{"id":568,"date":"2018-10-17T05:52:12","date_gmt":"2018-10-17T05:52:12","guid":{"rendered":"http:\/\/mgmtp01.epgpbooks.inflibnet.ac.in\/?post_type=chapter&#038;p=568"},"modified":"2019-01-03T06:10:30","modified_gmt":"2019-01-03T06:10:30","slug":"incentives-fringe-benefit-introduction","status":"publish","type":"chapter","link":"https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/chapter\/incentives-fringe-benefit-introduction\/","title":{"rendered":"Incentives &amp; Fringe Benefit: Introduction"},"content":{"raw":"<div><span style=\"float: right\"><a href=\"https:\/\/youtu.be\/ifxDINaps-A\" target=\"_blank\" rel=\"noopener\"><img src=\"http:\/\/epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/2018\/11\/download.png\" alt=\"epgp books\" width=\"75px\" height=\"75px;\" \/><\/a>\r\n<\/span><\/div>\r\n<div>\r\n\r\n&nbsp;\r\n\r\n&nbsp;\r\n\r\n<strong>Learning outcome:-<\/strong>\r\n\r\n&nbsp;\r\n<p style=\"text-align: justify\">The primary objective of incentive schemes is to attract &amp; retain efficient employees &amp; induce them to work harder in the job.<\/p>\r\n\r\n<ul>\r\n \t<li style=\"text-align: justify\"><em>Developing on Ownership Interest: <\/em>Incentive schemes aim at creating a personal interest among the employees in organizational affairs so that this world, in turn, improve the sense of responsibility of these employees.<\/li>\r\n \t<li style=\"text-align: justify\"><em style=\"font-size: 1em\">Enhancing Employee Motivation: <\/em><span style=\"font-size: 1em\">Organisation <\/span>look<span style=\"font-size: 1em\"> at incentives as a value option to increase &amp; then sustain employee motivation through monetary &amp; non-monetary rewards.<\/span><\/li>\r\n \t<li style=\"text-align: justify\"><em style=\"font-size: 1em\">Improving Employee Retention: <\/em><span style=\"font-size: 1em\">Incentives aim at controlling the <\/span>labour<span style=\"font-size: 1em\"> turnover arising out of employee dissatisfaction due to the absence of merit recognition &amp; poor pay. Thus, incentives programme aim at enhancing the employee retention rate.<\/span><\/li>\r\n \t<li style=\"text-align: justify\"><em style=\"font-size: 1em\">Facilitating a Greater Role for employees in Pay Determination: <\/em><span style=\"font-size: 1em\">Incentives schemes enable <\/span>to<span style=\"font-size: 1em\"> employees to determine their own income by linking their pay with their actual performance. By varying their performance levels, they can earn the required incomes.<\/span><\/li>\r\n \t<li style=\"text-align: justify\"><em style=\"text-align: initial;font-size: 1em\">Increasing the performance &amp; productivity: <\/em><span style=\"text-align: initial;font-size: 1em\">By establishing a link between the pay &amp; the performance, organizations aim at increasing <\/span>organisational<span style=\"text-align: initial;font-size: 1em\"> performance &amp; employee productivity to the desired levels.<\/span><\/li>\r\n \t<li style=\"text-align: justify\"><em style=\"text-align: initial;font-size: 1em\">Reducing the labour cost: <\/em><span style=\"text-align: initial;font-size: 1em\">Through productivity- linked schemes, <\/span>organisations<span style=\"text-align: initial;font-size: 1em\"> seek to avoid a permanent <\/span>raise<span style=\"text-align: initial;font-size: 1em\"> in the pay levels of the employees. This is in contrast to the basic pay &amp; other fixed employee benefits, which permanently commit the <\/span>organisation<span style=\"text-align: initial;font-size: 1em\"> to a fixed <\/span>labour<span style=\"text-align: initial;font-size: 1em\"> cost, irrespective of its performance &amp; profitability.<\/span><\/li>\r\n \t<li><em style=\"text-align: initial;font-size: 1em\">Reducing the time &amp; Cost of supervision: <\/em><span style=\"text-align: initial;font-size: 1em\">Incentives schemes aim at reducing the supervisory cost &amp; time by enhancing the sense of responsibility of the employee through linking their performance with pay.<\/span><\/li>\r\n<\/ul>\r\n<\/div>\r\n<div>\r\n\r\n<strong>\u00a0 \u00a0 24.1. Introduction:<\/strong>\r\n\r\n&nbsp;\r\n<p style=\"text-align: justify\">Hard work pays is the simple philosophy behind incentive programmes. Employees usually get incentives in addition to their base salary in the organisation. Incentives enable an organisation to present challenges &amp; rewards alike to its. Workforce in order to make the employees enjoy their jobs more. The primary purpose of providing wage incentives is to enhance the organisational performance &amp;\u00a0employee productivity. Understandably, incentives constitute an important HR tools to achieve the desired performance goals within a reasonable cost. Performance-based incentive programmes enable an organisation to keep its employees satisfied without producing any permanent rise in pay &amp; \/ or benefits. Thus, incentives schemes help an organisation establish a formal relationship between the individual performance &amp; remuneration. Incentives also motivate the employees to work harder in their jobs in order to get recognition in monetary &amp; non-monetary terms.<\/p>\r\n\r\n<\/div>\r\n<img class=\"aligncenter wp-image-578\" src=\"http:\/\/mgmtp01.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-48.png\" alt=\"\" width=\"555\" height=\"204\" \/>\r\n<div>\r\n\r\nSource: <a href=\"https:\/\/www.linkedin.com\/pulse\/3-ways-drive-revenue-staff-sales-incentives-prosalesguy-training\">https:\/\/www.linkedin.com\/pulse\/3-ways-drive-revenue-staff-sales-incentives-prosalesguy-training<\/a>\r\n\r\n&nbsp;\r\n<p style=\"text-align: justify\">However, when the rewards offered as a part of the incentives programme do not fulfil the exact needs of the employees, they cannot be considered as an incentive at all. The incentive programme should be such that they should get and keep employees motivated by fulfilling their exact needs. Generally, incentives are provided to employees when their actual performance meets the performance standards set by the organisation. Although organisations predominantly offer non-monetary rewards to their employees. Finally, an important prerequisite for any effective incentive scheme is the presence of an objective performance evaluation procedure.<\/p>\r\n&nbsp;\r\n\r\n<strong>24.2. Meaning &amp; Definition:<\/strong>\r\n\r\n&nbsp;\r\n\r\n<img class=\"aligncenter size-full wp-image-579\" src=\"http:\/\/mgmtp01.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-49.png\" alt=\"\" width=\"1493\" height=\"368\" \/>\r\n\r\n&nbsp;\r\n\r\nSource: <a href=\"https:\/\/www.amazon.com\/corporate-gift-cards\/b?ie=UTF8&amp;node=15243182011\">https:\/\/www.amazon.com\/corporate-gift-cards\/b?ie=UTF8&amp;node=15243182011<\/a>\r\n\r\n&nbsp;\r\n<p style=\"text-align: justify\">Incentives are monetary benefits paid to workmen in recognition of their outstanding performance. They are defined \u201cVariable rewards granted according to variations in the achievement of specific results.\u201d The International Labour office refers to incentives as payment by results. But it is appropriate to call them \u2018incentive systems of payment\u2019 emphasizing the point of motivation, that is, the imparting of incentives to workers for higher production &amp; productivity.<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">\u2018Incentive Pay\u2019 is based on units produced &amp; provide the closest connection between effort or performance &amp; individual pay. According to Steven Gross &amp; Jeffery Bacher, \u201cAny compensation plan that emphasizes a shared focus on <\/span>organisational<span style=\"text-align: initial;font-size: 1em\"> success, broaden opportunities for incentives to non-traditional groups(such as <\/span>non executives<span style=\"text-align: initial;font-size: 1em\"> or <\/span>non managers<span style=\"text-align: initial;font-size: 1em\">), and operates outside the base pay increase system.\u201d It is also called \u2018variable pay\u2019 or \u2018incentive compensation\u2019. Incentive <\/span>pay or<span style=\"text-align: initial;font-size: 1em\"> \u201cperformance-based rewards\u201d are an attempt to link compensation to performance. Thus, it is a compensation system which is designed around performance. It is linking pay to performance.<\/span><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">According to Ray &amp; Altmansberger \u2018pay for performance systems\u2019, also called \u2018incentive pay system\u2019, reward employee performance on the basis of the following three <\/span>assumption<span style=\"text-align: initial;font-size: 1em\">:<\/span><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">1.\u00a0\u00a0 Individual employees &amp; work teams differ in how much they contribute to the firm-not only in what they do but also in how well they do it.<\/span><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">2.\u00a0\u00a0 The firm\u2019s overall performance depends to a large degree on the performance of individual &amp; groups within the firm.<\/span><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">3.\u00a0\u00a0 To attract, retain &amp; motivate high performers &amp; to be fair to all employees, a company needs to rewards employees on the basis of their relative performance.<\/span><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\">24.3. Importance of Incentive pay:<\/strong><\/p>\r\n\r\n<\/div>\r\n<div>\r\n\r\n<img class=\"aligncenter wp-image-580\" src=\"http:\/\/mgmtp01.