SOUND INCENTIVE PROGRAM………………………
§ Sound incentive program must be easily understood.
§ It should be acceptable to the employees.
§ It must benefit employees as well as employer.
§ It should not be costly to operate.
§ It should stimulate the interest among the workers.
§ It should assist in supervision.
INDIVIDUAL INCENTIVE PLANS:
Advantages:
§ Raise productivity, lower production costs
§ Increase earning
§ Individual motivation
§ Less direct supervision required
§ Objective evaluations
§ Employee perception of equity – high performance linked to high reward.
Disadvantages:
§ Quality vs. quantity issues: Undesirable outcomes: low quality, equipment damage, poor customer service, etc.
§ New production methods/improvements may be resisted
§ Lack of cooperation in on-the-job-training
§ Elevated levels of mistrust between management & workers
TYPES
OF INCENTIVE PLANS………………………..
1. EARNINGS VARY IN THE SAME PROPORTION AS
OUTPUT:
1.1.
STRAIGHT PRICE WORK
- Straight
piece-rate is the first of the methods of payment by production to replace
the time-rate method.
- Here,
the rate per unit of output is fixed, and the total earnings of a worker
are arrived at by multiplying the total output (measured in terms of
units) by the rate per unit. For example:
|
§ Rate
per unit
|
: Tk.10
|
|
§ Total
output
|
: 100 units
|
|
§ Earnings
|
100X0.10=Tk.1000
|
1.2.
STANDARD HOUR:
§
It is designed to protect the worker against unduly low earnings due to
causes beyond his or her control.
- In
the standard hour system, 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.
- He
or she is paid the same wages if he or she takes more than the standard
time, 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.
The following examples illustrate the
method:
|
§ Standard
time
|
: 10 hrs
|
|
§ Rate
per hour
|
: Tk. 1.00
|
|
CASE (i)
|
|
|
Time taken
|
: 8 hrs
|
|
Earnings
|
: 10X1=Tk.10
|
|
CASE (ii)
|
|
|
Time taken
|
: 12 hrs
|
|
§ Earnings
if time wages are not guaranteed
§ Earnings
if time wages are guaranteed
|
: 10X1=Tk.10
: 12X1=Tk.12
|
1.2. EARNINGS VARY LESS PROPORTIONATELY THAN
OUTPUT
1.2.1.
HALSEY PREMIUM PLAN
§
This plan was developed by FA
Halsey and was first introduced in the Weir Engineering Works, England.
§
With this method, if a man improve
on the standard time (which is commonly based upon the average day-work record,
and not upon any scientific time study), he is given not the whole of the time
saved as under the piece-rate system, but a definite portion of it, commonly
one half. The remaining going to the employer.
§ If the worker takes the standard time or more to complete the job, he
or she gets paid at the time rate. In other word, time wage are guaranteed even
if the output of the worker is below standard.
The following examples illustrate the plan:
|
Standard
time
|
:
10 hrs
|
|
Rate
per hour
|
:
Tk. 1
|
|
Case
(i)
|
|
|
Time
taken
|
:
10 hrs
|
|
Earnings
|
:
10 x 1 =Tk. 10
|
|
Case
(ii)
|
|
|
Time
taken
|
:
12 hrs
|
|
Earnings
|
:
12 x 1 =Tk. 12
|
|
Case
(iii)
|
|
|
Time
taken
|
:
8 hrs
|
|
Earnings:
Time
wages
Bonus
|
:
8 x 1 = Tk. 8.00
:
½ x 2 x 1 = Tk. 1.00
Tk. 9.00
|
1.2.2.
THE ROWAN PREMIUM PLAN
§ Under the Rowan System too, standard time and rate per hour
are fixed. If the time taken to complete the job is equal to or exceeds the
standard time, the employee is paid for the time taken at the rate per hour.
§ If the time taken is less than the standard time, the
employee is entitled to bonus, in addition to time wages.
§ The Rowan system follows the Halsey premium in paying a
portion of the time saved, but instead of giving to the worker a fixed
percentage of the saving, it takes the form of a percentage of the worker’s
time-rate. This percentage is equal to proportion of the saved time.
§ Thus, if the employee performs a task in eight hours, the
standard time having been fixed at ten hours, he would get a premium of
two-tenths or 20 per cent of 8 hours- 1.6 hours. (It should be noted that the
premium percentage is applied to the time actually worked, not to the time
saved).
