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Types of Employee Incentive Schemes

Individual and group incentive schemes aim to increase employee productivity by linking wages to effort and results. Individual payment by results systems tie wages directly to output levels, while measured day work links wages to meeting preset targets. Group incentives distribute enhanced earnings to members working on interlinked tasks. Company-wide bonuses like the Scanlon plan tie wages to overall plant or company productivity measures. While incentive schemes can boost productivity, they also carry risks of quality issues, waste, and conflicts if not properly monitored and rewards distributed equitably.

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73 views13 pages

Types of Employee Incentive Schemes

Individual and group incentive schemes aim to increase employee productivity by linking wages to effort and results. Individual payment by results systems tie wages directly to output levels, while measured day work links wages to meeting preset targets. Group incentives distribute enhanced earnings to members working on interlinked tasks. Company-wide bonuses like the Scanlon plan tie wages to overall plant or company productivity measures. While incentive schemes can boost productivity, they also carry risks of quality issues, waste, and conflicts if not properly monitored and rewards distributed equitably.

Uploaded by

veenaraveendran
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

INCENTIVE

SCHEMES

By
SOUMYA.S and VEENA.R.S
The basic premise underlying incentive wage

scheme is that money can be used to induce


effort on the part of the employees.

The objective is to increase the


productivity

It implies the monetary inducements offered


to employees to perform beyond acceptance
standards
Types of Incentive Schemes

Individual Group Plant-wide/Company -wide

Payment by Payment
results by time
system system
Individual Incentive Schemes

a) Payment by results (PBR) system


The PBR system has a continuous relation between money and
results and the worker should be guaranteed a minimum flat wage
rate.
Acceptable productivity level(APL) : The level of output
rate or productivity above which the incentive wage
payment starts .

Motivated productivity level (MPL) : The incentive pace


which can be maintained day after day without any
harmful effect on the worker.

Participation Ratio: The per cent increase in wages for


one percent increase in product.
Problems

The wide disparity between income levels of individuals


may produce conflicts among employees

There may be problems of coordination of one operation


with the other

Employees may also employ various other devious


methods to increase the incentive earnings.
Measures to overcome problems related to
the PBR system

Protection of quality

Protection against wastage

Indirect workers and incentives


Measured Day Work (MDW) or Payment by Time System
An employee opts to maintain an agreed higher target level of output in
order to secure a stable higher wage rate

MDW means two levels of wages – an agreed higher level of wages for
a specified higher level of consistent performance and the basic wage
for lower levels of performance

Premium Pay Plan – For different specified levels of performance there


are corresponding different levels of wage rates starting from basic to
higher and higher premium pay rates

Wage rate

Performance
Group Incentive Scheme

In a Group system of incentives , the enhanced earnings of


the group are distributed amongst the members in an
equitable manner

Installation of the group system of incentives requires a


commonality of that group

The nature of the tasks involved, the inter linkages, the


production system in operation, the physical layout , etc.
are some of the factors to be taken into consideration in
forming a group
Merits of the Group System
Better sharing and linking-up of work
resulting in overall increase in productivity

Better interchecking of quality of product


in a group working situation

Supervising, time-keeping and incentive


accounting are simplified

The problem of including indirect workers in


an incentive system are also taken care of to
an extent
Demerits

oThere may be a levelling effect

oManagement would have very little control over the


output

oIf in a group the workers perform different tasks, then the


question arises as how to distribute the group’s
incentives
Company wide Bonus Schemes

The objective is to enhance the overall


productivity of the plant or the company

The success of this scheme depends on the


relevance of the productivity measure to the
work of the employees.
Some of the company wide incentive systems are the
Scanlon plan and Rucker plan

The success of the company-wide incentive schemes


lies in how much the workers feel a part of the
company and come up with extra efforts to increase
the productivity.
THANK YOU

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