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-50.png\" alt=\"\" width=\"482\" height=\"352\" \/>\r\n\r\n&nbsp;\r\n\r\n&nbsp;\r\n<p style=\"text-align: justify\">The importance of incentive pay &amp; performance based reward systems is discussed under the following:<\/p>\r\n&nbsp;\r\n\r\n<strong><em>24.3.1. Pay for Performance:<\/em><\/strong>\r\n\r\n&nbsp;\r\n<p style=\"text-align: justify\">Most workers believe that those who work harder &amp; produce more should be rewarded accordingly. If employees see that pay is not distributed on the bases of merit, they are more likely to lack commitment the organisation, decrease their level of effort &amp; look for employment opportunities elsewhere.<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.3.2. Strategic Importance:<\/em><\/strong><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">It is hard to underestimate the strategic importance of using variable pay to align compensation with <\/span>organisational<span style=\"text-align: initial;font-size: 1em\"> goals &amp; to signal to employees what the major <\/span>organisational<span style=\"text-align: initial;font-size: 1em\"> values are.<\/span><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.3.3. Motivational Device:<\/em><\/strong><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">When pay is contingent on performance, individual &amp; group performances are consistently higher. Linking pay to performance provides <\/span>an increased incentives<span style=\"text-align: initial;font-size: 1em\"> for top performers to remain with the <\/span>organisation<span style=\"text-align: initial;font-size: 1em\">, a means of reinforcing <\/span>organisational<span style=\"text-align: initial;font-size: 1em\"> objectives, and a method of keeping <\/span>labour<span style=\"text-align: initial;font-size: 1em\"> costs in line with productivity. It can lead to better employee performance.<\/span><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.3.4. Facing Challenges of Global Economy:<\/em><\/strong><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\">E.E.<span style=\"text-align: initial;font-size: 1em\">\u00a0\u00a0 Lawer States that incentive pay programmes seek to align compensation with <\/span>organisational<span style=\"text-align: initial;font-size: 1em\"> goals, values &amp; culture, as well as the challenges of the global economy.<\/span><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.3.5. Retention:<\/em><\/strong><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">Linking pay to performance is likely to help improve <\/span>work force<span style=\"text-align: initial;font-size: 1em\"> composition. High performers will tend to gain a larger share of compensation resources &amp; thus be motivated stay with the <\/span>organisation<span style=\"text-align: initial;font-size: 1em\">. Below average performers will become discouraged &amp; will tend to leave the <\/span>organisation<span style=\"text-align: initial;font-size: 1em\">.<\/span><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.3.6. Productivity:<\/em><\/strong><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">When performance is linked to rewards, those capable of doing what will lead to top productivity are motivated to do so. The top performers make the extra effort that will result in productivity when they know they will share in the rewards of their productivity.<\/span><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.3.7. Cost Savings:<\/em><\/strong><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">An obvious benefit of pay for performance is the capability to link compensation costs with productivity results. By basing pay on performance, employers can ensure that compensation costs, typically a major cost of doing <\/span>business,<span style=\"text-align: initial;font-size: 1em\"> will be tied to organizational results. When the results are poor &amp; the <\/span>organisation<span style=\"text-align: initial;font-size: 1em\"> is less able to pay, compensation costs are lower.<\/span><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.3.8. Attainment of Organisational Goals:<\/em><\/strong><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">Because of their important influence on motivation &amp; satisfaction, reward systems have the ability to communicate <\/span>organisational<span style=\"text-align: initial;font-size: 1em\"> objectives. By linking pay to defined performance, it is also possible to ensure <\/span>that individual objectives<span style=\"text-align: initial;font-size: 1em\">. Employees whose efforts are not synchronized with <\/span>organisational<span style=\"text-align: initial;font-size: 1em\"> objectives will not enjoy an equal share of the rewards.<\/span><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\">24.4. The Incentive Planning Process:<\/strong><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">Though each <\/span>organisation<span style=\"text-align: initial;font-size: 1em\"> can have its own style of incentive plans to serve the needs of its employees, the incentive planning process shown <\/span>is<span style=\"text-align: initial;font-size: 1em\"> figure 24.1. can be adopted by any organization with necessary modification.<\/span><\/p>\r\n\r\n<\/div>\r\n<img class=\"aligncenter size-full wp-image-581\" src=\"http:\/\/mgmtp01.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-51.png\" alt=\"\" width=\"269\" height=\"332\" \/>\r\n<div>\r\n<p style=\"text-align: center\">Fig 24.1. The Incentive Planning Process<\/p>\r\n&nbsp;\r\n\r\n<strong><em>24.4.1. Setting the Objectives:<\/em><\/strong>\r\n\r\n&nbsp;\r\n<p style=\"text-align: justify\">The first step in the process of installing an incentive plan is the determination of goals for such incentive plans. Organizational objectives usually provide the basis for determining the goals of the incentive programmes. An organisation must decide the specific goals it wants to accomplish through the incentive schemes &amp; how its employees can contribute to those goals. It is only when the employees believe that the performance goals are attainable that they would put in the additional efforts required to accomplish them.<\/p>\r\n&nbsp;\r\n\r\n<strong><em>24.4.2. Determining the Nature of Reward &amp; the Mode of Payment:<\/em><\/strong>\r\n\r\n&nbsp;\r\n<p style=\"text-align: justify\">Having formulated the goals to be accomplished through incentive plans, the next step is the determination of the type of incentives &amp; the mode of its payment. An organisation should first determine the total compensation payable to the employees for reaching specific performance goals. It should also choose between individual &amp; group incentive plans to achieve the proposed incentive goals. Besides, it should decide between monetary &amp; non-monetary rewards for compensating its employees.<\/p>\r\n&nbsp;\r\n\r\n<strong><em>24.4.3. Sharing the Goals with the Employees:<\/em><\/strong>\r\n\r\n&nbsp;\r\n<p style=\"text-align: justify\">In the next step, the organisation should effectively communicate the objectives &amp; nature of the incentives plans to all its employees so that they can understand their role &amp; reward in the incentive plans clearly. All the features of the incentive plans should be explained to them &amp; all their queries clarified. The organisation should ensure that the employees believe that the rewards offered to them are worth the efforts put in by them in the job.<\/p>\r\n&nbsp;\r\n\r\n<strong><em>24.4.4. Evaluating the Actual Performance:<\/em><\/strong>\r\n\r\n&nbsp;\r\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">At the end of a specified period, the organization must evaluate the employee\u2019s performance to decide whether they attained the performance standards &amp; also the <\/span>amount<span style=\"text-align: initial;font-size: 1em\"> of incentives payable to each one them. However, <\/span>organisations<span style=\"text-align: initial;font-size: 1em\"> do not evaluate the <\/span>employees<span style=\"text-align: initial;font-size: 1em\"> performances only to determine the incentives. Usually, the performance evaluation system keeps incentives fixation as one of its several objectives.<\/span><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.4.5. Application of Incentive Plans:<\/em><\/strong><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><span style=\"font-size: 1em\">Once the performance of employees has been evaluated, the next stage is the application of appropriate incentive plans to determine the performance rating &amp; pays of the employees. Typically, the employees at this stage get to know what their reward will be. In fact, the process of an incentives scheme begins with goal setting &amp; ends with reward decisions.<\/span><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.4.6. Feedback:<\/em><\/strong><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">Sometimes, the employees may not be satisfied with the incentive plans, the performance evaluation process or the mode of payment of incentives. In such a situation, the incentive schemes may not fail to motivate the employees but also dissatisfy them, causing increased <\/span>labour<span style=\"text-align: initial;font-size: 1em\"> turnover &amp; absenteeism. To avoid such a situation, it is necessary for the organization to receive periodic feedback from the employee in order to know their views on the incentive schemes.