1. INCENTIVE PLANS AND FRINGE BENEFITS
Submitted by:
Archi Goyal Danish Sharma
Roll No. : Roll No. : 55
B.com I-A B.com I-A

2. INTRODUCTION
To succeed, an organization must attract and retain productive employees. Therefore, a business establishes competitive incentive plans to accomplish these objectives. Incentive plans, which are known as performance incentive plans (PIPs), motivate employees to exceed expectations and grow the business. Such plans promote exceptional behaviour during a specific period. In addition, they attract potential employees to an organization and encourage company loyalty. However, an incentive plan must contain obtainable goals. Otherwise, employee morale will fade, and the plan becomes ineffective.

3. CHARACTERISTICS Standardization Incentive for Quantity And Quality
Clarity of Objectives
Willingness of Workers
Conducive to Health
Attainable Standards
Attraction for Worker
2. Just and Equitable
Simple to Understand

4. BENEFITS OF INCENTIVE PLANS
Mutual rewards
Increased Motivation
Increased morale
Increased productivity
Reduced company costs
team work
Reduced absenteeism
Decreased Turnover

5. LIMITATIONS OF INCENTIVE PLANS
Difficult to fix standard time
More supervision required
Union opposition
Poor Quality
Expensive
Time Consuming

6. ESSENTIALS OF A GOOD INCENTIVE PLAN
1) Suitable Climate—Success of an incentive plan greatly depends on the kind of relation between management and workers. If the relations are good, any incentive plan may work successfully. If there is mutual ill-will workers may oppose it considering it as an attempt by the management to force them to work hard. It is necessary that before introducing any incentive scheme, workers and management should discuss the scheme. (2) Information as to goals—The workers should be told about the objectives and goals of the incentive plan in clear terms. The objective may be to increase the quality or quantity of the production. (3) Simplicity—The incentive scheme should be easy to understand and simple to operate. (4) Just and Equitable—It should take into account the skills and abilities of workers. If it is unduly biased in favour of efficient and experienced workers, it will lack motivation for those who arc not so. If it seeks to favour inexperienced and inefficient workers, outstanding and ambitious workers will not have any use for it.

7. (5) Attractive—Incentive payments, should be large enough to attract the employees. If a worker already earning Rs. 500 a month is to get an extra benefit of Rs. 25, he may not consider it worthwhile to strain himself for such a petty gain. (6) Economical—The cost of operating an incentive scheme should be compared with the benefits accruing from it. The gains and benefits should exceed the cost of its implementation. (7) Minimum guaranteed wages—The employee should be assured of a minimum base wage as determined by job evaluation method, irrespective of his output. This gives the worker a feeling of security about his means. The base rate may be reduced due to circumstances beyond his control. (8) Grievance procedure—An incentive wage plan gives rise to grievances of all sorts. Therefore, the management should have an effective grievance procedure to deal with complaint and dissatisfaction ventilated by employees. (9) Stability-The standards and rates once fixed under an incentive plan should not be frequently changed unless there is a substantial change in methods, materials or equipment used in production process. Frequent change in standards and rates will demoralise workers.

8. (10) Comprehensive coverage—Any scheme of incentive wages should embarrass all jobs. If any job in the unit is left out, the workers so neglected will develop grievances and will shake the faith in management. (11) Conducive to workers health and welfare—The incentive wage plan should not aim at overstraining workers because it may tempt the workers to work hard in order to earn more and management may also be benefitted but such gains will not last longer. In the long run, its consequences will be disastrous because it will have ill effects on workers health. (12) Attainable standards—Standards set for performance should reasonably attainable by average employees. They should be neither too difficult nor too easy to attainable by average employees. They should be neither too difficult nor too easy to attain.
(13) Flexible—An incentive scheme should be flexible enough lobe adapted to the needs of any change in the situation.

