Types of Incentive Schemes

7/29/2019 Types of Incentive Schemes

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Archana Choudhary


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Applications of motivational

concepts :Job Designing :

has emerged as an important application area forwork motivation.

job design concerns and approaches are usuallyconsidered to have begun with scientific management.

The goal of such management was to maximizehuman efficiency in job performance.

The scientific management approach resulted in jobengineering, which focused on product and process,plant layout, human-machine interactions, etc.


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Advances in technology, computer systems, etc., haveresulted in job specialisation.

Even though specialization resulted in better control and

efficiency, other aspects like motivation and satisfactionwere neglected.

Consequently, over a period of time, efficiency decreasedand dissatisfaction prevailed among the work force.

The problems today are compounded with downsizing andincreased use of technology.

For academicians as well as practitioners, job design takeson special importance as it reduces stress, enhancesmotivation, and results in satisfaction.


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Job enlargementJob enlargement refers to expansion of the scope of job

horizontally. In simple terms, it means increasing thenumber of tasks that need to be executed.

For example, it an assembly-line worker was inserting100 nuts in a day, he would perhaps increase it byanother 50.

The variety that is experienced by the individual isonly in terms of the number of tasks. Some amount ofboredom may be relieved by this approach.


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Disadvantages of job enlargement First, the workers need to be trained or multi skilled in

order to handle the variety of jobs.

Maybe it requires a new way of functioning in analready existing system.

Moreover, it may not be possible to introduce job-enlargement programmes for all the jobs in the

organization.


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Job enrichment :

The proposition of Herberg that motivators when presentenhance the motivational aspects of the individual findsits direct application in a job-enrichment programme.

In enrichment, the job is enlarged vertically so that

there is greater variety of work content. It requires a high level of knowledge and skill, gives

workers more autonomy and responsibility in terms ofplanning directing and controlling their own

performance, and provides opportunities for personalgrowth and a meaningful work experience.


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Advantages of job enrichment Research has supported us with evidence that there is

more employee satisfaction, better customer service,less employee overload, and fewer employee errors incase of job enrichment.

Another study also found that employees were morecreative when they worked in an enriching context of

complex, challenging jobs, and supportive, non-controlling supervisory climate.


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Schemes of payment by results ILO classifies all the schemes of payment by results

into 4 categories:

Schemes where the workers earnings vary in the sameproportion as output.

Schemes where earnings vary less proportionately thanoutput.

Schemes where earnings vary proportionately morethan output.

Schemes where earnings differ at different levels ofoutput.


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Earnings vary inthe sameproportion asoutput

Earnings varylessproportionatelythan output

Earnings varyproportionatelymore thanoutput

Earnings differat differentlevels of output

INCENTIVE SCHEMES

Straight piecework

Standardhour

Halsey Plan

Rowan Plan

BarthScheme

Bedaux Plan

High piecerate

Highstandard hour

Taylorsdifferential piecerate

Merrickdifferential piece

rate

Gantt task system

Emersons

efficiency planTypes of Incentives


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Straight Piece Work Simplest, oldest and the most commonly used method Here, rate per unit of output is fixed, &

total earnings of a worker = total output in units*rate perunit

e.g. rate per unit is 10 paise and the total output is 100 units,his earnings will be 100*0.10=Rs. 10.00.

Standard Hour System(also called 100 % gains-sharing) Here, standard time in terms of hours is fixed for completion

of a job. The rate per hour is then determined.

A worker is paid for a standard time at his or her time-rate if

he or she completes the job in the standard time or less oreven more, unless he or she is guaranteed time wages.

If time wages are guaranteed, he or she gets paid on the basisof the time taken multiplied by the time-rate.


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Examples:

Standard time=10 hrs

Rate per hour- Re 1Case (i)

Time taken= 8 hrs

Earnings= 10*1 =Rs. 10.00

Case (ii)

Time taken = 12 hrs.

(a) Earnings if time wages are not guaranteed

= 10*1=Rs. 10.00(b) Earnings if time wages are guaranteed

=12*1=Rs. 12


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Earnings varying proportionately less than output

In all types, time is used as the measure of output andbonus is paid on the time saved, i.e. the differencebetween the standard time-set for the job and the timeactually taken.

Called gain sharing schemes as both employee &employer share gains resulting from the saved time.

Applied where it is not possible to set standards or tomeasure the workers output accurately.


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Hasley system:

Given by E.A. Halsey (an American engineer)

Standard time is fixed for the completion of a job & therate per hour is then determined.

Time wages are guaranteed even if the output of theworker is below standard.

Bonus paid to a worker is equal to 50% of time savedmultiplied by rate per hour.


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Example:

Standard time= 10 hrs

Rate per hour= Re 1

Case (i)Time taken=10 hrs

Earnings = 10*1 = Rs. 10.00

Case(ii)

Time taken=12 hrsEarnings = 12*1 = Rs. 12.00

Case(iii)

Time taken=8 hrs

Earnings :Time wages= 8*1 = Rs. 8.00

Bonus= *2*1=Rs. 1.00

=Rs. 9.00


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Rowan Plan: Introduced by D. Rowan in 1901. Standard time and rate hour are fixed. Bonus paid to the employee is equal to the proportion of the time saved to the

standard time. Example:Standard time= 10 hrsRate per hour= Re 1

Case (i)

Time taken=10 hrsEarnings = 10*1 = Rs. 10.00Case(ii)Time taken=12 hrsEarnings = 12*1 = Rs. 12.00Case(iii)Time taken=8 hrsEarnings :Time wages= 8*1 = Rs. 8.00Bonus= 2/10*8=Rs. 1.60

=Rs. 9.60


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Barth Variable Sharing System:

Does not guarantee the time rate unlike Halsey and

Rowan systems.Workers pay is ascertained by multiplying the

standard hour by the number of hours actually takento do the job, taking the square root of the product and

multiplying it by the workers hourly rate. Example:


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Standard time= 10 hrs

Rate per hour= Re 1

Case (i)

Time taken=12 hrsEarnings = (12*10) = Rs. 10.95*1Case(ii)

Time taken=10 hrs

Earnings = (10*10) = Rs. 10*1=Rs.10.00

Case(iii)Time taken=8 hrs

Earnings := (8*10)= Rs. 8.94*1=Rs. 8.94


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Bedeaux scheme: Standard time for a job is fixed.

Each minute of the standard time is called a point orB.

Each job has a standard number of Bs.

The worker receives bonus which is equal to 75% of the

no. of points earned, in excess of 60 per hour, multipliedby one sixtieth of the workers hourly rate.

If a worker does not reach his or her standard, he or sheis paid at the time rate.

Example:


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Standard time = 10 hrs

Rate per hour = Re 1

Case (i)

Actual time = 12 hrsEarnings = 12*1=Rs. 12.00

Case(ii)

Actual time = 8 hrs

Earnings: Time wages = 8*1=Rs. 8.00Bonus:

Standard Bs=10*60=600

Actual Bs = 8*60=480

Bs saved = 120

Bonus 75100(1201)/60= Rs. 1.50Total earnings = 8+1.50=Rs.9.50


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QuestionWhy college and university professors and

administrative staff are not brought under incentiveschemes? Make a case of their inclusion.

Types of Incentive Schemes

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