1. 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
A successful incentive program requires clearly defined rules, suitable
rewards, efficient communication strategies, and measurable success
metrics. By adapting each element of the program to fit the target audience,
companies are better able to engage program participants and enhance the
overall program effectiveness.
An incentive program represents a substantial investment to most
organizations. Receiving a sufficient return on that investment requires the
full participation of the program participants. Incentive programs are
based upon the concept that effort increases as people perceive themselves
progressing towards their goal. Therefore programs should offer
participants a variety of products and services based on their unique
interests and diverse needs. Successful programs need to carefully develop
their reward methods to keep participants eager to approach a new goal
once they have achieved a reward.
Recognition of performance is a major trend in reward, and leading
organisations have implemented variable pay to differentiate and recognise
top performers in the organisation, in the form of incentives.
A short-term incentive measures performance for up to 1 year, and
typically includes profit share, gain share, commission and bonus schemes.
A short-term incentive scheme has the following purposes:
Drive company strategy
Engender an entrepreneurial spirit
Change the focus from process to outputs
Align employee behavior with shareholder expectations
A long-term incentive scheme measures performance for over 1 year,
and typically includes share schemes, EVA, and rolling cash-based schemes.
Strategic advantages of a long-term incentive scheme:
Aligning executives’ interests with those of the shareholders
Encouraging executives to maximise long-term shareholder value (if
the design of equity vehicles is appropriate) inter alia by facilitating
share ownership for executives
Acting as an attraction and retention vehicle for top skills
Necessity to provide market related remuneration, particularly at
There are various ways that we can assist you with incentive
We can review/audit your existing incentive schemes to ensure to ensure
alignment with the business’ objectives, and best practice.
We can assist you with the design and implementation of the various types
of incentive schemes.
We can benchmark your incentive schemes to the market.
We can provide training on all aspects of incentive schemes to ensure the
skills are retained in your organisation.
3. How and why they work
Incentive programs improve performance.
Carefully selected and implemented incentive programs, using rewards -
whether in the form of gift cards, travel/vacations, cash or time off increase
performance by an average of 22%. Team incentives can increase
productivity as much as 44%.
Incentive programs engage participants.
Employees are motivated by being rewarded. When a program is initially
offered, employers see a spike in the level of interest and motivation among
employees. As the program continues an even greater performance level
and job satisfaction can be achieved.
Incentive programs attract quality employees.
Organizations that offer incentive programs with the right mix of benefits,
training rewards and recognition have the ability to attract higher quality
workers than other organizations.
Long-term programs outperform short-term programs.
Be in it for the long haul. Studies prove that programs that run longer than
a year produced a higher percentage of performance and met the goals of
Executives and Employees value being rewarded.
Both executives and employees report they value incentive programs.
Employees come to work with a new attitude and executives see a healthier
and happier work environment.
Quota-based rewards programs work best.
Programs that give everyone a chance to be rewarded based on meeting or
exceeding goals typically generate the best results. Least effective are
tournament based programs, closed-ended programs that only reward a
certain number of winners
5. COMPENSATION STRATEGY OF NTPC –
NTPC is known as the highest payer in the power sector.
The main objectives of such strategy are–
1. Recruitment and retention of qualified employees.
2. Increasing the moral of employees.
3. Rewarding and encouraging good performance.
4. Achieve internal and external equity.
5. Pre loyalty Modification (through negotiations) or influence the
practices of unions.
REWARDS AND BENEFITS -
NTPC believes that everyone who works should feel. That is why the
company offers a total compensation package that includes both cash
compensation and benefits. Cash compensation to ensure that NTPC
attracts, retains and motivate high-performing.
The compensation structure is designed in such a way so as to recognize
and reward critical skills and competencies in employees.
Compensation structure includes
Base pay, fixed bonuses, allowances or other payments relevant to the
local market. Performance bonus and sales incentive may also be included
in the cash compensation, and are used to ensure that the employees are
paid competitively in the market.
High performing employees are paid performance bonus through schemes
like, generation performance scheme ‟to reward the employees for good
performance. This helps in boosting the moral of employees and recognizes
6. Employee stock purchase plan
Since 1988, NTPC has offered stock purchase plans because the company
believes in the value of employee ownership. All regular employees,
including workers who are regular part timers, are eligible to participate in
the plan if they choose.
Healthcare, well being and personal benefits
NTPC offers arrange of personal benefits such as medical schemes, dental
schemes, health screening, wellness programs, retirement and insurance
programs. The dependents of the employee are also under the purview of
Flexibility and work life balance
NTPC is committed to create a workplace culture and environment in
which the employee can balance the career aspirations and personal
priorities. The company offers a number of programs, Additional programs.
NTPC offers employees various discounts for goods and services–
NTPC Personal computer purchase,
Housing assistance purchase plan,
Car purchase plan,
Child care services and mobile phone plans,
Fitness centres and educational courses.
COMPENSATION & BENEFIT PRACTICES, POLICIES, PROGRAMS AND
POLICIES– EMPLOYEE BENEFITS –
Healthcare (PPO, POS, HMO, HAS).
Dental care plans
Flexible benefit plans
Disability benefit plans
Group life & AD insurance plans
Benefits for part-time employees Domestic partner benefits
7. EMPLOYEE POLICY & PROGRAMS –
Paid time off (PTO)
Alternative work schedule
Recruitment and hiring
Work place environment
Career planning & professional development
Military leave policy.
Other benefits to worker class
Wage Incentive scheme –
A method of payment for work of an acceptable quality produced over and
above specified quality or standard.
Individual Payment by result schemes –
Several individual PBR systems are in vogue. Some of the well known plans
are piece rate system, premium bonus system or work improvement
Piece rate systems were the forerunners of modern incentives systems
under this category. The unit of measurement can be number, weight or
volume of the items produced reward is based on an agreed rate per unit of
Another method of individual PBR considers time as the unit of analysis.
Earning incentive depend on the difference between the time taken and
time allowed to complete a certain job. Such schemes are called as
premium bonus or bonus schemes.
Group Payment – by- Result Scheme –
Group PBR is appropriate where the jobs are interdependent, where it is
difficult to meaningfully measure individual performance and where group
pressure can influence the output of the members of the group. As in
8. individual PBR schemes, there should be an objective measure of
performance for the groups which the members should know that they can
effect by their performance.
Plant or Enterprise Schemes –
PBR schemes could be extended to plants or enterprises. The schemes
emphasize gain sharing accruing through reduction in labor and other
costs. Performance index based on a ratio of some output of some output
costs like labor, material or other costs is calculated. the objectives and
scope of plant or enterprise wide PBR can be much wider providing for
employee participation and labor management cooperation.
Time rate systems –
On situation where individual group or plant/enterprise based PBR
systems are difficult to introduce, pay could be related to time put in on the
job. Simple time rate system does not provide any linkage between pay and
performance and therefore the latter may become a casualty. Variations
like measured day work and merit rating seek to link performance with
time rate payment.
Measure day work –
Under this pay is determined in the employment contract. The employee is
required to put in a minimum specified performance to be eligible to get
Merit rating –
Scheme is a method of granting fixed pay increments or regular pay raises
linked to performance appraisal. The size of the raise, timing and pace of
the pay range are all an aspect on which there is a need to establish a
policy. It may also be in the form of bonus.
Managerial Incentive Plans –
Most of the incentive scheme discussed generally been applied to workmen
and staff but these extended to the managerial employees also. Managerial
employees are given the following types of incentives:
9. Commission as a percentage of profit.
Stock options whereby managerial employees are given shares at a special
price usually lower than market value.
Bonuses in cash or kind (discount coupons, paid holiday travel,