<\/span><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\">24.5. Prerequisites for Good Incentive System:<\/strong><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">Only an effective incentive scheme can have <\/span>a desired<span style=\"text-align: initial;font-size: 1em\"> impact on the productivity &amp; efficiency of the employees. The installation of a good incentive scheme requires meticulous planning &amp; honest execution. The <\/span>organisation<span style=\"text-align: initial;font-size: 1em\"> should also make certain that the incentive schemes proposed to be introduced <\/span>fulfil<span style=\"text-align: initial;font-size: 1em\"> the following conditions:<\/span><\/p>\r\n\r\n<\/div>\r\n<div>\r\n\r\n<img class=\"aligncenter wp-image-582\" src=\"http:\/\/mgmtp01.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-52.png\" alt=\"\" width=\"297\" height=\"416\" \/>\r\n\r\n&nbsp;\r\n\r\n<strong><em>24.5.1. Transperancy:<\/em><\/strong>\r\n\r\n&nbsp;\r\n<p style=\"text-align: justify\">The foremost requirement for an efficient incentive scheme is its transperancy. The scheme must be comprehensible to all the employees who are part of this scheme. Even uneducated employees must be able to understand the working of the incentive schemes clearly.<\/p>\r\n&nbsp;\r\n\r\n<strong><em>24.5.2. Objectivity:<\/em><\/strong>\r\n\r\n&nbsp;\r\n<p style=\"text-align: justify\">The incentive scheme should keep objectivity in the performance evaluation &amp; incentive computation to the minimum. The greater the objectivity in the incentive schemes, the larger the scope for charges of personal bias &amp; prejudice in the determination of rewards for employees. When the employees suspect unfairness in the distribution of monetary rewards, they might remain indifferent to or even oppose the\u00a0<span style=\"text-align: initial;font-size: 1em\">scheme.<\/span><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.5.3. Measurability:<\/em><\/strong><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">The next important prerequisite for an effective incentive scheme is that the scheme <\/span>be<span style=\"text-align: initial;font-size: 1em\"> quantifiable. The incentive scheme must be readily measurable. It should be based on rational and scientific work measurements. <\/span>Organisational<span style=\"text-align: initial;font-size: 1em\"> should not attempt to keep abstract terms like <\/span>attentions<span style=\"text-align: initial;font-size: 1em\">, required concentration &amp; stress levels as the basis for determining the incentives.<\/span><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.5.4. Attainability:<\/em><\/strong><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">The performance goals fixed by an <\/span>organisation<span style=\"text-align: initial;font-size: 1em\"> for computing the incentives should be practical &amp; achievable. If they are too tough to be achieved by the employees, the latter may not be keen on accomplishing these goals. Eventually, the employees may develop an indifferent attitude towards the incentive schemes of the <\/span>organisation<span style=\"text-align: initial;font-size: 1em\">.<\/span><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.5.5. Flexibility:<\/em><\/strong><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">An effective incentive scheme should be flexible enough to <\/span>adopt<span style=\"text-align: initial;font-size: 1em\"> itself to the changes in the internal &amp; external environment. The <\/span>organisation<span style=\"text-align: initial;font-size: 1em\"> must be able to effect, changes in the scheme without too much delay. The administrators of the scheme should review its performance periodically &amp; make necessary changes as &amp; when required.<\/span><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.5.6. Comprehensiveness:<\/em><\/strong><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">An effective incentive scheme should have something to offer for all the employees of the <\/span>organisation<span style=\"text-align: initial;font-size: 1em\">. All the sections of the employees from foreman &amp; supervisors to helpers must be covered under the scheme. The total cooperation of the workers, managers &amp; unions must be obtained for the scheme.<\/span><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.5.7. Cost-Effectiveness:<\/em><\/strong><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">A good incentive scheme should not only be efficient but also economical in achieving the goals of the incentive programme. The purpose of linking pay with performance is to achieve cost-effectiveness in the management of the incentive scheme. In contrast, if the cost of maintenance of such schemes is more than the savings made through them, there is no point in continuing with such schemes.<\/span><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.5.8. Instantaneous Feedback:<\/em><\/strong><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">As far as possible, the reward available to the employees must be paid immediately. This would make an incentive scheme more relevant &amp; attractive to those who participate in it. Besides, the employees would be more determined in earning the reward if it is going to benefit them in the immediate future. Thus, an effective incentive scheme should pass on the rewards to the employees as quickly as possible.<\/span><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\">24.6. Barriers &amp; Challenges to Incentive system\u2019s success:<\/strong><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.6.1. Nature of the Task: <\/em><\/strong><span style=\"text-align: initial;font-size: 1em\">Very few employees have total control over their own performance. Direct pay for performance incentives should be adopted only when employee skill &amp; effort have a substantial impact on output.<\/span><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.6.2. Not fair Measurement of performance: <\/em><\/strong>subjective<span style=\"text-align: initial;font-size: 1em\"> measure of performance creates difficulty in the accurate &amp; fair measurement of employee performance. As a result, <\/span>individual are<span style=\"text-align: initial;font-size: 1em\"> likely to feel that their rewards are not related to their effort but instead are a function of the <\/span>judgement<span style=\"text-align: initial;font-size: 1em\"> of their particular supervisor.<\/span><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.6.3. Amount of Payout: <\/em><\/strong><span style=\"text-align: initial;font-size: 1em\">Incentive compensation on average amounts for only 10% of base compensation. Thus the size of the payout is frequently a barrier to the successful linkage of pay and performance.<\/span><\/p>\r\n\r\n<\/div>\r\n<img class=\"aligncenter size-full wp-image-583\" src=\"http:\/\/mgmtp01.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-53.png\" alt=\"\" width=\"405\" height=\"266\" \/>\r\n<div>\r\n\r\n&nbsp;\r\n\r\n<strong><em>24.6.4.\u00a0\u00a0 Negative\u00a0\u00a0 Effects\u00a0\u00a0\u00a0 of\u00a0\u00a0 the\u00a0\u00a0\u00a0 spirit<\/em><\/strong>\u00a0\u00a0\u00a0 <strong><em>of\u00a0<\/em><\/strong><strong><em>Cooperation: <\/em><\/strong>studies show that incentives compensation may provoke conflict &amp; competition while discouraging cooperation. Internal competition may set off rivalries that lead to quality problems sabotaging a project, spreading rumours or even cheating.\r\n\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong>24.6.5. Psychological Contracts: <\/strong>Once implemented, incentive systems create a psychological contract between the employer &amp; the firm. This creates a set of expectations based on prior experience, &amp; it is very resistant to change. Breaking a psychological contract can have damaging results.<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong><em>24.6.6. Credibility Gap: <\/em><\/strong>Employees often do not believe that incentive systems are fair or that they truly reward performance. Studies indicate that as many as 75% of employees question the integrity of incentive plans. If employees do not consider the system legitimate &amp; acceptable, it may have negative rather than positive effects on their behaviour.<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong><em>24.6.7. Job Dissatisfaction &amp; Stress: <\/em><\/strong>Incentive systems may lead to greater productivity but lower job satisfaction. Some research suggests that the more pay is tied to performance, the more the work unit begins to unravel &amp; the more unhappy employees become.<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong><em>24.6.8. Potential Reduction of Intrinsic Drives: <\/em><\/strong>studies show that an organisation that puts too much emphasis on pay in attempting to influence behaviour may reduce employee\u2019s intrinsic drives. It may stifle their talents &amp; creativity.<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong><em>24.6.9. Effect on Mentality: <\/em><\/strong>To avoid subjective judgements &amp; favouritism, incentives systems tend to rely on objective indicators of performance. This creates a \u201cdo only what you get paid for\u201d syndrome. This is harmful for increasing the productivity.<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><strong><em>24.6.10. Lack of control:<\/em><\/strong>\u00a0\u00a0 Employees often cannot control all of the factors affecting their performance. Some example of factor beyond an employee\u2019s control are: (a) supervisors; (b) performance of other work group member; (c) the quality of the materials the employee is working with; (d) working condition; (e) the amount of support them from management &amp; (f) the environmental factors.