Incentive Plans.ppt

7/30/2019 Incentive Plans.ppt

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Human ResourceManagement

Incentive Plans

Unit-III

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Individual Wage Plans

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Based on Time


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Halsey Plan

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The slow worker is paid time wages and efficient worker is

paid some bonus in addition to the time wages (normally

50% of wages for the time saved.)

Std Time (S) : 10 HrsRate (R) : Rs. 4 per hr

Time taken (T) : 6 hrs

Rate of bonus (P) : 50% of time saved

Total wages : T*R+(S-T)*50%*4

: Rs. 32 %


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Rowan Plan

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It is similar to Halsey plan except the calculation of

bonus. Here bonus is calculated by taking

proportion of time saved

Wages = (T * R) + (Time saved / std time * T*R)

Wages = (6*4)+(4/10 * 6 * 4)

= Rs 33.6


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Bedeaux Plan

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In this plan std time is expressed in minutes and are knownas Bs. Bonus is paid to worker at the rate of 75% of the

wages for the time saved, the rest 25% goes to the foreman.

For Example

Std Time (S) = 300 Bs. (5 Hrs)

Actual Time (T) = 240 Bs. (4 Hrs)

Rate of wages (R) = Rs 6 Per hours

Value of time saved = {(300-240)/60}*6 = Rs 6

Total Wages = S*R+75% of time saved

= 5*6+(75/100*6) = 34.50


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Emerson Plan

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A minimum wage is guaranteed to workers. Conditionsof work are standardized and std output if fixed which is

to be completed with in the specified period of time. The

pattern of incentive under this plan is as under

Less than 66.67 % of Std, worker gets time wages

66.67% to 80% of Std, Bonus payable is 4%

more than 80% to 90%, Bonus is 20%

Between 90% to 100%, Bonus is 20%


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Individual Wage Plans

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Based on Productivity


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Taylor Plan

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Std task is established. Two piece rates are laid down. The lowerrate for those workers who fail to complete the standard task

within the allotted time and higher rate for those who complete the

task with in or less than std time. For e.g. If std output is 50units

per day. The piece rates fixed are Rs. 2 and Rs 1.50 per unit. Three

workers A,B and C produces 40, 50 and 60 units during the day.

Their total wages will be as follows

A : 40*1.50 = Rs. 60

B : 50*2.00 = Rs. 100

C : 60*2.00 = Rs 120


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Merricks multiple Piece Rate Plan

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Merrick introduced three piece rates as under :

Output (% of Task) Piece Rate Wage

Less than 83% Basic Piece Rate

From 83% to 100% 110% of Basic Piece Rate

Over 100% 120% of Basic Piece Rate


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Gantt Task and Bonus Wage Plan

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Under it standard time is fixed through time and motion study.

Minimum time wage is guaranteed to all workers. A worker who fails

to complete the task within the standard time receives wages for

actual time spent at the specified rate. Worker who achieve or exceed

the std get extra bonus varying between 20% to 50% of hourly rate for

the time allotted for the task For Example If std time fixed for the job

is 8hrs and the time rate is Rs 10per hour and the rate of bonus is

25%. A worker who completes the task in 10 hours he will get Rs. 80

(10*8) only. Whereas the worker who completes the task in 6 hrs will

receive Rs 100 (80+25% of 80)


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GROUP INCENTIVE PLANS

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Priest man's Plan

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Std output is laid down for the group. However,

minimum wage is assured to each group member.

The group members become entitled to the bonus if

their output exceeds the standard. Bonus if paid in

proportion to the excess of actual output over std

output. For example if actual production is 20%

higher than the std output, the wage of each member

of group will rise by 20%. The additional wage of

each member is his bonus.


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Gain Sharing Plan

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Towne devised this plan, under this plan,

half of the savings in labor cost as a result

of output in excess of standard is

distributed among workers and foreman,

and bonus is paid half early. The

percentage of foreman is fixed in advance.


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Goal Sharing Plan or Work Teams Results

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It rewards employees for meeting specific goals

in terms of quality, services and job performance.

For e.g. an employee may be paid Rs 20 extra for

each one percent improvement over baseline.

E.g. The baseline is 90% and group achieves

93% performance, this would mean each group

member would receive Rs 60 bonus based on

group performance


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Organizationwide Plans

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Scanlon Plan

It is a organization-wide scheme designed to involve workers in making

suggestions for reducing the cost of operations and improving work

methods by showing the gains of increased productivity. It has two basic

features

Financial incentives are used to increase productivity and to reduce

costs.

Departmental screening committee are set up to evaluate employee

suggestions

If a suggestion is implemented successfully, all employees share the

gains in productivity

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The conditions needed for the success of the plans are:

The no of workers should be small preferably less than

1000

Product lines and cost are stable

Healthy industrial relations and good supervision

Strong commitment to the plan on the part of

management

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Scanlon Plan


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Profit-sharing Plans: In this plan the employees receive or earn a share

of the companys profit, which is calculated as a % of the total profit.

Distributive Plan: Annual or quarterly cash bonus is paid

according to a pre-determined formula. Based on companyprofits.

Deferred Plan: Employees earn profit-sharing credits instead of

cash payment, which is distributed when the employee parts with

the organization.

Combination Plan: Combination of distributive & deferred Plan.

Profit sharing Plan


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Co-partnership

In this employees are made part-owners of the enterprise and

are allowed to participate in the decision-making process. The

employees are converted in to co-partners or co-workers of the

company. Thus, employees get higher status and naturally they

take more interest in the management of their company. It can

be introduced in the following forms:

Offering new shares to employees

Through employee stock option plans.

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Employee Stock Option Plan

ESOP provides a mechanism through which certaineligible employees may purchase the stock of the company

at a reduced rate. Eligibility is usually determined by wage

level or length of service or both. There are various ways

in which ESOP is implemented:

The stock is offered at the market rate

The stock is offered at a price which is 10 to 20 % less

than the market price

The employee is given the option to purchase a certainamount of stock at a stated price in future within a

specified period of time.

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Questions ???

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Incentive Plans.ppt

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