Presentation of Types of Incentive plan
Standard Hour Plans
Dr. Piyali Ghosh
Mudit Chandra (2012MB76)
Kamal Kumar (2012MB35)
Mithlesh Chaubey (2012MB29)
Jitendra Yadav (2012MB14)
Halsey Premium Plan
This plan was originated by F A Halsey( an American engineer)
recognizes individual efficiency and pays bonus on the basis of
time saved. Main features of this plan are:
This is a time-saved bonus plan which is ordinarily used when
accurate performance standards have not been established.
Under this plan, it is optional for a workman to work on the
premium plan or not.
His day’s wage is assured to him whether he earns a premium or
not, provided he is not so incompetent as to be useless.
The bonus is based on the amount of time saved by the worker.
EXAMPLE : If 8 hours is the standard time of a job, & Rs. 0.50 is
the guaranteed wage per hour, calculate wages of workers and
premium earned by them under different time saved slots ?
(half of the time saved)
If the work is
in 6 hours, 0.5
3.5/6 = 0.58
in 4 hours,1.00
3.0/4 = 0.75
in 2 hours, 1.50
2.5/2 = 1.25
in 1 hour, 1.75
2.25/1 = 2.25
Wages under Halsey System = [Time taken * Time rate] + (50% of
time saved * time rate)
Effective Hourly Rate = Total Wages under Halsey Plan
Actual time taken
Halsey-Weir Premium Plan
This plan is similar to the Halsey Premium Plan except that
33.33 per cent of the time saved is given as premium to
Formula : Bonus = 1/3 * Time saved * Hourly rate
Beneficial to efficient worker
Causes no harm to new worker, trainee, or slow worker
Management shares benefits of over-achievement by
Minimum base wage is guaranteed.
(i)Workers get only a percentage of return on their overachievement
(ii)Due to undue
(iii)Management gets wrong picture of worker’s ability.
Rowan Premium Plan
The plan was introduced by D. Rowan in 1901
In the Rowan Plan, the time saved is expressed as a percentage
of the time allowed, and the hourly rate of pay is increased by
that percentage so that total earnings of the worker are the total
number of hours multiplied by the increased hourly wages. The
plan aims at ensuring the permanence of the premium rate,
which is often cut by the employer when the worker’s efficiency
increase beyond a certain limit.
Bonus = Time Saved * Time taken * Hourly rate
Total Earning = Time Taken * Hourly Rate + Bonus
The premium is proportionate to the time saved, if the
rate has been wrongly fixed, the effect will be less
serious. So Rowan scheme is safer than the Halsey
scheme, as far as the point of view of employer is
It assures minimum time wages.
This automatic check enables the worker to earn a fair
wage, because there is less chance of rate-cutting by the
employer, as he is not paying extraordinary wages.
Better wage is earned by the employees; their
improvement in efficiency is rewarded.
The ordinary worker may find the bonus calculation a
Like Hasley Plan, this plan does not encourage
For example, if the time saved is more than half the
total, earning begin decreasing.
Example :- Calculate the total earnings of a worker & the effectively rate
of labour wages per hour where payment of bonus is under the Rowan
scheme from the below mentioned particulars:
Basic wage rate per hour – $.10.80,
Time allowed for the job – 48 hours,
Actual time taken – 36 hours.
Total wages =
Normal time wage + Time saved/Time Allowed *Time taken* Time rate
Normal time wage = 36 hours @ $. 10.80 = 388.80
Bonus = Time saved/Time Allowed*(Time taken * Time rate)
Total Wage = 388.8 + 97.2 = 486
Effective hourly rate = $.486.00/36 = $. 13.50
Observations From Halsey &
Under Halsey system, with the increase in efficiency the bonus
increases steadily. On the other hand, under Rowan system, up to
certain level of efficiency, i.e. where time saved is 50% of allotted
time, bonus increases & then it begins to decline.
More wages is earned by the worker under Rowan system than under
Halsey system, where time saved is less than 50% of the standard
If worker saves 2/3rd of the standard time, doubles his earnings per
hour under Halsey system whereas earnings per hour can never be
doubled under Rowan system.
Bonus under both the systems is the same, when the time saved is ½
of the standard time.
Example: The time allowed for a completing a job is 24 hours. The
hourly rate is $. 4. For every 4 hours saved progressively, prepare a
statement showing the bonus earned, earnings per hour & total earnings
under Halsey system (50% to worker) & Rowan system of premium
this plan, all operation or job is expressed
in terms of so many standard minutes, which are
called ‘Bedeaux points’.
Each B representing one minute through motion
& time study. Upto 100% performance,
i.e., up to standard B's, a worker is salaried time
wages without any premium for efficiency. If the
real performance exceeds the standard
performance in terms of B's, then 75% of the
wages of the time saved is salaried to the worker
as bonus and 25 % is earned by the foremen.
If the standard time is 10 hours real time taken is 8 hours
and rate per hour Re.1, the worker will obtain.
= 8 hours at Re 1 + 75% of 120 (points saved) x 1/60
= Rs 9.50/-