<\/p>\r\n&nbsp;\r\n\r\n<strong>24.7. Incentive in India:<\/strong>\r\n\r\n&nbsp;\r\n<p style=\"text-align: justify\">In a country like India incentives are an important tool for motivating workers, improving productivity &amp; reducing costs per unit. Various five year plans have suggested introduction of incentive schemes to promote more efficient working of industries. The second plan recommended that the earnings beyond the\u00a0<span style=\"text-align: initial;font-size: 1em\">minimum wage should be related to results and that workers should be consulted before a system of payment by results was introduced. The National Commission on <\/span>labour<span style=\"text-align: initial;font-size: 1em\"> suggested that \u201cunder our condition, a wage incentive is concerned with an effective <\/span>utilisation<span style=\"text-align: initial;font-size: 1em\"> of manpower which is the cheapest, quickest &amp; surest means of increasing productivity. The only practicable &amp; self-sustaining means of improving manpower <\/span>utilisation<span style=\"text-align: initial;font-size: 1em\"> is to introduce incentive schemes &amp; stimulate human efforts to provide a positive motivation to greater output.\u201d<\/span><\/p>\r\n\r\n<\/div>\r\n<div>\r\n\r\n<img class=\"aligncenter wp-image-595\" src=\"http:\/\/mgmtp01.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-54.png\" alt=\"\" width=\"540\" height=\"401\" \/>\r\n<p style=\"text-align: center\">Source: https:\/\/www.slideshare.net\/rajnishdeo\/ppt-on-tcs<\/p>\r\n&nbsp;\r\n\r\nIn India, the need for introducing wage incentive plans is greater due to the following reasons:\r\n\r\n&nbsp;\r\n<p style=\"text-align: justify\">(i) The average Indian worker is financially poor. Wage incentives will help to improve the earnings of workers.<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\">(ii) The productivity of the Indian workers in low &amp; needs to be increased. Wage incentives can help to improve productivity.<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\">(iii) Technology in Indian Industries needs to be modernised &amp; upgraded. Incentives may help to reduce worker\u2019s resistance to mechanisation &amp; automation.<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\">(iv) Effective application of wage incentive plan is likely to have a beneficial impact in the price level.<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\">(v) Incentive schemes can be applied to all sectors of the economy in the national interest.<\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\">The National Productivity Council conducted an All India Survey of wage incentive plans in the country.<\/p>\r\nThe survey revealed that:\r\n\r\n&nbsp;\r\n\r\n(i) Incentive plan are more popular in labour intensive industries\r\n\r\n&nbsp;\r\n\r\n(ii) Group incentive schemes were more common-than plant-wise or individual plans.\r\n\r\n&nbsp;\r\n\r\n(iii) Standards were fixed generally through time study &amp; past experience.\r\n\r\n&nbsp;\r\n\r\n(iv) Incentive plans led to significant (about 40%) rise in average productivity.\r\n\r\n&nbsp;\r\n\r\n(v) More comprehensive plans led to greater savings in cost per unit &amp; overtime working.\r\n\r\n&nbsp;\r\n\r\n(vi)\u00a0Scientific\u00a0 techniques\u00a0 of\u00a0 work\u00a0 measurement\u00a0 are\u00a0 preferable\u00a0 in\u00a0 the setting of standards.\r\n\r\n&nbsp;\r\n\r\n<strong>24.8. Fringe Benefits:<\/strong>\r\n\r\n&nbsp;\r\n<p style=\"text-align: justify\">The term \u2018fringe benefits\u2019 refer to the extra benefits provided to employees in addition to the normal compensation paid in the form of wage or salary. Edurn Flippo writes, \u201c In the broadest sense such \u2018fringes\u2019 includes all\u00a0<span style=\"text-align: initial;font-size: 1em\">expenditures designed to benefit employees over and above regular base pay &amp; direct variable compensation related to output.\u201d Belcher describes these benefits as \u201cany wage cost not directly connected with employees productive effort, performance service or sacrifice.\u201d The Glossary of current Industrial Relation &amp; Wage Terms has defined fringe benefits as \u201csupplements to wages received by workers at a cost of employers. The term encompasses a number of benefits-paid vacation, pension, health &amp; insurance plans etc-which usually add up to something more than a \u2018fringe\u2019 &amp; is sometimes applied to a practice that may constitute a dubious benefit for workers.\u201d<\/span><\/p>\r\n&nbsp;\r\n\r\n<img class=\"aligncenter wp-image-596\" src=\"http:\/\/mgmtp01.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-55.png\" alt=\"\" width=\"273\" height=\"189\" \/>\r\n\r\n<\/div>\r\n<div>\r\n<p style=\"text-align: center\">Source: http:\/\/www.igze.com\/what-is-fringe-benefit\/<\/p>\r\n\r\n<\/div>\r\n<img class=\"aligncenter size-full wp-image-597\" src=\"http:\/\/mgmtp01.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-56.png\" alt=\"\" width=\"496\" height=\"275\" \/>\r\n<div>\r\n<p style=\"text-align: center\">Source: http:\/\/www.businessdictionary.com\/definition\/fringe-benefit.html<\/p>\r\n&nbsp;\r\n\r\nThe main objectives of fringe benefits are:\r\n\r\n&nbsp;\r\n<p style=\"text-align: justify\">1. To promote employee\u2019s welfare &amp; paternalistic attitudes.<\/p>\r\n<p style=\"text-align: justify\">2. To create &amp; improve sound industrial relations.<\/p>\r\n<p style=\"text-align: justify\">3. To motivate the employees by identifying &amp; satisfying their unsatisfied needs &amp; to improve their morale.<\/p>\r\n<p style=\"text-align: justify\">4. To keep in line with the prevailing practices of offering benefits &amp; services which are given by similar concerns.<\/p>\r\n<p style=\"text-align: justify\">5. To gain employee\u2019s loyalty &amp; cooperation, encouraging them to greater productive efforts.<\/p>\r\n<p style=\"text-align: justify\">6. To provide security to the employees against social risks, like old-age benefits &amp; maternity benefits.<\/p>\r\n<p style=\"text-align: justify\">7. To provide health care &amp; safety to the employees.<\/p>\r\n<p style=\"text-align: justify\">8. To create a sense of belongingness among employees. Hence, fringe benefits are called \u201cgolden handcuffs\u201d.<\/p>\r\n<p style=\"text-align: justify\">9. To meet the requirements of various legislation relating to fringe benefits.<\/p>\r\n<p style=\"text-align: justify\">10. To improve &amp; furnish the organisational image in the eyes of the public.<\/p>\r\n<p style=\"text-align: justify\">11. To recognise the official trade unions bargaining strength, because a strong trade union always compels an employer to adopt a sound fringe benefits programmes for his employees.<\/p>\r\n\r\n<\/div>\r\n<img class=\"aligncenter wp-image-598\" src=\"http:\/\/mgmtp01.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-57.png\" alt=\"\" width=\"406\" height=\"884\" \/>\r\n<div>\r\n<p style=\"text-align: center\">Source: http:\/\/bankofinfo.com\/objectives-of-fringe-benefits\/<\/p>\r\n&nbsp;\r\n<p style=\"text-align: left\"><strong style=\"text-align: initial;font-size: 1em\">Summary:<\/strong><\/p>\r\n&nbsp;\r\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">Wage incentives refer to <\/span>performance linked<span style=\"text-align: initial;font-size: 1em\"> compensation. It helps to improve industrial relations, employee morale and productivity, work methods and <\/span>team work<span style=\"text-align: initial;font-size: 1em\">. It may cause damage to employee health, quality of work, industrial safety, interpersonal relations etc. Proper climate, workers\u2019 involvement, scientific standards, guaranteed minimum wage, simplicity, equity, economy, flexibility, promptness, provisions for appeal and follow up are the essentials of a sound wage incentive plan. Fringe benefit refers to the benefits like paid holidays, housing etc. in addition to regular wages, salaries.<\/span><\/p>\r\n\r\n<\/div>\r\n<table>\r\n<tbody>\r\n<tr>\r\n<td><strong>you can view video on Incentives &amp; Fringe Benefit: Introduction<\/strong><\/td>\r\n<td><a href=\"https:\/\/youtu.be\/ifxDINaps-A\" target=\"_blank\" rel=\"noopener\"><img class=\"alignnone wp-image-120\" src=\"http:\/\/epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/2018\/11\/download.png\" alt=\"\" width=\"36\" height=\"36\" \/><\/a><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>","rendered":"<div><span style=\"float: right\"><a href=\"https:\/\/youtu.be\/ifxDINaps-A\" target=\"_blank\" rel=\"noopener\"><img decoding=\"async\" src=\"http:\/\/epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/2018\/11\/download.png\" alt=\"epgp books\" width=\"75px\" height=\"75px;\" \/><\/a><br \/>\n<\/span><\/div>\n<div>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Learning outcome:-<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">The primary objective of incentive schemes is to attract &amp; retain efficient employees &amp; induce them to work harder in the job.<\/p>\n<ul>\n<li style=\"text-align: justify\"><em>Developing on Ownership Interest: <\/em>Incentive schemes aim at creating a personal interest among the employees in organizational affairs so that this world, in turn, improve the sense of responsibility of these employees.<\/li>\n<li style=\"text-align: justify\"><em style=\"font-size: 1em\">Enhancing Employee Motivation: <\/em><span style=\"font-size: 1em\">Organisation <\/span>look<span style=\"font-size: 1em\"> at incentives as a value option to increase &amp; then sustain employee motivation through monetary &amp; non-monetary rewards.