This document discusses various types of incentive plans used to motivate employees, including time-based plans like Halsey and Rowan plans, efficiency-based plans like Emerson plan, and sales-based commission plans. It provides details on how each plan calculates incentives and bonuses, along with their advantages and disadvantages. Key incentive plans covered are Halsey, Rowan, Emerson, Bedeaux, and various plans for white-collar workers involving bonuses, commissions, and profit sharing.

1. By,
JASMINE J
Master of Business Administration,
Bon Secours college for Women,
Thanjavur.

2. •The term incentive refers to the portion of an
employee's salary that is related to performance,
and not a guaranteed payment.
•It is additional money, or other rewards of value
such as stock options, that are supplementary to
base salary.

3. •Increasing morale
•Increasing productivity
•Avoid or minimize additional capital investment
•Improving safety

4. •Motivational tool
•Promoting teamwork
•Morale boosters
•Service levels
•Clear goals and objectives

5. •Halsey premium plan
•Rowan plan
•Emerson efficiency bonus plan
•Bedeaux point plan

6. •Invented by Mr.Halsey
•Time wage to the worker is assured
•Given an option to work on premium
•A standard time for standard output is fixed on the basis of
past experience.
•If a worker finishes the work earlier than the prescribed
time, he is rewarded by paying him premium or bonus.
•The premium or bonus is calculated on the basis of time
saved in performing a job.
•The payment of premium is in addition to the time wages
for which he is entitled even though time is not saved.
•This plan is a combination of time and piece wages.
• A care should be taken that premium rate be moderately
fixed.

7. Time rate – Re 1.00 per hour
Time allowed – 8 hours
Time taken to complete job – 6 hours
Premium for time saved – 50 percent
The formula for calculation is
Earnings = Time Taken x Time rate + 50 percent of time saved x Time rate
= 6 x 1 + 50/ 100 x 2x 1
= 7

8. •It assures time wages to the average workers and offers
extra payments to the efficient and hard workers.
•It is simple in calculations.
•It reduce labor cost due to increased productivity. Premium
is shared by employer.

9. •The standard time for standard work is fixed on the basis
of past performance and no new standard are fixed.
•It creates dissatisfaction because employer also shares a
part of incentive earned by the worker.
•The management cannot force the worker to produce
more after finishing the standard output.
•The standard time may not have been properly fixed.

10. •Invented by James Rowan of Scotland.
•Modified form of Halsey plan.
•The premium is calculated as the ratio of the time saved
to the standard time multiplied by the time taken on the
job.

11. Time rate – Re 1/- per hour
Time allowed – 8 hours
Time taken to complete the job – 6 hours
Formula for calculation is,
Earnings = Time taken x Time rate + Time Saved / Time
Allowed x Time Taken x Time Rate
= 6 x 1 + 2/8 x 6 x 1
=8.5

12. •The minimum wages are assured in Rowan plan
also.
•Employers are also benefitted when the efficient
workers get bonus.
•The efficient workers get bonus at a diminishing
rate if they save more than 50 percent of standard
time. This checks them to overstrain themselves
and maintain quality.

13. •The worker is discouraged to achieve saving in
time more than 50 percent of the standard time.
•The calculation of premium is complex and
hence cannot be easily understood by the
workers.
•It is not beneficial for the employees having
high efficiency.

14. •Minimum time wage is guaranteed to the
workers.
•Conditions of work are standardized and a
standard output is fixed which is to be completed
within a specified period of time. A worker
attaining 66.66 percent efficiency gets a minimum
bonus.
•The percentage of bonus goes up with the
increased efficiency up to 20 percent of the
guaranteed wages.

15. •The workers minimum wages are assured. If worker is
unable to produce 66.66 of the standard output, he is not
deprived of his daily wage.
•There is enough scope for earning more and more for the
efficient workers. The plan is therefore very beneficial to
extra ordinary workers.
•The drawback of this plan is that it offers bonus to the
workers who have efficiency less than 100 percent.

