INCENTIVE SCHEME

Muzzammil Sheriff M
App SSE/Electrical/General Service
GOC Workshop, Ponmalai, Trichy
 INCENTIVE
• With the available men and material and within the stipulated time,
getting more output
• The worker are remunerated for this extra output
 HISTORY OF INCENTIVE
• The first formal incentive scheme was introduced in Chittaranjan
Locomotive Works in December 1954.
• The initial success of the scheme known as "payment by results"
manifested in extending it to other Repair Workshops and Integral
Coach Factory in 1969.
 FEATURES
• Classification of Workers

DIRECT WORKERS INDIRECT WORKERS ESSENTIALLY INDIRECT WORKERS

• a) The workers in an incentive shop are classified as Direct, Essentially
Indirect and Indirect Workers: -
• i. Direct workers are those engaged in work, whose quantum can be assessed
through time studies.
• ii. Essential Indirect workers are those who contributed to the continuity of
the work and whose services are essential but whose work cannot be
assessed through time studies. Supervisors up to the rank of Charge man are
also included in this category.
• iii. Indirect workers are those who are provided for cleaning etc. do not
contribute directly or indirectly to production and do not earn any incentive
bonus.
• iv. Apprentices are not eligible to participate in the incentive bonus scheme.
• b) Basic wage is guaranteed to all the workers.
• c) Time is the yardstick for measuring work. The various operations in
the workshops are subjected to time study in accordance with the
standard practices of work measurement.
• d) The allowed time is so fixed that a workman of normal ability may
earn 33-1/3%, bonus over and above his basic wages in respect of
period spent on piece-work jobs.
 TERMINOLOGY
• Allowed Time
• This is assessed on the assumption that under non-incentive conditions, an
average employee will work at a rating of 60 units.
• The same worker while working under incentive conditions would be
expected to improve his rating to 80 units i.e. 33-1/3% more.
• The ceiling limit of profit is fixed at 50%, of the time taken in each of the
operation.
Time Study
• The system envisages fixation of time standards for each operation, through a
time study to determine the time necessary to carry out a given activity as
accurately as possible from a limited number of observations, at a defined
standard of performance.

Time Taken
>Actual time taken to complete the work

Overtime working in Incentive sections

>There should not be any overtime booking in sections under incentives
Rating

• Rating is the assessment of the skill and effort involved in each element
and every element should be rated independently of previous elements.
• The principle of rating is that an average worker when working at such a
speed and with such an effort that he is just earning basic pay i.e. working
at a time or day work rate under non-incentive conditions is said to be
working at a 60 rating. This can be interpreted as saying that he is
producing 60 units of work per hour.
• This same average worker when working under a properly applied
incentive scheme works at a speed and with such effort as to earn 33-1/3%
more i.e. at an 80 rating, can then be said to be producing 80 units of work
per hour.
• If he is working at half the effective speed, he is working at 30 rating or
alternatively if he is working at double the effective speed, he is said to be
working at 120 rating.
• Job Cards/Squad Cards
• Job card /squad cards are basic documents on the basis of which incentive
bonus is calculated. Allowed time for the job is indicated in each job card.
Once the job is done, same is passed by inspector and certified by Rate Fixer.
Such completed job/squad cards should be sent to Incentive Bonus section
within 48 hours of completion of the job.

Out-turn
Results of Incentive working will be determined on the total quantity
"passed" in respect of each operation as recorded on the job-card. The
"passed" out-turn should be recorded by the inspector concerned on job
cards under his dated initials.
GA (Gate Attendance) SYSTEM
• With the introduction of computerized GA system, accountal of Time
Taken in job cards for the monthly accountal period can be simplified
by accounting the total number of jobs passed by inspector for the
respective accountal period of the month instead of maintaining
Allowed Time vis a vis Time Taken for each job card passed.
• Time Saved/Time Lost
The difference between the "time allowed" and "time taken" is
the time saved, if the former is greater than the latter and "time lost"
if it is otherwise,

