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Unit 6: Compensation and Rewards

(c) The plan should be easily understood by the employees so that they can easily Notes
calculate personal cost and personal benefit for various levels of effort put in by them.
Complicated plans and formulae sow seeds of doubt and mistrust in the worker’s
mind.
(d) The plan should provide for rewards to follow quickly after the performance that
justifies the reward. Employees do not like to be rewarded next month for extra effort
expended today.
(e) The plan must be within the financial and budgetary capacity of the organization. In
other words, the plan should not be very costly in operation. It should be ascertained
in advance that these costs (incentives) are amply covered by the resultant benefits.
(f) The work standard once established should be guaranteed against change. The work
standard should be viewed as a contract with the employees. This rule must be strictly
adhered to by management. Once the plan is operational, great caution should be used
before decreasing the size of the incentive in any way.
(g) The plan should be set on reasonable standards, i.e. it should not be too difficult or
too easy. If the standard sets are too difficult they make the employees unenthusiastic
about it. If the standard sets are too easy, the employees would hardly experience any
competition. Thus, a fair and optimum standard is the key to any incentive plan.
(h) The reward must be valuable to the employees. The incentive payments under the plan
should be large enough in relation to the existing income of employees.

(i) The incentive plans must encourage employees to support each other rather than be
non-cooperative.
(j) The plan should not be detrimental to the health and welfare of the employees. It
should therefore include a ceiling on the maximum earnings by way of incentives.
(k) Individuals or group’s contributions and efforts must be clearly identifiable, if rewards
are to be given for specific performance.

(l) A guaranteed base rate should be included in any plan. Employees want to be assured
that they will receive minimum wages regardless of their output. This introduces an
element of security for the employees.

The work standard once established should be guaranteed against change
and viewed as a contract with the employees, great caution must be taken
before decreasing the size of the incentive in any way.

6.2.8 Fringe Benefits

Fringe benefits are the additional benefits and services that can be provided by a company
to its employees in addition to their direct salary. Therefore, fringe benefits can be defined
as the additional benefits and services that a company provides to its employees on the basis
of their performance. Both the terms, benefits and services are considered similar by most
of the people but some believe that they are entirely different. According to them, benefits
are applicable only for those items that can be associated with some monetary value whereas
a service is applicable for the items that cannot be associated with any direct money values.
However, more or less, both the terms, benefits and services, mean the same in reference
to fringe benefits.

The fringe benefits help:
1. Lessen fatigue
2. Oppose labour unrest

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