{"id":2866,"date":"2019-11-30T16:06:57","date_gmt":"2019-11-30T16:06:57","guid":{"rendered":"https:\/\/commerceiets.com\/?p=2866"},"modified":"2019-11-30T16:06:57","modified_gmt":"2019-11-30T16:06:57","slug":"incentive-plans-for-employees","status":"publish","type":"post","link":"https:\/\/commerceiets.com\/incentive-plans-for-employees\/","title":{"rendered":"INCENTIVE PLANS FOR EMPLOYEES"},"content":{"rendered":"\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/commerceiets.com\/incentive-plans-for-employees\/#INCENTIVE_PLANS_FOR_EMPLOYEES\" title=\"INCENTIVE PLANS FOR EMPLOYEES\">INCENTIVE PLANS FOR EMPLOYEES<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/commerceiets.com\/incentive-plans-for-employees\/#TYPES_OF_INCENTIVE_PLANS\" title=\"TYPES OF INCENTIVE PLANS\">TYPES OF INCENTIVE PLANS<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/commerceiets.com\/incentive-plans-for-employees\/#TIME_BASED_INCENTIVE_PLANS\" title=\"TIME BASED INCENTIVE PLANS\">TIME BASED INCENTIVE PLANS<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/commerceiets.com\/incentive-plans-for-employees\/#PRODUCTIVITY_BASED_INCENTIVE_PLANS\" title=\"PRODUCTIVITY BASED INCENTIVE PLANS\">PRODUCTIVITY BASED INCENTIVE PLANS<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"has-text-align-center wp-block-heading\" id=\"incentive-plans-for-employees\"><span class=\"ez-toc-section\" id=\"INCENTIVE_PLANS_FOR_EMPLOYEES\"><\/span>INCENTIVE PLANS FOR EMPLOYEES<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"259\" height=\"194\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2022\/02\/download-83.jpg\" alt=\"\" class=\"wp-image-5230\"\/><figcaption>INCENTIVE PLANS FOR EMPLOYEES<\/figcaption><\/figure>\n\n\n\n<p class=\"has-medium-font-size\">Incentive Plans for employees are the plans formulated to influence and motivate the workers to achieve the set targets to get the reward. The incentive is given to the worker by paying some bonus or premium in addition to their normal wages. Under an incentive plan, normally a standard time is fixed by means of time study of the performance of a specific job and the worker is paid a time rate plus specified proportion of the wages of the time saved by way of bonus. <\/p>\n\n\n\n<p class=\"has-medium-font-size\">The main object of introducing incentive plans is to reduce the per unit overhead cost by means of an increase in production. The incentive plans can be for lower level employees, middle management and senior management. An Incentive Plan comprises of incentives like<\/p>\n\n\n\n<ul><li>Profit sharing<\/li><li>Project bonuses<\/li><li>Stock options<\/li><li>Sales commission, etc.<\/li><\/ul>\n\n\n\n<h2 class=\"has-text-align-center wp-block-heading\" id=\"types-of-incentive-plans\"><span class=\"ez-toc-section\" id=\"TYPES_OF_INCENTIVE_PLANS\"><\/span>TYPES OF INCENTIVE PLANS<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"960\" height=\"720\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/11\/Slide3-2.jpg\" alt=\"TYPES OF INCENTIVE PLANS\" class=\"wp-image-2867\" srcset=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/11\/Slide3-2.jpg 960w, https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/11\/Slide3-2-300x225.jpg 300w, https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/11\/Slide3-2-768x576.jpg 768w\" sizes=\"(max-width: 960px) 100vw, 960px\" \/><figcaption>INCENTIVE PLANS FOR EMPLOYEES<\/figcaption><\/figure>\n\n\n\n<h2 class=\"has-text-align-center wp-block-heading\" id=\"time-based-incentive-plans\"><span class=\"ez-toc-section\" id=\"TIME_BASED_INCENTIVE_PLANS\"><\/span>TIME BASED INCENTIVE PLANS<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"has-text-align-center has-pale-cyan-blue-background-color has-background has-large-font-size\">1. <strong>HALSEY PREMIUM PLAN<\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\">It is one of the important types of Incentive Plans. Halsey premium Plan was originated by the <strong><em>Fredrick Arthur Halsey<\/em><\/strong> who was an American mechanical engineer and economist. He introduced this plan by publishing his article in the American Machinist Magazine in 1891.<\/p>\n\n\n\n<p class=\"has-medium-font-size\">According to this incentive plan, the employees are paid\nagreed hourly rate of wages for the actual time taken to complete the job plus\na fixed percentage of the wages of the time saved by way of bonus or premium.