INCENTIVE PLANS AND

FRINGE BENEFITS
SUBMITTED TO - SUBMITTED BY-
PRIYANKA JAIN MAM
RAKSHIT(223)
AKHIL(224)
NAVRAJ(225)
ANSHIT(228)
NISHTHA(229)
DIVIJ(231)
 MEANING
• According to The National Commission on Labour “ Wage incentives are extra
financial motivation. They are designed to atimulate human effort by
rewarding the person over and above the time rated remuneration for
improvements in present or targeted results.

• KEY WORDS:
- Extra financial motivation.
- Designed to stimulate human effort.
- Over and above the time rated remuneration.
 CHARACTERISTICS OF INCENTIVE PLANS
• Minimum wages are guranteed to all workers.
• An incentive plan may consist of both monetary and monetary elements.
(Non monetary such as re-imbursement)
• For a successful incentive plan, the essentials are timings, accuracy,
frequency of incentives.
• The incentive plan requires that it should be properly communicated to the
workers to encourage individual performance provide feedback and
encourage redierection.
 BENEFITS OF INCENTIVE PLANS
• The scientific work study which is done before introducing a wage incentive
plan brings about improvements in methods, work flow etc.
• Provide an opportunity to hard working and ambitious employees
• Lesser supervision- Employees become disciplined and responsible
• Minimise absenteesim, accidents.
• Employee-Employer relations are improved.
• Morale of workers is increased.
• Spirit of mutual cooperation and team work is created.
• Employees are satisfied with high earnings and Employer or Management
with increased productivity
 LIMITATIONS OF INCENTIVE PLANS

• If there is no bar on incentive plans workers may involve themselves in

overtime and invite many health problems
• Workers may show negligence to improve units of produce.
• Management may face various challenges while introducing new plans and
making changes in the old one. Workers may show resistance to adopt the
new plans.
• Formation and implementation requires additional cost and tine of clerical
staff.
• Jealousy and conflicts may arise between workers in regard to production of
units
 ESSENTIALS OF GOOD INCENTIVE PLANS
• Suitable climate
• Worker's Participation
• Simplicity
• Just and equitable
• Organisation and Method study
• Scientifically set standards
• Minimum guaranteed wages
• No upper limits
• Economical
• Stability
• Comprehensive coverage
• Conducive to worker’s health and
welfare
• Prompt payment
• Grievance machinery
• Follow up
TYPES OF WAGE INCENTIVE PLANS

 There are a number of incentives plans used in various industries.

 There are both individual as well as group plans.

 In individual plans, payments are made on the basis of time taken and
percentage of time saved.

 In group incentive plans, all members of group are given incentives for
increasing their collective performance.
 TYPES OF INCENTIVE PLANS

Incentive Wage System

Individual Incentive System Group Incentive System
Production
Time Based
Based

Halsey Plan
 Taylor’s Priestman’s Plan
Differential
Rowan Plan
Piece Rate
Scalon Plan
Emerson System Co-Partnership
Plan  Grantt’s
Bedeaux
Plan
Task and
Plan Bonus Plan Profit Sharing
 TIME BASED SYSTEMS

 Halsey Plan
 Designed by F.A.Halsey of Rand Deill Co., Canada.

 A standard time is fixed for completing a work in advance.

 Generally wages for one half of time saved are paid.

 Formula for calculating wages :

T *R + (S –T ) *R S = Standard T = Time taken

2 R = Hourly Rate
Rowan Plan
 Designed by Rowan

 A worker is guaranteed minimum wages for time spent in job.

 In Rowan Plan , bonus is that proportion of wages of time taken

which the time saved to standard time allowed.

 Formula for calculating wages :

T *R + (S -T )*R *T S = Standard T = Time taken

S R = Hourly Rate
 Emerson Plan
 Designed by Emerson, an associate of F.W.Taylor in 1910.

 A worker reaching upto 66.67% of efficiency is paid only

minimum wages.

 Bonus is paid only when his efficiency crosses this limit.

 Under this plan bonus is 20% of wages at 100% efficiency

and increases by 1% with every percent increase in
efficiency.

