This document discusses different types of organization-wide incentive plans including profit sharing, gain sharing, and employee stock ownership plans. Profit sharing rewards employees based on the organization's success over a period of time. Gain sharing specifically shares greater-than-expected gains in profits and productivity with employees. Common gain sharing plans discussed are Scanlon, Rucker, and ImproShare plans. Employee stock ownership plans give employees the right to purchase company stock in the future at an agreed upon price to foster employee loyalty and commitment.
Gain sharing - compensation management - Manu Melwin Joymanumelwin
Gain sharing is a system of management used by a business to increase profitability by motivating employees to improve their performance through involvement and participation. As their performance improves, employees share financially in the gain (improvement).
Types of bonus - compensation management - Manu Melwin Joymanumelwin
One very basic type of bonus program is current profit sharing. A company sets aside a predetermined amount, usually between 2.5 and 7.5 percent of payroll but sometimes as high as 15 percent, as a bonus on top of base salary.
Gain sharing - compensation management - Manu Melwin Joymanumelwin
Gain sharing is a system of management used by a business to increase profitability by motivating employees to improve their performance through involvement and participation. As their performance improves, employees share financially in the gain (improvement).
Types of bonus - compensation management - Manu Melwin Joymanumelwin
One very basic type of bonus program is current profit sharing. A company sets aside a predetermined amount, usually between 2.5 and 7.5 percent of payroll but sometimes as high as 15 percent, as a bonus on top of base salary.
COMPENSATION PRACTICES
Compensation is the process of providing adequate, equitable and fair remuneration to the employees. It is what employees receive in exchange for their contribution to the organization. It is a comprehensive term which includes pay, incentives and benefits offered to the employees.
PURPOSEOF COMPENSATION
THE PAY MODEL
STRATEGIC COMPENSATION PLANNING
COMPENSATION POLICY ISSUES
COMPENSATION ADMINISTRATION PROCESS
CLASSIFICATION OF REWARDS
COMPONETS OF FINANCIAL COMPENSATION
BASE PAY
VARIABLE PAY/PAY FOR PERFORMANCE : INCENTIVES
TYPES OF INCENTIVES
Driving Growth & Talent Retention through Pay for PerformanceBest Practices
Valuing and recognizing the company's top performers are critical factors to staying healthy and competitive in today's marketplace. In addition to other incentives, an annual bonus program provides companies with opportunities to financially reward employees for their contributions each year. However, smaller bonus pools, unfair distributions, misalignment of goals, complex global administration, and other obstacles can plague the integrity of the system, ultimately sending talent out the door.
Best Practices, LLC conducted this cross-industry study to investigate how compensation organizations at leading global companies are structuring and implementing pay for performance annual bonus programs to reward top performers and retain talent in today's environment of shrinking resources and increasing talent competition.
Savvy companies design, implement, and continuously evaluate a pay for performance compensation plan to reward top performers. By identifying drivers, measures of success, program elements, global differences, and implementation best practices, this study will highlight the must-haves of successful pay for performance bonus plans.
The presentation comprised the strategy to improve employee performances through compensation and benefit. The presentation also includes case study of FMCG industry.
Most business leaders believe that some portion of employee pay should be in the form of incentives, but are left struggling to find answers to key questions: How much of someone’s pay should be variable? And who should have incentive pay as part of their mix? How much of the incentive should be short-term and how much should be based on long-term performance? What type of incentive(s) should it be? What if I don’t pay incentives and just pay higher salaries than my competitors? Will that work just as well?
If these are questions you are facing, don’t miss this presentation!
Role of compensation in organization - compensation management - Manu Melwi...manumelwin
Compensation is fundamental to organization formation and its existence. People work to earn their living and organization compensates employees by providing monetary and non monetary benefits and other amenities for producing goods and services.
- Compensation
- Compensation Administration
- Types of Compensation
- Objectives of Compensation
- Nature of Compensation
- Principles of Wage and Salary Administration
- Components of Salary Administration
COMPENSATION PRACTICES
Compensation is the process of providing adequate, equitable and fair remuneration to the employees. It is what employees receive in exchange for their contribution to the organization. It is a comprehensive term which includes pay, incentives and benefits offered to the employees.
PURPOSEOF COMPENSATION
THE PAY MODEL
STRATEGIC COMPENSATION PLANNING
COMPENSATION POLICY ISSUES
COMPENSATION ADMINISTRATION PROCESS
CLASSIFICATION OF REWARDS
COMPONETS OF FINANCIAL COMPENSATION
BASE PAY
VARIABLE PAY/PAY FOR PERFORMANCE : INCENTIVES
TYPES OF INCENTIVES
Driving Growth & Talent Retention through Pay for PerformanceBest Practices
Valuing and recognizing the company's top performers are critical factors to staying healthy and competitive in today's marketplace. In addition to other incentives, an annual bonus program provides companies with opportunities to financially reward employees for their contributions each year. However, smaller bonus pools, unfair distributions, misalignment of goals, complex global administration, and other obstacles can plague the integrity of the system, ultimately sending talent out the door.