<\/span><\/li>\n<li style=\"text-align: justify\"><em style=\"font-size: 1em\">Improving Employee Retention: <\/em><span style=\"font-size: 1em\">Incentives aim at controlling the <\/span>labour<span style=\"font-size: 1em\"> turnover arising out of employee dissatisfaction due to the absence of merit recognition &amp; poor pay. Thus, incentives programme aim at enhancing the employee retention rate.<\/span><\/li>\n<li style=\"text-align: justify\"><em style=\"font-size: 1em\">Facilitating a Greater Role for employees in Pay Determination: <\/em><span style=\"font-size: 1em\">Incentives schemes enable <\/span>to<span style=\"font-size: 1em\"> employees to determine their own income by linking their pay with their actual performance. By varying their performance levels, they can earn the required incomes.<\/span><\/li>\n<li style=\"text-align: justify\"><em style=\"text-align: initial;font-size: 1em\">Increasing the performance &amp; productivity: <\/em><span style=\"text-align: initial;font-size: 1em\">By establishing a link between the pay &amp; the performance, organizations aim at increasing <\/span>organisational<span style=\"text-align: initial;font-size: 1em\"> performance &amp; employee productivity to the desired levels.<\/span><\/li>\n<li style=\"text-align: justify\"><em style=\"text-align: initial;font-size: 1em\">Reducing the labour cost: <\/em><span style=\"text-align: initial;font-size: 1em\">Through productivity- linked schemes, <\/span>organisations<span style=\"text-align: initial;font-size: 1em\"> seek to avoid a permanent <\/span>raise<span style=\"text-align: initial;font-size: 1em\"> in the pay levels of the employees. This is in contrast to the basic pay &amp; other fixed employee benefits, which permanently commit the <\/span>organisation<span style=\"text-align: initial;font-size: 1em\"> to a fixed <\/span>labour<span style=\"text-align: initial;font-size: 1em\"> cost, irrespective of its performance &amp; profitability.<\/span><\/li>\n<li><em style=\"text-align: initial;font-size: 1em\">Reducing the time &amp; Cost of supervision: <\/em><span style=\"text-align: initial;font-size: 1em\">Incentives schemes aim at reducing the supervisory cost &amp; time by enhancing the sense of responsibility of the employee through linking their performance with pay.<\/span><\/li>\n<\/ul>\n<\/div>\n<div>\n<p><strong>\u00a0 \u00a0 24.1. Introduction:<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">Hard work pays is the simple philosophy behind incentive programmes. Employees usually get incentives in addition to their base salary in the organisation. Incentives enable an organisation to present challenges &amp; rewards alike to its. Workforce in order to make the employees enjoy their jobs more. The primary purpose of providing wage incentives is to enhance the organisational performance &amp;\u00a0employee productivity. Understandably, incentives constitute an important HR tools to achieve the desired performance goals within a reasonable cost. Performance-based incentive programmes enable an organisation to keep its employees satisfied without producing any permanent rise in pay &amp; \/ or benefits. Thus, incentives schemes help an organisation establish a formal relationship between the individual performance &amp; remuneration. Incentives also motivate the employees to work harder in their jobs in order to get recognition in monetary &amp; non-monetary terms.<\/p>\n<\/div>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-578\" src=\"http:\/\/mgmtp01.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-48.png\" alt=\"\" width=\"555\" height=\"204\" \/><\/p>\n<div>\n<p>Source: <a href=\"https:\/\/www.linkedin.com\/pulse\/3-ways-drive-revenue-staff-sales-incentives-prosalesguy-training\">https:\/\/www.linkedin.com\/pulse\/3-ways-drive-revenue-staff-sales-incentives-prosalesguy-training<\/a><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">However, when the rewards offered as a part of the incentives programme do not fulfil the exact needs of the employees, they cannot be considered as an incentive at all. The incentive programme should be such that they should get and keep employees motivated by fulfilling their exact needs. Generally, incentives are provided to employees when their actual performance meets the performance standards set by the organisation. Although organisations predominantly offer non-monetary rewards to their employees. Finally, an important prerequisite for any effective incentive scheme is the presence of an objective performance evaluation procedure.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>24.2. Meaning &amp; Definition:<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-579\" src=\"http:\/\/mgmtp01.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-49.png\" alt=\"\" width=\"1493\" height=\"368\" srcset=\"https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-49.png 1493w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-49-300x74.png 300w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-49-768x189.png 768w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-49-1024x252.png 1024w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-49-65x16.png 65w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-49-225x55.png 225w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-49-350x86.png 350w\" sizes=\"auto, (max-width: 1493px) 100vw, 1493px\" \/><\/p>\n<p>&nbsp;<\/p>\n<p>Source: <a href=\"https:\/\/www.amazon.com\/corporate-gift-cards\/b?ie=UTF8&amp;node=15243182011\">https:\/\/www.amazon.com\/corporate-gift-cards\/b?ie=UTF8&amp;node=15243182011<\/a><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">Incentives are monetary benefits paid to workmen in recognition of their outstanding performance. They are defined \u201cVariable rewards granted according to variations in the achievement of specific results.\u201d The International Labour office refers to incentives as payment by results. But it is appropriate to call them \u2018incentive systems of payment\u2019 emphasizing the point of motivation, that is, the imparting of incentives to workers for higher production &amp; productivity.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">\u2018Incentive Pay\u2019 is based on units produced &amp; provide the closest connection between effort or performance &amp; individual pay. According to Steven Gross &amp; Jeffery Bacher, \u201cAny compensation plan that emphasizes a shared focus on <\/span>organisational<span style=\"text-align: initial;font-size: 1em\"> success, broaden opportunities for incentives to non-traditional groups(such as <\/span>non executives<span style=\"text-align: initial;font-size: 1em\"> or <\/span>non managers<span style=\"text-align: initial;font-size: 1em\">), and operates outside the base pay increase system.\u201d It is also called \u2018variable pay\u2019 or \u2018incentive compensation\u2019. Incentive <\/span>pay or<span style=\"text-align: initial;font-size: 1em\"> \u201cperformance-based rewards\u201d are an attempt to link compensation to performance. Thus, it is a compensation system which is designed around performance. It is linking pay to performance.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">According to Ray &amp; Altmansberger \u2018pay for performance systems\u2019, also called \u2018incentive pay system\u2019, reward employee performance on the basis of the following three <\/span>assumption<span style=\"text-align: initial;font-size: 1em\">:<\/span><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">1.\u00a0\u00a0 Individual employees &amp; work teams differ in how much they contribute to the firm-not only in what they do but also in how well they do it.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">2.\u00a0\u00a0 The firm\u2019s overall performance depends to a large degree on the performance of individual &amp; groups within the firm.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">3.\u00a0\u00a0 To attract, retain &amp; motivate high performers &amp; to be fair to all employees, a company needs to rewards employees on the basis of their relative performance.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\">24.3. Importance of Incentive pay:<\/strong><\/p>\n<\/div>\n<div>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-580\" src=\"http:\/\/mgmtp01.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-50.png\" alt=\"\" width=\"482\" height=\"352\" \/><\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">The importance of incentive pay &amp; performance based reward systems is discussed under the following:<\/p>\n<p>&nbsp;<\/p>\n<p><strong><em>24.3.1. Pay for Performance:<\/em><\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">Most workers believe that those who work harder &amp; produce more should be rewarded accordingly. If employees see that pay is not distributed on the bases of merit, they are more likely to lack commitment the organisation, decrease their level of effort &amp; look for employment opportunities elsewhere.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.3.2. Strategic Importance:<\/em><\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">It is hard to underestimate the strategic importance of using variable pay to align compensation with <\/span>organisational<span style=\"text-align: initial;font-size: 1em\"> goals &amp; to signal to employees what the major <\/span>organisational<span style=\"text-align: initial;font-size: 1em\"> values are.