\nThe standard time is fixed for each unit or job on the basis of time studies\nand motion studies. The bonus provided to each employee on the basis of the\ntime saved is one-half or one-third of the wages of the time saved.<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong><em>CALCULATION OF TOTAL WAGES<\/em><\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong>Total Wages= T*R+ (S-T\/2)*R<\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\">Where,<\/p>\n\n\n\n<p class=\"has-medium-font-size\">T= Actual time taken<\/p>\n\n\n\n<p class=\"has-medium-font-size\">S= Standard time Allowed<\/p>\n\n\n\n<p class=\"has-medium-font-size\">R= Rate of wages per hour.<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong><em>FEATURES OF HALSEY PLAN<\/em><\/strong><\/p>\n\n\n\n<ul><li>Standard time for each job is fixed in advance.<\/li><li>Wages are calculated on the time basis.<\/li><li>The wage payment is guaranteed as the payment is\nmade on time basis, so even inefficient worker will also get wages for the time\ntaken to complete the job. <\/li><li>Standard time is decided on the basis of time\nstudies and motion studies.<\/li><li>The bonus provided is 50% of the actual wages or\nsometimes one-third of the actual wages. <\/li><\/ul>\n\n\n\n<p class=\"has-medium-font-size\"><strong><em>EXAMPLE: <\/em><\/strong>Suppose the hourly rate of wage is Rs. 1 per hour, standard time to complete the job is 16 hours and actual time taken is 12 hours. The calculation of wage rate under Halsey plan is as follows:<\/p>\n\n\n\n<p class=\"has-medium-font-size\">&nbsp;Total Wages= T*R+\n(S-T\/2)*R<\/p>\n\n\n\n<p class=\"has-medium-font-size\">= 12*1+(16-12\/2)*1<\/p>\n\n\n\n<p class=\"has-medium-font-size\">=12+2<\/p>\n\n\n\n<p class=\"has-medium-font-size\">=Rs.14<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong><em>ADVANTAGES OF HALSEY PLAN<\/em><\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\">The following are the advantages of Halsey plan:<\/p>\n\n\n\n<ul><li>The calculation of wage rate under the Halsey\nPlan is easy and simple and does not involve tedious calculations.<\/li><li>As per this plan, the minimum wage rate is\nguaranteed to the worker.<\/li><li>As the minimum wage rate is guaranteed under\nthis plan, the workers have a sense of security amongst them to get earnings.<\/li><li>As per this plan, the efficient workers get\nrewarded by the way of bonus and inefficient workers do not get rewarded.<\/li><li>As the workers feel motivated by getting extra\nreward their productivity increases.<\/li><li>The benefit from the time saved is shared\nequally by the employer and employee. <\/li><li>The employers also gain since direct labor cost\nand overheads cost per unit declines.<\/li><\/ul>\n\n\n\n<p class=\"has-medium-font-size\"><strong><em>DISADVANTAGES OF HALSEY PLAN<\/em><\/strong><\/p>\n\n\n\n<ul><li>The workers are given only 50% of the wages of the time saved not the full amount. Because of this, some workers oppose this plan.<\/li><li>To complete the work before time, employee sacrifices the quality of the production.<\/li><li>The standard time to complete the job is just an estimation which may not be true in all the cases.<\/li><li>Due to over-speeding there are chances of wastage of raw-materials.<\/li><\/ul>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"299\" height=\"168\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2022\/02\/images-30.jpg\" alt=\"\" class=\"wp-image-5231\"\/><figcaption>INCENTIVE PLANS FOR EMPLOYEES<\/figcaption><\/figure>\n\n\n\n<p class=\"has-text-align-center has-pale-cyan-blue-background-color has-background has-large-font-size\"><strong>2.ROWAN PLAN<\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\">Rowan Plan was originated by <strong><em>David Rowan <\/em><\/strong>of Glasgow, USA. This incentive plans guarantees the hourly rate of wages to the workers. As per this plan, the worker is paid the wages comprise two amounts:<\/p>\n\n\n\n<ul><li>The wage rate per hour for the actual time taken\nto complete the job.<\/li><li>Amount of bonus for the time saved.