i. Ideally, incentive plans should promote a desired behavior or result, but sometimes they miss the mark. 10 per hour and the rate of bonus is 25%, then a worker who completes the job in 10 hours will be paid Rs. iv. Workers who perform the job in less than the standard time and thus save time are rewarded with a bonus but the worker who takes longer time than the standard time is not punished and is paid wages according to time wage system. A Long Term Incentive Plan (LTIP) is a generic name for a plan that aims to provide incentives to employees over the long-term, usually a year or more, via reward linked to shares or securities. Human Resource Management, Incentive, Types of Incentive Plans. If through cooperative efforts these costs can be reduced to 28%, then 2% of sales is divided among employees on the basis of seniority and/or salary levels. As they have become partners in the business, they try to make it a very profitable enterprise. Incentives Programme

• Wage incentives include all the plans that provide extra pay for extra … II. There needs to be a concrete way to decide whether an employee met the criteria needed to earn their incentive. For example, if rate per hour is Rs.3and standard time for completion of job is 10 hours. (II) A bonus, which is paid to the worker when output is equal to or more than the task. This system considers the productivity of all workers as a whole. The worker is awarded for his efficiency by giving incentive under some incentive plans. However, this is a complicated system and not easy to understand and administer. i. This plan was developed by F.A. There is no sudden rise in wages on achieving the standard of performance. For example, if the piece rate is Rs. The two common types of incentives are: 1. This plan was developed by James Rowan in 1898. Whether you eventually put in motion short-term or long-term plans, they should be carefully designed for maximum applicability to your organizational structure, growth goals and employee types. (iv) Jealousy and rivalry among workers defeats the very purpose of teamwork and cooperation. Total wage = T x R + T x R x (Time saved/Standard time). 50. The plan aims at ensuring the performance of the premium rate, which is often cut by the employer when the worker’s efficiency increases beyond a certain limit. A med-tech company uses two curves in its compensation plan. For instance, say, the standard time for a job is eight hours and the worker completes it in six hours, he has saved 25% time. Some of the production based incentive plans are: I. Taylor’s differential piece rate system. If time wages are guaranteed, the employee is paid on the basis of time taken multiplied by the time-rate. An incentive is most frequently built on monetary rewards, but includes a variety of non-monetary rewards or prizes.” It is responsibility of management to attract and … Terms of Service 7. (iii) The calculation of wages requires less clerical work. (i) This scheme does not distinguish among individuals on the basis of effort and contribution. Incentive can be extra payment or something more than the regular salary or wage. Each worker is guaranteed a minimum wage. The plan thus emphasizes participative management and joint planning between the company and the union. These are time based individual incentive and output based individual incentive plans. Under this plan, it is optional for a workman to work on the premium plan or not. Incentive programs are designed for special efforts and to stretch the goals so that everyone involved can work harder and achieve desired outcomes. Group incentive plans are usually applied to small work groups, for example, 5 or 6 people who must assemble a component together. No bonus is paid to a worker where efficiency is less than 100%. 4. Under this plan, there are two piece rates, namely high rate and low rate for each job or task. Scanlon plan has been adopted with varying degrees of sources in several U.S. organizations; however there are also instances where it has been tried and failed. (b) This plan’s incentive value is low at high production levels, thus this is unjust to efficient workers. Rs.18 + 20% of 18 = Rs.21.6. i. Incentive programs should reflect the type of work that is done and the structure of the organization. This is possible if a worker completes the task in half the standard time of the task. He who finishes the task in 8 hours has 100% efficiency. The only difference between Halsey Plan and Rowan Plan relates to the calculation of bonus. As his extra earning is not in proportion to his usual wage rate, the overall production cost per piece falls when the output increases. 1.00. Shares of Stock. Type # 6. There might be conflict between the slow and the fast worker. (II) Employees may not be encouraged to increase their output beyond the standard level, as rewards may be nominal. Just like other incentive plans, a minimum wage is also guaranteed in this plan. In addition to this, workers with low efficiency are not penalized, as they are in Taylor’s Differential Piece Rate. Payment of bonus/incentive is related to efficiency of the workers. (I) Wage calculations require careful attention. i. At 120% efficiency, worker receives a bonus of 40% and at 140 efficiency the bonus is 60% of day wage. In practice, this plan is seldom used now. Workers are paid different bonus rates as per their efficiency level. Management has some discretion in distributing the 20% of time rate over 17% of production above 83%. 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