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.3.3. Motivational Device:<\/em><\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">When pay is contingent on performance, individual &amp; group performances are consistently higher. Linking pay to performance provides <\/span>an increased incentives<span style=\"text-align: initial;font-size: 1em\"> for top performers to remain with the <\/span>organisation<span style=\"text-align: initial;font-size: 1em\">, a means of reinforcing <\/span>organisational<span style=\"text-align: initial;font-size: 1em\"> objectives, and a method of keeping <\/span>labour<span style=\"text-align: initial;font-size: 1em\"> costs in line with productivity. It can lead to better employee performance.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.3.4. Facing Challenges of Global Economy:<\/em><\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">E.E.<span style=\"text-align: initial;font-size: 1em\">\u00a0\u00a0 Lawer States that incentive pay programmes seek to align compensation with <\/span>organisational<span style=\"text-align: initial;font-size: 1em\"> goals, values &amp; culture, as well as the challenges of the global economy.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.3.5. Retention:<\/em><\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">Linking pay to performance is likely to help improve <\/span>work force<span style=\"text-align: initial;font-size: 1em\"> composition. High performers will tend to gain a larger share of compensation resources &amp; thus be motivated stay with the <\/span>organisation<span style=\"text-align: initial;font-size: 1em\">. Below average performers will become discouraged &amp; will tend to leave the <\/span>organisation<span style=\"text-align: initial;font-size: 1em\">.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.3.6. Productivity:<\/em><\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">When performance is linked to rewards, those capable of doing what will lead to top productivity are motivated to do so. The top performers make the extra effort that will result in productivity when they know they will share in the rewards of their productivity.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.3.7. Cost Savings:<\/em><\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">An obvious benefit of pay for performance is the capability to link compensation costs with productivity results. By basing pay on performance, employers can ensure that compensation costs, typically a major cost of doing <\/span>business,<span style=\"text-align: initial;font-size: 1em\"> will be tied to organizational results. When the results are poor &amp; the <\/span>organisation<span style=\"text-align: initial;font-size: 1em\"> is less able to pay, compensation costs are lower.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.3.8. Attainment of Organisational Goals:<\/em><\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">Because of their important influence on motivation &amp; satisfaction, reward systems have the ability to communicate <\/span>organisational<span style=\"text-align: initial;font-size: 1em\"> objectives. By linking pay to defined performance, it is also possible to ensure <\/span>that individual objectives<span style=\"text-align: initial;font-size: 1em\">. Employees whose efforts are not synchronized with <\/span>organisational<span style=\"text-align: initial;font-size: 1em\"> objectives will not enjoy an equal share of the rewards.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\">24.4. The Incentive Planning Process:<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">Though each <\/span>organisation<span style=\"text-align: initial;font-size: 1em\"> can have its own style of incentive plans to serve the needs of its employees, the incentive planning process shown <\/span>is<span style=\"text-align: initial;font-size: 1em\"> figure 24.1. can be adopted by any organization with necessary modification.<\/span><\/p>\n<\/div>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-581\" src=\"http:\/\/mgmtp01.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-51.png\" alt=\"\" width=\"269\" height=\"332\" srcset=\"https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-51.png 269w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-51-243x300.png 243w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-51-65x80.png 65w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-51-225x278.png 225w\" sizes=\"auto, (max-width: 269px) 100vw, 269px\" \/><\/p>\n<div>\n<p style=\"text-align: center\">Fig 24.1. The Incentive Planning Process<\/p>\n<p>&nbsp;<\/p>\n<p><strong><em>24.4.1. Setting the Objectives:<\/em><\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">The first step in the process of installing an incentive plan is the determination of goals for such incentive plans. Organizational objectives usually provide the basis for determining the goals of the incentive programmes. An organisation must decide the specific goals it wants to accomplish through the incentive schemes &amp; how its employees can contribute to those goals. It is only when the employees believe that the performance goals are attainable that they would put in the additional efforts required to accomplish them.<\/p>\n<p>&nbsp;<\/p>\n<p><strong><em>24.4.2. Determining the Nature of Reward &amp; the Mode of Payment:<\/em><\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">Having formulated the goals to be accomplished through incentive plans, the next step is the determination of the type of incentives &amp; the mode of its payment. An organisation should first determine the total compensation payable to the employees for reaching specific performance goals. It should also choose between individual &amp; group incentive plans to achieve the proposed incentive goals. Besides, it should decide between monetary &amp; non-monetary rewards for compensating its employees.<\/p>\n<p>&nbsp;<\/p>\n<p><strong><em>24.4.3. Sharing the Goals with the Employees:<\/em><\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">In the next step, the organisation should effectively communicate the objectives &amp; nature of the incentives plans to all its employees so that they can understand their role &amp; reward in the incentive plans clearly. All the features of the incentive plans should be explained to them &amp; all their queries clarified. The organisation should ensure that the employees believe that the rewards offered to them are worth the efforts put in by them in the job.<\/p>\n<p>&nbsp;<\/p>\n<p><strong><em>24.4.4. Evaluating the Actual Performance:<\/em><\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">At the end of a specified period, the organization must evaluate the employee\u2019s performance to decide whether they attained the performance standards &amp; also the <\/span>amount<span style=\"text-align: initial;font-size: 1em\"> of incentives payable to each one them. However, <\/span>organisations<span style=\"text-align: initial;font-size: 1em\"> do not evaluate the <\/span>employees<span style=\"text-align: initial;font-size: 1em\"> performances only to determine the incentives. Usually, the performance evaluation system keeps incentives fixation as one of its several objectives.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.4.5. Application of Incentive Plans:<\/em><\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><span style=\"font-size: 1em\">Once the performance of employees has been evaluated, the next stage is the application of appropriate incentive plans to determine the performance rating &amp; pays of the employees. Typically, the employees at this stage get to know what their reward will be. In fact, the process of an incentives scheme begins with goal setting &amp; ends with reward decisions.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.4.6. Feedback:<\/em><\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">Sometimes, the employees may not be satisfied with the incentive plans, the performance evaluation process or the mode of payment of incentives. In such a situation, the incentive schemes may not fail to motivate the employees but also dissatisfy them, causing increased <\/span>labour<span style=\"text-align: initial;font-size: 1em\"> turnover &amp; absenteeism. To avoid such a situation, it is necessary for the organization to receive periodic feedback from the employee in order to know their views on the incentive schemes.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\">24.5. Prerequisites for Good Incentive System:<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">Only an effective incentive scheme can have <\/span>a desired<span style=\"text-align: initial;font-size: 1em\"> impact on the productivity &amp; efficiency of the employees. The installation of a good incentive scheme requires meticulous planning &amp; honest execution. The <\/span>organisation<span style=\"text-align: initial;font-size: 1em\"> should also make certain that the incentive schemes proposed to be introduced <\/span>fulfil<span style=\"text-align: initial;font-size: 1em\"> the following conditions:<\/span><\/p>\n<\/div>\n<div>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-582\" src=\"http:\/\/mgmtp01.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-52.png\" alt=\"\" width=\"297\" height=\"416\" \/><\/p>\n<p>&nbsp;<\/p>\n<p><strong><em>24.5.1. Transperancy:<\/em><\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">The foremost requirement for an efficient incentive scheme is its transperancy. The scheme must be comprehensible to all the employees who are part of this scheme. Even uneducated employees must be able to understand the working of the incentive schemes clearly.