HRMChapter-4

Motivational Strategies

Types of Incentives Schemes

Incentive Schemes

Earnings vary in The same proportion

As output

Earnings vary lessProportionately

Than output

Earnings vary proportionatelyMore than output

Earnings differ atDifferent levels of output

1.Straight Piece Work

2. Standard Hour

1. Hasley Plan2. Rowan Plan

3. Barth Scheme4. Bedaux Plan

1. High piece rate

2. High standard hour

1. Taylor’s Differential Piece rate2. Merrick Differential

Piece rate3. Gantt task

System4. Emerson’s efficiency

plan

1. Straight piece-work

• Straight piece-work method is the oldest, simplest and the most commonly used method.

• Here, the rate per unit of output is fixed, and the total earnings of a worker arrived at by multiplying the total output ( measured in terms of units) by the rate per unit.

Example

• If the rate per unit is 10 paisa and the total output of an employee is 100 units, his or her earnings will be

• 100 * 0.10= Rs.10.00

• Extending the logic of the piece-rate system, a worker has to go without wages if he or she fails to turn out the required goods.

• For this reason, the system is modified in one respect – the worker’s time –rate is guaranteed.

2. Standard hour system( 100 % gains –sharing)

StandardHour system

Wages Are not

guaranteed

Wages are guaranteed

Example(Wages Are not guaranteed)

• Standard time = 10 hours• Rate per hour = Re 1

• Case (i) • Time taken =8 hours• Earnings = 10*1= Rs.10

Example(Wages Are guaranteed)

• Standard time = 10 hours• Rate per hour = Re 1

• Case (ii) • Time taken =12 hours• Earnings = 12*1= Rs.12

1. Hasley Plan

• Standard time is fixed for the completion of a job and the rate per hour is determined.

• If the worker takes the standard time or more to complete the job, he or she gets paid at the time rate.

• In other words, time wages are guaranteed even if the output of the worker is below standard.

• When the work is done in less than the standard time, he or she gets paid for the actual time, at the time rate plus a bonus which is calculated as at or as a specified percentage of the saved time.

• The percentage varies from 30-70 percent. The usual share is 50 percent, the remaining going to the employer.

Example

• Standard time = 10 hours• Rate per hour = Re 1

• Case (i) • Time taken =10 hours• Earnings = 10*1= Rs.10

• Standard time = 10 hours• Rate per hour = Re 1

• Case (ii) • Time taken =12 hours• Earnings = 12*1= Rs.12

• Standard time = 10 hours• Rate per hour = Re 1

• Case (iii) • Time taken = 8 hours• Earnings = 8*1= Rs.8 ( Time wages)• Bonus = ½*2*1= Rs.1• Total = Rs. 9

2. Rowan System

• 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 the time wages.

• The bonus takes the form of a percentage of the worker’s time-rate.

• This percentage is equal to the proportion of the saved time, to the standard time.

Example

• Standard time = 10 hours• Rate per hour = Re 1

• Case (i) • Time taken =10 hours• Earnings = 10*1= Rs.10

• Standard time = 10 hours• Rate per hour = Re 1

• Case (ii) • Time taken =12 hours• Earnings = 12*1= Rs.12

• Standard time = 10 hours• Rate per hour = Re 1

• Case (iii) • Time taken = 8 hours• Earnings = 8*1= Rs.8 ( Time wages)• Bonus = 2/10*8=Rs.1.6• Total =Rs. 9.60

3. Barth System

• The barth system does not guaranteed the time-rate.

• The worker’s pay is ascertained by multiplying the standard hour by the number of hours actually taken to do the job, taking the square root of the product and multiplying it by the worker’s hourly rate.

Example

• Standard time = 10 hours• Rate per hour = Re 1

• Case (i) • Time taken =12 hours• Earnings = 12*10 (square root) = 10.95 * 1 = Rs. 10.95

• Standard time = 10 hours• Rate per hour = Re 1

• Case (ii) • Time taken =10 hours• Earnings = 10*10 (square root) = 10 * 1 = Rs. 10.00

• Standard time = 10 hours• Rate per hour = Re 1

• Case (ii) • Time taken = 8 hours• Earnings = 8*10 (square root) = 8.94 * 1 = Rs. 10.00

4. Bedaux Scheme • The standard time for a job is determined.• 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 workers receives, in addition to his or her

hourly rate, a bonus which under the original plan is equal to 75% of the no. 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.