16. •Under this plan the amount of work done by a worker per
minute is taken as standard work unit. This is known as
Bedeaux point ‘B’.
•The standard time for a job in the number of Bs allowed
completing it.
•Let a work gets completed in 60 Bs taken as a standard
per hour. Now if a worker completes it earlier or earns
more than 60 Bs, gets a premium of 75 percent for the
number of Bs i.e. time saved. The standard work unit B
includes the time of work as well as rest.

17. •Minimum wages are guaranteed to the workers even
though they fail to complete the job within the standard
time.
•Since one fourth of wages for time saved goes to the
foreman, he is induced to get higher productivity from his
workers.
•The plan is most suited to the industrial units where
worker is expected to perform more than one jobs because
under this plan jobs can be reduced to standard unit B.

18. •Calculations under this plan is complex and
therefore is difficult for workers to understand.
•Foreman is also entitled for one fourth share of
bonus which workers do not like. They feel
cheated.

19. •Talyor’s differential piece rate plan
•Merricks multiple piece rate plan
•Gantt task and bonus plan
•Halsey-weir premium plan
•The 100 percent premium plan

20. •This plan is devised by F.W.Taylor
•Day wages are not guaranteed
•Taylor believed that the standard of performance can be
accurately fixed by means of time and motion studies.
•Low piece rate to less efficient and high piece rate to
more efficient workers.
•This plan suits to those units where direct expenses are
more than the cost of labour.
•The wage plans proposed by H. L. Gantt and Merrick
are improvement over the Taylor’s differential piece rate
of wages.

21. •This incentive plan provides more earnings to efficient
and penalize less efficient workers. This differential in
wage may enthuse less efficient workers to work more.
•Total output goes up because every worker wants to
improve his efficiency thereby increasing their own
earnings and output.
•It is simple and easily understood by the workers.

22. •Minimum wages are not assured by this plan.
•The penalty for low efficiency is very high for those
whose productivity in less than the set standard.
•This may promote disunity among workers because of
dual standards set for efficient and less efficient workers.
This will also lead to jealousy among workers.

23. •The workers are paid according to the efficiency of the
job.
•Three different piece rate systems are:
1.The workers having efficiency less than 80
percent of the standard are paid as per basic piece rate
prescribed.
2.The workers having efficiency more than 80
percent but less than 100 percent of the standard gets
wages at higher rate by 10 percent.
3.The workers having 100 percent efficiency get
wages at the highest rate of 20 percent in addition.

24. It is a liberal plan giving further chance for workers to
increase their efficiency and to enhance their earnings. It is
a morale booster for hard working and efficient workers.
•This plan does not guarantee any minimum wages to the
workers.
•There is a wide gap between two slabs.
•Each worker working below 80 percent of performance
gets wages at the same rate. This creates dissatisfaction
among comparatively efficient workers.

25. •This plan is devised by H.L.Gantt, an associate of
F.W.Taylor.
•This plan guarantees the wages as per fixed time rates to
the workers.
•Standards for output and time for performance of each
job are fixed.
•If the workers complete the job within standard time or
take less time receive wages for the standard time.
•In addition to this he gets bonus at the rate ranging from
20 to 50 percent of the time allowed.

26. •The minimum wages of workers are
guaranteed.
•The workers with less ability get minimum
wages and with more ability benefit more.
•It leads to increase production and lowers
costs.

27. •Every worker is assured of wages at the rate of time
rate. So less efficient workers also get wages at time rate.
It discourages efficient workers.
•The workers unions are displeased with the scheme and
they make demand for wages at high rate of time wage.
These are all short term plans meant for production
workers.

28. It is a modified version of Hasley premium plan
introduced by G.J. Weir in England. The
modification is in the percentage of incentive or
premium on time saved. This percentage is 33.33
while the rest is shared by the employer.

29. •The task standard are set on the basis of time study and
work sampling. The rates are expressed in terms of time
rather than money e.g.:- 0.30 hour per piece.
•Workers are paid according to hourly rate.
•The plan is similar to straight piece rate plan except for its
higher guaranteed hourly rate and the use of task time as a
unit of payment instead price per piece.
•The worker gets the full value of time saved.
•Incentive Plan for White Collar Workers.