<\/p>\n<p>&nbsp;<\/p>\n<p><strong><em>24.5.2. Objectivity:<\/em><\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">The incentive scheme should keep objectivity in the performance evaluation &amp; incentive computation to the minimum. The greater the objectivity in the incentive schemes, the larger the scope for charges of personal bias &amp; prejudice in the determination of rewards for employees. When the employees suspect unfairness in the distribution of monetary rewards, they might remain indifferent to or even oppose the\u00a0<span style=\"text-align: initial;font-size: 1em\">scheme.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.5.3. Measurability:<\/em><\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">The next important prerequisite for an effective incentive scheme is that the scheme <\/span>be<span style=\"text-align: initial;font-size: 1em\"> quantifiable. The incentive scheme must be readily measurable. It should be based on rational and scientific work measurements. <\/span>Organisational<span style=\"text-align: initial;font-size: 1em\"> should not attempt to keep abstract terms like <\/span>attentions<span style=\"text-align: initial;font-size: 1em\">, required concentration &amp; stress levels as the basis for determining the incentives.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.5.4. Attainability:<\/em><\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">The performance goals fixed by an <\/span>organisation<span style=\"text-align: initial;font-size: 1em\"> for computing the incentives should be practical &amp; achievable. If they are too tough to be achieved by the employees, the latter may not be keen on accomplishing these goals. Eventually, the employees may develop an indifferent attitude towards the incentive schemes of the <\/span>organisation<span style=\"text-align: initial;font-size: 1em\">.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.5.5. Flexibility:<\/em><\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">An effective incentive scheme should be flexible enough to <\/span>adopt<span style=\"text-align: initial;font-size: 1em\"> itself to the changes in the internal &amp; external environment. The <\/span>organisation<span style=\"text-align: initial;font-size: 1em\"> must be able to effect, changes in the scheme without too much delay. The administrators of the scheme should review its performance periodically &amp; make necessary changes as &amp; when required.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.5.6. Comprehensiveness:<\/em><\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">An effective incentive scheme should have something to offer for all the employees of the <\/span>organisation<span style=\"text-align: initial;font-size: 1em\">. All the sections of the employees from foreman &amp; supervisors to helpers must be covered under the scheme. The total cooperation of the workers, managers &amp; unions must be obtained for the scheme.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.5.7. Cost-Effectiveness:<\/em><\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">A good incentive scheme should not only be efficient but also economical in achieving the goals of the incentive programme. The purpose of linking pay with performance is to achieve cost-effectiveness in the management of the incentive scheme. In contrast, if the cost of maintenance of such schemes is more than the savings made through them, there is no point in continuing with such schemes.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.5.8. Instantaneous Feedback:<\/em><\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">As far as possible, the reward available to the employees must be paid immediately. This would make an incentive scheme more relevant &amp; attractive to those who participate in it. Besides, the employees would be more determined in earning the reward if it is going to benefit them in the immediate future. Thus, an effective incentive scheme should pass on the rewards to the employees as quickly as possible.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\">24.6. Barriers &amp; Challenges to Incentive system\u2019s success:<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.6.1. Nature of the Task: <\/em><\/strong><span style=\"text-align: initial;font-size: 1em\">Very few employees have total control over their own performance. Direct pay for performance incentives should be adopted only when employee skill &amp; effort have a substantial impact on output.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.6.2. Not fair Measurement of performance: <\/em><\/strong>subjective<span style=\"text-align: initial;font-size: 1em\"> measure of performance creates difficulty in the accurate &amp; fair measurement of employee performance. As a result, <\/span>individual are<span style=\"text-align: initial;font-size: 1em\"> likely to feel that their rewards are not related to their effort but instead are a function of the <\/span>judgement<span style=\"text-align: initial;font-size: 1em\"> of their particular supervisor.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong style=\"text-align: initial;font-size: 1em\"><em>24.6.3. Amount of Payout: <\/em><\/strong><span style=\"text-align: initial;font-size: 1em\">Incentive compensation on average amounts for only 10% of base compensation. Thus the size of the payout is frequently a barrier to the successful linkage of pay and performance.<\/span><\/p>\n<\/div>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-583\" src=\"http:\/\/mgmtp01.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-53.png\" alt=\"\" width=\"405\" height=\"266\" srcset=\"https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-53.png 405w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-53-300x197.png 300w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-53-65x43.png 65w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-53-225x148.png 225w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-53-350x230.png 350w\" sizes=\"auto, (max-width: 405px) 100vw, 405px\" \/><\/p>\n<div>\n<p>&nbsp;<\/p>\n<p><strong><em>24.6.4.\u00a0\u00a0 Negative\u00a0\u00a0 Effects\u00a0\u00a0\u00a0 of\u00a0\u00a0 the\u00a0\u00a0\u00a0 spirit<\/em><\/strong>\u00a0\u00a0\u00a0 <strong><em>of\u00a0<\/em><\/strong><strong><em>Cooperation: <\/em><\/strong>studies show that incentives compensation may provoke conflict &amp; competition while discouraging cooperation. Internal competition may set off rivalries that lead to quality problems sabotaging a project, spreading rumours or even cheating.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong>24.6.5. Psychological Contracts: <\/strong>Once implemented, incentive systems create a psychological contract between the employer &amp; the firm. This creates a set of expectations based on prior experience, &amp; it is very resistant to change. Breaking a psychological contract can have damaging results.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong><em>24.6.6. Credibility Gap: <\/em><\/strong>Employees often do not believe that incentive systems are fair or that they truly reward performance. Studies indicate that as many as 75% of employees question the integrity of incentive plans. If employees do not consider the system legitimate &amp; acceptable, it may have negative rather than positive effects on their behaviour.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong><em>24.6.7. Job Dissatisfaction &amp; Stress: <\/em><\/strong>Incentive systems may lead to greater productivity but lower job satisfaction. Some research suggests that the more pay is tied to performance, the more the work unit begins to unravel &amp; the more unhappy employees become.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong><em>24.6.8. Potential Reduction of Intrinsic Drives: <\/em><\/strong>studies show that an organisation that puts too much emphasis on pay in attempting to influence behaviour may reduce employee\u2019s intrinsic drives. It may stifle their talents &amp; creativity.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong><em>24.6.9. Effect on Mentality: <\/em><\/strong>To avoid subjective judgements &amp; favouritism, incentives systems tend to rely on objective indicators of performance. This creates a \u201cdo only what you get paid for\u201d syndrome. This is harmful for increasing the productivity.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><strong><em>24.6.10. Lack of control:<\/em><\/strong>\u00a0\u00a0 Employees often cannot control all of the factors affecting their performance. Some example of factor beyond an employee\u2019s control are: (a) supervisors; (b) performance of other work group member; (c) the quality of the materials the employee is working with; (d) working condition; (e) the amount of support them from management &amp; (f) the environmental factors.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>24.7. Incentive in India:<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">In a country like India incentives are an important tool for motivating workers, improving productivity &amp; reducing costs per unit. Various five year plans have suggested introduction of incentive schemes to promote more efficient working of industries. The second plan recommended that the earnings beyond the\u00a0<span style=\"text-align: initial;font-size: 1em\">minimum wage should be related to results and that workers should be consulted before a system of payment by results was introduced. The National Commission on <\/span>labour<span style=\"text-align: initial;font-size: 1em\"> suggested that \u201cunder our condition, a wage incentive is concerned with an effective <\/span>utilisation<span style=\"text-align: initial;font-size: 1em\"> of manpower which is the cheapest, quickest &amp; surest means of increasing productivity. The only practicable &amp; self-sustaining means of improving manpower <\/span>utilisation<span style=\"text-align: initial;font-size: 1em\"> is to introduce incentive schemes &amp; stimulate human efforts to provide a positive motivation to greater output.