9. INCENTIVE WAGE SYSTEMS
INDIVIDUAL INCENTIVE SYSTEMS
TIME BASED SYSTEMS
PRODUCTION BASED SYSTEMS
GROUP INCENTIVE SYSTEMS
PRIESTMAN’S PLAN
SCALON PLAN
CO-PARTNERSHIP PLAN
PROFIT SHARING
HALSEY PLAN
ROWAN PLAN
EMERSON PLAN
BEDEAUX
PLAN
TAYLOR’S DIFFERENTIAL PIECE RATE SYSTEM
GANTT’S TASK AND BONUS PLAN

10. Time based systems 1. Halsey Plan:
This plan was first designed by Halsey in Under this plan, a standard time is fixed for completing a work in advance. A person taking standard or more time is paid for the time taken by him. A worker completing his task in less than the standard time is paid for some of the time saved. The payments for time saved vary from 33 1/3% to 66 2/3 % but generally wages for one half of time saved is paid. The wage of a worker is given by
W = T * R * (S-T/2) * R
2. Rowan Plan:
This system is similar to that of Halsey plan. A worker is guaranteed minimum wages for time spent on the job. He gets bonus for completing the job in less than the standard time. The only difference between Halsey and Rowan plans is the method of calculating bonus is that proportion of the wages of the time taken which he saved bears to the standard time allowed.
Wages are calculated by the following relations:
W = T x R + (S – T / 2) x T x R
Here S= standard time allowed
T= time taken
R= hourly rate

11. 3. Emerson Plan:
Emerson, an associate of F.W. Taylor, developed this efficiency plan in A standard output is fixed for determining the efficiency of workers. A worker reaching up to 66 % of efficiency is paid only minimum wages and bonus is paid only when his efficiency crosses this limit.
The rate or bonus increases with the increase in efficiency. For example, 2000 units are fixed as a standard production, a person producing 2000 units achieves 100% efficiency, another person producing 1600 units reaches 80% efficiency and so on.
Under this plan bonus is 20% of wages earned at 100% efficiency and increases by 1% with every percent increase in efficiency. If efficiency is 110% then bonus will be 30% at this level. Efficiency of workers is well acknowledged in this system.
4. Bedeaux Plan:
This plan was devised by Charles E. Bordeaux in It provides comparable standards for all workers. The benefit of time saved goes both to the worker and his supervisor in the ratio of and respectively. A supervisor also helps a worker in saving his time so he is also given some benefit in this method.
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. A worker is paid time wages up to standard B’s or 100% performance. Bonus is paid when actual performance exceeds standard performance in terms of B’s.

12. Productivity based systems
1. Taylor’s Differential Piece-Rate Plan:
F.W. Taylor started this method as a part of the scheme of scientific management. The underlying principle of this system is to reward an efficient worker and penalise the inefficient person. In Taylor’s system, inefficient persons have no place in his organization.
The standard time was fixed for completing a task with the help of time and motion study. 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.
2. Gantt’s Task and Bonus Plan:
This method is named after H.L. Gantt, a class associate of F.W. Taylor. He tried to improve Taylor’s method of wage payment. The workers are guaranteed minimum wages for taking standard time or more. A person taking less than the standard time gets time wages plus bonus.

13. Group incentive plans Suitability:
Group incentive schemes are suitable under the following situations:
1. When individual performance cannot be measured precisely.
2. The workers comprising a group possess the same type of skill or ability.
3. The completion of the task is linked with the collective efforts of the group.
4. The aim is to provide incentive to indirect workers rather than direct workers.
5. The number or persons constituting a group is not large.

14. Methods of Distributing Group Bonus:
1. If all the persons in the group possess the same type of ability or skill then bonus may be distributed equally among them.
2. When group members are paid wages according to same time scale, bonus may also be divided according to that time scale.
3. If workers earn different amounts of wages then bonus maybe distributed in proportion to wages earned by them.
4. Bonus may also be paid on the basis of certain percentage, fixed on the basis of the experience, skill and wages earned by worker.