30. •The firms make payment to their sales staff on the basis
of salary cum commission.
•Many stockbrokers and real estate agents are paid solely
on a commission basis.
•Advantage of commission payment is that they are tied to
the revenues of the firm.
•Employees are motivated towards increasing sales
volume. During recession the firm reduces the
commission.

31. Sales staffs are paid in three ways:
According to which they receive monthly salary only. Here there is
no linkage of incentive for hard work.
Sales personnel receive only commission on sales volume. Here the
salesman will sell those items which are of high value.
Under this scheme sales personnel are paid a fixed salary and
commission as an incentive based on sales volume.

32. Bonuses are allocated on the basis of manager’s
contribution at the year end, on the basis of the extent to
which the person attains the objectives agreed on at the
beginning of the year under M.B.O. scheme, spot bonuses
and cash awards are given to the managers and
professionals for extra ordinary performance, stock option
is yet another incentive given to them.

33. •Priestman’s plan
•Scanlon plan
•Profit sharing

34. •The group members are entitled for a bonus if their output exceeds the
set standard.
•The payment of bonus is made in proportion to the excess of actual
output over the standard output.
•This plan encourages the feelings of team spirit among the members
of the group.
•The employees behave as a group and work together to increase
output.
•This scheme does not consider the individual efficiency of worker.
•Thus the inefficient member of the group also get bonus.

35. •This plan was devised by Joseph Scanlon in 1937,a trade union leader.
•Under this plan workers are involved in decision making. They are
encouraged to make suggestions regarding cost reduction and
increasing productivity.
•They recommend measures to increase production. It promotes
healthy labour relations, minimizes supervision, increases efficiency
and sense of partnership among workers.
•They are involved in the various screening committees in the plant to
find out ways and means to judge the cost reduction suggestions. In
this way employees work with their supervisors, managers and other
fellow employees on various screening committees.
•If the suggestions are successfully implemented, employees get share
in the savings.
•This plan suffers from certain drawbacks such as the inefficient
worker gets rewarded because of better performance of the group.

36. •A certain percentage of profit is distributed at fixed ratio
among some categories of employees annually. According
to Henry R. Seager, “profit sharing is an agreement freely
entered into by which the employees receive a share, fixed
in advance, of the profits.”
•The decision of sharing of profit to the employees is
informed in advance. The basis of profit sharing is decided
on the length of service or the number of working days in a
year or the wages earned by a worker during a year.
•It is direct incentive to a worker. The payment of profit
can be made in cash or it can be deposited in the account of
provident fund of an employee. The advantage of this
scheme is that workers develop common concern for the
development and progress of the undertaking.

37. It is the one directly paid to the employee annually or
six monthly.
It is the one which is not paid directly to the employee
but credited in his provident fund account or to pension
account or sometimes paid in the form of bonus shares.

38. •Creation of industrial peace because workers are satisfied as
they are getting an additional amount besides their wages.
•The bonus is paid only when the amount of profit exceeds
the set target. It means bonus is not part of cost of production.
•Profit sharing scheme is based on the basic pay of the
employees.
•Workers have share in profit and not losses incurred by the
employer.
•It brings about team spirit among the employees. They
developed a sense of belonging to the organization, reduces
training time.

39. •Employees are entitled to bonus when company earns
profit. They do not get bonus when company recur losses.
•It is not possible for newly established company to pay
bonus.
•There is no distinction between efficient and inefficient
employees of the company while distribution of bonus.
•Bonus is paid to the employee once in a year. This does
not motivate them for better performance.

40. •Motivate employee for higher efficiency and productivity.
•Improve the work flow and work methods.
•Make employee hardworking and innovative.
•When employees are dedicated, supervision costs can be
reduced.
•Helps to establish positive response within an organization.
•Other benefits are reduced turnover, reduced absenteeism
and reduced lost time.

41. •Can lead to dispute among workers
•Worker may involve in malpractices to earn more money.
•For enhanced incentive, they may sacrifice quality.
•Leads to corruption by falsifying the production records.
•Can create tension among different personnel.
•Hunger for money among the workers forces them to
overwork, which may affect their health.