Individual Incentive System

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1. 1. Time Based Systems Individual Incentive Systems

2. A. Halsey plan This plan was first designed by F.A. Halsey of Rand Deill Co., Canada. According to this plan, a standard time is fixed for completing a work in advance. If a worker completes his task in less than standard time is paid for some of the time saved. Generally wages for one half of time saved are paid.

3. Example. Time allowed for a task :20 hrs Actual time taken :15 hrs Hourly rate of pay :Rs.1.50 Calculate the wages of the workers. Solution. 15 X 1.5 +(20-15/2) X 1.50 = 12.50 + (2.5X1.50) =22.50 + 3.75 =Rs.26.25 In this equation, a worker gets Rs. 3.75 as incentive for saving four hours. T X R + (S-T/2) X R S =standard time taken. T =time taken. R =hourly rate.

4. Merits and demerits. Merits. Simple. Beneficial to efficient workers. Minimum base-wage is guaranteed. No need to over speed. Demerits. Fixed percentage of return. Fixing of standard time. Quality suffers.

5. B. Rowan plan This system is very much similar to Halsey’s plan. The only difference between Halsey and Rowan Plans is the method of calculating bonus. In this bonus is that proportion of wages of the time taken which the time saved bears to the standard time allowed. T X R + (S-T/2) X T X R

6. Merits and demerits Merits. Guaranteed minimum wages. Efficiency is rewarded. Demerits. Calculation of bonus is complicated. Discourages workers to over-achieve.

7. C. Emerson plan Emerson has developed this efficiency plan in 1910. Under this, a standard output is fixed for determining the efficiency of worker. A worker reaching 66 2/3% of efficiency is paid only minimum wages and bonus is paid only when his efficiency crosses this limit.

8. Merits and Demerits. Merits. Simple & easy to understand. Guaranteed minimum wage. Encourage workers. Demerits. More clerical work. Discourage the workers.

9. D. Bedeaux plan This plan was devised by Charles E. Bedeaux in 1911. This plan provide comparable standards for all workers. In this benefit of time saved goes to both to the worker as well as to his superior in the ratio of ¾ and ¼. The standard time for each job is determined in terms of minutes which are called Bedeaux Points or B’s. Each B represents one minute through time and motion study.

10. Merits and Demerits. Merits. Simple. Guaranteed minimum wages. Motivated Supervisor. Demerits. Quality suffers. More clerical work & complicated work. Workers do not like that foreman should share their bonus.

11. 2. Production based Systems

12. A. Taylor’s differential piece-rate system The underlying principle of this system is to reward an efficient worker and penalise the insufficient worker. Under this, a standard time was fixed for completing a task, if a worker completes the task in the standard time he is paid at higher rate and lower rate is paid if more than the standard time is taken.

13. Features. No minimum wages are guaranteed. A standard time is fixed for completing the task. Higher rate is given if work is completed in standard and lower rate is offered if more standard if more time is taken.

14. Merits and Demerits. Merits. Simple. Good incentives to efficient worker. Preferred by employees. Demerits. Punish slow workers. Disunity among workers. No guaranteed minimum wages. Quality suffers.

15. B. Gantt’s task and bonus plan A standard time is fixed for completing the work. A worker taking standard or more time gets wages on an hourly rate. A bonus ragging from 25% to 50% is paid for completing the task in less than standard time. Demerits. Less efficiency of workers. Disunity among workers.

16. Group Incentive Systems

17. A. Priestman’s plan Under this plan a standard production is fixed for the whole factory. If productivity exceeds the standard then bonus is paid in accordance with the increase; and if not workers will get minimum wages only. A team spirit is visible because production will increase with the collective efforts of everyone in the organisation.

18. B. Scalon plan This method is named after Joseph Scalon of USA. In this, a payment of one percent participating bonus for every one percent increase in productivity. The bonus is available to all employees except top management. For this bonus, a reserve fund of one- half of first fifteen % is created for off setting any change in labour cost; and after every year if the reserve is unused it will distributed among employees in last month of the year.

19. C. Co-partnership Under this scheme, the employees are offered shares of the enterprise at reduced rates. The underlying of this method is to make workers feel themselves as a part of the organisation and understand the viewpoint of the management. Because as a co-partner they will try to make the concern more and more profitable.

20. D. Profit sharing In this plan workers should also get a part of profits for contributing their labour. These profits are paid to workers in addition to their nominal wages. The payment is made after ascertaining net profit. Objective- To recognise the right of workers for sharing the prosperity of the company. To make workers feel as members of the enterprise rather than only employees. Cordial relations between employees and employers.

21. Merits.

22. Demerits.