Meaning Incentives are the rewards to an employee, over and above his base wage or salary, in recognition of his performance and contribution. “ An incentive.
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Meaning Incentives are the rewards to an employee, over and
above his base wage or salary, in recognition of his performance
and contribution. An incentive scheme is a plan or programmes to
motivate individual or group performance. An incentive programme is
most frequently built on monetary rewards but may also include a
variety of non-monetary rewards or prizes. By- Burack and
Smith
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Pre-requirements For Effective Incentive System Incentive plan
should be simple so that it may be easily understood by the
workers. The plans should be acceptable to the workers, trade
unions and management. The incentives rates should be made
attractive so as to encourage the worker to give his best results.
All incentives should guarantee a minimum days wages.
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The scheme should be explained and discussed with all employees
and supervisors before it is implemented. Standards once fixed
should not be changes unless it is necessary.
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Two Types Of Incentives 1. Financial Incentives 2.
Non-Financial Incentives
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Types Of Financial Incentives Hourly rate for an expected
minimum output. For production over the standard, incentives as per
piece produced. Piecework plan Standards are determined using time
study or allied techniques. Individuals who have high merit rating
score are paid higher hourly pay. Measured Day- Work A worker is
paid a basic hourly rate and is paid an extra percentages of his or
her base for production exceeding the standard per hour or per day.
100 % Bonus System or Standard Hour Plan
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Group Incentive/ Bonus Plan It is a plan in which a production
standard is set for a specific work group and its members are paid
incentives if the group exceeds the production standard.
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Profit Sharing Scheme It is an incentive plan that engages many
or all employees in a common effort to achieve a companys
productivity and any resulting incremental cost-savings gains are
shared among employees and the company.
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Gainsharing Plan It is an incentive plan that engages many or
all employees in a common effort to achieve a companys productivity
objectives and any resulting incremental cost saving are shared
among employees and the company.
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At-Risky Pay plan These are some times called variable pay
plans but are essentially plans that put some portion of the
employees pay at risk, subject to the firms meeting its financial
goals.
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Salary plan Salary plan varies from organization to
organization. Some firms pay sales people fixed salaries and no
specific commission or bonus schemes are paid on achieving the
sales targets. The emphasis being on customer service rather on
high pressure selling.
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Commission Plan Commission plans provide sales representatives
with payment based on a percentage of sales turnovers they
generate.
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Combination Plan Most companies pay their salespeople a
combination of salary and commission. A portion of total earnings
is paid in form of fixed salary.
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Bonus Scheme And Awards Bonus scheme provide pay in addition to
basic salary which is related to the achievement of defined and
preferably agreed targets. These may refer simply to sales volume
or profit.
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Base Salary Decisions on the base salary of directors and
senior executives are usually formed on the basis of market worth
of the individuals. Remuneration on joining the company is usually
settled by negotiation, often subject to the approval of a
remuneration committee
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The Annual Bonus Annual bonus plans are those which are aimed
at motivating the short term performance of their managers and
executives and are given on the basis of the profitability of the
company.
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Stock Option A stock option is the right to purchase a specific
number of shares of company stock at a specific price during a
period of time.
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Book Value Plan Managers are permitted to purchase stock at
current book value. Executives can earn dividend on the stock they
own, as the company grows the book value of their shares may grow
too.
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Stock Appreciation Rights The employee is given the
appreciation in the value of shares from the date the option was
granted till the date it was relinquished. He earns without
investing any money in buying the options.
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Restricted Stock Plans Shares are usually awarded without cost
to the executive but with certain restrictions. One of the major
restrictions is that the shares may be forfeited if they are not
earned out over a specified period of time.
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Phantom Stock Plan Executives receive not shares but units that
are similar to shares of company stock. Then at some future time
they receive value equal to the appreciation of the phantom stock
they own.
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Employee Stock Option Plan: A company contributes shares of its
own stock or cash to be used to purchase such stock to a trust. The
trust holds the stock in individual employee accounts and
distributes it to employees upon their retirement or at the time of
separation from service.
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Employee Stock Purchase Plan The employees are given the right
to acquire shares of the company, normally at a price lower than
the prevailing market price.
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Non-Financial Incentives Materialistic Incentives Canteens
Housing Facilities Education Facilities Pension Provident Fund
Schemes Non-Materialistic Incentives Recognition and praise Good
working environment Cordial human relations Job satisfaction
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Imagine life as a game in which you are juggling some five
balls in the air. You name them - work, family, health, friends and
spirit - and you're keeping all of these in the air. You will soon
understand that work is a rubber ball. If you drop it, it will
bounce back. But the other four balls - family, health, friends and
spirit - are made of glass. If you drop one of these, they will be
irrevocably scuffed, marked, nicked, damaged or even shattered.
They will never be the same. You must understand that and strive
for balance in your life. -Brian G. Dyson President and CEO
Coca-Cola Enterprises
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Definition Fringe benefits are those monetary and non monetary
benefits given to the employee during and post-employment period
which are connected with employment but not to the employees
contribution to the organization.
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For Example You Could receive a benefit when you Use a work car
for private purposes. Are provided with a cheap loan. Are provided
with free private health insurance. Are provided with cleaning
services for your private residence or enter in to a salary
sacrifice arrangement.
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Need & Importance of Fringe Benefits: To retain the
employees. To motivate performance. As a social security. Trade
Union demand. Skill shortage. Employee Demand.
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Principles of Fringe Benefits Satisfaction of Real Needs.
Flexibility. Proper Communication. Educate the workers. Corporate
Tools. Participation
Fringe Benefits In India : Payment for Time not Worked.
Voluntary Benefits. Payment For Special Duties. Payment For Health
and Security Benefits.
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Conclusion: Basically, a fringe benefit is a benefit provided
to an employee or an associate (For Example: Family, Spouse and
children) because of his employment. Fringe Benefits provide output
in terms of employee loyalty and co-operation, employee welfare and
create Organizational image.
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References 1. Ajai Kumar Singhal,Human Resource Management. 2.
Gary Dessler & Biju Varkkey, Human Resource Management.