F ear of Rate Cut: There is fear in the minds of the money-oriented, and the company has less control

2. F ear of Rate Cut: There is fear in the minds of the money-oriented, and the company has less control

employees that standards will be raised high or rates will be over them;

cut if they earn too much.

(iii)Salesmen’s income generally fluctuates widely.

3. Group Restrictions: Peer pressure is a double-edged sword

(c) Combination Method of Salary and Commission Basis:

when it comes to incentive plans. If the group views the plan as fair, it can keep “Loafers” in line and maintain high production.

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If the group feels that plan is not in its interest it will Several authors have suggested a list of requisites that monetary

through education, ostracism, or punishment - see that incentive plans should meet if the incentive method is to be

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production levels of group members is kept at a minimum. attractive to the employee; and at the same time administratively

4. E mployees do not understand the Plan: This happens when

sound. Some of the more important requisites/ specific

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either the details of the plans are not communicated to guidelines for developing effective incentive plans are:

M 1.Insure that Efforts and Rew ards are Directly Related

employees or if communicated, the employees do not clearly

A understand them. If employees cannot understand how The incentive plan should reward employees in direct

performance will lead to rewards, the plans would not prove

proportion to their performance and increased productivity.

G fruitful in motivating them.

E mployees must also perceive that they can actually do the tasks

5. Lack of Require Tools, Training, E quipment etc: The lack of

required.

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required machines and tools, equipment and absence of a This standard set has to be attainable; necessary tools,

sound organisation structure often break the effort - reward equipment, training etc. should be timely provided and the link; and without that link, incentive plan fails.

employee should have adequate controls over the work process.

6. Other Causes: The inequitable wage structure with the

2.The Rew ard M ust be Valuable to the Employees

organisation and the inter-group conflict also lead to non- Increased monetary earnings must have the potential to satisfy cooperation of the employees.

the existing needs of the worker if the worker is to be attracted

W hen to use ‘time’ or ‘output’ basis as an incentive plan?

to them. In other words, the monetary incentives offered must The employees may be paid on a ‘time’ basis under following

be relative to current or visible future needs. circumstances:

3.The Rew ard M ust be Clearly Identifiable

1. When units of output are difficult to measure; Individual’s or groups’ contributions and efforts must be clearly

2. When employees have little control over the quantity of the identifiable, if rewards are to be given for specific performance. . output, such as on much-paced assembly lines;

4.M ethods and Procedures M ust be Carefully Studied

3. When there is no clear direct relationship between the Since effective incentive plans are generally based on a worker’s effort and his output, such as when jobs are highly

meticulous work methods study, the services of an Industrial interrelated;

E ngineer or other Methods’ expert should be obtained who

4. When delays in the work are frequent and beyond employee’s may” through careful observation and measurement, define fair control;

performance standards on which the. plan is to be based.

5. When quality is a primary consideration as with engineering

5.The Plan M ust be Understandable and Easily Calculable

and other professional personnel; and

by the Employees

6. When precise advance knowledge of unit labour costs is not The incentive plan should be easily understood by the workers required by competitive conditions.

so that they can easily calculate personal cost benefit for various On the other hand, payment on ‘output’ basis would be

levels of effort put by them.

preferable if:

6.Effective Standard M ust be Set

1. Units of output can be measured. The standards of which the plan is to be based should be

2. There is a clear relationship between employee effort and effective, i.e., they should satisfy these conditions: quantity of output.

(i) Standards are viewed as fair by the subordinates;

3. The job is standardised, the work-flow is regular, and delays (ii)They should be set high, but reasonable (i.e., there should be are few or consistent.

about a 50-50 chance at reaching it);

4. Quality is less important than quantity or, if quality is

(iii)They should be specific; and

important, it is easily measured. (iv)They should be complete. “Do not just focus on quantity

5. Competitive conditions require that unit labour costs be and disregard quality, unless that is the intention.” definitely known and fixed in advance of production.

7.Standards M ust be Guaranteed

Requisites or guidelines for effective incentive Plans

The standard should be viewed as a contract with the Monetary incentive plans do motivate employees. Robert

employees. Once the plan is operational, great caution should Opsahl and Marvin Dunnettee have concluded: “There is

be used before decreasing the size of the incentive in any way. considerable evidence that installation of such plans usually

8. An Hourly Base Rate M ust be Guaranteed

results in greater output per man hour, lower unit cost, and At least the plant employees should be guaranteed the base rate. higher wages in comparison with outcomes associated with the Moreover, there should be one base rate for a job regardless of straight payment systems.”

whether or not it is on ‘incentives.’

But these plans will not be effective unless a careful planning is done and the plans properly implemented.

9. Clear Policies and Rules M ust be Developed

Specific policies and rules concerning how employees will be paid, and the rules for attaining the standard (and incentives) should be clear to both manager and employees.

10. Rew ards M ust be Consistent w ith Government

Notes

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Regulations P

The incentives offered must govern regulations regarding

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compensation. The level of the reward and the frequency of it

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must meet minimum wage guidelines.

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