Incentive for motivation

1. DHANYA K J, MBA DCSMAT
VAGAMON,KERALA
INCENTIVES
Dhanya K J

2. INCENTIVE
DHANYA K J, MBA DCSMAT
VAGAMON,KERALA
An incentive is something that motivates an
individual to perform an action in a consistent
manner.
 The study of incentive structure is central to the
study of all economic activities.
Incentives are variable rewards granted to
employees according to variations in their
performance.

3. DHANYA K J, MBA DCSMAT
VAGAMON,KERALA
The other name for incentives is
‘payment by results’
but the word ‘incentive’ is most
appropriate because of its motivational
content

4. Incentive Plans
Incentive plans predict a basic rate usually on
time basis applicable to all workers &
Incentive rates payable to the more efficient
among them as extra compensation
Its for their meritorious performance in terms of
time, costs & quality.
 The incentive rates may take the form of bonus
or premium.
DHANYA K J, MBA DCSMAT VAGAMON,KERALA

5. Features of Incentive plans:
I. Minimum wages are guaranteed to all workers.
II. Incentives by way of Bonus, etc., are offered to
efficient workers for the time saved,production
& services
III. A standard time is fixed & the workers is expected
to perform the given work within the time.
DHANYA K J, MBA DCSMAT VAGAMON,KERALA

6. Objective of Incentive Plans
• Increase in productivity
• Reduction in labour costs
• Improvement in efficiency
• Rise in worker’s earnings
• Higher employee motivation & morale
• Greater contribution to organizational effectiveness
• Encouraging employees to achieve specific organizational
goals, such as increasing profits, improving product quality, etc.
• creating & maintain harmonious labour management relations.
DHANYA K J, MBA DCSMAT VAGAMON,KERALA

7. Types of Incentive Schemes
The International Labour Organization (ILO)
classifies it in four types:
 Earnings vary in Proportion to Output
 Earnings vary less Proportionately than Output
 Earnings vary Proportionately more than Output
 Earnings differ at different levels of Output.
DHANYA K J, MBA DCSMAT VAGAMON,KERALA

8. Types of Incentive Schemes:-
 Earnings vary in the same proportion as output
1) Straight Piece Work
2) Standard Hour
 Earnings vary less Proportionately than output
1) Halsey Plan,
2) Rowan plan,
3) Barth scheme
4) bedaux plan
 Earnings vary Proportionately more than output
1) High Piece Rate
2) High Standard Hour
3) Scanlon plan
 Earnings differ At different Levels of output
1) Taylor's Differential Piece Rate,
2) Merrick Differential Piece Rate,
3) Gantt Task System,
4) Emerson’s Efficiency plan
DHANYA K J, MBA DCSMAT
VAGAMON,KERALA

9. 1) Earnings vary in the same proportion as
output
Straight Piece Work: It is a simplest & oldest method. Here, Rate per unit
of output is fixed & the total earnings of worker are arrived at by multiplying
the total output by the rate per unit.
E.g.: If the rate per unit is 10 paisa & the total output of an employee is 100
units,
his or her earnings will be
100*0.10= Rs 10.00
Standard Hour: Also called “100 percent gains-sharing.” Standard time in
terms of hours is fixed for completion of a job. The rate per hour is then
determined.
DHANYA K J, MBA DCSMAT VAGAMON,KERALA

10. 2) Earnings vary less Proportionately than
output
Halsey Plan : Recognizes individual efficiency & pays bonus on
the basis of time saved.
Main features are:
• Standard time is fixed for each job or operation.
• Time rate is guaranteed & the worker receives the guaranteed
wages irrespective of whether he completes the work in the
time allowed or takes more time to do the same.
• If the job is completed in less than the standard time, the
worker is paid a bonus of 50% of time saved at time rate in
addition to his normal time wages.
Total Earnings = Time Taken* Hourly Rate + Bonus
Bonus = 50% of time saved (1/2*Time Saved*Hourly Rate)
DHANYA K J, MBA DCSMAT VAGAMON,KERALA

11. • Barth Scheme : does not guarantee the time – rate.The
worker’s pay is determined by multiplying the standard hour
by the number of hours actually taken to do the job, taking
the square root of the product & multiplying it by the worker’s
hourly rate.
Wages = Standards Time* Time Taken *Hourly Rate
• Rowan Plan:Bonus paid to the employee is equal to the
proportion of the time saved to the standard time.
DHANYA K J, MBA DCSMAT VAGAMON,KERALA

12. • Bedaux Scheme:
DHANYA K J, MBA DCSMAT
VAGAMON,KERALA
 Standard time for the job is fixed.
 Each minute of the standard time is called a
point or B
 Each job has a standard number of Bs.
 The worker receives bonus which is equal to
75% of the number of points earned, in
excess of 60 per hour, multiplied by one
sixtieth of the worker’s hourly rate.

13. 3) Earnings Varying Proportionately
More than Output:-
This category includes three methods;
(i) High Piece Rate
(ii) High Standard Hour System
(iii) Scanlon plan
DHANYA K J, MBA DCSMAT VAGAMON,KERALA

14. 4) Earnings differ at Different Levels of
Outputs:-
Taylor’s Differential Piece Rate System: There is low rate for
output below the standard, and a higher piece-rate for output
above the standard with a large bonus of 50% of the time-rate
when the standard output is attained.
Merrick Differential Piece–Rate System: It is a modification of
earlier system with three instead of two rates.
DHANYA K J, MBA DCSMAT VAGAMON,KERALA

15. Gantt Task System:
DHANYA K J, MBA DCSMAT
VAGAMON,KERALA
The worker is guaranteed his /her time-rate for output below the
standard. On reaching the std output or task, which is set at a
high level, the worker is entitled to a bonus of 20% of time wages
Emerson’s Plan:
A standard is set for the job, & efficiency of each worker is
determined by dividing the time taken by the std time.

16. OTHER TYPES OF INCENTIVES
A. BONUS
B. PROFIT SHARING
C. STOCK OPTIONS
DHANYA K J, MBA DCSMAT
VAGAMON,KERALA

17. DHANYA K J, MBA DCSMAT
VAGAMON,KERALA
THANKS…