Page 138 - DMGT106_MANAGING_HUMAN_ELEMENTS_AT_WORK

Managing Human Element at Work

Notes Simple Incentive Plan

The simplest of all wage incentives may be described as the straight piece-rate system. The
piece-work method is perhaps one of the oldest and simplest of the incentive plans. The basis
of computation is the rate per piece multiplied by the number of pieces produced. For
example, if the piece-rate is ` 2 for each unit of output, then a worker who produces 10 units
in a given time, say 8 hours, will be paid ` 20. Another worker whose production is 12 units
in the given time (i.e. 8 hours) will receive ` 24 and so on.
This method of payment is suitable if the process of production is standardized and large
quantities are produced by repetition. The system is not suitable where workers working
fastly to earn more wages are likely to lower the quality of the goods they produce.

Sharing Incentive Wage Plan
There are a large number of plans in this category. These plans are the modifications of the
Taylor’s differential piece rate incentive plan. Under this plan, the workers exceeding the
standard or even just attaining it are entitled to the higher rate and those, whose output is
less than the standard output, are paid at a lower rate. Taylor’s philosophy was to attain a
high level of output and therefore, there was a differential piece rate, low rates for output
below the standard and high rates for output above the standard.

Group Incentive Plan

Individual incentive scheme is not suited to cases where several workers are required to
perform jointly a single operation. In such cases, a team approach is called for, with all the
members of that team doing their share to achieve and maintain the output. The advantage
of group incentive plans is that they encourage team spirit and a sense of mutual cooperation
among workers. Under the group incentive plan, each member of the group is determined
first of all by measuring the amount of the production which passes inspection as it leaves
the group. The total earnings for the group are then determined and if all the members are
of equal skill, these earnings are usually divided among them equally.
6.2.7 Requisites for the Success of an Incentive Plan

An incentive scheme is based on three basic assumptions. They are:
1. Money is a strong motivator.
2. There is a direct relationship between effort and reward.

3. The worker is immediately rewarded for his efforts.
Though monetary incentive plans do motivate employees, these plans will not be effective
unless certain requisites are met. Several authorities on the subject have suggested a list of
requisites that monetary incentive plans should meet if they are to be attractive to the
employees. These requisites are:
(a) The relations between management, supervisory staff and workers should be cordial
and free from suspicion. Management must, therefore, ensure association of workers
during the development and installation of the scheme.

(b) The incentive plan should reward employees in direct proportion to their
performance. The standard set has to be attained; necessary tools, equipment,
training, etc. should be provided and the employee should have adequate control
over the work process.

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