Types of incentive

schemes

Archana Choudhary
Applications of motivational concepts :
Job Designing :
• has emerged as an important application area for
work motivation.
• job design concerns and approaches are usually
considered to have begun with scientific management.
• The goal of such management was to maximize
human efficiency in job performance.
• The scientific management approach resulted in ‘job
engineering’, which focused on product and process,
plant layout, human-machine interactions, etc.
Advances in technology, computer systems, etc., have resulted in
job specialisation.
Even though specialization resulted in better control and
efficiency, other aspects like motivation and satisfaction were
neglected.
Consequently, over a period of time, efficiency decreased and
dissatisfaction prevailed among the work force.
 The problems today are compounded with downsizing and
increased use of technology.
 For academicians as well as practitioners, job design takes on
special importance as it reduces stress, enhances motivation, and
results in satisfaction.
Job enlargement
Job enlargement refers to expansion of the scope of job
horizontally. In simple terms, it means increasing the
number of tasks that need to be executed.
For example, it an assembly-line worker was inserting
100 nuts in a day, he would perhaps increase it by
another 50.
The variety that is experienced by the individual is
only in terms of the number of tasks. Some amount of
boredom may be relieved by this approach.
Disadvantages of job enlargement
First, the workers need to be trained or multi skilled in
order to handle the variety of jobs.
Maybe it requires a new way of functioning in an
already existing system.
Moreover, it may not be possible to introduce job-
enlargement programmes for all the jobs in the
organization.
Job

enrichment :
The proposition of Herberg that motivators when
present enhance the motivational aspects of the
individual finds its direct application in a job-enrichment
programme.
 In ‘enrichment’, the job is enlarged vertically so that
there is greater variety of work content.
It requires a high level of knowledge and skill, gives
workers more autonomy and responsibility in terms of
planning directing and controlling their own
performance, and provides opportunities for personal
growth and a meaningful work experience.
Advantages of job enrichment
Research has supported us with evidence that there is
more employee satisfaction, better customer service,
less employee overload, and fewer employee errors in
case of job enrichment.
Another study also found that employees were more
creative when they worked in an enriching context of
complex, challenging jobs, and supportive, non-
controlling supervisory climate.
Schemes of payment by results
ILO classifies all the schemes of payment by results
into 4 categories:
Schemes where the workers’ earnings vary in the same
proportion as output.
Schemes where earnings vary less proportionately
than output.
Schemes where earnings vary proportionately more
than output.
Schemes where earnings differ at different levels of
output.
 INCENTIVE SCHEMES

Earnings vary in Earnings vary Earnings vary Earnings differ

the same less proportionately at different
proportion as proportionately more than levels of output
output than output output

•Straight piece •Halsey Plan •High piece •Taylor’s

work rate differential piece
•Rowan Plan rate
•Standard •High
hour •Barth standard hour •Merrick
Scheme differential piece
rate
•Bedaux Plan

•Gantt task system

•Emerson’s
efficiency plan
Types of Incentives
Straight Piece Work
• Simplest, oldest and the most commonly used method
• Here, rate per unit of output is fixed, &
• total earnings of a worker = total output in units*rate per
unit
• e.g. rate per unit is 10 paise and the total output is 100 units,
his earnings will be 100*0.10=Rs. 10.00.
Standard Hour System(also called 100 % gains-sharing)
Here, standard time in terms of hours is fixed for completion
of a job. The rate per hour is then determined.
A worker is paid for a standard time at his or her time-rate if
he or she completes the job in the standard time or less or
even more, unless he or she is guaranteed time wages.
If time wages are guaranteed, he or she gets paid on the basis
of the time taken multiplied by the time-rate.
Examples:
Standard time=10 hrs
Rate per hour- Re 1
Case (i)
Time taken= 8 hrs
Earnings= 10*1 =Rs. 10.00
Case (ii)
Time taken = 12 hrs.
(a) Earnings if time wages are not guaranteed
= 10*1=Rs. 10.00
(b) Earnings if time wages are guaranteed
=12*1=Rs. 12
Earnings varying proportionately less than output

In all types, time is used as the measure of output and

bonus is paid on the time saved, i.e. the difference
between the standard time-set for the job and the time
actually taken.
Called “gain sharing schemes” as both employee &
employer share gains resulting from the saved time.
Applied where it is not possible to set standards or to
measure the worker’s output accurately.
Halsey system:
Given by E.A. Halsey (an American engineer)
Standard time is fixed for the completion of a job & the
rate per hour is then determined.
Time wages are guaranteed even if the output of the
worker is below standard.
Bonus paid to a worker is equal to 50% of time saved
multiplied by rate per hour.
Example:
Standard time= 10 hrs
Rate per hour= Re 1
Case (i)
Time taken=10 hrs
Earnings = 10*1 = Rs. 10.00
Case(ii)
Time taken=12 hrs
Earnings = 12*1 = Rs. 12.00
Case(iii)
Time taken=8 hrs
Earnings : (time taken * hourly rate) + bonus
Time wages= 8*1 = Rs. 8.00
Bonus= ½*2*1=Rs. 1.00
=Rs. 9.00
Rowan Plan:
Introduced by D. Rowan in 1901.
Standard time and rate hour are fixed.
Bonus paid to the employee is equal to the proportion of the time saved to the standard
time.
 Example:
Standard time= 10 hrs
Rate per hour= Re 1
Case (i)
Time taken=10 hrs
Earnings = 10*1 = Rs. 10.00
Case(ii)
Time taken=12 hrs
Earnings = 12*1 = Rs. 12.00
Case(iii)
Time taken=8 hrs
Earnings : Time taken* hourly rate+ bonus
Time wages= 8*1 = Rs. 8.00
Bonus= 2/10*8=Rs. 1.60
=Rs. 9.60
Barth Variable Sharing System:
Does not guarantee the time rate unlike Halsey and
Rowan systems.
Worker’s pay is ascertained by multiplying the
standard hour by the number of hours actually taken
to do the job, taking the square root of the product
and multiplying it by the worker’s hourly rate.
Example:
Standard time= 10 hrs
Rate per hour= Re 1
Case (i)
Time taken=12 hrs
Earnings = √(12*10) = Rs. 10.95*1
Case(ii)
Time taken=10 hrs
Earnings = √(10*10) = Rs. 10*1=Rs.10.00
Case(iii)
Time taken=8 hrs
Earnings := √(8*10)
= Rs. 8.94*1=Rs. 8.94
Bedeaux scheme:
 Standard time for a job is fixed.
 Each minute of the standard time is called a point or
B.
 Each job has a standard number of Bs.
The worker receives bonus which is equal to 75% of the
no. of points earned, in excess of 60 per hour, multiplied
by one sixtieth of the worker’s hourly rate.
If a worker does not reach his or her standard, he or she
is paid at the time rate.
Example:
Standard time = 10 hrs
Rate per hour = Re 1
Case (i)
Actual time = 12 hrs
Earnings = 12*1=Rs. 12.00
Case(ii)
Actual time = 8 hrs
Earnings: Time wages = 8*1=Rs. 8.00
Bonus:
Standard Bs=10*60=600
Actual Bs = 8*60=480
Bs saved = 120
Bonus 75÷100×(120×1)/60= Rs. 1.50
Total earnings = 8+1.50=Rs.9.50
Question
Why college and university professors and
administrative staff are not brought under incentive
schemes? Make a case of their inclusion.