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Incentives and Employee Benefits
Incentives and Employee Benefits
Incentives and Employee Benefits
Chapter
17
INCENTIVES AND
EMPLOYEE BENEFITS
17-2
ANNOTATED OUTLINE
INTRODUCTION
A proper system of wage payment is absolutely essential to keep
employees in good humour. Ideally, such a system must have the
following characteristics:
Characteristics of a wage payment plan
Simple
Beneficial
Equitable
Guaranteed minimum wage
Balanced
Incentive-oriented
Quality output
Certainty
Cost effective
flexible
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T h e R a te S y s te m P a y m e n t b y R e s u lts
F la t t im e H ig h w a g e G r a d u a t e d t im e P ie c e ra te P r e m iu m b o n u s G ro u p b o n u s O th e r in c e n t i v e
ra te s y s te m ra te s y s te m p la n s s y s te m schem e
C o m b in a t io n o f
S t r a ig h t p ie c e D if f e r e n t ia l tim e a n d p ie c e P ro fit C o -p a r tn e r s h ip
w o rk p ie c e w o r k r a te s h a rin g
Ta y lo r s y s t e m M e r r ic k s y s te m
G a n tt ta s k E m e rs o n P o in t
and bonus e ffic ie n c y schem es
s y s te m s s y s te m
Bedeaux H a y n e s M a n it
s y s te m s y s te m
H a ls e y p r e m iu m R ow an A c c e le r a t in g
p la n schem e p r e m iu m b o n u s s c h e m e
P r i e s t m a n ’s p r o d u c t i o n b o n u s R u c k e r p la n S c a n l o n p la n To w n e p la n
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Minus points
Delays beyond one's control could affect workers earnings
adversely
Beginners and slow learners are left behind in the race
The focus on quantity would affect quality
Workers may stretch themselves to unhealthy levels to earn
more
Encourages rivalry between workers
Taylor's differential piece rate system: A worker is paid more
if he finishes the assigned task before the stipulated time.
Merrick's differential piece rate system: This method uses
threerates; up to 83%of the standard output workers are paid at
the ordinary piece rate; between 83% to 100% at 110% of the
ordinary piece rate and above 100% at 120% of the ordinary
piece rate.
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Halsey plan: Here the worker gets a guaranteed wages based on the
time, irrespective of whether the assigned work is completed or not. If the
worker is able to finish the task in less than the standard time, he or she is
entitled to get fifty (in some cases one third) per cent of time saved at
time rate in addition to normal time wages.
Rowan plan: It assures minimum time wages. Bonus is paid on the
basis of time saved. But unlike a fixed percentage , it is calculated thus
Bonus = Time saved/Standard time X Time taken X hourly rate
Gantt task and bonus plan: Here time wages are guaranteed.
Standard time for each task is fixed. Workers, who fail to finish the job within
the time limits, get time wages. A worker who reaches the standard is paid
time wage plus bonus at a fixed percentage (20 per cent)of normal time
wages. If a worker exceeds the standards, he is paid a high piece rate.
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Bonuses
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Merit Pay
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Companies like Mastek, Godrej and Boyce have tried to link their rewards to team based
performance in recent times quite successfully
Team based rewards: Best practices
Set quantifiable targets when evaluating team performance for rewards.
Ensure that top performers in each team earn the highest level of rewards.
Link team performance closely to the company's profits and overall financial health.
Avoid subjectivity when assessing both the team and its member's performance.
Offer uniform non-team based incentives to employees within each grade.
Other companies like Pfizer, Siemens have been linking rewards to shop floor workers
based on the worker ability to meet productivity as well as performance targets. In any
case, the emerging picture is quite clear especially in the post liberalisation era in India.
The start that need entrepreneurial action from its employees will have to offer large
doses of cash, goal linked incentive pay and possibly stock options to link compensation
to profits. Mature companies, whose focus is on managing their earnings per share and
protecting market shares, will have to seek out managerial talent and reward it with
flexible tax-friendly compensation packages with benefits designed to improve the
quality of working life.
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Plus points
Empower the employee to participate in the growth of a company as
part owner and get a fair share of the cake.
Helps the company to retain talented employees and make them
committed to the job and the company
Better industrial relations, reduced employee turnover, lesser
supervision, are other benefits
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Fringe Benefits
Features
Supplementary forms of compensation
Paid to all employees
Indirect compensation, since they are not directly related to performance
May be statutory or voluntary
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T y p e s o f F r i n g e B e n e f i ts
P a y m e n t fo r T im e E m p lo y e e S a fe ty a n d W e lf a r e r e c r e a tio n a l O ld a g e a n d
n o t w o rke d s e c u r it y h e a lth fa c ilitie s r e tir e m e n t
b e n e fits
H o u rs o f P a id S h if t H o lid a y P a id
w o rk h o lid a y s p r e m iu m pay v a c a tio n
R e tre n c h m e n t L a y o ff
c o m p e n s a t io n c o m p e n s a tio n
S a fe ty W o r k m e n ’s H e a lth
m e a su re s c o m p e n s a tio n b e n e fits
P r o v id e n t fu n d P e n s io n
D e p o s it li n k e d i n s u r a n c e
G r a tu ity
M e d ic a l b e n e fits
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