Incentives

• An incentive can be anything that attracts an

employees’ attention and stimulates him to
work.
• It is monetary and non monetary inducements
offered to employees to perform beyond
acceptance standards.
• It is directly or indirectly related to productivity
and profitability of the enterprise.
National Commission of Labour defines:

“Wage incentives are some financial motivation.

They are designed to stimulate human effort by
rewarding the person, over and above the time
related remuneration for improvements in the
present or targeted results”.
 In the words of Suri
• “a wage incentive scheme is essentially a
managerial device of increasing a worker’s
productivity. Simultaneously, it is a method of
sharing gains in productivity with workers by
rewarding them financially for their increased
rate of output”.
• The National Productivity Council conducted
an all India Survey of wage incentive plans in
the country.
• The survey revealed that:
 incentive plans are more popular in labour
intensive industries.
 Group incentive schemes were more common
than plant wise or individual plans.
 Standards were fixed generally through time
study and past experiences.
 Incentive plans led to significant (about 40%)
rise in average productivity.
 More comprehensive plans led to greater
savings in cost per unit and overtime working.
 Scientific techniques of work measurement
are preferable in the setting of standards.
 Types of Incentive plans

Individual
Group incentive
Incentive plans
plans
 Individual plans
TIME BASED
 Halsey
 Rowan
 Emerson
 Bedeaux
OUTPUT BASED
 Taylor
 Merrick
 Gantt
 Group Incentive plans
• Priestman plan
• Scalon plan
 Halsey /Weir plan
• Developed by F A Halsey
• At Weir Engineering Works, England
• Minimum wage is guaranteed to worker.
Wages= (T X R)+ {50% (S-T) X R }
• Where S- Standard time.
T- Time taken.
R- Rate of wages.
B – Bonus.
W- Total Wages.
 Rowan Plan
• Modified form of Halsey
• Developed by Rowan in England

W= (T X R)+ (T X R X Time saved

ST
 Emerson Efficiency Plan
• Bonus is given at an increasing percentage beyond
the prescribed level of efficiency.
where efficiency is measured by comparing the actual
time taken with the standard time.

W= (T X R) + (% of Bonus X T X R)

Bonus (a) 10% upto 75% efficiency

(b) 20% upto 75%-100% efficiency
(c) 30% beyond 100%
 Bedaux Plan
• Developed by Bedaux in 1911.
• A Standard time of 240 B i.e. the job should be
completed with in 240 minutes.
W= S X R X {75% of R X (S-T)}
Generally,
75% of wages for the time saved are paid to
worker.
25% to the foreman.
 Taylor’s piece rate plan
• Given by F W Taylor- Father of Scientific
Management
• A standard task is established through Time
and Motion Study.
• Two piece rates are laid down i.e. lower rate
and higher rate.
• The lower rate for those workers who fail to
complete the standard task within the
allocated time.
• The higher rate for those who complete the
task within or less than the allocated time.
 Eg.
• The standard output is 50 units per day.
• The piece rate fixed are Rs. 2 and Rs. 1.50 per
unit.
• Three workers A, B and C produces 40, 50 and
60 units resp. find total wages???
 Merrick Multiple Piece Rate Plan
• It was designed to overcome drawbacks in Taylor’s
plan.
• Under this, 3 graded piece rates are prescribed:
1) Workers producing < than 83% of the standard
are paid at a basic piece rate.
2) From 83% to 100% of the standard output are
paid 110% of the basic piece rate.
3) If production is more than standard output are
paid 120% of the Basic piece rate.
 Priestman Plan
• A committee of workers and management sets
the standard of performance.
• A minimum wage is guaranteed to each worker.
• The group gets incentives when actual output
exceeds the standards.
• Supervisors also get share.
• Problem: it makes no distinction between
efficient and inefficient workers.
 Scalon plan
• A plant wide scheme designed to involve
workers in making suggestions for reducing
the cost of operations and improving work
methods by showing the gains of increased
productivity.