07-05-2012, 01:51 PM
Incentive Plan for Employees
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INTRODUCTION
An incentive program is a formal scheme used to promote or encourage specific actions or behavior by a specific group of people during a defined period of time. Incentive programs are particularly used in business management to motivate employees, and in sales to attract and retain customers. Scientific literature also refers to this concept as pay for performance.
“Incentives wages related earnings to productivity and may use bonuses, premiums or a variety or rates to compensate for superior performance.” Incentive paln offer an attraction of extra payment for efficiency or more production. These incentive plans provides for variable payment based on either individual output or group output.
The basic objective of an incentive plan is to increase the production by giving an inducement to workers in the form of higher wages.
TYPES OF INCENTIVES
Incentives may be classified on the following three basis:
1. Positive & Negative Incentives
2. Individual & collective Incentives
3. Financial & Non-financial Incentives
A) Positive & Negative Incentives
Positive Incentives
These are the incentives which basically increase the income of individualas. Positve induce the workers to more to get more benefits. This benefit includes Bonus, Incentives Wages System, Profit-Sharing Scheme, Co-Partnership Scheme, Prizes, and Promotions & Recognition etc.
These incentives help in increasing the efficiency and productivity of workers. As the results of these incentives, the production of the enterprise increasea per unit cost of prodution is reduced; the workers get more remuneration, the relations between the labour and the management improved.
Negative incentives
These incentives are given in the form of punishment, suspension, termination, lay-off and fine etc. to force the workers to work in order to accomplish the target given to them. These incentives do not generate loyalty, commitment on the pait of workers towards the organisation.
Under these incentives workers are forced to work and in case of any kind of negligence, they are subject to punishment of fine etc.
B) Individual & collective Incentives
Individual Incentives
Individual incentives are the incentives which are given on an individual basis based on individual’s performance.when an incentives scheme is apples on personal basis, it is called individual incentives.these incentive may again be classified as monetory and non-monetory incentives:
Monetory incentive includes- Higher Rate of Wages, Bonus, Promotion and Prize etc.
Non-Monetory incentive includes – Appreciation Letter, Certificate of Proficiency, and Personal Regards etc.
Individual incentives are also known as direct incentives. In case of individual incentives, incentives of all the workers differ from each other.
Collective Incentives
These are the incentives which are provided to all the employees of an organization. When the incentives are given to a group of employees, it is called group incentives. These incentives are given to all the employees of an organisation simultaneously. Collective incentives are also classified as monetary and non-monetory incentives.
Monetory incentive includes – Bonus, Profit-sharing scheme, Co-Partenership Scheme etc.
Non-Monetory incentive includes – Employees Suggestion Scheme, Effective Communication System etc.