Incentive systems

Concept Goals Types

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. Gainsharing Production 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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