<\/li><\/ul>\n\n\n\n<p class=\"has-medium-font-size\">In case of Rowan plan, the bonus or premium is not provided\non the fixed basis rather varies on the basis of time saved in comparison with\nstandard time. The bonus of the worker who is able to finish the job in less\nthan the allowed time, is equal to his time wage for that proportion of the\ntime taken as the saved time bears to the time allowed. In other words, the\nratio between the bonus and the time saved is equal to the ratio between the\ntime taken and the time allowed. <\/p>\n\n\n\n<p class=\"has-medium-font-size\">i.e. Bonus Hours\/ Time saved= Time Taken\/ Time Allowed<\/p>\n\n\n\n<p class=\"has-medium-font-size\">or Bonus Hours: Time saved:: Time Taken: Time Allowed.<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong><em>CALCULATION OF TOTAL WAGES<\/em><\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong>Total Wages= T*R+ (S-T\/S)*T*R<\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\">Where,<\/p>\n\n\n\n<p class=\"has-medium-font-size\">T= Actual time taken<\/p>\n\n\n\n<p class=\"has-medium-font-size\">S= Standard time Allowed<\/p>\n\n\n\n<p class=\"has-medium-font-size\">R= Rate of wages per hour.<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong><em>FEATURES OF ROWAN PLAN<\/em><\/strong><\/p>\n\n\n\n<ul><li>It is an individual incentive plan based on time\nrate system.<\/li><li>The minimum wages are guaranteed in this system.<\/li><li>&nbsp;Standard\ntime for each job is fixed in advance.<\/li><li>The wage payment is guaranteed as the payment is\nmade on time basis, so even inefficient worker will also get wages for the time\ntaken to complete the job. <\/li><li>Standard time is decided on the basis of time\nstudies and motion studies.<\/li><li>The rate of bonus or premium is not fixed under\nthis plan.<\/li><\/ul>\n\n\n\n<p class=\"has-medium-font-size\"><strong><em>EXAMPLE:<\/em><\/strong> Suppose the hourly rate of wage is Rs. 1 per hour, standard time to complete the job is 16 hours and actual time taken is 12 hours. The calculation of wage rate under Halsey plan is as follows:<\/p>\n\n\n\n<ul><li><strong>&nbsp;Total Wages= T*R+ (S-T\/S)*T*R<\/strong><\/li><li>= 12*1+(16-12\/16)*12*1<\/li><li>=12+3<\/li><li>=Rs.15<\/li><\/ul>\n\n\n\n<p class=\"has-medium-font-size\"><strong><em>ADVANTAGES OF ROWAN PLAN<\/em><\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\">The following are advantages of Rowan Plan<\/p>\n\n\n\n<ul><li>The calculation of wage rate under the Rowan\nPlan is easy and simple and does not involve tedious calculations.<\/li><li>As per this plan, the minimum wage rate is\nguaranteed to the worker.<\/li><li>As the minimum wage rate is guaranteed under\nthis plan, the workers have a sense of security amongst them to get earnings.<\/li><li>As the workers feel motivated by getting extra\nreward their productivity increases.<\/li><li>Because the premium is proportionate to the time\nsaved, if the rate has been wrongly fixed, the effect will be less serious. So\nRowan scheme is safer than Halsey Scheme from the point of view of employer.<\/li><li>Fixed overhead per unit will be lower as result\nof higher output.<\/li><li>Better wage is earned by the employees; their\nimprovement in efficiency is rewarded.<\/li><\/ul>\n\n\n\n<p class=\"has-medium-font-size\"><strong><em>DISADVANTAGES OF ROWAN PLAN<\/em><\/strong><\/p>\n\n\n\n<ul><li>The workers do not like the idea of sharing the savings by both employer and employee, since the time is saved by the workers.<\/li><li>The bonus hour\u2019s rate will not exceed the 25% of the time allowed in any case.<\/li><li>\u00a0The ordinary worker finds it very difficult to calculate the wages as per this plan.<\/li><\/ul>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"275\" height=\"183\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2022\/02\/images-31.jpg\" alt=\"\" class=\"wp-image-5232\"\/><figcaption>INCENTIVE PLANS FOR EMPLOYEES<\/figcaption><\/figure>\n\n\n\n<p class=\"has-text-align-center has-pale-cyan-blue-background-color has-background has-large-font-size\"><strong>3.BEDAUX PLAN<\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\">Bedaux plan was introduced by <strong><em>Charles E. Bedaux<\/em><\/strong> in 1911. The Bedaux plan is an incentive scheme in which the standard time for the completion of the job is fixed and the rate per hour is defined. Each minute of the standard time is called as a point or B, such as in one hour there are 60 Bs.<\/p>\n\n\n\n<p class=\"has-medium-font-size\">Under bedaux plan, every job has a standard number of Bs. If\nthe worker completes the job in more than standard hours, then he is paid\naccording to the time rate i.e. time taken is multiplied by the hourly rate. In\ncase, the work is completed in hours less than the standard time, then the\nworker is entitles to the bonus in addition to the hourly rate. A bonus is\nequal to the 75% of the earned\/ saved points multiplied by the one-sixth of the\nhourly rate. Even if the worker does not reach the standard, then he is paid\naccording to the time-rate.<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong><em>EXAMPLE: <\/em><\/strong>Suppose standard time to complete the job is 8 hours and rate per hour is Rs. 1. The wage rate as per Bedaux plan is calculated as follows:<\/p>\n\n\n\n<ul><li><strong><em>CASE I: <\/em><\/strong>Actual time= 10 hours.<\/li><li>Earnings= 10*1= Rs. 10.<\/li><\/ul>\n\n\n\n<ul><li><strong><em>CASE II: <\/em><\/strong>Actual Time= 6 hours.<\/li><li><strong>Earnings: <\/strong><\/li><li>Time wages= 6*1= Rs.6<\/li><li><strong>Bonus:<\/strong><\/li><li>Standard Bs= 60*8= 480<\/li><li>Actual Bs= 60*6= 360<\/li><li>Saved Bs= (480-360)= 120<\/li><li>Bonus= (75\/100)*(120*1\/60)<\/li><li>= 1.50<\/li><li><strong>Thus, total earnings= 6+1.50= Rs. 7.50<\/strong><\/li><\/ul>\n\n\n\n<p class=\"has-medium-font-size\"><strong><em>FEATURES OF BEDAUX PLAN<\/em><\/strong><\/p>\n\n\n\n<ul><li>Based upon the work measurement study, the\nstandard time is established for each job in terms of points. One point is\nequal to one minute i.e. a standard hour consists of 60 points.<\/li><li>Guaranteed wage rate is paid up to standard\nperformance.<\/li><li>Guaranteed wage rate plus incentive is paid\nabove the standard performance.<\/li><\/ul>\n\n\n\n<p class=\"has-medium-font-size\"><strong><em>ADVANTAGES OF BEDAUX PLAN<\/em><\/strong><\/p>\n\n\n\n<ul><li>This plan is simple and easy to operate.<\/li><li>This plan provides incentives for higher\nproductions in the real sense.<\/li><li>This brings in a competitive spirit amongst the\nworkers to produce more.<\/li><\/ul>\n\n\n\n<p class=\"has-medium-font-size\"><strong><em>DISADVANTAGES OF BEDAUX PLAN<\/em><\/strong><\/p>\n\n\n\n<ul><li>The calculations of this plan are complicated which are not understandable by the workers.<\/li><li>Workers do not like that foreman should share their bonus.<\/li><\/ul>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"318\" height=\"159\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2022\/02\/images-32.jpg\" alt=\"\" class=\"wp-image-5233\" srcset=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2022\/02\/images-32.jpg 318w, https:\/\/commerceiets.com\/wp-content\/uploads\/2022\/02\/images-32-300x150.jpg 300w\" sizes=\"(max-width: 318px) 100vw, 318px\" \/><figcaption>INCENTIVE PLANS FOR EMPLOYEES<\/figcaption><\/figure>\n\n\n\n<p class=\"has-text-align-center has-pale-cyan-blue-background-color has-background has-large-font-size\"><strong>4.EMERSON\u2019s EFFICIENCY PLAN<\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\">This plan was introduced by <em><strong>Mr. Hemington Emerson<\/strong><\/em>. Under this plan of incentive wages, the wages are paid at the standard rate and the amount of bonus paid to the workers depends on the individual efficiency of the workers. Under this plan, the tools and equipments are standardized and the standard time for completing the work is determined so that an average worker of average efficiency may also complete the work within the standard time.<\/p>\n\n\n\n<p class=\"has-medium-font-size\">The efficiency of the worker is determined in the ratio of\nactual time taken by the worker with standard time of the work.<\/p>\n\n\n\n<p class=\"has-medium-font-size\">Emerson was of the opinion that generally the workers\nproduce only 67% of the standard production, therefore the workers who produce\nmore than this, must be rewarded with bonus. The rate of bonus increases with\nthe increase in efficiency of the worker.<\/p>\n\n\n\n<p class=\"has-medium-font-size\">If a worker produces less than this, no bonus should be paid\nto him. The bonus is calculated on the following basis:<\/p>\n\n\n\n<ul><li>Bonus must be 20% of his daily wages if the\nefficiency exceeds 100%. <\/li><li>If efficiency exceeds by 10% over 100%, bonus\nwill be 20%+10%= 30%.<\/li><li>In the same manner, the rate of the bonus will\nbe 40% at 120% level, 50% at 130% level and 60% at 140% level of efficiency.<\/li><\/ul>\n\n\n\n<p class=\"has-medium-font-size\"><strong><em>ADVANTAGES OF EMERSON\u2019S EFFICIENCY PLAN<\/em><\/strong><\/p>\n\n\n\n<ul><li>This method is simple and easily understood by\nworkers.<\/li><li>It gives minimum guaranteed wage to all workers.<\/li><li>It is a good source of motivation, as the rate\nof bonus is directly related to efficiency in a rational manner.<\/li><li>It helps to reduce job turnover and\ndissatisfaction and helps to increase the efficiency of the workers.<\/li><\/ul>\n\n\n\n<p class=\"has-medium-font-size\"><strong><em>DISADVANTAGES OF EMERSON\u2019S EFFICIENCY PLAN<\/em><\/strong><\/p>\n\n\n\n<ul><li>It is not a good source of encouragement for every efficient worker, as benefit is normal above the standard level.<\/li><li>It is difficult to maintain a separate record for different categories of workers.<\/li><\/ul>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2022\/02\/images-33-1.jpg\" alt=\"\" class=\"wp-image-5234\"\/><figcaption>INCENTIVE PLANS FOR EMPLOYEES<\/figcaption><\/figure>\n\n\n\n<h2 class=\"has-text-align-center wp-block-heading\" id=\"productivity-based-incentive-plans\"><span class=\"ez-toc-section\" id=\"PRODUCTIVITY_BASED_INCENTIVE_PLANS\"><\/span>PRODUCTIVITY BASED INCENTIVE PLANS<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"has-text-align-center has-pale-cyan-blue-background-color has-background has-large-font-size\"><strong>1.GANTT\u2019S TASK AND BONUS SCHEME<\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\">This plan was originated by <em><strong>Henry Laurence Gantt <\/strong><\/em>who was an American Mechanical Engineer. This plan is the combination of time rate system, differential piece rate systems and bonus systems. This plan ensures the minimum wages to the workers.<\/p>\n\n\n\n<p class=\"has-medium-font-size\">Under this plan, a standard time is fixed for doing a particular\njob and the actual performance of the worker is compared with the set standard\nand his efficiency is determined. The wage rate under this method is determined\nas: <\/p>\n\n\n\n<ul><li>The worker who fails to attain the standard is\npaid the guaranteed time rate.<\/li><li>The worker who attained the standard is paid the\nguaranteed wage rate. <\/li><li>The worker going above the standard is paid a\nhigher piece wage rate plus 20% bonus of the time rate. <\/li><\/ul>\n\n\n\n<p class=\"has-medium-font-size\">Thus, with the very reduction in the time, the plan ensures progressive increase in total wages. For this reason, this plan is also known as <strong>\u2018Progressive Rate System\u2019<\/strong>. <\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong><em>FEATURES OF GANTT\u2019S TASK AND BONUS SCHEME<\/em><\/strong><\/p>\n\n\n\n<ul><li>A standard time is fixed for completing the\nwork.<\/li><li>A worker taking standard or more time gets wages\non hourly rate.<\/li><li>A bonus ranging from 25% to 50% is paid for\ncompleting the task in less than standard time.<\/li><\/ul>\n\n\n\n<p class=\"has-medium-font-size\"><strong><em>EXAMPLE:<\/em><\/strong> The Gantt\u2019s Task system can be illustrated as follows:<\/p>\n\n\n\n<ul><li>Rate per hour= 0.5 Rs.<\/li><li>High piece rate= 0.10<\/li><li>Standard output= 100 units<\/li><li>Time taken= 8 hours.<\/li><\/ul>\n\n\n\n<p class=\"has-medium-font-size\"><strong><em>CASE I:<\/em><\/strong> Output= 80 units.<\/p>\n\n\n\n<p class=\"has-medium-font-size\">Since the output is less than\nthe standard, the worker is entitled to only time wages, so <\/p>\n\n\n\n<p class=\"has-medium-font-size\">Earnings= 8*0.5= Rs.4<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong><em>CASE II:<\/em><\/strong> Output= 100 units.<\/p>\n\n\n\n<p class=\"has-medium-font-size\">As the output is equivalent to\nthe standard, the worker is paid the time wages plus a bonus of 20% on time wages.\nThus, earnings are<\/p>\n\n\n\n<p class=\"has-medium-font-size\">Time wages= 8*0.5= Rs.4<\/p>\n\n\n\n<p class=\"has-medium-font-size\">Bonus= 20\/100*4= Rs. 0.8<\/p>\n\n\n\n<p class=\"has-medium-font-size\">Total earnings= 4+0.8= 4.8 Rs.<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong><em>CASE III:<\/em><\/strong> Output= 110 units<\/p>\n\n\n\n<p class=\"has-medium-font-size\">Since the output is more than\nthe standard, the worker shall be paid at a high piece-rate, thus<\/p>\n\n\n\n<p class=\"has-medium-font-size\">Earnings= 110*0.10= Rs. 110<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><em><strong>ADVANTAGES OF GANTT\u2019S TASK AND BONUS SCHEME<\/strong><\/em><\/p>\n\n\n\n<p class=\"has-medium-font-size\">The advantages of this method\nare as follows:<\/p>\n\n\n\n<ul><li>As per this plan, the minimum wage is assured to\nevery employee.<\/li><li>The worker\u2019s with low productivity do not get\npunished.<\/li><li>This plan is a motivating factor for employees\nto increase their efficiency as it is directly related to incentive.<\/li><li>This plan is most profitable for workers where\nefficiency is very high as the bonus is paid on the increased wage.<\/li><\/ul>\n\n\n\n<p class=\"has-medium-font-size\"><strong><em>DISADVANTAGES OF GANTT\u2019S TASK AND BONUS PLAN<\/em><\/strong><\/p>\n\n\n\n<ul><li>Since minimum wage is guaranteed, workers\nreluctant to achieve the target and increase their efficiency.<\/li><li>There is wide gap between wages of efficient and\ninefficient workers, which increases feeling of jealousy and conflicts among\nthem.<\/li><li>This system is against the interests of labor\nunions.<\/li><li>If the standard performance is too high, it may\ncause dissatisfaction among the workers. <\/li><li>It increases labor cost for low production.<\/li><li>Adequate attention is paid in fixing the\nguaranteed time rate and determination of standard output, as any error creates\ndisturbances among workers.<\/li><\/ul>\n\n\n\n<p class=\"has-text-align-center has-pale-cyan-blue-background-color has-background has-large-font-size\"><strong>2.TAYLOR INCENTIVE PLAN<\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\">This system was introduced by <em><strong>Fredrick Winslow Taylor<\/strong><\/em>. Under this system, standard time for every work is determined on the basis of time and motion study. Two rates of wages are determined which are high rate and low rate. The workers, who complete their work within standard time or before standard time, are paid wages at high rate. The workers who fail to complete their work within or less than standard time will get wages at low rate.<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong><em>FEATURES OF TAYLOR INCENTIVE PLAN<\/em><\/strong><\/p>\n\n\n\n<ul><li>The workers who complete their work in more than\nstandard time will get wages at low rate.<\/li><li>The workers who complete their work in less than\nstandard time will get high rate of wages.<\/li><li>Standard time of work is determined.<\/li><li>Two rate of wages determined are low rate and\nhigh rate.<\/li><\/ul>\n\n\n\n<p class=\"has-medium-font-size\"><strong><em>ADVANTAGES OF TAYLOR INCENTIVE PLAN<\/em><\/strong><\/p>\n\n\n\n<ul><li>This system helps in lowering down the cost of\nproduction per unit.<\/li><li>This system is based upon scientific\ncalculations, proper work and job standardization.<\/li><li>Most important merits of this system are that it\nrewards an efficient worker and penalizes the inefficient worker.<\/li><li>This system helps in eliminating the workers who\nare quite inefficient, because in the course of time, they will try to get the\nwork elsewhere.<\/li><li>This method reduces the supervision to the\nminimum.<\/li><li>It encourages the worker to produce more and\nmore.<\/li><\/ul>\n\n\n\n<p class=\"has-medium-font-size\"><strong><em>DISADVANTAGES OF TAYLOR INCENTIVE PLAN<\/em><\/strong><\/p>\n\n\n\n<ul><li>Workers in order to earn more will not care much\nfor quality of the work, hence more wastages and rejections.<\/li><li>Quantity orientation makes the workers to work\nfast, in due course the workers may neglect the safety measures.<\/li><li>If the standard work of the worker is less than\nhis normal capacity it causes great dissatisfaction among the workers.<\/li><li>The greatest demerit of this plan is that it\ndoes not guarantee minimum wages. So this plan is opposed by the labor unions.<\/li><li>This system classifies the workers into two\ncategories: efficient or inefficient.<\/li><li>This system is not suitable for the unity of the\nworkers.<\/li><\/ul>\n\n\n\n<p class=\"has-text-align-center has-pale-cyan-blue-background-color has-background has-large-font-size\"><strong>3.MERRICK EMERSON\u2019S PLAN<\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\">Merrick\u2019s Emerson Plan is an improvement over the Taylor\u2019s plan. Under this plan, three rates of wages are determined in place of two rates:<\/p>\n\n\n\n<ul><li>Straight piece rate up to 83% of the standard\nperformance.<\/li><li>10% above the normal rate for producing between\n83%-100%.<\/li><li>20% above the normal rate for producing more\nthan 100% of the standard performance.<\/li><\/ul>\n\n\n\n<p class=\"has-medium-font-size\">Under this system, the workers who complete 80% of the\nstandard production get minimum wages. They do not get any bonus. The workers,\nwho achieve the level of performance between 80% and 99% get 100% bonus also in\naddition to their wages. The workers, who achieve 100% of standard performance,\nget 10% additional bonus.<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong><em>EXAMPLE: <\/em><\/strong>Suppose standard output is 200 units and piece rate is 10 paise. The wage rate as per Merrick\u2019s Emerson plan is calculated as follows:<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong><em>CASE I: <\/em><\/strong>Output= 160 units.<\/p>\n\n\n\n<p class=\"has-medium-font-size\">Piece rate= 10 paise.<\/p>\n\n\n\n<p class=\"has-medium-font-size\">Since the efficiency is less than 83%, the worker is paid\nonly the basic rate i.e. 10 paise. Thus earnings will be Rs. 8.<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong><em>CASE II:<\/em><\/strong> &nbsp;Output= 180 units.<\/p>\n\n\n\n<p class=\"has-medium-font-size\">Efficiency= 180\/200*100= 90%<\/p>\n\n\n\n<p class=\"has-medium-font-size\">As the efficiency is more than 83% but less than 100%, 10%\nabove the normal rate is paid to the worker. Thus, Earnings= 90*(110\/100)*0.1=\nRs. 9.9 <\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong><em>CASE III:<\/em><\/strong> Output= 220 units.<\/p>\n\n\n\n<p class=\"has-medium-font-size\">Efficiency= (220\/200)*100= 110%<\/p>\n\n\n\n<p class=\"has-medium-font-size\">As the efficicency is 110%, 20% above the normal rate is\npaid to the worker. Thus, earnings= 110*(120\/100)*0.1= Rs.13.30<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong><em>FEATURES OF MERRICK EMERSON\u2019S PLAN<\/em><\/strong><\/p>\n\n\n\n<ul><li>The minimum wage is not guaranteed under this\nsystem.<\/li><li>Standard rate is established after a thorough\nanalysis of each job.<\/li><li>It encourages the workers to produce more and if\nthey come up to 83% of the standard performance, they are going to get the\npiece rate above the standard piece rate.<\/li><\/ul>\n\n\n\n<p class=\"has-medium-font-size\"><strong><em>ADVANTAGES OF MERRICK EMERSON\u2019S PLAN<\/em><\/strong><\/p>\n\n\n\n<ul><li>It is liberal for the efficient workers.<\/li><li>It reduces the severity of Taylor\u2019s plan and is\nan improvement to it.<\/li><\/ul>\n\n\n\n<p class=\"has-medium-font-size\"><strong><em>DISADVANTAGES OF MERRICK EMERSON\u2019S PLAN<\/em><\/strong><\/p>\n\n\n\n<ul><li>No minimum wage is guaranteed.<\/li><li>A feeling of insecurity develops among low\nperformers due to wide gaps in wage rate slabs.<\/li><\/ul>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>ALSO STUDY:<\/strong><\/td><td><strong>ALSO STUDY:<\/strong><\/td><td><strong>ALSO STUDY:<\/strong><\/td><td><strong>ALSO STUDY:<\/strong><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/management\/\">Management<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/objectives-of-management\/\">Objectives of management<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/functions-of-management\/\">Functions of management<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/process-of-management\/\">Process of management<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/management-is-an-art\/\">Management as an art<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/management-as-a-science\/\">Management as a science<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/management-as-profession\/\">Management as a profession<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/joint-stock-company\/\">Company<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/incentive-plans\/\">Incentive plans<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/14-principles-of-management-by-henri-fayol\/\">14 principles of management by Henry Fayol<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/principles-of-scientific-management\/\">Principles of scientific management<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/scientific-management\/\">Scientific management<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/what-is-work-study\/\">Work study<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/time-study\/\">Time study<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/motion-study\/\">Motion study<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/method-study\/\">Method study<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/planning\/\">Planning<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/importance-of-planning-in-management\/\">Importance of planning in management<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/benefits-of-planning-in-business\/\">Advantages of planning in business<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/process-of-planning\/\">Process of planning<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/types-of-planning-in-business\/\">Types of planning in business<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/setting-objectives-in-management\/\">Setting objectives in management<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/objectives\/\">Objectives<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/smart-test\/\">SMART test<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/management-by-objectives\/\">Management by objectives<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/policies-in-business\/\">Policies in Business<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/management-and-business-administration\/\">Management and business administration<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/functional-areas-of-management\/\">Functional areas of management<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/limited-liability-partnership\/\">Limited Liability partnership<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-llp-and-company\/\">LLP Vs company<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-llp-and-partnership\/\">LLP vs Partnership<\/a><\/td><td><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\" href=\"https:\/\/www.linkedin.com\/in\/kajal-mahajan-7549b2197\/\" target=\"_blank\" rel=\"noreferrer noopener\">CONNECT ON LINKEDIN<\/a><\/div>\n<\/div>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"512\" height=\"152\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/04\/cropped-cropped-Presentation-resize-1.jpg\" alt=\"INCENTIVE PLANS FOR EMPLOYEES\" class=\"wp-image-4836\" srcset=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/04\/cropped-cropped-Presentation-resize-1.jpg 512w, https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/04\/cropped-cropped-Presentation-resize-1-300x89.jpg 300w\" sizes=\"(max-width: 512px) 100vw, 512px\" \/><figcaption>INCENTIVE PLANS FOR EMPLOYEES<\/figcaption><\/figure>\n","protected":false},"excerpt":{"rendered":"<p>INCENTIVE PLANS FOR EMPLOYEES Incentive Plans for employees are the plans formulated to influence and motivate the workers to achieve the set targets to get the reward. The incentive is given to the worker by paying some bonus or premium in addition to their normal wages. Under an incentive plan, normally a standard time is&#8230;<\/p>\n<p class=\"more-link-wrap\"><a href=\"https:\/\/commerceiets.com\/incentive-plans-for-employees\/\" class=\"more-link\">Read More<span class=\"screen-reader-text\"> &ldquo;INCENTIVE PLANS FOR EMPLOYEES&rdquo;<\/span> &raquo;<\/a><\/p>\n","protected":false},"author":2,"featured_media":2874,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[68],"tags":[206,207,208,209,210,211],"_links":{"self":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/2866"}],"collection":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/comments?post=2866"}],"version-history":[{"count":0,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/2866\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media\/2874"}],"wp:attachment":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media?parent=2866"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/categories?post=2866"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/tags?post=2866"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}