Best Practices, LLC conducted this cross-industry study to investigate how compensation organizations at leading global companies are structuring and implementing pay for performance annual bonus programs to reward top performers and retain talent in today's environment of shrinking resources and increasing talent competition.
Savvy companies design, implement, and continuously evaluate a pay for performance compensation plan to reward top performers. By identifying drivers, measures of success, program elements, global differences, and implementation best practices, this study will highlight the must-haves of successful pay for performance bonus plans.
The presentation comprised the strategy to improve employee performances through compensation and benefit. The presentation also includes case study of FMCG industry.
Most business leaders believe that some portion of employee pay should be in the form of incentives, but are left struggling to find answers to key questions: How much of someone’s pay should be variable? And who should have incentive pay as part of their mix? How much of the incentive should be short-term and how much should be based on long-term performance? What type of incentive(s) should it be? What if I don’t pay incentives and just pay higher salaries than my competitors? Will that work just as well?
If these are questions you are facing, don’t miss this presentation!
Role of compensation in organization - compensation management - Manu Melwi...manumelwin
Compensation is fundamental to organization formation and its existence. People work to earn their living and organization compensates employees by providing monetary and non monetary benefits and other amenities for producing goods and services.
- Compensation
- Compensation Administration
- Types of Compensation
- Objectives of Compensation
- Nature of Compensation
- Principles of Wage and Salary Administration
- Components of Salary Administration
Job Evaluation: concept, process, compensation: concept, components, Designing and Administering the Wage and Salary Structure, Grievance Procedure and Handling.IT is about maintainence of HUMAN RESOURCES
Entpreneurial Management (EM04_01 ) starting up a small scale industry - 1Suhas Dutta
This is part of a course that I taught at the Bangalore University last spring - on Entrepreneurial Management. Decks EM04_01 -4 are on starting a small scale industry and on pre-startup processes for small scale industries in India
Compensation is the process of providing adequate, equitable and fair remuneration to the employees. It is what employees receive in exchange for their contribution to the organization. It is a comprehensive term which includes pay, incentives and benefits offered to the employees.
PURPOSEOF COMPENSATION
THE PAY MODEL
STRATEGIC COMPENSATION PLANNING
COMPENSATION POLICY ISSUES
Cash or short-term incentive plans (STIP) engage employees in the process of achieving business objectives, reward desired behaviors, and help execute the organization’s long-term strategy. Incentive plans, when properly aligned to business outcomes and rolled-out effectively, can be a powerful tool that enable organizations to “do more with less” and achieve a greater return on investment (ROI) in cash compensation programs.
Similar to Organisationwideincentiveplans 131203054141-phpapp02 (1) (20)
3. Introduction
Organization wide incentive plans reward employees
on the basis of the success of the organization over a
specified time period.
These plans seek to promote a culture of ownership
by developing a senses of belongingness, cooperation
and teamwork among all employees.
There are three basic types of organization wide
incentive plans;
Profit sharing
Gain sharing
Employees stock ownership plans
4. Profit sharing:
Profit sharing is a scheme whereby employers undertake to
pay a particular potion of net profits to their employees on
compliance with certain service conditions.
The purpose:
To strengthen the loyalty of employees to the firm by
offering them an annual bonus.
The share of profit of the worker may be given in cash or
in the form of shares in the company.
In India, the share of the worker is governed by the
Payment of Bonus act.
5. Merits:
1) inspires the management and the worker to be
sincere, devoted and loyal to the firm.
2) It helps in supplementing the remuneration of
workers and enables them to lead a rich life.
3) It is likely to induce motivation in the workers and
other staff for quicker and better work.
6. Merits(cont….)
4) Workers do not require close supervision as they
are self-motivated to put in extra labour for the
prosperity of the firm.
5) It attracts talented people to join the ranks of a
firm with a view to share the profits.
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7. Demerits
1) Workers may get nothing if the business does not
succeed.
2) Management may dress up profit figures and deprive
the workers of their legitimate share in the profits.
3) Workers tend to develop loyalty towards firms
discounting their loyalty towards trade unions, thus,
impairing the unity of trade unions.
8. •Gainsharing is the sharing with employees of greater-than-
expected gains in profits and/or productivity.
Gainsharing attempts to increase “discretionary efforts”—that
is, the difference between the maximum amount of effort a person
can exert and the minimum amount of effort necessary to keep
from being fired.
Cost-savings gains are shared among employees and the
company.
It is better for motivation.
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9. Gainsharing(cont…….)
It is a popular family of incentive programs that include a
system to monitor the performance of the organization and
distribute rewards when goals are met, and focuses on
employee involvement in order to increase their sense of
ownership.
The basic principle is that everyone will gain more if each
person acts in the interest of the group rather than in the
interest of the self. Thus, gainsharing rewards people for
working together.
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10. When does Gainsharing work best?