 Example: If efficiency is 110 % then bonus will be 30% at

this level.
 Bedeaux Plan
 Designed by Charles E. Bedeaux, in 1911.

 According to this plan the benefit of saving time goes both to

worker as well as his supervisor in ratio 3:1.

 A supervisor also helps in saving time so he is also given some

benefit in this method.

 The standard time for each job determined in terms of minutes

are called Bedeaux Points or B’s.

 A worker is paid time wages upto 100% performance.

 Bonus is paid when actual performance exceeds standard

performance in terms of B’s.
 Production
based systems

Taylor's
differential
piece rate
system.

Gantt’s task
and bonus
plan.
 TAYLOR’S DIFFERENTIAL PIECE RATE
SYSTEM.
 Taylor started this method as a part of the scheme of scientific management.
 Principle of this system is to reward an efficient worker and penalise inefficient worker.
 Standard time was fixed to complete the task with the help of Time and motion study.
 Features are:- 1.No minimum wages guaranteed.
2. A standard time is fixed .
3. Different rates are fixed for taking standard time or more.
 Merits are:- 1. Simple and easy
2.Good incentives offered.
 Demerits are:- 1.Minimum wages are not guaranteed.
2.Difficult to determine labour cost.
 GANTT’S TASK AND BONUS PLAN.

 Named after H.L. Gantt ,a close associate of F.W. Taylor.

 Minimum wages are guaranteed for taking standard time or more.
 Features are:- 1.Standard time fixed for completing the task.
2.Wages on hourly rate.
3.Bonus of 25%-50% is given for completing task in less than standard time.
 Merit is that minimum wages are guaranteed and person completing task in less time gets
time wage plus bonus.
 Demerits are:- 1. workers don’t bother about efficiency.
2. creation of jealousy among efficient and inefficient workers.
 GROUP INCENTIVE SYSTEMS.
 Workers paid on personal performance.
 Situations may arise where performance is not measurable.
 The work of one person may be influenced by work of other.
 Amount of bonus divided among all in organisation.
 Suitability -: 1.individual performance cant be measured.
2.groups have same ability and skills.
3.incentive to indirect workers.
4.number of person in one groups is not large.
 METHODS OF DISTRIBUTING BONUS
 Persons with same ability and skills if in one group then equal bonus.
 Group members paid wages according to same time rate then bonus also on time rate.
 Workers earning different amount of wages then bonus in ratio of wages.
 May also be paid on the basis of percentage ,experience, skill and wages earned by
worker.

Methods

Same ability
&skills

Ratio of Percentage,
Time rate
wages skills, wages.
 TYPES OF GROUP INCENTIVE PLANS
1. Priestman’s Plan
2. Scalon Plan
• Method named after Joseph Scalon of USA.
• There is payment of one percent participating bonus for every one percent increase in
productivity.
• Bonus available to all employees except top management.
• Entire bonus is not paid rather reserve fund of one half of first 15% is created for setting off in
labor cost.
• Incase reserve remains unused at end of year then this amount is distributed among
employees.
3. Co- Partnership
• Under this scheme employees are offered shares of enterprise at reduced rates.
• Payment is collected in installments.
• Employees share profits as its members.
• Underlying idea of this method is to make workers feel themselves as part of organization.
• As co-partners they will behave responsibly and try to achieve maximum profits.
4. Profit Sharing
• When shareholders share profits for contributing towards capital then
workers should also get part of profits.
• Workers are integral part of organization so they should be rewarded by
making them recipients of profits.
 ESSENTIALS OF GOOD INCENTIVE PLAN
1.Simple To Understand
• Good incentive plan should be simple to understand by workers.
• They should be able to know extra amount to be paid to them.
• If method involves complicacy calculations
then workers may find difficulty in calculating
their wages.
2. Just And Equitable
• System will succeed if it is just and equitable.
• Worker should be fully awarded for the effort put by him.
• Wages paid must be commensurate with the interest taken by workers.

