REWARDS & INCENTIVES

RASHMI.S

STATISTICS

• An employee's positive attitude can affect a

company's bottom line.

• Gallup Poll, 2009 - Organizations with employees

pleased with their work life reported customer

satisfaction scores 38% higher than those with less

satisfied workers.

• These companies also enjoyed 22% higher

productivity ratings and 27% higher profits.

• Gallup estimates these disengaged workers cost

employers $292 billion to $355 billion a year

Industry 2001 Variable Pay 2005 Variable Pay

Manufacturing 11% 16.20%

Banking 13.50% 23.30%

IT 10.90% 13.70%

ITeS 12.90% 16.40%

Telecommunications 14% 17.80%

Financial Services 19.20% 23.50%

FMCG 13.30% 16.50%

•Hewitt India Annual Salary Increase Survey 2005-06

10 WAYS OF APPRECIATING EMPLOYEES THIS RECESSION

• Praise something your coworker has done well. Identify the specific actions that you

found admirable.

• Say "thank you." Show your appreciation for their hard work and contributions. And,

don't forget to say "please" often as well. Social niceties do belong at work. A more

gracious, polite workplace is appreciated by all.

• Ask your coworkers about their family, their hobby, their weekend or a special event

they attended. Your genuine interest - as opposed to being nosey – causes people to feel

valued and cared about.

• Offer staff members flexible scheduling for the holidays, if feasible. If work coverage is

critical, post a calendar so people can balance their time off with that of their

coworkers.

• Know your coworker’s interests well enough to present a small gift occasionally. An

appreciated gift, and the gesture of providing it, will light up your coworker’s day.

• If you can afford to, give staff money. End of the year bonuses, attendance bonuses,

quarterly bonuses and gift certificates say "thank you" quite nicely. TechSmith staff

receive a percentage of their annual salary for their end of year bonus.

• Almost everyone appreciates food. Take coworkers or staff to lunch for a birthday,

a special occasion or for no reason at all. Let your guest pick the restaurant

• Create a fun tradition for a seasonal holiday. ReCellular employees draw names for

their Secret Santa gift exchange. Alison Doyle, About's Guide to Job Searching,

also works in Career Services at Skidmore College where they do a "gift grab" at

their holiday party.

LuAnn Johnson who works in Human Resources at the

Schaller Anderson Mercy Care Plan says, "We celebrate Treat Tuesday, every

Tuesday between Thanksgiving and Christmas. We match up departments or

people who don't normally work together as a unit and assign a day to provide

gooey, healthy or scrumptious treats for the other groups. It's a great mixer, an

opportunity to show off our culinary skills and a morale builder - to say nothing of

the sugar high!"

• Bring in bagels, doughnuts or another treat for staff and coworkers. Offerings such

as cookies or cupcakes, that you've baked personally, are a huge hit. (Have you

tried baking cupcakes in ice cream cones? People love them.) Another hit? Bring

chocolate - chocolate anything.

• Last, but not least, provide opportunity. People want chances for training and

cross-training. They want to participate on a special committee where their talents

are noticed. They like to attend professional association meetings and represent

your organization at civic and philanthropic events.

ESSENTIALS !!!• WAGE : fair day’s remuneration for fair day’s work.

• WAGE INCENTIVE SCHEME : a method of payment for work of an

acceptable quality produced over & above a specified quantity or

standard.

• REWARDS : rooted in behavioural sciences. Part of broader

strategy to enhance loyalty, motivation & satisfaction.

• PAY BY RESULTS : direct linking of employee’s earnings to a

measure of their performance.

• INCENTIVE SCHEME : Plan or performance to motivate

individuals & group performance.

• INCENTIVE PROGRAMME : Built on monetary rewards. Includes

non monetary rewards & prizes.

INCENTIVES CLASSIFICATION

Direct compensation

Basic pay, overtime, holiday premium,

bonus, ESOP.

Indirect compensationProtection programmes (insurance, pensions),

services , perquisites.

Monetary : overtime wages , higher basic pay,

promotion, fringe benefits, allowances.

Non- monetary : good human relations, work

ambience, recognition, self-respect, status, higher

responsibility…

Individual - individual output

Group – bonus proportionate to all

Organization – wide – pre – determined profit

share to employees.

PRE-REQUISITES OF AN EFFECTIVE INCENTIVE SCHEME

• Co- operation of workers – 1. methods in measuring the results

on which output will be based.

2. methods in setting wage rates for diff. classes of work.

3. appropriate safeguards – job security, dispute

settlements….

• Scientific work measurement – realistic standards, necessary

tools & equipment….

• Indirect workers – foreman, helpers, crane operators… -

covered under incentive scheme.

• Management commitment

• Detailed planning.

INCENTIVE – TYPES

International labour organization (ILO)

• Schemes where workers earnings are proportionate to

the output.

• Schemes where earnings vary less than the output.

• Schemes where earnings vary proportionately more

than the output.

• Schemes where earnings differ at diff. levels of output.

• Also called Shop floor Incentives & