mod.4-incentives and benifits

7/28/2019 MOD.4-Incentives and Benifits

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Amity Global Business School, Noida

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AMITY GLOBAL BUSINESS

SCHOOL

MBA, Semester 1

Human Resource Management

Ms. Mamta Chawla


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1. Wage payment METHODS

2. Theories for Incentives- Reinforcement & Expectancy

3. Incentive Plans- Individual Vs. Group

AGENDA


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Essentials of a sound incentive plan

Guaranteed minimum

wages

Simple

Equitable

Economical

Flexible

Supported by workers andunions

Motivating

Prompt payment 7/16/2013


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Methods of Wage Payment

Methods of wage paymentMethods of Remuneration

The Rate System Payment by Results

Flat time High wage Graduated time Piece rate Premium bonus Group bonus Other incentive

rate system rate system plans system scheme

Combination of

Straight piece Differential time and piece Profit Co-partnership

work piece work rate sharing

Taylor system Merrick system

Gantt task Emerson Pointand bonus efficiency schemes

systems system

Bedeaux Haynes Manit

system system

Halsey premium Rowan Accelerating

plan scheme premium bonus scheme

Priestmans production bonus Rucker plan Scanlon plan Towne plan

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Time wage system: A worker is paid on the basis of time spenton the work, irrespective of the amount of work done.

Plus points

Simple and easy to operate

Guaranteed wages to workers

Favoured by trade unions

Good for precision jobs

Minus points

Makes no distinction between efficient and inefficientworkers

Offers very little to efficient workers

Requires close supervision so that workers do not wastetheir time

No relationship exists between wages and productivity

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Piece rate system: A worker is paid at a stipulated rate per pieceor unit of output. This method is suitable where quality of work is

not important, work is repetitive in nature, there is sufficient

demand for output to guarantee continuous work and the job is a

standardised one

Plus points

Encourages efficient workers to produce more

Workers adopt better ways of getting things done, to earn

more

Idle time is reduced to the minimum Workers take every precaution to avoid machine breakdowns.

Cost of supervision is less


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Taylor's differential piece rate system: A worker is paid more

if he finishes the assigned task before the stipulated time.

Merrick's differential piece rate system: This method usesthreerates; up to 83%of the standard output workers are paid at

the ordinary piece rate; between 83% to 100% at 110% of the

ordinary piece rate and above 100% at 120% of the ordinary

piece rate.

Minus points Delays beyond one's control could affect workers earnings

adversely

Beginners and slow learners are left behind in the race

The focus on quantity would affect quality

Workers may stretch themselves to unhealthy levels to earnmore

Encourages rivalry between workers



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Incentive Plans


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Pay influences employeesthrough

Reinforcement theory

Expectancy theory


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Amity Global Business School, NoidaReinforcement Theory

Behavior that is rewarded will be repeated.


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Expectancy Theory

ExpectancyIf I attempt this level of

performance, am I likely to

succeed?

Instrumental i tyIf I achieve this level of

performance, am I likely to be

rewarded?

ValenceWhat value do I place on the

rewards available to me?

Motivational Force =

E * I * V


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Incentive Programs

Differ by

payment method

frequency of payout

ways of measuring performance

choice of which employees are covered

Fitting program to situation depends on organizational structure

management style

type of work


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DISCUSSION

Individual Vs. Group

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Types of Plans

Merit Pay

Individual Incentives Profit Sharing

Ownership

Gainsharing

Group Incentives

Alternative Reward Systems


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Bonuses

It is an incentive payment granted to a worker at the end of a particular

year, in addition to ones normal standard wage.

The Payment of Bonus Act, 1965The Act defines an employee who is covered by it as one earning Rs 2,500 p.m. (w.e.f.1.4.93) basic plus dearness allowance and specifies the formula for calculating the allocablesurplus from which bonus is to be distributed. The minimum bonus to be paid has beenraised from 4 per cent to 8.33 per cent (w.e.f. 25.9.75) and is sought to be linked toincreased productivity in recent times. Through collective bargaining, the workers, throughtheir representative union, can negotiate for more than what the Act provides and get thesame ratified by the government, if necessary. In the absence of such a process, the Actmakes it mandatory to pay bonus to employees (who have worked in the unit for not lessthan 30 working days in a year) following a prescribed formula for calculating the availablesurplus. The available surplus is normally the gross profits for that year after deductingdepreciation, development rebate/investment allowance/ development allowance, direct taxand other sums referred to in Sec. 6 The Act applies to every factory or establishment inwhich 20 or more persons are employed in an accounting year. Currently the position is suchthat even if there is a loss, a minimum bonus needs to be paid treating the same as deficit tobe carried forward and set off against profits in subsequent years (Sec. 15). The Act isproposed to be changed since the amount of bonus, the formula for calculating surplus, and

the set off provisions have all been under serious attack from various quarters.


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Alternative RewardSystems

alternatives to cash --

travel

merchandise

earned time off symbolic awards

plaques, coffee cups, bananas


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Incentive Plans


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Conditions for EffectiveIncentive Plans Plan is clearly communicated.

Plan is understood by employees and management.

Bonuses are easy to calculate.

Employees participate in administrating the plan.

Employees believe they are being treated fairly.

Employees believe they can trust the company and

that they have security.

Bonuses are awarded as soon as possible after the

desired performance.


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Conditions for Effective Performance-Based Pay

Systems Pay-performance linkage must be perceived by employees

Pay is valued by employees

Employees must perceive that effort and ability lead to

rewarded behavior

Performance measurement must be fair

Employees must trust the organization

Pay program must be understood Employees must be able to control their performance

Performance appraisal system cannot be biased

There must be enough money to fund incentives

A valid job evaluation must have been conducted


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Amity Global Business School, NoidaFringe Benefits

These are extra benefits provided to employees in addition to thenormal compensation paid in the form of wages or salaries.

Features Supplementary forms of compensation

Paid to all employees Indirect compensation, since they are not directly related to performance

May be statutory or voluntary

Need for fringe benefits

Employee demands Trade union demands

Employer's preference

A kind of social security

To improve industrial relations

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Amity Global Business School, NoidaTypes of Fringe Benefits

Types of Fringe Benefits

Payment for Time Employee Safety and Welfare recreational Old age and

not worked security health facilities retirement

benefits

Hours of Paid Shift Holiday Paid

work holidays premium pay vacation

Retrenchment Lay off

compensation compensation

Safety Workmens Health

measures compensation benefits

Canteens Consumer Credit Housing Legal aid Employee Welfare Holiday Educational Trans- Parties &societies societi es counsell ing o rganisations homes facilities portation picnic

Provident fund

Deposit linked insurance

Gratuity

Medical benefits

Misce-llaneous

Pension

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