\u201d<\/span><\/p>\n<\/div>\n<div>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-595\" src=\"http:\/\/mgmtp01.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-54.png\" alt=\"\" width=\"540\" height=\"401\" \/><\/p>\n<p style=\"text-align: center\">Source: https:\/\/www.slideshare.net\/rajnishdeo\/ppt-on-tcs<\/p>\n<p>&nbsp;<\/p>\n<p>In India, the need for introducing wage incentive plans is greater due to the following reasons:<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">(i) The average Indian worker is financially poor. Wage incentives will help to improve the earnings of workers.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">(ii) The productivity of the Indian workers in low &amp; needs to be increased. Wage incentives can help to improve productivity.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">(iii) Technology in Indian Industries needs to be modernised &amp; upgraded. Incentives may help to reduce worker\u2019s resistance to mechanisation &amp; automation.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">(iv) Effective application of wage incentive plan is likely to have a beneficial impact in the price level.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">(v) Incentive schemes can be applied to all sectors of the economy in the national interest.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">The National Productivity Council conducted an All India Survey of wage incentive plans in the country.<\/p>\n<p>The survey revealed that:<\/p>\n<p>&nbsp;<\/p>\n<p>(i) Incentive plan are more popular in labour intensive industries<\/p>\n<p>&nbsp;<\/p>\n<p>(ii) Group incentive schemes were more common-than plant-wise or individual plans.<\/p>\n<p>&nbsp;<\/p>\n<p>(iii) Standards were fixed generally through time study &amp; past experience.<\/p>\n<p>&nbsp;<\/p>\n<p>(iv) Incentive plans led to significant (about 40%) rise in average productivity.<\/p>\n<p>&nbsp;<\/p>\n<p>(v) More comprehensive plans led to greater savings in cost per unit &amp; overtime working.<\/p>\n<p>&nbsp;<\/p>\n<p>(vi)\u00a0Scientific\u00a0 techniques\u00a0 of\u00a0 work\u00a0 measurement\u00a0 are\u00a0 preferable\u00a0 in\u00a0 the setting of standards.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>24.8. Fringe Benefits:<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">The term \u2018fringe benefits\u2019 refer to the extra benefits provided to employees in addition to the normal compensation paid in the form of wage or salary. Edurn Flippo writes, \u201c In the broadest sense such \u2018fringes\u2019 includes all\u00a0<span style=\"text-align: initial;font-size: 1em\">expenditures designed to benefit employees over and above regular base pay &amp; direct variable compensation related to output.\u201d Belcher describes these benefits as \u201cany wage cost not directly connected with employees productive effort, performance service or sacrifice.\u201d The Glossary of current Industrial Relation &amp; Wage Terms has defined fringe benefits as \u201csupplements to wages received by workers at a cost of employers. The term encompasses a number of benefits-paid vacation, pension, health &amp; insurance plans etc-which usually add up to something more than a \u2018fringe\u2019 &amp; is sometimes applied to a practice that may constitute a dubious benefit for workers.\u201d<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-596\" src=\"http:\/\/mgmtp01.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-55.png\" alt=\"\" width=\"273\" height=\"189\" \/><\/p>\n<\/div>\n<div>\n<p style=\"text-align: center\">Source: http:\/\/www.igze.com\/what-is-fringe-benefit\/<\/p>\n<\/div>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-597\" src=\"http:\/\/mgmtp01.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-56.png\" alt=\"\" width=\"496\" height=\"275\" srcset=\"https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-56.png 496w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-56-300x166.png 300w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-56-65x36.png 65w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-56-225x125.png 225w, https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-56-350x194.png 350w\" sizes=\"auto, (max-width: 496px) 100vw, 496px\" \/><\/p>\n<div>\n<p style=\"text-align: center\">Source: http:\/\/www.businessdictionary.com\/definition\/fringe-benefit.html<\/p>\n<p>&nbsp;<\/p>\n<p>The main objectives of fringe benefits are:<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\">1. To promote employee\u2019s welfare &amp; paternalistic attitudes.<\/p>\n<p style=\"text-align: justify\">2. To create &amp; improve sound industrial relations.<\/p>\n<p style=\"text-align: justify\">3. To motivate the employees by identifying &amp; satisfying their unsatisfied needs &amp; to improve their morale.<\/p>\n<p style=\"text-align: justify\">4. To keep in line with the prevailing practices of offering benefits &amp; services which are given by similar concerns.<\/p>\n<p style=\"text-align: justify\">5. To gain employee\u2019s loyalty &amp; cooperation, encouraging them to greater productive efforts.<\/p>\n<p style=\"text-align: justify\">6. To provide security to the employees against social risks, like old-age benefits &amp; maternity benefits.<\/p>\n<p style=\"text-align: justify\">7. To provide health care &amp; safety to the employees.<\/p>\n<p style=\"text-align: justify\">8. To create a sense of belongingness among employees. Hence, fringe benefits are called \u201cgolden handcuffs\u201d.<\/p>\n<p style=\"text-align: justify\">9. To meet the requirements of various legislation relating to fringe benefits.<\/p>\n<p style=\"text-align: justify\">10. To improve &amp; furnish the organisational image in the eyes of the public.<\/p>\n<p style=\"text-align: justify\">11. To recognise the official trade unions bargaining strength, because a strong trade union always compels an employer to adopt a sound fringe benefits programmes for his employees.<\/p>\n<\/div>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-598\" src=\"http:\/\/mgmtp01.epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/sites\/66\/2018\/10\/Untitled-57.png\" alt=\"\" width=\"406\" height=\"884\" \/><\/p>\n<div>\n<p style=\"text-align: center\">Source: http:\/\/bankofinfo.com\/objectives-of-fringe-benefits\/<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: left\"><strong style=\"text-align: initial;font-size: 1em\">Summary:<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify\"><span style=\"text-align: initial;font-size: 1em\">Wage incentives refer to <\/span>performance linked<span style=\"text-align: initial;font-size: 1em\"> compensation. It helps to improve industrial relations, employee morale and productivity, work methods and <\/span>team work<span style=\"text-align: initial;font-size: 1em\">. It may cause damage to employee health, quality of work, industrial safety, interpersonal relations etc. Proper climate, workers\u2019 involvement, scientific standards, guaranteed minimum wage, simplicity, equity, economy, flexibility, promptness, provisions for appeal and follow up are the essentials of a sound wage incentive plan. Fringe benefit refers to the benefits like paid holidays, housing etc. in addition to regular wages, salaries.<\/span><\/p>\n<\/div>\n<table>\n<tbody>\n<tr>\n<td><strong>you can view video on Incentives &amp; Fringe Benefit: Introduction<\/strong><\/td>\n<td><a href=\"https:\/\/youtu.be\/ifxDINaps-A\" target=\"_blank\" rel=\"noopener\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-120\" src=\"http:\/\/epgpbooks.inflibnet.ac.in\/wp-content\/uploads\/2018\/11\/download.png\" alt=\"\" width=\"36\" height=\"36\" \/><\/a><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n","protected":false},"author":3,"menu_order":24,"template":"","meta":{"pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":["dr-pragya-dheer"],"pb_section_license":""},"chapter-type":[],"contributor":[61],"license":[],"class_list":["post-568","chapter","type-chapter","status-publish","hentry","contributor-dr-pragya-dheer"],"part":3,"_links":{"self":[{"href":"https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/wp-json\/pressbooks\/v2\/chapters\/568","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/wp-json\/wp\/v2\/users\/3"}],"version-history":[{"count":7,"href":"https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/wp-json\/pressbooks\/v2\/chapters\/568\/revisions"}],"predecessor-version":[{"id":810,"href":"https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/wp-json\/pressbooks\/v2\/chapters\/568\/revisions\/810"}],"part":[{"href":"https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/wp-json\/pressbooks\/v2\/parts\/3"}],"metadata":[{"href":"https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/wp-json\/pressbooks\/v2\/chapters\/568\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/wp-json\/wp\/v2\/media?parent=568"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/wp-json\/pressbooks\/v2\/chapter-type?post=568"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/wp-json\/wp\/v2\/contributor?post=568"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/ebooks.inflibnet.ac.in\/mgmtp01\/wp-json\/wp\/v2\/license?post=568"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}