3.Attractive
• Incentive payments should be large enough to attract workers for improving
their performance.
• If incentive is small workers will not be tempted towards it.
4.Reasonable Standards
• Standards fixed under incentive plans should be attainable with some extra
efforts.
• Workers will feel discouraged if standards are not achieved with extra
efficiency.
• Standards should be such that they may be achieved by average workers
also.
5.Willing Co-operation of workers
• Scheme should have willing support of workers.
• Before introducing scheme it should be discussed with workers and their
viewpoints should be incorporated.
FRINGE BENEFITS
 DEFINITION:-

Fringe benefits are supplements to wages received by workers at a cost

to the employers. The term encompasses a number of benefits-paid
vacation, pension, health insurance plans etc. which usually add up to
something more than the ‘fringe’ and is sometimes applied to a practice
that may constitute a dubious benefit for workers.
 FEATURES:-
 Fringe benefits are supplementary to regular wages or salaries.
 These benefits are paid to all the employees based on their membership
in the organisation.
 These benefits are indirect compensation because these are usually
extended as a condition of employment and are not directly related to
performance.
 Fringe benefits involve labour cost for the employer and are not meant
directly to improve efficiency.
 Fringe benefits raise the living standard of employees.
 FRINGE BENEFITS IN INDIA
A. Payment for time not worked
B. Employee security
C. Safety and health
D. Workmen’s compensation
E. Health benefits
F. Voluntary arrangements
G. Welfare and Recreational facilities
H. Old age and Retirement benefits
A. PAYMENT FOR TIME NOT WORKED
I. Paid holidays. According to the factories Act, 1948, an adult worker shall have
weekly paid holidays, preferably Sunday. When a worker is deprived of weekly
holidays, he is eligible for compensatory holidays of the same number in same
month.
II. Shift Premium. Companies operating second and third shifts, pay a premium to
the workers who are required to work during the night shift.
III. Holiday Pay. Generally organisations offer double the normal rate of the salary to
workers who work during holidays.
IV. Paid Vacation. Workers in manufacturing, mining and plantations who had
worked for 240 days during the calendar year are eligible for paid vacation at the
rate of one day for every 20 days worked in case of adult workers and one day
for every 15 days worked in case of child workers.
B. EMPLOYEE SECURITY
A minimum and continuous wage or salary gives a sense of security to the
employees. The payment of wages Act 1936, provide income security to the
employees. In addition to this, the Industrial Disputes Act,1947 provides for
payment of compensation in case of lay off and retrenchment.

C. SAFETY AND HEALTH

Employees’ safety and health should be taken care of in order to protect the
employees against accidents, unhealthy working conditions and to protect the
workers’ productive capacity. In India, The Factories Act, 1948, has stipulated
certain conditions and requirements regarding working conditions with a view to
provide safe working environment.
D. WORKMEN’S COMPENSATION
Workmen’s Compensation Act, 1923 is intended to meet the contingency of
invalidity and death of a worker due to an employment injury or an
occupational disease specified under the Act as the sole responsibility of the
employer.

E. HEALTH BENEFITS
Organisations provide various medical facilities to the employees and their
family members. Employees State Insurance Act, 1948 deals comprehensively
about the health benefits to be provided. Benefits under this Act include:
1. Sickness Benefit
2. Maternity Benefit
3. Disablement Benefit
4. Dependent Benefit
5. Medical Benefit
F. VOLUNTARY ARRANGEMENTS
Many large organisations provide health services over and above the legal
requirements free of cost to their employees by setting up hospitals, clinics,
dispensaries and homeopathic dispensaries.

G. OLD AGE AND RETIREMENT BENEFITS

Employers provide some old age and retirement benefits to their employees, with a
view to create a feeling of security about old age. These include:-
I. Provident Fund
II. Pension
III. Deposit Linked Scheme
IV. Gratuity
V. Medical Benefits
H. WELFARE AND RECREATION FACILITIES
These include:-
I. Canteens
II. Consumer Societies
III. Credit Societies
IV. Housing
V. Legal Aid
VI. Employee Counselling
VII. Welfare organisations
VIII. Holiday Homes
IX. Educational Facilities
X. Transportation
XI. Parties and Picnics
XII. Miscellaneous