commonly employed wage incentive scheme guarantee a minimum wage plus incentive based
upon the operator performance. Normally the wage incentive plan should be based on the standard set by the
work study. The wage rate may be the result of the mutual agreement between employer and employee.
Essential Conditions of a Sound Wage Incentive Plan
The requirements of a sound wage incentive are:
It should be simple, easy to understand and operate. It should involve least clerical work.
The number of satisfactory units produced by his section/department in one day or one week.
The number of work hours saved in achieving the same output.
Reduction in scrap or wastage.
Net cost saved for the organisation.
The number of orders in whose case the delivery dates were met.
Managerial Staff: For running as concern effectively, it is highly necessary to maintain the interest and
participation of the managerial staff. Incentive to managerial staff may be in the form ofBonus: Bonus may be given to managerial staff in the proportion to their merits, job requirements or salary
drawn by them.
Issue of Shares: Company shares may be issued to managerial staff. The number of shares, naturally builds
up year by year and this induces a sense of discipline, loyalty and cooperation in the managers who start
realizing that they are partners in the company and they have to work sincerely and whole heartedly for the
same. In this way labour turnover automatically gets minimised.
Profit Sharing: As per the mutual agreement between the employer and the indirect workers, a portion of
the company profit may be shared by the indirect workers, in addition to their normal wages. The share of
profit which goes to a particular person may depend upon his salary, length of service, merits and
responsibilities.
Fringe Benefits: Free Accommodation, Provision for Conveyance and Phone Facilities, Financial Assistance
in the time of Difficulty, Subsidised Children Education, etc.