Example

• Standard time = 10 hours• Rate per hour = Re 1

• Case (i) • Time taken =12 hours• Earnings = 12*1= Rs.12

• Case (ii)Actual time = 8 HoursEarnings: Time wages = 8*1= Rs. 8Bonus: Standard Bs = 10* 60 = 600Actual Bs = 8*60 = 480Bs saved = 120Bonus = 75/100*120*1/60 = Rs. 1.50Total earnings = 8+1.5 = Rs. 9.5

1. The high piece rate and2. The high standard hour

system• Under this, the earnings of the worker are

in proportion to his or her output, as in straight piece-work, but the increment in earnings for each of the output above the standard is greater.

• Example:- for each one percent increase in output in earnings under the straight piece-rate system.

Example

• Standard time = 10 hours• Rate per hour = Re 1

• Case (i) • Time taken =12 hours• Earnings = 12*1=12 hours• Increase in output=1.2*1*4/3=1.6• Total =13.6

1. Taylor’s Differential piece-rate system

• There is a low rate for output below the standard, and a higher piece-rate for output above the standard.

• Differentials to be applied:• 120% of piece-rate at or above the

standard• 80% of piece-rate when below the

standard

Example

• Standard output = 100 units• Rate per unit = 10 paisa

• Differentials 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 =120*120/100*0.10= Rs.14.40

Case (ii) = 90 unitsEarnings = 90*80/100*0.10= Rs. 7.20

2. Merrick differential piece-rate system

• Is a modification of the Taylor system, with three instead of two-rates.

• So, as to encourage new and average workers.

• Straight piece-rates are paid up to 83% of the standard output, at which a bonus of 10% of the time-rate is payable, with a further 10% bonus on reaching the standard output.

• Differentials to be applied:• As the efficiency is more than 83% but

less than 100%,110% of the base piece-rate applies

• As the efficiency exceeds 100%, 120% of the base piece-rate applies

Example• Standard output = 100 units• Rate per unit = Re 1

• Case (i) • output =80 units• Earnings = 80/100*100 = Rs.80%• As the efficiency is less than 83%, only the base

piece-rate applies• 80*0.10=Rs. 80

• Case (ii) Output =90 unitsEfficiency = 90/100*100=90%As the efficiency is more than 83% but less

than 100%, 110% of the base-rate applies90*110/100*0.10= RS.9.90

• Case (iii) Output =110 unitsEfficiency = 110/100*100=110%As the efficiency is more than 100%, 120%

of the base-rate applies110*120/100*0.10= RS.13.20

3. Gantt Task System

• The worker is guaranteed his of her time-rate for output below the standard.

• On reach in the output or task, which is set at a high level, the worker is entitled to a bonus of 20% of the time wages.

• For outputs above the task, high piece-rates are paid.

Example• Standard output = 80 units• Time taken = 8 hrs• Rate per hour= Re 0.50• High piece-rate=Re. 0.10• Case (i) • Time taken =70 units• As the output is less than the standard, only time

wages are paid to workers• 8*0.50=Rs.4.0

• Case (ii) • Time taken =80 units• As the output is equal to the standard, the

worker is entitled to time wages plus 20% of the time wages as bonus.

• Time wages = 80*0.50=Rs.4.0• Bonus = 20/100*4=Rs0.80• Total earnings = Rs. 4.80

• Case (iii)• Output earnings = 110 units• As the output is more than the standard,

the worker is entitled to a high piece-rate.• 110*0.10= Rs. 11.00

4. Emerson’s Plan

• 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 1% efficiency.

Example• Case (i)• Standard output = 100 units• Rate per hour = Re 1• Case (i) Output in 10 hrs = 50 unitsEarnings Efficiency = 50 percent As the efficiency is below 67% the worker is

entitled to time wages only.Earnings =10*1 = Rs. 10

Case (ii) Output in 10 hrs = 100 unitsEarnings Efficiency = 100 percent The worker is entitled to time wages plus

20% of time wages as bonus Time wages =10*1 = Rs. 10Bonus = 20/100*10=Rs.2Earnings = Rs. 12

Case (iii) Output in 10 hrs = 130 unitsEarnings Efficiency = 130 percent The worker is entitled to time wages plus

20% of time wages as bonus Time wages =10*1 = Rs. 10Bonus = 50/100*10=Rs.5Earnings = Rs. 15