Employee motivation, Incentives and Fringe Benefits

FICCI CE

Individual Performance=f(ability*motivation)

Motivation is defined as an innate need or desire with a physiological or psychological basis that propels an individual to undertake an activity to satisfy the need or desire.

Employee motivation

FICCI CE

Motivational Process:

1. Awareness on the part of the individual that a need is operating.

2. Identifying mechanisms to satisfy the need.

3. Drive mechanism implementation.

4. Attainment of goals.

Employee motivation

FICCI CE

Freud’s Defense Mechanisms• Repression• Reaction Formation• Projection• Rationalization• Intellectualization• Displacement• Regression

Employee motivation

FICCI CE

Employee motivation

Functions of Work:Work is instrumental for survival.Contributes to personal identityProvides opportunities for interaction with others.Status and self-respect.Growth and Development.Generates self-confidence.Relate to and contribute towards society.

FICCI CE

Chris Argyris’ Immaturity-Maturity Theory:

Immaturity Characteristics

• Passivity• Dependence• Capable of behaving in

few ways• Shallow interest• Short-term perspective• Subordinate position• Lack of Self-Awareness

Maturity Characteristics• Active• Independence• Capable of behaving in

many ways• Deep interest• Long-term perspective• Super ordinate position• Self-Awareness and

Control

FICCI CE

These theories attempt to determine what motivates people at work and are concerned with identifying and prioritizing needs.

• Maslow’s need-hierarchy theory• Herzberg’s Two-Factor theory• Alderfer’s ERG theory• McClelland’s Achievement motivation theory

Content Theories of Work Motivation

FICCI CE

Growth needs(G needs): Self-Actualization Esteem Belongingness

Basic needs(B needs): Safety Physiological

Maslow’s Need-Hierarchy Theory

FICCI CE

Maslow’s Model in a work situation

Self-Actualization

Esteem

Social

Security

Pay

FICCI CE

Herzberg’s Two-Factor Theory

Hygiene Factors Company policy and

administration Supervision, Technical Salary Interpersonal Relations Short-term perspective Working Conditions Advancement

Motivators Achievement Recognition Work itself Responsibility

FICCI CE

Alderfer’s ERG Theory

ERG stands for Existence, Relatedness and Growth.It is a more practical theory compared to Maslow’s Theory as it explains individual differences in pursuit of development regardless of whether or not other needs are satisfied. But the main drawback is we are not sure as to what motivates an individual.

FICCI CE

McClelland’s Achievement Motive Theory

A brief description is as follows:Need for AchievementNeed for PowerNeed for Affiliation

FICCI CE

Process theories of Work Motivation

•Vroom’s Expectancy Model•Adam’s Equity Theory•Porter-Lawler’s performance-satisfaction Model

FICCI CE

Incentives And Fringe benefits

FICCI CE

Meaning

Incentives are the rewards to an employee, over and above his base wage or salary, in recognition of his performance and contribution.

“ An incentive scheme is a plan or programmes to motivate individual or group performance. An incentive programme is most frequently built on monetary rewards but may also include a variety of non-monetary rewards or prizes.”

By- Burack and Smith

FICCI CE

Pre-requirements For Effective Incentive System

Incentive plan should be simple so that it may be easily understood by the workers.

The plans should be acceptable to the workers, trade unions and management.

The incentives rates should be made attractive so as to encourage the worker to give his best results.

All incentives should guarantee a minimum day’s wages.

FICCI CE

The scheme should be explained and

discussed with all employees and

supervisors before it is implemented.

Standards once fixed should not be

changed unless it is necessary.

FICCI CE

Two Types Of Incentives

1.Financial Incentives

2.Non-Financial Incentives

FICCI CE

FICCI CE

Group Incentive/ Bonus Plan

It is a plan in which a production

standard is set for a specific work

group and its members are paid

incentives if the group exceeds

the production standard.

FICCI CE

Profit Sharing Scheme

It is an incentive plan that engages many or all employees in a common effort to achieve a company’s productivity and any resulting incremental cost-savings gains are shared among employees and the company.

FICCI CE

At-Risky Pay plan

These are some times called variable

pay plans but are essentially plans

that put some portion of the

employee’s pay at risk, subject to

the firm’s meeting its financial goals.

FICCI CE

Salary plan Salary plan varies from organization

to organization. Some firms pay sales people fixed salaries and no specific commission or bonus schemes are paid on achieving the sales targets. The emphasis being on customer service rather on high pressure selling.

FICCI CE

Commission Plan Commission plans provide sales representatives with payment based on a percentage of sales turnovers they generate.

