DISIGNING SOUND INCENTIVE SCHEMES, PARAMETERS AND REQUREMENT Presented By : Mukesh Upadhyay Roll No. 39 MPM 3 rd Sem.

What Is Incentive Incentives are Reward Relating to Certain goals. Incentives can be Financial Or Non-financial. Incentive is the stimulation of effort and effectiveness by offering monetary or extra facilities. Wage incentives include all the plans that provide extra pay for extra performance In addition to regular wages for the job. It implies monetary inducements offered to employees to perform beyond acceptance standards.

ADVANTAGES OF INCENTIVES Benefits to the business Support to staff for joining business Retain existing staff Goodwill Increase staff motivation, morale and loyalty Boost productivity Reduce absenteeism Link individual and business performance Focus employees on achieving targets Build teamwork Get Best Out Of Employee For Example: Free health assessments may reduce absences.

BENEFITS TO STAFF Enhancing the quality of working life Rewarding staff efforts Adding value to the employment contract

Incentives Must Be Affordable Transparent and Appropriate to business Incentives Should not seen as a Substitute of Good Pay

Incentive schemes Types of Incentive Schemes Financial and Non-Financial Schemes Individual And Group Schemes Short Term And Long Term Schemes

Financial Incentive can help improve performance And Self Financing I. Profit Related And Share Option Scheme II.Bonuses III.Commission IV.Prizes Non-Financial And Non Pay Include I.Formal Recognition / Award II.Training Schemes III.Promotion Plan IV.Gift Vouchers V.Extra Holidays VI.Company Car

Advantages and disadvantages of incentive schemes INCENTIVEADVANTEGSDISADVANTEGES FINANCIAL Can focus employees on hitting a target. Places a value on achievement. Rewards are sometimes small. Can demoralise if not earned. NON-FINANCIAL Can recognise employee priorities and lifestyles. Can encourage attachment to business. Can be taken for granted. May be inappropriate. INDIVIDUAL Can focus the individual on achievement. Links extra pay with extra output. Can be divisive. Individual earnings can fluctuate. GROUP Can encourage team working.. Can correct individual under-performance. Can undervalue individual skills.. May encourage bullying of under-performers.

Factors in Incentive Scheme Productivity Effect on Labour Incidence of Fixed Overhead

Steps to Designing Incentive Scheme Identify the scheme's objectives. Consult with staff and trade unions. Relate the scheme to the business' remuneration system. Ensure that the planned scheme is competitive. Decide on performance measures for staff. Evaluate results. Regularly review scheme and obtain feedback.

Parameters for Sound Incentive Scheme The Reward Must be linked with the effort involved and should be faire for both(E,E) It should provide for worthwhile and attainable objectives with Std. of performance not beyond the capability of Avg. worker. There shouldn't limit for additional earning. Scheme should be permanent basis and shouldn’t be changed without workers approval. Continue………………

Employee’s earning should not be affected by matter beyond their control. like Breakdown. The scheme should be in accordance with relevant national or local trade agreement. The scheme should facilitate supervision and assist in production control.

Requirements for Effective Incentives Requirements for Effective Incentives SCHEMES is clearly communicated. Schemes is clearly communicated. are understood. Schemes are understood. Rewards are easy to calculate. Rewards are easy to calculate. Employees participate in administering the plan. Employees participate in administering the plan. Employees believe they are being treated fairly. Employees believe they are being treated fairly. Employees believe they can trust the company and that they have security. Employees believe they can trust the company and that they have security. Rewards are awarded as soon as possible after the desired performance. Rewards are awarded as soon as possible after the desired performance.