Types of Incentive Schemes¶
Incentive schemes are designed to motivate employees and enhance their performance. These schemes can be categorized into individual, group, enterprise, and non-financial incentive schemes, each with its own set of methods and objectives.
1. Individual Incentive Schemes:¶
Individual incentive schemes are tailored to individual performance, rewarding employees based on their personal achievements.
a) Incentives in Proportion to Performance:¶
- Straight Piece-Work (Production): Employees are paid a fixed rate for each unit produced.
- Standard Hour-Plan (Task): Employees are paid a fixed rate for each hour of work, with bonuses for completing tasks within a shorter time.
b) Incentives Varying Proportionately Less Than Performance:¶
- Halsey Plan (Task & Time): Employees are guaranteed a fixed hourly wage, with a bonus for completing tasks in less time than the standard time.
- Rowan Premium Plan (Time Spent & Time Saved): Similar to Halsey but the bonus decreases as the work time exceeds the standard time.
- Barth Variable Sharing Plan (Number of Hours): The hourly rate varies based on efficiency, and the sharing ratio of benefits varies too.
- Bedaux Plan (Rate per Hour): Employees earn a standard rate per hour plus a bonus for exceeding the standard performance.
c) Incentives Varying Proportionately More Than Performance:¶
- High Piece-Rate System (Output): A higher rate is paid for each unit produced beyond a certain level.
- High Standard Hour System (Time): A higher hourly rate is paid for work completed in less than the standard time.
d) Incentives Varying in Proportions That Varies With Levels of Performance:¶
- Taylor's Differential Piece-Rate System (Low & High): Two different rates are set for below and above standard performance.
- Merrick's Multiple Piece-Rate System (3 Piece Rates): Three piece rates are set for different levels of performance.
- Gantt Task and Bonus Plan (Output and Time Standards): Standard time is set for each task, with bonuses for better performance.
- Emerson's Efficiency Plan (Time Efficiency): Bonuses are given based on the efficiency percentage.
- Accelerating Premium System (Standard Output): The premium increases as the level of output increases.
2. Group Incentive Schemes:¶
Group incentive schemes reward a group of employees for collective performance, promoting teamwork and shared responsibility.
3. Enterprise Incentive Schemes:¶
Enterprise incentive schemes are organization-wide plans where all employees are eligible for incentives based on the overall performance of the company.
4. Non-Financial Incentive Schemes:¶
Non-financial incentive schemes provide recognition, appreciation, opportunities for growth and development, and other non-monetary rewards to motivate employees.
Each type of incentive scheme has its own set of advantages and challenges, and the selection of a particular scheme would depend on the nature of the job, the organizational structure, and the overall goals of the organization.