Download - incentive scheame
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Incentives payments
By:
Sheeba Rehman
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Incentives Programme
Wage incentives include all the plans thatprovide extra pay for extra performance Inaddition to regular wages for the job.
It implies monetary inducements offered toemployees to perform beyond acceptancestandards.
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Different Types of Variable Pay
PlansCash Profit Sharing Stock Ownership or
Options
Balanced Scorecard
Productivity / Gain-Sharing
Team / GroupIncentives
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Short Term Pay-for-PerformancePlans
Merit Pay
Lump-Sum BonusesIndividual Spot Awards
Individual Incentives
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Long-Term Incentive Plans
Employee Stock Ownership Plans(ESOPs)
Performance Plans (PerformanceShare and Performance Unit)
Broad-Based Option Plans (BBOP)
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Individual Incentives
Under a system of individual incentives, allor a portion of an individuals pay is tied totheir performance.
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Group Incentives
Improve Organizational PerformanceOrganizational MeasuresMeasured Periodically
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Team / Group Incentive Plans
Gain-Sharing Plans
Profit Sharing Plans
Earnings-at-Risk Plans
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Individual Incentive Plans
Method of Rate DeterminationUnits of production per
time period Time period per unit of
production
(1) (2)
(4)(3)
Straight piecework plan Standard hour plan
Bedeaux plan
Halsey 50 - 50 method
Rowan plan
Gantt plan
Taylor differential piecerate system
Merrick multiple piecerate system
Pay constant function of
production level
Pay varies as function of production level
Relationshipbetweenproduction leveland pay
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Types of Incentives PlansThe ILO classifies all the schemes of payment by results intofour categories:
Earning vary inthe same proportionas output
Straight Piece WorkStandard Hour
Earnings vary
lessproportionatelythan output
Halsey PlanRowan PlanBarth SchemeBedaux Plan
Earnings varyProportionatelyMore than outputs
High Piece RateHigh Standard Hour
Earnings differat different levelsof output
Taylors DifferentialPiece RateMerrick DifferentialPiece RateGantt Task SystemEmersons Efficiency plan
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Halsey PlanRowan PlanBarth PlanBedaux Plan
Time - Based
Output - Based
Taylors Differential Piece Rate Merrick Differential Piece RateGantt Task SystemEmersons Efficiency plan
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Halsey PlanStd Time= 10 HrsRate per hr= Re 1
Case 1 time taken= 10 HrsEarnings = 10* 1
Case 2 Time taken = 10 Hrsearnings = 12* 1
Case 3 Time taken = 8 Hrsearnings = 8*1Bonus = *2*1 = Rs 1.00
Rs 9.00
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Rowan PlanStd Time= 10 HrsRate per Hr= Re 1Case 1 time taken= 10 Hrs
Earnings = 10* 1Case 2 Time taken = 10 Hrs
earnings = 12* 1
Case 3 Time taken = 8 Hrsearnings = 8*1
Bonus = 2/10*8 = Rs 1.60
Rs 9.60
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Barth PlanStd Time= 10 HrsRate per Hr= Re 1Case 1 time taken= 10 Hrs
Earnings = 10 * 10
= 10*1= Rs 10.00Case 2 Time taken = 12 Hrs
earnings = 12* 10
= 10.95*1 = 10.95Case 3 Time taken = 8 Hrs
earnings = 8*10= 8.94 * 1 = 8.94
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Bedaux PlanStd Time= 10 Hrs
Rate per Hr= Re 1Case 1 time taken= 12 HrsEarnings = 12 * 1
= 12.00Case 2 Time taken = 8 Hrs
earnings = 8*1= 8.00
Bonus:Std Bs = 10*60 = 600Actual Bs = 8*60 = 480Bs saved = 120Bonus 75 * 120*1 = Rs 1.50
100 60
Total earnings = 8+1.50= Rs 9.50
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Taylors Differential Piece -Rate
Standard outputs: 100 UnitsRate per Unit: 10 paiseDifferential to be applied:120% of piece-rate at or above the standards
80% of piece-rate when below the standardsCase 1: Outputs = 120 units
Earnings = 120* 120 * 0.10 = Rs 14.40100
Case 2: Outputs = 90 unitsEarnings = 90* 80* 0.10 = Rs 7.20
100
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Merrick Differential piece-rateStraight piece-rates less than 83% of the Std outputs110% of the base-piece rate for 83%-100% of the Std outputs
120% of the base-piece rate for more than 100% of the Std outputsCase 1 Output = 80 units
Efficiency = 80 *100 = 80%100
Earnings: As the efficiency is less than 83%, only the base pie-rate applies:
80*0.10 = 8.00Case 2 Output = 90 unitsEfficiency = 90 *100 = 90%of
100Earnings: As the efficiency is 83% but less than 100%, 110% the base pie-rate applies:
90*110*0.10 = 9.90100
Case 3 Output = 110 unitsEfficiency = 110 *100 = 110%
100Earnings: As the efficiency exceeds 100%, 120% of the base piece-rate applies:
110*120*0.10 = 13.20
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Gantt Task SystemRate per Hr =Re 0.50High piece-rate = Re 0.10Std Outputs = 80 unitsTime taken = 8 Hrs
Std Bonus = 20%
Case 1 Output = 70 unitsEarningsAs the output is less than the standard only time wages are paid to the worker
=8*0.50=Rs 4.00Case 2 Output =80 unitsEarningsAs the output is equal to the standard, the worker is entitled to time wage plus20% bonusTime wages =8*0.50= Rs 4.00Bonus =20*4 = Re 0.80
100Total earnings = Rs 4.80Case 3 Output =110 unitsAs the output is more than th Std, the worker is entitled to a high piece rate
10*0.10= Rs 11.00
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Emersons Plan Up to 67% of efficiency, the workr is determined by dividing the time taken by the Std
Time-rate
Up to 100% efficiency, 20% bonus is paid to workers
An additional bonus of Rs 1% is added for each additional 1% eficiency
Case 1 Output in 10 Hrs: 50 units
Efficiency: 50%( below 67%, the worker is eligible for 50% of the time wae as bonus)
Case 2 Output in 10 Hrs : 100 units
Efficiency : 100% (time-wage + 20% bonus)
Case 3 : Output in 10 Hrs : 130 units
Efficiency : 130%
At the rate of 20% at 100% efficiency and 1% increase for every 1% increase in
Efficiency, the worker is eligible for 50% of the time wage as bonus:
Time wag =10*1 Rs 10.00
Bonus =50*10.00 Rs 5.00
100
Rs 15.00
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Conditions for Effective Incentives Plans
Plan is clearly communicatedPlan is understoodRewards are easy to calculateEmployees participate in administering the planEmployees believe they are being treated fairly
Employees believe they can trust the companyand that they have securityRewards are awarded as soon as possible after the
desired performance