INCENTIVES

sunandaC

New member
INCENTIVES​


Besides wages and salaries, employees are paid incentives depending upon Their performance. Incentive payments are quite substantial and are paid as regularly as wages and salaries. This chapter is devoted to a detailed discussion on the nature, significance and types of incentives.

MEANING AND DEFINITION '

Incentives are monetary benefits paid to workmen in recognition of their outstanding performance- They are defined as "variable rewards granted according to variations in the achievement of specific results”. The International Labour Office refers to incentives as 'payment by results'. But it is appropriate to call them 'incentive systems of payment' emphasizing the point of motivation, that is, the imparting of incentives to workers for higher production and productivity. However, both these terms are used in this chapter. Unlike wages and salaries which are relatively fixed, incentives generally vary from individual to individual, and from period to period for the same individual.

IMPORTANCE/ADVANTAGES

The primary advantage of incentives is the inducement and motivation of workers for higher efficiency and greater output. It may not be difficult to get people for fixed wages and salaries. But with fixed remuneration, it is difficult to motivate workers to show better performance. Fixed remuneration removes fear of insecurity in the minds of employees. A feeling of secured income fails to evoke positive response. Positive response will surely come when incentives are included as a part of the total remuneration.


Earnings of employees would be enhanced due to incentives. There are instances where incentive earnings exceed two to three times the time-rated wages or salaries. Increased earnings would enable the employees to improve their standard of living.


There will be reduction in the total as well as unit cost of production, through incentives. Productivity would increase resulting in greater number of units produced for given inputs. This would bring down the total and unit cost of production.


The other advantages of incentive payments are reduced supervision, better utilization of equipment, reduced scrap, reduced lost lime, reduced absenteeism and turnover, and increased output. Furthermore, systems of payment by results would, if accompanied by improved organisation and work measurement, enable firms to estimate labour costs more accurately than under the system of payment by time. This would facilitate the application of cost-control techniques like standard costing and budgetary control.

Apart from the benefits cited above, incentive packages are a very attractive proposition for managements because they do not affect employer's contribution to the provident fund and other employee-retirement benefits.

DISADVANTAGES


On the other hand, systems of payment by results may have disadvantages. There is a tendency for the quality of products to deteriorate unless steps are taken to ensure maintenance of quality through checking and inspection. This involves added expenses. In some cases, it may not be possible or may be too expensive to maintain quality fully, and the benefit, gained in the form of increased output and lower cost may be offset to a considerable degree by deterioration in the quality of the products.


Difficulties may arise over the introduction of new machines or methods. Workers may oppose such introduction for fear that new piece or bonus rates set, when the job is re-scheduled at intervals of lime, may yield lower earnings; or when new machines or methods are introduced: they may slacken their rate of work in order to avoid rising output to a level which would make a re-study of the job necessary. Costs may not. Therefore, be lowered to the extent that would he necessary if the workers were on lime-based work. Most trade unions agree that cuts in piece or bonus rates arc justifiable in such circumstances. But individual workers may not share this view, and output and the level of costs may be affected accordingly.


Workers tend, moreover, to regard their highest earnings as normal and may. Therefore, press for a considerably higher minimum wage when they arc paid by results than when they arc paid by the hour. Payment by results may, therefore lead 10 higher labour costs in certain industries such as paper-making and coal mining where workers experience, for reasons beyond their control, good and had runs. Their earnings on the days they have good runs are apt lo be regarded by them as normal earnings,'


Besides, there is evidence that some workers paid by results have disregarded security regulations in order to achieve high output, thus, increasing the danger of accidents. Some workers tend to overwork during the normal working day and sometimes keep on working in their lunch hour. These practices would affect their health.


Another disadvantage is that Jealousies may arise among workers because some are able to earn more than others. In the case of group-incentive schemes, the workers who are fast in their work may be dissatisfied with those who are slow. Where heavy work is involved, older workers are likely to be criticized for being too slow.


One of the greatest difficulties with the incentive systems is in (he setting of piece or bonus rates). Rate fixing involves delicate problems of judgment in which there is always a risk of error. If rates are set too low, workers are bound to be dissatisfied and will be under pressure to work very hard. If rates are set too high, workers may slacken their efforts at times so that their employers may not have cause to ask for a revision of rates because the earnings are too high.

Workers sometimes decide approximately how much they feel they wish to earn and are, therefore, not interested in working for that part of the day which remains after they have earned the amount they want.
 

jiten005

Banned
INCENTIVES​


Besides wages and salaries, employees are paid incentives depending upon Their performance. Incentive payments are quite substantial and are paid as regularly as wages and salaries. This chapter is devoted to a detailed discussion on the nature, significance and types of incentives.

