A presentation on
“Incentives For Indirect Workers”
Compiled by:Nitin Srivastava
Incentives For Indirect Workers
Incentive Schemes In Indian
Installing An Incentive Scheme
INCENTIVES FOR INDIRECT WORKERS
Indirect workers such as crane operators, helpers, charge
hands, canteen staff, security staff, employees in purchasing,
sales and accounts, and maintenance staff also deserve
incentives at par with direct workers.
Incentives should be paid to such workers either on the ground
that they contribute to the increased production which the
direct workers may achieve or on the ground that there work
has increased because of increased production , or both.
Such payments are desirable to avoid dissatisfaction and
dissension among the workers in a plant, or even strikes,
which may result if indirect workers are paid at time-rates
while direct workers receive substantial bonus.
The payment of bonus to indirect workers poses a serious
problem because the output of many of them cannot be
For example, it is extremely difficult to measure the output of
maintenance staff, security personnel, or canteen employees,
through it is possible to assess the performance of inspectors,
sweepers and packers.
But whether the output of indirect staff can be measured or
not, a single system of bonus payment is made applicable to all
of them. In some cases, the bonus is calculated according to
some agreed percentage on the output of the plant or of a
In others, the bonus is a specified percentage of the incentives
of all or some of the direct workers.
Many managements, however, prefer to apply a merit-rating
system to indirect workers, which rewards these workers for
other qualities, in addition to their output.
INCENTIVE SCHEMES IN INDIAN INDUSTRIES
Introduced in 1946, incentive payments have become highly
popular in our industries. They are as common as monthly
wages and salaries.
But the schemes in operation defy any generalization because
no two plants follow an identical scheme.
The schemes differ from industry to industry and from plant to
plant within an industry. Some of the incentive schemes
described by the ILO are followed here, but not in there
original form. They have been modified to suit the local
FEATURES OF INCENTIVE PAYMENTS
Though incentives are as old as industries themselves, it was
only in 1946 that they were introduced in our country. Even to
this day, the incentive schemes are in there infancy.
In most industrial establishments, the introduction of incentive
schemes has not been preceded by work studies, consultations
with workers’ representatives and rationalization of wage
structure through job evaluation.
Incentive schemes differ from industry to industry and plant to
plant within an industry.
Most incentive schemes in operation fall under one or the
other of the four classes mentioned by the ILO. But the
schemes are fine tuned to suit the requirements of the
The schemes in public sector plants have an extremely varied
coverage, some applying only to day-rated employees while
others are being made applicable right upto the top
Inflation has reduced the motivational effect of incentives.
Hence, incentives have to be substantial if workers are to be
motivated for higher efficiency and greater output.
In many cases, incentives seems to have achieved their
objectives, that is increased productivity and enhanced
INSTALLING AN INCENTIVE SCHEME
Installing a scheme of payment by results must proceed on the
1-Define the objectives of the payment system and if necessary,
challenge the assumptions held about the purpose of the system
and how it should operate.
2-Collect facts about the exiting system- the pay structure, the
types of payment schemes in use, the number of people paid
under each arrangement, the levels of earnings in different
occupations and the make-up of earnings ,including overtime
3-Analyze the circumstances in which the payment system
4-Compare the existing or proposed arrangement against the
criteria for evaluating systems listed above.
5-Analyze the effectiveness of the pay structure and payment
(i)Comparing the results achieved with the objectives of the
system under such headings as ability to attract and retain
staff, effect of productivity, effect on management-employee
(ii)Identifying particular problem areas where the system is
producing anomalies in pay or earnings between occupations
or units, where the requirements of the equal-pay legislation
are not met or where rates of pay are not competitive with
local going rates.
6-Consider conducting an attitude survey to obtain the view of
workers, rate fixers and supervisors about the present system
and the changes need to be made.
7-Consult as required with unions and employees on the present
arrangements and what needs to be done about them.
8-Conduct pay surveys as required to establish local market rates.
9-Conduct job evaluation studies as required in consultation with
unions to establish correct relativities and to provide the basic
data for designing a logical pay structure.
10-Develop pilot tests and install any revised or new individual,
group or measured day-work payment systems that may be
required, in consultation with unions.
11-Revise the pay structure as necessary in the light of the actions
taken in step 8 and 10 and in consultation with the unions or
employee representatives. In a unionised concern. revisions in
the pay structure would, of course, have to be negotiated with
12-Ensure that information is available which will enable the
effectiveness of a revised pay system or structure to be
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