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7/30/2019 Incentive Plans.ppt
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Human ResourceManagement
Incentive Plans
Unit-III
1
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Individual Wage Plans
2
Based on Time
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Halsey Plan
3
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
4
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
5
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
6
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
7
Based on Productivity
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Taylor Plan
8
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
9
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
10
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
11
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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
13
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
14
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
15
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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
16
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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 ???
21