Gainsharing works best when an organization's
performance levels are easily measurable.
Measureable metrics include teamwork, output,
product quality, safety, and attendance.
When work environment is based on openness and
trust.
Requires management commitment, training and
frequent and ongoing communications.
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12. Scanlon Plan
Joseph Scanlon, 1937
The Scanlon plan has been implemented in many
organizations, especially in smaller unionized
industrial firms.
The basic concept underlying the Scanlon plan is that
efficiency depends on teamwork and plant wide
cooperation.
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13. Scanlon Plan(cont……)
The system is activated through departmental
employee committees that receive and review cost-
saving ideas submitted by employees.
The scope of the departmental committees are passed
to the plant screening committee for review.
Savings that result from suggestions are passed on to
all members of the organization.
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14. Scanlon Plan(cont……)
Incentive rewards are paid to employees on the basis
of improvements in pre established ratios.
Incentive =$ Labours cost / $ total sales value
The Scanlon plan is not a true profit-sharing plan,
because employees receive incentive compensation
for reducing labor costs, regardless of whether the
organization ultimately makes a profit.
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15. Numerical
Average monthly sales as a base period = Rs1,00,000
Average monthly wage costs as a base period=Rs20,000
Incentive = Rs Labours cost/ Rs total sales value=
20,000/1,00,000= 20
Work out the "normal" ratio of wage costs to sales=20%
Suppose the first month's sales =Rs2,00,000
The wage costs = Rs30,000
The normal ratio (20%) would have produced wage costs
=Rs40,000
Saving= Rs 40,000-Rs 30000 =Rs10,000
Shared 50-50 between the company and the employees.
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16. Rucker Plan
The Rucker plan was developed in the 1930s by the
economist Allan W. Rucker.
Emphasizes employee involvement
The Scanlon formula measures performance against a
standard of labor costs in relation to the dollar value
of production, whereas the Rucker formula introduces
a third variable: the dollar value of all materials,
supplies, and services that the organization uses.
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17. Rucker Plan(cont….)
The Rucker formula is calculated as follows:
= $ Value of the Labor Costs
($ Value of Production) – ($ Value of Materials,
Supplies, and Services)
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18. Numerical
Average monthly sales as a base period = Rs1,00,000
Average monthly wage costs as a base period=Rs20,000
Value of Materials, Supplies, and Services=Rs20,000
Incentive = $ Value of the Labor Costs / ($ Value of
Production) – ($ Value of Materials, Supplies, and Services)
The ratio of wages to added value=Rs20,000/(Rs 1,00,000 - Rs
20,000) =20,000/80,000= 25%
Suppose the first month's sales =Rs2,00,000
The wage costs = Rs30,000
Value of Materials, Supplies, and Services=Rs40,000
The normal ratio (25%) would have produced wage costs
=Rs40,000
Saving= Rs 40,000-Rs 30000 =Rs10,000
Shared 50-50 between the company and the
employees.
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19. IMPROSHARE
Improshare plans measure changes in the relationship
between outputs and the time (input) required to
produce them.
This plan is minimally affected by changes in sales
volume, technology and capital equipment, product
mix, or price and wage increases. It's the easiest of the
gainsharing plans to understand and install.
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20. It is an industrial engineering-based gainsharing plan that
uses past production records to establish base
performance standards.
The ImproShare plan, which was developed in 1973,
measures only labour cost and uses time standards and
past production records to set a production criterion. The
difference between current labour hours to produce a
given amount of output and past labour hours on similar
output is the basis of the bonus formula.
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21. Advantages of Gainsharing
Supports other performance improvement efforts and
helps promote positive change
Helps companies achieve sustained improvement in
key performance measures
Rewards only performance improvement
Enhances employee focus and awareness
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22. Enhances the level of involvement, teamwork and
cooperation
Aligns employees to organization goals
Promotes morale, pride, and more positive attitudes
toward the organization
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23. Disadvantages of Gainsharing
Paid on the basis of group performance rather than individual
merit.
Requires a participative management style.
Requires that management openly shares information related to
performance measures.
Increases the level of organizational stress since everyone has
more of a financial stake in the organization's success.
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24. ESOP
Employee stock ownership plan originated in the USA in
early 90’s.
Stock option plan implies the right of an eligible
employee to purchase a certain amount of stock in future
at agreed price.
The eligible criteria may include length of service,
contribution to the department/division where employee
works.
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25. The company may even permit employees to pay the
price of stock allotted to them in instalments or even
advance money to be recovered from their salary
every month.
The allotted shares are generally held in trust and
transferred to the name of the employee whenever he
or she decides to exercise the option.
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26. Benefits by ESOP
Stock options are motivator.
Employees remain loyal and committed towards
company.
ESOP foster a long term bond between the employee
and the company.
Reduced employee turnover
Lesser supervision
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27. Demerits of ESOP
Only profitable companies can use the tool
Falling share price could mean losses for employees
Sometimes employee feel forced to join
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