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There are: (i) Statutory payments such as old age pension, unemployment insurance, group insurance etc. In case, this reserve remains unused at the end of the year then this amount is also distributed among employees in the last month of the year and a fresh reserve is created in the New Year. v. The companies are able to attract and retain employees. According to the National Commission on Labour, “Wage incentives are extra financial motivation. (c) Bonus – It is a reward that is offered on a one-time basis for high performance. Trade unions and workers feel that bonus payment is better compared to profit sharing. It increases sense of security among workers. (d) Job security – In India, due to widespread unemployment, job security is very important. Therefore, companies have come out with non-financial incentive such as recognition of outstanding performance, annual conferences in hill stations/foreign countries, membership in Achievers’ Club, members of the task force, personal letters of commendations, etc. Some of the important principles of such a plan are outlined in the following: A wage-incentive system is installed primarily to benefit the persons who will in any way be affected by its installation. Develops long-term relations between employer and employee. A commission plan has the advantage at relating rewards directly to performance. The increase in production will reduce overhead cost per unit. 2. 1. Privacy Policy3. The organization provides funds/bonuses bases … Copyright 10. (f) Incentive plan encourages attendance and reduces absenteeism. The Act is intended to meet the contingency of invalidity and death of a worker due to an employment injury or an occupational disease specified under the Act as the sole responsibility of the employer. provident fund, pension etc. (v) Other benefits such as profit sharing, suggestions reward, reimbursement of tuition fees, festival allowance etc. 2. 5. The standard time was fixed for completing a task with the help of time and motion study. Fringe benefits are supplementary to regular wages or salaries. There are a number of incentive plans used in various enterprises or industries. The amount of the bonus is typically unknown to the employee or employer, and is determined when the outcome is achieved. (e) Workers may also lead to unethical and illegal behaviour for task completion. The use of incentive assumes that people’s actions are related to their skills and ability to achieve important goals. 3. The incentives are higher for senior manager and lower for executives. Some of the problems in designing a merit pay scheme are: 1. It has been reviewed & published by the MBA Skool Team. Human Resource Management, Employee, Incentive, Incentive Plans. 3. 4. To increase productivity of individual as well as group. It ensures regular income in future and relieves them of worry. It is also known as “deferred profit-sharing plan” or “DPSP”. Some important non-financial incentives are: (a) Status – It means formal position in the organisation. Incentives – Human Resource Management Incentives refer to rewards given to employees in monetary on non-monetary form in order to motivate them to work more efficiently. Sometimes, past records may also be used for this purpose. In other words, an incentive plan must include in its purview the characteristics of time-based and output-based systems of wage payment. Equitable – The plan should be fair, equitable and should cover all the employees. Characteristics of Incentive Plans 3. As per the scheme, up to 83% of standard output, workers are paid at the ordinary piece rate, 83% to 100% at 110% of ordinary piece rate and above 100% at 120% of the ordinary piece rate. A standard time is fixed for completing the task. 1. 6. Under this scheme the employees are offered shares of the enterprise at reduced rates. Worker’s Participation – Incentive plan should be accepted only after taking into confidence the workers and their union. Stock options are tremendous motivators because they directly link performance to the marketplace. Merit pay motivates the employees to work hard and achieve the assigned tasks. If a ceiling is put to the incentive earnings, it may also curtail the opportunity to achieve lower production costs per unit. His aim is not to waste time. Employee stock option scheme – The Company grants an option to its employees to acquire shares at a future date. It is the minimum wage, which each worker should get either on hourly or daily basis. Ideally the plan should encourage workers to support one another rather than to be non- cooperative. The suggestion received from employees is screened and evaluated by a committee. The work of one person may be influenced by the work of the another. Characteristics/Requirements of a Good Incentive Plan: The essentials of a good incentive plan are: a. Earnings above the standard (or task) should be in direct proportion to the increase in output above the standard. ii. Privacy Policy 8. 3. b. Objectives 4. Advantages and Limitations of Incentive Plans, Requirements of an Effective Incentive Plan, Incentive Plans – Top 12 Prerequisites for Effective Incentive Plan, Incentive Plans – Requisites of a Sound Incentive Plan, Incentive Plans – Important Incentive Plans for Managers, Incentive Plans – Benefits: To Workers and Producers, Incentive Plans – 6 Major Limitations (With Reasons for Failure). The following are the advantages of incentive plans to the workers: (a) Increases in the Wages of Workers – These systems increase the total wages of workers because they get besides prescribed wages, the premium or bonus also.

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