FICCI CE

Combination Plan

Most companies pay their salespeople a combination of salary and commission. A portion of total earnings is paid in form of fixed salary.

FICCI CE

Bonus Scheme And Awards

Bonus scheme provide pay in addition to basic salary which is related to the achievement of defined and preferably agreed targets. These may refer simply to sales volume or profit.

FICCI CE

Base Salary

Decisions on the base salary of directors and senior executives are usually formed on the basis of market worth of the individuals. Remuneration on joining the company is usually settled by negotiation, often subject to the approval of a remuneration committee

FICCI CE

The Annual BonusAnnual bonus plans are those which are aimed at motivating the short term performance of their managers and executives and are given on the basis of the profitability of the company.

FICCI CE

Stock Option A stock option is the right to

purchase a specific number of shares of company stock at a specific price during a period of time.

FICCI CE

Book Value Plan Managers are permitted to

purchase stock at current book value. Executives can earn dividend on the stock they own, as the company grows the book value of their shares may grow too.

FICCI CE

Stock Appreciation Rights

The employee is given the appreciation in the value of shares from the date the option was granted till the date it was relinquished. He earns without investing any money in buying the options.

FICCI CE

Restricted Stock Plans Shares are usually awarded without cost to the executive but with certain restrictions. One of the major restrictions is that the shares may be forfeited if they are not earned out over a specified period of time.

FICCI CE

Phantom Stock Plan Executives receive not shares but

“units” that are similar to shares of company stock. Then at some future time they receive value equal to the appreciation of the “phantom” stock they own.

FICCI CE

Employee Stock Option Plan:

A company contributes shares of its own stock or cash to be used to purchase such stock to a trust. The trust holds the stock in individual employee accounts and distributes it to employees upon their retirement or at the time of separation from service.

FICCI CE

Employee Stock Purchase Plan

The employees are given the right to acquire shares of the company, normally at a price lower than the prevailing market price.

FICCI CE

Non-Financial Incentives

Materialistic Incentives

CanteensHousing FacilitiesEducation

FacilitiesPensionProvident Fund

Schemes

Non-Materialistic Incentives

Recognition and praise

Good working environment

Cordial human relations

Job satisfaction

FICCI CE

Fringe Benefits For Employees

FICCI CE

“Imagine life as a game in which you are juggling some five balls in the air. You name them - work, family, health, friends and spirit - and you're keeping all of these in the air. You will soon understand that work is a rubber ball. If you drop it, it will bounce back. But the other four balls - family, health, friends and spirit - are made of glass. If you drop one of these, they will be irrevocably scuffed, marked, nicked, damaged or even shattered. They will never be the same. You must understand that and strive for balance in your life.”

-Brian G. DysonPresident and CEO

Coca-Cola Enterprises

FICCI CE

Definition

Fringe benefits are those monetary and non monetary benefits given to the employee during and post-employment period which are connected with employment but not to the employees contribution to the organization.

FICCI CE

For ExampleYou Could receive a benefit when you

• Use a work car for private purposes.• Are provided with a cheap loan.• Are provided with free private health insurance.• Are provided with cleaning services for your

private residence or enter in to a salary sacrifice arrangement.

FICCI CE

Need & Importance of Fringe Benefits:

•To retain the employees.•To motivate performance.•As a social security.•Trade Union demand.•Skill shortage.•Employee Demand.

FICCI CE

Principles of Fringe Benefits

• Satisfaction of Real Needs.• Flexibility.• Proper Communication.• Educate the workers.• Corporate Tools.• Participation

FICCI CE

Fringe Benefits Categories :

• Car Fringe benefits.• Loan Fringe Benefits.• Expenses Payment Fringe Benefits.• Housing Fringe Benefits.• Airline Transport Fringe benefits.• Living-Away-from-Home allowance fringe

benefits.• Car Parking Fringe Benefits.• Property Fringe Benefits.

FICCI CE

Fringe Benefits In India :

• Payment for Time not Worked.• Voluntary Benefits.• Payment For Special Duties.• Payment For Health and Security

Benefits.

FICCI CE

Conclusion:

• Basically, a fringe benefit is a benefit provided to an employee or an associate (For Example: Family, Spouse and children) because of his employment.

• Fringe Benefits provide output in terms of employee loyalty and co-operation, employee welfare and create Organizational image.

FICCI CE

References

1.Ajai Kumar Singhal,“Human Resource Management.”

2.Gary Dessler & Biju Varkkey, “Human Resource Management.”

3. Google

FICCI CE