wage incentives

8/7/2019 Wage Incentives

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Arundhati Sawant Arundhati SawantMM--41364136



W AGE INCENTIVESW AGE INCENTIVES



INTRODUCTIONINTRODUCTION

An incentive or reward is An incentive or reward is

anything that attracts a personsanything that attracts a personsattention & stimulate him to work. It isattention & stimulate him to work. It is

a payment plan related to the outputa payment plan related to the output

of a workmen.of a workmen.



DEFINITIONDEFINITION

National commission on labour:National commission on labour:--

Extra financial motivation designed toExtra financial motivation designed tostimulate human effort by rewarding thestimulate human effort by rewarding the

person over & above time ratedperson over & above time rated

remuneration, for improvements in theremuneration, for improvements in the

present & targeted results.present & targeted results.



FEATURESFEATURES

1.1. Financial incentives aim at cutting cost &Financial incentives aim at cutting cost &increasing efficiency.increasing efficiency.

2.2. It assumes that increasing efficiency requiresIt assumes that increasing efficiency requires

company wide cocompany wide co--operation.operation.

3.3. Committee of management & workers consider Committee of management & workers consider

problem together & make suggestions.problem together & make suggestions.

4.4. The scheme is open for all workers,The scheme is open for all workers,

supervisors & managers.supervisors & managers.



BENEFITSBENEFITS

1.1. Reduction in per unit labour cost leads to improvedReduction in per unit labour cost leads to improved

profits.profits.

2.2. Avoid or minimize additional capital investment for Avoid or minimize additional capital investment for expansion of production capacity.expansion of production capacity.

3.3. To increase workers earning without all time higher To increase workers earning without all time higher wage structure.wage structure.

4.4. Better manpower utilization.Better manpower utilization.



DEMERITSDEMERITS

1.1. Generates tendency among employees toGenerates tendency among employees to

sacrifice quality for quantity.sacrifice quality for quantity.

2.2. Safety regulations could be neglected inSafety regulations could be neglected in

a hurry to achieve targets.a hurry to achieve targets.

3.3. Hampers team spirit & leads to jealousyHampers team spirit & leads to jealousy

among workers.among workers.



TYPES OF INCENTIVE PLANTYPES OF INCENTIVE PLAN

1.1. Individual Incentive Plan :Individual Incentive Plan :--

2.2. Time saved Based Incentive Plan:Time saved Based Incentive Plan:--

3.3. Gantt Plan:Gantt Plan:--

4.4. Group Incentive Plan:Group Incentive Plan:--



Individual Incentive PlanIndividual Incentive Plan

I.I. Piece rate based incentive plan:Piece rate based incentive plan:--

a)a) Straight piece rate plan:Straight piece rate plan:--

The monetary incentive is the same atThe monetary incentive is the same at

all points on the individuals production curve. Butall points on the individuals production curve. Butcompany pays minimum wages if an employeecompany pays minimum wages if an employeedoesn¶t reach minimum production.doesn¶t reach minimum production.

b) Differential piece rate plan:b) Differential piece rate plan:--

Employees who perform below theEmployees who perform below thestandard are paid at lower rate & those who performstandard are paid at lower rate & those who performabove the predetermined standard are paid at aabove the predetermined standard are paid at ahigher rate.higher rate.



Time saved based incentive planTime saved based incentive plan

a)a) Frederick Halsey:Frederick Halsey:--

Bonus = 1/2 *(Time Saved / TimeBonus = 1/2 *(Time Saved / TimeTaken)*Wages.Taken)*Wages.

ThereforeWages=Time Taken*Hourly Rate.ThereforeWages=Time Taken*Hourly Rate.

b)b) Rowan Incentive:Rowan Incentive:--Rowan Incentive =Rowan Incentive =

(TimeSaved/TimeAllowed)*Wages(TimeSaved/TimeAllowed)*Wages



Gantt PlanGantt Plan

All employees are guaranteed at All employees are guaranteed at

a base wage & bonus is paid at the rate of a base wage & bonus is paid at the rate of

120% Per employees to meet or exceed120% Per employees to meet or exceed

the target.the target.



Group Incentive PlanGroup Incentive Plan

a)a) Gain Sharing Plan:Gain Sharing Plan:--It is any organizational process designed toIt is any organizational process designed to

increase productivity, quality & financialincrease productivity, quality & financialperformance by sharing rewards in groups of performance by sharing rewards in groups of employees.employees.

b) Scanlon plan:b) Scanlon plan:--

Joseph scanlon a union leader in steel plantJoseph scanlon a union leader in steel plantdeveloped a group incentive system that willdeveloped a group incentive system that will

inform workers in making suggestions for inform workers in making suggestions for process improvement leading to cost reductionprocess improvement leading to cost reductionin labour & share gains of increasedin labour & share gains of increasedproductivity.productivity.

wage incentives

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