MEANING AND DEFINITION '

Incentives are monetary benefits paid to workmen in recognition of their outstanding performance- They are defined as "variable rewards granted according to variations in the achievement of specific results”. The International Labour Office refers to incentives as 'payment by results'. But it is appropriate to call them 'incentive systems of payment' emphasizing the point of motivation, that is, the imparting of incentives to workers for higher production and productivity. However, both these terms are used in this chapter. Unlike wages and salaries which are relatively fixed, incentives generally vary from individual to individual, and from period to period for the same individual.

IMPORTANCE/ADVANTAGES

The primary advantage of incentives is the inducement and motivation of workers for higher efficiency and greater output. It may not be difficult to get people for fixed wages and salaries. But with fixed remuneration, it is difficult to motivate workers to show better performance. Fixed remuneration removes fear of insecurity in the minds of employees. A feeling of secured income fails to evoke positive response. Positive response will surely come when incentives are included as a part of the total remuneration.


Earnings of employees would be enhanced due to incentives. There are instances where incentive earnings exceed two to three times the time-rated wages or salaries. Increased earnings would enable the employees to improve their standard of living.


There will be reduction in the total as well as unit cost of production, through incentives. Productivity would increase resulting in greater number of units produced for given inputs. This would bring down the total and unit cost of production.


The other advantages of incentive payments are reduced supervision, better utilization of equipment, reduced scrap, reduced lost lime, reduced absenteeism and turnover, and increased output. Furthermore, systems of payment by results would, if accompanied by improved organisation and work measurement, enable firms to estimate labour costs more accurately than under the system of payment by time. This would facilitate the application of cost-control techniques like standard costing and budgetary control.

Apart from the benefits cited above, incentive packages are a very attractive proposition for managements because they do not affect employer's contribution to the provident fund and other employee-retirement benefits.

DISADVANTAGES


On the other hand, systems of payment by results may have disadvantages. There is a tendency for the quality of products to deteriorate unless steps are taken to ensure maintenance of quality through checking and inspection. This involves added expenses. In some cases, it may not be possible or may be too expensive to maintain quality fully, and the benefit, gained in the form of increased output and lower cost may be offset to a considerable degree by deterioration in the quality of the products.


Difficulties may arise over the introduction of new machines or methods. Workers may oppose such introduction for fear that new piece or bonus rates set, when the job is re-scheduled at intervals of lime, may yield lower earnings; or when new machines or methods are introduced: they may slacken their rate of work in order to avoid rising output to a level which would make a re-study of the job necessary. Costs may not. Therefore, be lowered to the extent that would he necessary if the workers were on lime-based work. Most trade unions agree that cuts in piece or bonus rates arc justifiable in such circumstances. But individual workers may not share this view, and output and the level of costs may be affected accordingly.


Workers tend, moreover, to regard their highest earnings as normal and may. Therefore, press for a considerably higher minimum wage when they arc paid by results than when they arc paid by the hour. Payment by results may, therefore lead 10 higher labour costs in certain industries such as paper-making and coal mining where workers experience, for reasons beyond their control, good and had runs. Their earnings on the days they have good runs are apt lo be regarded by them as normal earnings,'


Besides, there is evidence that some workers paid by results have disregarded security regulations in order to achieve high output, thus, increasing the danger of accidents. Some workers tend to overwork during the normal working day and sometimes keep on working in their lunch hour. These practices would affect their health.


Another disadvantage is that Jealousies may arise among workers because some are able to earn more than others. In the case of group-incentive schemes, the workers who are fast in their work may be dissatisfied with those who are slow. Where heavy work is involved, older workers are likely to be criticized for being too slow.


One of the greatest difficulties with the incentive systems is in (he setting of piece or bonus rates). Rate fixing involves delicate problems of judgment in which there is always a risk of error. If rates are set too low, workers are bound to be dissatisfied and will be under pressure to work very hard. If rates are set too high, workers may slacken their efforts at times so that their employers may not have cause to ask for a revision of rates because the earnings are too high.

Workers sometimes decide approximately how much they feel they wish to earn and are, therefore, not interested in working for that part of the day which remains after they have earned the amount they want.

Hey friend, thanks for your sharing and i am sure it would help many people. Well, I also want to share some information on INCENTIVES so that more and more people can take benefit from your thread.
 

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