• Abnormal Profits
• The ceiling limit on profit is fixed at 50% of time taken/GA hours.
• When large profits (above 50%) are made more or less consistently or
by the majority of workers, the causes contributing to this result
should be carefully analyzed and any defects discovered, rectified.
• Allowed times can be revised if improved machine tools are installed
or other time saving devices are introduced and also if there is any
error in computation or in printing.
• Losses
• It is expected that the average worker will complete an operation in
75% of the allowed time when he will earn 33 1/3 % bonus.
• If allowed times are realistic and established, there should be no
reason why an employee of average ability should incur losses instead
of making profits.
• Therefore where losses, however, small are made more or less
consistently by the majority of workers, the inducement offered by
the incentive scheme has ceased to exist.
• Hence detailed investigations must be made to ascertain the cause
and take remedial measures including improvement of methods.
 Prerequisites for introduction of Incentive
Scheme

• The proposal to bring the direct workers, essentially indirect workers

and staff of service shops under the coverage of Incentive Scheme
shall be dealt with on the basis indicated in the broad guidelines laid
down by the Railway Board from time to time and shall be sanctioned
by the General Managers under their own powers.
• Following points are kept in view while introducing incentive scheme
in shops/sections of a workshop: —
• Whether a list of items to be manufactured or repaired in the
section/shop in which incentive scheme is proposed to be introduced
has been prepared.
• Whether adequate load to meet the increased capacity generated as
a result of introduction of Incentive scheme has been ensured.
• Whether proper computation and the time studies have been carried
out.
• Whether allowed time have been approved by the Production
Engineer/Works Manager.
• Whether the strength and categories of indirect workers including
those declared essentially indirect have been fixed as a result of
proper analysis and approved by Chief Mechanical Engineer.
• Whether the strength and categories of staff of direct workers have
been determined with reference to the workload on the different load
centers and sections. The No. of effective hours available per shift per
month will be taken as 200 and with the addition of 33-1/3%
representing the average efficiency under incentive scheme, 267 man
hours per man per month shall be the basis for working out the
number of direct workers.
• Whether the number of supervisors has been determined according
to actual need keeping in view the supervisory ratio authorized by
Railway Board from time to time.
• Whether regular supply of raw materials has been ensured. Also
whether arrangements have been made with the stores departments
for their reservation before the release of work orders.
• Whether a system of periodical oiling of machines tools and plants
and other preventive maintenance measures have been introduced.
• Whether a proper system of inspection has been introduced.
• Whether computers for making production documents are in place.
CALCULATIONS
 FIXING OF ALLOWED TIME
• Actual time taken to finish the job = 1.000 hrs
• This is calculated from the average of time taken by a slow, average
and fast worker
• Contingency = 10% = 0.100 hrs
• Fatigue = 12.5% = 0.125 hrs
• Gauging = 5% = 0.050 hrs
• Total = 1.275 hrs
• Minimum Bonus for avg worker = 33.3% = 0.333
• Hence, allowed time for job = 1.275 + 0.333 = 1.608 hrs
 NUMBER OF WORKERS SAVED CALCULATION
• 80 Rating (With Incentive)
• Allowed Time for entire shop activity = 26,700 Hrs.
• Man hours in 1 month = 8 hrs (1 day) x 25 days = 200 hrs
hours
• Incentive Minimum Bonus for average worker = 33 1/3%
• Thus, for 200 hours = 200 + (200 x 33 1/3%) = 267 hrs
• No of direct workers required = 26700/267 = 100 Men
• Leave reserve = 12.5% of 100=13
• Total =113
• No of EIWs = 10% of 113 = 11 Men
• No of IWs = 5% of 113 = 6 Men

