INCENTIVE SCHEMES FOR DIRECT & INDIRECT WORKERS

PRESENTED BY:

SWATI GOYAL(33)SWATI GOYAL(33)

TUSHAR GAURAV(34)TUSHAR GAURAV(34)

INCENTIVE SCHEMESINCENTIVE SCHEMESMEANING:

Incentive is the stimulation of effort & effectiveness by offering monetary inducement or extra facilities. It is a method of remuneration of labour so as to encourage them to do their best. It may be monetary or non-monetary.

A good incentive plan should have the following characteristicscharacteristics: It should be simple & easy to understand. Operating cost of the system should be low. It should permit less supervision. The time lag between effort & reward should be minimum. It should be fair to the employees & employer. The standard set should be attainable.

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Performance above standard should be well rewarded. It should be flexible. The premium should be large enough to induce workers to work

hard. All workers should be given equal opportunity to earn. It should facilitate budgetary control & standard cost systems. Inspection should be good Good working conditions must be available. System should be introduced on a permanent basis & should not be

ambiguous. No rate cutting should be permitted & an individual’s earning

should not be curtailed. Their should be uniformity of reward for same amount of effort. Indirect workers should also be included.

ADVANTAGES OF INCENTIVE ADVANTAGES OF INCENTIVE SCHEMESSCHEMES

Less supervision is required. The employees morale is high because they earn more. There is increased productivity. Increased production reduces cost. Labour cost can be estimated. It is possible to set standards for labour with accuracy. There is maximum utilization of resources. A task is done in the most economical manner which reduces

labour cost.

DISADVANTAGES OF INCENTIVE DISADVANTAGES OF INCENTIVE SCHEMESSCHEMES

If rates are not uniform for same type of jobs, it causes discontent.

Quality may deteriorate & may be sacrificed in order to increase quantity.

It involves more calculations. The workers may not adhere to the safety precautions in order to

increase production. Hence accidents may occur. The workers’ health may be affected due to overstrain. There may be apprehensions regarding rate cutting. Inefficient workers may envy the efficient ones which may cause

unrest. Unskilled workers sometimes earn more than skilled workers if

the latter have to work on time basis.

CLASSIFICATION OF INCENTIVE CLASSIFICATION OF INCENTIVE SCHEMESSCHEMES

Incentive schemes can be classified as:

DIRECT WORKERSDIRECT WORKERS

DIFFERENTIAL PIECE RATE

PREMIUM BONUS

SCHEMES

GROUPBONUSPLANS

INDIRECT WORKERSINDIRECT WORKERS

BONUSSCHEMES

CLASSIFICATION OF INCENTIVE CLASSIFICATION OF INCENTIVE SCHEMES.....CONTINUED......SCHEMES.....CONTINUED......

MONETARY SCHEMES

NON-MONETARY SCHEMES

DIRECT INDIRECT

PROFITSHARING

CO-PATENERSHIPDIFFERENTIAL

PIECERATE

PREMIUMBONUS

SCHEMES

GROUPBONUSPLANS

BONUS SCHEMES

FORINDIRECTWORKERS

BONUS SCHEME FOR INDIRECT BONUS SCHEME FOR INDIRECT WORKERSWORKERS

Production cannot be increased by giving incentives to direct workers hence indirect workers are equally important.

It is difficult to introduce an incentive scheme for indirect workers because standards cannot be set easily, efficiency is difficult to measure & actual output can’t be determined in relation to set standards.

VARIOUS WAYS:VARIOUS WAYS: Indirect workers can be associated with direct workers for eg:

Supervisors, Material Handling Workers etc. & in this case bonus can be linked to output of direct workers .i.e. % of average bonus earned by direct workers.

Indirect workers provide some general services, eg: Canteen staff, Cleaners etc. & their bonus can be based on output of department, output of entire organisation, merit rating, job evaluation, % of bonus for direct workers or high time-rates.

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Sometimes, bonus of indirect workers can be related to total production of dept. of cost centre. In case of higher levels of production, higher rate of bonus are applicable.

POINTS TO BE CONSIDER WHILE INTRODUCING AN POINTS TO BE CONSIDER WHILE INTRODUCING AN INCENTIVE SCHEME:INCENTIVE SCHEME:

It should be able to achieve all round efficiency. It should relate rewards to efforts. The bonus should be payable at some regular intervals. It should be introduced for a certain period.

INDIRECT MONETARY INCENTIVE INDIRECT MONETARY INCENTIVE SCHEMESSCHEMES1.1. PROFIT SHARING:PROFIT SHARING:“An agreement freely entered into, by which receives a share,

fixed in advance, of the profits.”-HENRY R. SEAGAR

The workers get a share in the profit in a certain agreed % which is often governed by Payment of Bonus Act, in addition to normal wages.

It leads to low labour turnover, high morale, better employer-employee relationship, attracting quality workers etc.

2.2. CO-PATNERSHIP:CO-PATNERSHIP:It is the profit given in form of shares to the workers.Though employees get part of profits, these shares may or may

not carry the voting rights, may deal freely or a few restrictions may be placed on them.