8/7/2019 prdn

1/13

INCENTIVESCHEMES

By

SOUMYA.S and VEENA.R.S

8/7/2019 prdn

2/13

The basic premise underlying incentive wage

scheme is that money can be used to induceeffort on the part of the employees.

The objective is to increase the

productivity

It implies the monetary inducements offeredto employees to perform beyond acceptance

standards

8/7/2019 prdn

3/13

Types of Incentive Schemes

Individual Group Plant-wide/Company -

wide

Payment by

results

system

Payment

by time

system

8/7/2019 prdn

4/13

Individual Incentive Schemes

a) Payment by results (PBR) system

The PBR system has a continuous relation between money andresults 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 wagepayment starts .

Motivated productivity level (MPL) : The incentive pace

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

Participation Ratio: The per cent increase in wages for

one percent increase in product.

8/7/2019 prdn

5/13

Problems

The wide disparity between income levels of individualsmay 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.

8/7/2019 prdn

6/13

8/7/2019 prdn

7/13

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 thereare corresponding different levels of wage rates starting from basic to

higher and higher premium pay rates

Wage rate

Performance

8/7/2019 prdn

8/13

Group Incentive Scheme

In a Group system of incentives , the enhanced earnings ofthe group are distributed amongst the members in an

equitable manner

Installation of the group system of incentives requires acommonality 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

8/7/2019 prdn

9/13

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 inan incentive system are also taken care of to

an extent

8/7/2019 prdn

10/13

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 groups

incentives

8/7/2019 prdn

11/13

8/7/2019 prdn

12/13

8/7/2019 prdn

13/13