This document discusses incentive systems used to motivate and reward employee performance. It defines incentives as compensation beyond normal expectations that motivates employees. The goals of incentives are motivation, retention, cost savings, and goal achievement. There are three types of incentive systems: individual incentives that directly link rewards to individual performance using methods like piecework and commissions; group incentives that link rewards to group performance; and organizational incentives that link rewards to overall organization performance using methods like profit sharing, suggestion plans, and employee stock ownership. The document provides examples of different incentive systems used for individual, group, and organizational rewards.

1. Incentive Systems
BY, PRAYASH NEUPANE

2. Concept Of Incentives
 Incentives are compensation that rewards an employee for performance beyond normal
expectations.
 An incentives are rewards that motivates an individual to perform more than the given
standard.
 Incentives are variable rewards granted according to variations in the achievement of
specific results. (Milton L. Rock)
 This is the methods of rewarding employees on the basis of their outputs.

3. Goals of incentives
 Motivation
 Retention
 Cost Savings
 Goal achievement

4. Incentive systems
Group Incentives
 Piecework
 Commission
 Bonus
 Production
Individual Incentives
• Piecework
• Commission
• Bonus
Organizational Incentives
• Productivity gain
sharing
• Profit sharing
• Suggestion plan
• Employee share
ownership

5. Individual incentive systems
 They directly link reward to the performance of individual employee.
 It is the reward on individual performance.
Piecework System: Used for production worker.
Commission System: Used for sales person.
Bonus Plan: Used for managerial & professional employee and also for
production workers.

6. Group incentive systems
 Reward is link to the combined performance of a group of employee.
Piecework system: Used for group of production workers.
Commission System: Used for group of sales person.
Bonus Plan: Used for group of managerial & professional employee and also
for production workers.
Production system: If a group of workers exceed predetermined levels of
production output, they receive incentives.

7. Organizational incentive systems
 Reward is link to the overall performance of organization.
 The goal is to direct the efforts of all employees towards improving organizational goals.
 All employees shares the reward.
Production
Gainsharing
Gainsharing
Cost Reduction
Gainsharing
Profit Sharing
Employee share
ownership

8. Conted…..
Profit sharing system: Employees share some portion of
organizational profit.
Suggestion system: Employees are rewarded for providing useful
ideas for improving organizational effectiveness. Suggestions can
be for reducing cost, improving quality & productivity, increasing
safety etc.
Employee share ownership system: Organizations allows employee
to buy shares at stated price which generally below market price.
Productivity gainsharing plan: It allows all employees to share in
overall labor or production costs saving through bonus payments.

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