INCENTIVE AND EMPLOYEE BENEFIT

INCENTIVES In the words of Burack & Smith, "An incentive scheme

is a plan or program to motivate individual or group performance. An incentive program is most frequently built on monetary rewards (incentive pay or a monetary bonus), but may also include a variety of non-monetary rewards or prizes”.

On the other hand, French says, the term “incentive system” has a limited meaning that excludes many kinds of inducements offered to people to perform work, or to work up to or beyond acceptable standards.

TYPES OF PLANS Merit Pay Individual Incentives Profit Sharing Ownership Gain sharing Group Incentives Alternative Reward Systems

MERIT PAY link performance appraisal ratings to annual pay

increases focus: identifying individual differences in performance better performance results in higher reward, contingent

on position in the range (compare-ratio)

INDIVIDUAL INCENTIVES reward individual performance payments are NOT rolled into base pay performance is usually measured as a physical output

rather than subjective ratings

PROFIT SHARING payments are based on a measure of organizational

performance (profits) payments do NOT become a part of base pay Advantage: may encourage workers to think more like

owners Drawbacks:

workers may perceive their performance has little to do with profit

deferred nature of payouts

OWNERSHIP encourages employees to focus on the success of the

organization as a whole but may not result in motivation for high individual performance

gains not realized until stock sold (employees leaving company?)

Methods: stock options ESOPs (employee stock ownership plans)

GAIN SHARING sharing productivity gains with employees differs from profit sharing in that instead of using an

organization-level performance measure (profits) plans measure group or plant performance

better for motivation Examples:

Scanlon plan, Rucker plan, Improshare

GROUP INCENTIVES Focus = smaller work groups While gain sharing typically measures physical output,

group incentives tend to measure performance in terms of a broader array such as cost savings successful completion of product design meeting deadlines

Drawback: competition among teams

ALTERNATIVE REWARD SYSTEMS alternatives to cash travel merchandise earned time off symbolic awards

MERITS AND DEMERIT OF INCENTIVE PLAN

Sr. Merits of Incentive based Remuneration

Demerits of Incentive based Remuneration

1. It is accepted as a sound technique for the achievement of greater productivity

It is not considered a very good scheme in countries in the West where it is mostly prevalent.

2. For employers the need of vigorous supervision is reduced.

It tends to create tension among different workers in an organization.

3. Workers have the advantage of working in a relatively calm atmosphere because of minimum vigilance on them by the superior.

A poor performer will earn very little.

4. The incentive is directly linked with the productivity of the worker.

Tensions caused by incentive schemes would give rise to internal relations problems which would be a serious matter of concern for the management.

5. The more the worker produces the more he earns.

The tension created would eventually affect the total output.

EMPLOYEE BENEFITS

Employee benefits encompass a broad range of benefits—other than salary—that companies provide to their employees. Some of these benefits, such as workers 'compensation, social security, and unemployment insurance, are required by law.

OVERVIEW OF EMPLOYEE BENEFIT SCENARIO IN INDIA

Employee Benefits

Pay for time not worked

INSURANCE

BENEFITS

Retirement Benefits

EMPLOYEE

SERVICES

PAY FOR TIME NOT WORKED

Pay for time not worked also called supplemental pay benefits is one of the most costly benefits.

Common time off with pay periods include: Unemployment insurance Vacations and holidays Personal days sick leave Maternity leave Funeral leave Family and medical leave act(FMLA)

EMPLOYEE BENEFITS – INSURANCE CO’S VIEWPOINT

Employee Benefits

Insurance Retirement

Defined Contribution

Defined Benefit

LifeAccident Mediclaim Leave Encashment

Gratuity

Superannuation

INSURANCE BENEFITS Insurance is the equitable transfer of the risk of a loss,

from one entity to another in exchange for payment. It is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss

CTD…….. Life insurance Health care insurance Legal insurance Long term care worker compensation

RETIREMENT BENEFITS

Retirement benefits are financial instruments designed to help individuals after they stop working. Individuals typically receive retirement benefits in the form of regular cash installments or as protection in the form of insurance coverage.

CONTD……. Pension Gratuity Leave Encashment Voluntary Retirement Compensation Social security

EMPLOYEE SERVICESo Employee assistance programo Counseling serviceso Educational assistance planso Child careo Elder careo Food serviceso Health serviceso Legal serviceso Financial planningo Housing and moving expenseso Transportation pooling/parkingo Purchasing assistanceo Credit unionso Social and recreational serviceso Awards