• Total staff required = 113 + 11 + 6 =130 Men

• 80 Rating Worker Distribution
• Sr Tech = 16% of 113 = 18
• Tech I = 54% of 113 = 61
• Tech II = 15% of 113 = 17
• Tech III = 15% of 133 = 17
• Total DW = 113
• EIW = 11
• IW = 6
• TOTAL WORKERS = 113 + 11 + 6 = 130
• 60 Rating (Without Incentive)
• Allowed Time for entire shop activity = 26,700 Hrs.
• Man hours in 1 month = 8 hrs (1 day) x 25 days = 200
hrs hours
• No of direct workers required = 26700/200 = 134 Men
• Leave reserve = 12.5% of 134 = 17
• Total =151
• No of EIWs = 10% of 151 = 15 Men
• No of IWs = 5% of 151 = 8 Men

• Total staff required = 151 + 15 + 8 =174 Men

• 60 Rating Worker Distribution
• Sr Tech = 16% of 151 = 24
• Tech I = 54% of 151 = 82
• Tech II = 15% of 151 = 23
• Tech III = 15% of 151 = 22
• Total DW = 151
• EIW = 15
• IW = 8
• TOTAL WORKERS = 151 + 15 + 8 = 174

• Thus total no. of workers saved = 174-130 = 44

 INCENTIVE AMOUNT CALCULATION
• Forenoon working hours per worker= 4.630 hrs
• Afternoon working hours per worker = 4.050 hrs
• FULL DAY working hours per worker = 8.680 hrs (Mon-Fri)
• SATURDAY working hours per worker = 4.600 hrs
• Total WEEK HOURS = 48 hrs (8.680+4.600)
• Opening Date = 16.09.2017
• Closing Date = 14.10.2017
• Total Man Hour in the period = 179.240 hrs
• Allowed Time for specific work = 179.240x1.49 (i.e. 49%)
• Thus, incentive range = 179.240 to 267.068 hrs
• Hence, full incentive for Sr Tech
• Allowed Time = 267.068 hrs
• Time Taken = 179.240 hrs
• Profit = 87.828 hrs
• Incentive = 87.828 x 49.65 (Rate fixed as per board)
= Rs. 4,360.6602
 Advantage of incentive scheme
• Increase the productivity
• Saving in labour, reduction of number of employees.
• Reducing the production cost. Decrease the manufacturing cost.
• Motivate the worker.
• Profit to the management as well as the worker.
• Increased earnings for workers, standard of living raised.
• Optimum utilisation of man & machine.
• Great returns for the capital invested.
• Supervision becomes easier.
• Production control is made easier.
• Less following/chasing is required.
• Better coordination.
• Achieving target in time.
 Disadvantage of Incentive Scheme
• Necessitates the usage of number of production forms, registers, documents etc.
• More number of accidents as the worker wants to earn more bonus.
• Requires sound inspection & quality control as the worker takes less care in quality &
concentrates on output only.
• Proper functioning of rate fixing, inspection etc. required otherwise resulting in loss to
the concern.
• Proper maintenance of crane, machinaries & tools required avoiding the idle time.
• Less skilled workers get disappointed as they would not be able to earn more bonus like
highly skilled workers.
• The incentive system is little complex & many of them are not able to understand the
system.
• It gives incentive for quantity and not for quality production.
• Limit is put on worker’s incentive earnings (50%).
 Reasons for Failure of Incentive Scheme
• 1. Procedural irregularity
• Failure of clocks
• Custody of cards
• Use of printed documents
• Submission of completed cards
• Use of tally sheets
• 2. Fixing of time standard
• Not much care was taken to fix up time standards
• Variations is not maintained
• Revision is not made
• Bargaining
• 3. Functioning of rate fixing sections
• Checking by RF (Rate Fixer)
• Abnormal profit/loss
• Methods and manufacturing are to be ensured
• Looking for method study
• Adjustment with workers/Inspectors
• Lack of training to RF
• 4. Working of inspection wings
• Documents are certified even though the job is not completed
• Final inspection sheets are prepared after the despatch
• Rejected items are not marked properly
• Process capability is not being checked
• 5. Miscellaneous factors
• Reduced motivation to supervisors
• Distortions – Machine & Men idle
THANK YOU