Rowan system operates on the following lines:
|
Standard time
|
10 hrs
|
|
Rate per hour
|
Tk. 1
|
|
Case (i)
|
|
|
Time taken
|
10 hrs
|
|
Earnings
|
10X1=Tk. 10
|
|
|
|
|
Case (ii)
|
|
|
Time taken
|
12 hrs
|
|
Earnings
|
12X1=Tk. 12
|
|
|
|
|
Case (iii)
|
|
|
Time taken
|
8 hrs
|
|
Earnings:
Time wages
Bonus
|
8X1 =Tk. 8.00
2/10X8 =Tk. 1.60
Tk.
9.60
|
.3.1.
TAYLOR’S DIFFERENTIAL PIECE-RATE PLAN
§ The differential piece-rate is a method of remuneration,
Developed by F.W. Taylor, the founder of Scientific Management in 1880) with
the aim of encouraging a maximum production.
§ The principle of the system lies, of course, in the
adjustment of reward to performance. For a high output a high piece-rate is
given; but this high rate is sacrificed by the worker if any part of his work
fails to attain a predetermined standard.
§ The task or number of units that a worker can produce in a
given time is determined and taken as a standard.
§ Two piece-rates are then set for the work, a high rate if the
worker does his task in the standard time or less, and a lower rate if he takes
longer than the standard time.
EXAMPLE:
|
§ Standard Output
|
: 100 units
|
|
§ Rate per unit
|
: Tk. 10
|
|
Differential to be applied:
§ 120% of piece-rate at or above the standard
§ 80% of piece-rate when below the standard
|
|
|
Case (i)
|
|
|
§ Output
|
: 120 units
|
|
§ Earnings
|
:
 |
|
Case (ii)
|
|
|
§ Output
|
: 90 units
|
|
§ Earnings
|
:
 |
1.2.3. BEDEAUX’S POINT PREMIUM PLAN
§
Under Bedeaux’s point premium plan,
the standard time for each job is fixed after undertaking time and motion
study.
§
Each minute of the allowed time is
called a point or B. Thus, there are 60 Bs in one hour. Each job has a standard
number of Bs. The rate per hour is also determined.
§
The worker receives, in addition to
his or her hourly rate, a bonus, which under the original plan is equal to 75%
of the number 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. In other words, the workers who
are not able to or just able to complete the program within standard time are
paid at the normal time rate.
§
Those who are able to complete their
work earlier are paid bonus equal to the wages for time saved. Generally, the
bonus paid to the worker is 75 per cent of the wages for time saved. The
remaining 25 per cent goes to the foreman.
§ Finally, the plan is the combination of straight piece rate and standard hour plan.
EXAMPLE: THE BEDAUX SYSTEM
Standard time
|
: 10 hrs
|
Rate per hour
|
: Tk. 1
|
Case (i)
|
|
Actual time
|
: 12 hrs
|
Earnings
|
: 12X1=Tk. 12
|
|
|
Case (ii)
|
|
Actual time
|
: 12 hrs
|
Earnings:
Time wages
Bonus:
Standard Bs
Bs Saved
|
: 8X1=Tk. 8
: 10X60= 600
: 8X60 = 480
120
|
Bonus
|
:
|
Total Earnings
|
: 8+1.50=Tk. 9.50
|
1.3. EARNINGS DIFFER AT DIFFERENT LEVELS OF
OUTPUT
Output
Based:
§ Taylor’s
Differential Plan
§ Merrick
Differential Plan
§ Gantt
Task System
Time
Based:
§ Emerson’s
Efficiency Plan
1.3.1.
TAYLOR’S DIFFERENTIAL PIECE-RATE PLAN
§ The differential piece-rate is a method of remuneration,
Developed by F.W. Taylor, the founder of Scientific Management in 1880) with
the aim of encouraging a maximum production.
§ The principle of the system lies, of course, in the
adjustment of reward to performance. For a high output a high piece-rate is
given; but this high rate is sacrificed by the worker if any part of his work
fails to attain a predetermined standard.
§ The task or number of units that a worker can produce in a
given time is determined and taken as a standard.
§ Two piece-rates are then set for the work, a high rate if the
worker does his task in the standard time or less, and a lower rate if he takes
longer than the standard time.
EXAMPLE:
|
§ Standard Output
|
: 100 units
|
|
§ Rate per unit
|
: Tk. 10
|
|
Differential to be applied:
§ 120% of piece-rate at or above the standard
§ 80% of piece-rate when below the standard
|
|
|
Case (i)
|
|
|
§ Output
|
: 120 units
|
|
§ Earnings
|
:
|
|
Case (ii)
|
|
|
§ Output
|
: 90 units
|
|
§ Earnings
|
:
|
1.3.2. GANTT TASK SYSTEM
§ Another system of remuneration associated with the Taylor plan is the Task-with-bonus, which originated with Mr. H. L. Gantt, who was associated with Dr. Taylor for some years.
§ The
worker is guaranteed his or her time-rate for output below the standard. On
reaching the standard output or task, which is set at a high level, the worker
is entitled to a bonus of 20% of the time wages. For output above the task,
high piece-rates are paid.
EXAMPLE:
|
§ Rate per hour
|
:
Tk. .50
|
|
§ High piece-rate
|
:
Tk. .10
|
|
§ Standard output
|
:
80 units
|
|
§ Time taken
|
:
8 hrs
|
|
Case
(i)
|
|
|
§ Output
|
:
70 units
|
|
§ Earnings
|
:
8X0.50=Tk. 4.00
|
|
As
the output is less than the standard only time wages are paid to the worker.
|
|
|
Case
(ii)
|
|
|
Output
|
:
80 units
|
|
Earnings:
§ Time wages
§ Bonus
§ Total Earnings
|
:
8X0.50 =Tk. 4.00
:
20/100X4=Tk. 0.80
Tk. 4.80
|
|
As the output is equal to the standard, the worker is
entitled to time wages plus 20% of time wages as bonus.
|
|
|
Case
(iii)
|
|
|
§ Output
|
:110
units
|
|
§ Earnings:
|
:110X0.10=Tk.
11
|
|
As the output is more than the standard, the worker is
entitled to a high-piece-rate.
|
|
1.3.3. THE EMERSON’S PLAN
§ Under the Emerson Efficiency bonus, a standard time is
set for each job, and the efficiency of each worker is determined by dividing
the time taken by the standard time.
§ Up to 67% of efficiency, the worker is paid by time-rate.
Thereafter, a graduated bonus, which amounts to a 20% bonus at 100% efficiency
is paid to the worker. Thereafter, an additional bonus of 1 % is added for each
additional 1% efficiency.
§ The Emerson Efficiency bonus, which originated in the United
States where it is said to be in successful operation, is perhaps more
particularly associated with railway repair-shops and with factories where it
is extremely difficult to standardize materials, processes and conditions.
§ This plan has for its basis a guaranteed time-wage and sets
up a standard of efficiency which is possible of attainment by a worker with
good average ability. For the attainment of this standard, which is called
"100 per cent efficiency", a bonus is awarded. The amount of the
bonus is commonly 20 per cent of the time-wage.
§ The unit of efficiency is determined for a period of time,
such as a day, week or month- usually for a full pay-roll period and not for
individual operations or jobs. The efficiency unit is obtained by dividing the
total actual times into the sum of the standard times.
EXAMPLE: THE EMERSON’S PLAN
|
§ Standard output in 10 hrs
|
:
100 units
|
|
§ Rate per hour
|
:
Tk. 1
|
|
Case
(i)
|
|
|
§ Output in 10 hrs
|
:
50 units
|
|
§ Efficiency
|
:
50%
|
|
§ Earnings (Time Wages only)
|
:
10 X 1=Tk. 10
|
|
As the efficiency is below 67%, only the time wage is
entitled.
|
|
|
Case
(ii)
|
|
|
Output
in 10 hrs
|
:
100 units
|
|
Efficiency
|
:
100%
|
|
Earnings:
§ Time wages
§ Bonus
§ Total
|
:
10 X 1 = Tk. 10.00
:
: Tk. 12.00
|
|
Time
wages plus 20% of time wages, as bonus is entitled.
|
|
|
Case
(iii)
|
|
|
Output
in 10 hrs
|
:
130 units
|
|
Efficiency
|
:
130%
|
|
Earnings:
§ Time wages
§ Bonus
§ Total
|
:
10 X 1 = Tk. 10.00
:
: Tk. 15.00
|
|
At the rate of 20% at 100% efficiency and 1% increase for
every 1% increase in efficiency, the worker is eligible for 50% of the time
wage as bonus.
|
|
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