15. Type of Group Incentive Plans:
1. Priest man’s plan:
A standard production is fixed for the whole enterprise under this plan. If productivity exceeds the standard then bonus is paid in accordance with the increase. In case production does not reach the standard then workers get minimum wages only. For example, a standard production of 200, 000 units is fixed for the year. Actual production during the year is 240,000 units since production has gone up by 20% workers will get 20% higher wages as bonus.
The workers get sufficient incentive to raise their performance. A team spirit is visible among the workers because production will increase with the collective efforts of various limbs of the organization. This method does not offer incentive to individual workers. Inefficient workers share the efforts of efficient workers because increased production benefits all the manpower in the organization.

16. 2. Scalon plan: 3. Co-partnership:
This method is named after Joseph Scalon. There is a payment of one percent participating bonus for every one percent increase in productivity under this plan. The bonus is available to all workers except top management.
The entitle amount or bonus is not paid every month. A reserve fund of one-half of first fifteen percent is created for off-setting any change in labour cost. In case, this reserve remains unused at the end of the year then this amount is also distributed among workers in the last month of the year and a fresh reserve is created in the year
3. Co-partnership:
The employees are offered shares of the enterprise at reduced rates in this plan. The payment is also collected in instalments. The employees share profits of the enterprise as its members. The underlying idea of this method is to make workers feel as a part of the organization and understand view point of the management. As co-partners they will behave in a responsible manner and will try to make the concern more and more profitable and successful.

17. 4. Profit sharing:
When shareholders share profits for contributing towards capital then workers should also get a part of profits for contributing their labour. The workers are an integral part of any organization and their contribution to its prosperity should also be rewarded by making them the recipients of profits.
This realization that employees/workers contribute significantly to increase profit has encouraged the adoption of this system. Profit sharing is a method of remuneration under which an employer undertakes to pay his employees a share in the net profits of an enterprise, in addition to regular wages.

18. Fringe Benefits

19. FRINGE BENEFITS
Fringe benefits refers to the extra benefits provided to the employees in addition to the normal compensation paid in the form of wage or salary .
Definition : According to the glossary of industrial relations and wage terms, “Fringe benefits are supplements to wage received at a cost to the employers . The term encompasses a number of benefits paid vacation, pension, health insurance planes etc. which usually add up to something ,ore than a ‘fringe’ and is sometimes applied to a practice that may constitute a dubious benefit for workers .

20. Main features of fringe benefits
Supplementary forms
Paid to all employees
Indirect compensation
Help raise the living standards
Not meant directly to improve efficiency
Refer to item for which a direct monitory value to the employees can be ascertained
May be statutory or voluntary

21. Objectives of fringe benefits
To recruit and retain the best employees
To protect employees against certain hazards
To improve motivation and morale of the employees
To improve work environment and industrial relations
To ensure health safety and welfare of employees
To develop a sense of belongingness and loyalty among workers
To meet statutory requirements
To satisfy the demands of trade unions
To improve the public image of organisation

22. Kinds of fringe benefits
George R. Terry has enumerated as many as 28 benefits under fringe. A few of them are-a bonus for quality and attendance, contribution to group insurance plan, lay off and termination pay, travel expenses, suggestion awards, medical leave with pay, overtime, university and trade course etc.
The Chamber of Commerce, USA has included 5 types of benefits under fringe benefits. There are;
1) statutory payments
2) Payment for pension and labour welfare
3) Rest or leave with pay
4) Payment for time not worked
5) Other benefits such as profit sharing, suggestions rewards, reimbursement of tuition fees, Festival allowance

23. Fringe benefits in India
Payment for time not worked
Employee security
Safety and Health
Workman’s compensation
Health benefits
Voluntary arrangements
Welfare and recreational facilities
Old age and retirements benefits

24. Fringe benefits offered by:
WIPRO
IBM

25. Cash compensation
Social security and well being
Development and education
Employee stock purchase program
5% discounts of WIPRO stocks
Leave for absence programs
Reallocation program
Railway half-fare season ticket
Family service: areas of child care
Homecare and eldercare
Bonus for recommending new employee
Special conditions for insurance
Sickness and accident income plans

26. Social security
Development and education
Cash compensation
Providing transit passes and van pooling
Airways fair
Travelling and food
Treasury regulations
Providing maternity leave
Bicycle commuter expenses