Employee benefits & incentives

8/7/2019 Employee benefits & incentives

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Employee benefits &Employee benefits &

incentivesincentives


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Employee benefitsEmployee benefits

y Management is concerned with attracting

and keeping employees, whose

performance meet at least minimum

levels of acceptability; and at keeping absenteeism and turnover at tolerable

levels.

y These benefits are usually known as

Fringe benefits.


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y There are five categories of services and

benefits under the term fringe benefits :-

1) Legally required payments

2) Pension and group insurance

3) Paid rest period

4) Payment for time not worked

5) Festival bonus


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DefinitionDefinition

y Fringe benefit is primarily a means in the

direction of ensuring, maintaining, and

increasing the income of the employee. It

is a benefit which supplements to aworkers ordinary wage and which are of

value to them and their families in so far

as it materially increases their retirement.


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Objective of fringe benefit andObjective of fringe benefit and

services programsservices programs1) To recruit and retain the best personnel2) To provide for the needs of the employees

and protect them against certain hazards of

life, particularly those, which an individualcannot, himself provide for;

3) To increase and improve employees morale

and create a helpful and positive attitude.4) To make the organization a dominant

influence in the lives of its employees.


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5) To improve and furnish the organizational

image in the eyes of the public with a

view to improving its market position

6) To recognize the official trade unions

bargaining strength, for a strong trade

union generally constrains an employer to

adopt a sound benefit and servicesprograms for his employees.


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Principles of fringesPrinciples of fringes

1) Benefits and services must be provided

to the employees on the basis of genuine

interest in the protection and promotion

of their well-being.

2) The benefit must satisfy a real need.

3) The benefit must be cost-effective.

4) The benefit should be as broad-based aspossible.


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y Cockman, however, has made a two-fold

classification of fringe benefits:

1) Which are offered on the basis of status

2) Which are key benefits


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y On the basis of their identification,benefits may be classified as under:

a) Employee security payments

b) Payment for time not worked

1) Rest period2) Holidays

3) Vacations


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4) Sick leave

5) Severance pay

6) Leave of absence

7) Pension programs

8) Insurance

c) Bonus and awards


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Guidelines to make benefitGuidelines to make benefit

programs more effectiveprograms more effective1) Fringe benefit programs should belooked at as a worthwhile corporateinstrument in HRM

2) Future policy planning in this area willhave to keep in view some freshreference points

3) Any meaningful package of benefits mustreflect some perspective planning

4) Poor internal communication hurts theprogram in at least three ways:


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a) More money is spent for officers welfare

b) Excess money spent on corporate image

building at the cost of more bonus

c) Priority officers children in admissions to

schools.

therefore, make the internal

communication system effective.


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IIncentive paymentsncentive payments

y Meaning and definition :

It can be defined asvariable rewards granted according to variations

in the achievement of specific result.

The international labour office refers to incentivesas payment by results . But it is appropriate tocall them incentive system of paymentemphasizing the point of motivation, that is , theimparting of incentives to workers for higherproduction and productivity.


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IImportancemportance

1) Inducement & motivation

2) Positive response

3) A feeling of security

4) Improve standard of living

5) Earning of employee would be enhanced

due to incentives.


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DDisadvantagesisadvantages

1) Payment by result

2) Danger of accidents

3) Overworking affect health

4) Jealousies may arise among workers

5) Group incentives schemes


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TTypes of incentives scchemesypes of incentives scchemes

y Incentives schemes are many and varied. Theinternational labour organization (ILO)classifies all the schemes of payment byresults into four categories. They are :-

1) Schemes where the workers earnings varyin the same proportion as output.

2) Schemes where earnings varyproportionately than output.

3) Schemes where earnings varyproportionately more than output.

4) Schemes where earnings differ at differentlevels of output.


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y Group incentive plans

It is the earning basedon the group performance not on individual

performance.Advantages:

1) Goal of the project is achieved

2) It reward things such as team work

3) Better co-operation among employees

4) Reduced clerical work

5) Shorter training time.


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y Disadvantages:

1) efficient worker may be penalized for the

inefficiency of the others.

2) The incentive may not be strong enough to

serve its purpose

3) Rivalry among the members of the groupdefeats the very purpose of team work.


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y Organization-wide incentive pay plans

y Incentives for indirect workers


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y Other incentive schemes

The features of incentive payments are:

1) Tough incentives are as old as industriesthemselves, it was only in 1946 that they wereintroduce in our country. Even to this day, theincentive schemes are in their infancy.

2) In most industrial establishments, theintroduction of incentive schemes has not been

preceded by work studies, consultations withworkers representatives and rationalization ofwage structure through job evaluation.


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3) Incentive schemes differ from industry to industryand from plant to plant within industry.

4) Most incentive schemes in operation fall under oneor the other of the four classes mention by the IOL.But the schemes are fine-tuned to suit requirementsof the organization.

5) The schemes in public sector plants have anextremely varied coverage , some applying only today-rated employees while others are being madeapplicable right up to the top management.

6)Inflation has reduced the motivational effect ofincentives . Hence, incentives have to be motivatedfor higher efficiency and greater output.


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y Pay for performance (PFP)

y Determinants of effective PFP systems?1) Worker value outcomes (money and prices)

2) Outcome is valued relatively to other rewards

3) Desired performance must be measurable

4) Worker must be capable of increasing output

5) Worker must believe that increased output willresult in receiving a reward

6) Size of rewards to sufficient to stimulateincreased efforts.


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y What are the problems in PFP programs?

1) Poor perceived connection betweenperformance and pay.

2) The level of performance pay is too low relativeto basic pay.The cost of more highly motivatingprograms may be prohibitive.

3) Lack of objectives, countable results for mostjobs, requiring the use of performance rating.

4) Faulty performance appraisal systems, withpoor co-operation from managers, lenience biasin the appraisal and the system change


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y Who do you select a PFP systems?

1) Who should be included in PFP system:

In general all groups should be included in a PFPsystem with one critical condition i.e the PFPsystem should be developed with specific groupsand conditions in minds. Many companies havedifferent PFP systems for various classes ofemployees. Some companies have reward system

that are compatible with the culture thatattempts to minimize the distance betweenpeoples at different levels in the organizationalhierarchy.


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2) How will performance be measured:The performance can measured on the basisof different organizational policies.

3)Which incentive will be used:

incentives are used on the basis of merit-payplan. They are:

y Use a bonus system in which merit pay isnot tied to basic salary

y Maintain a bonus ranging from 0 to 20% forlower pay levels and from 0 to 40% forhigher pay levels.


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y Take performance appraisal seriously.

Hold raters accountability for the

appraisal and provide training.

y Consider special awards separately from

and annual merit allocation that recognize.


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THANK YOU

Employee benefits & incentives

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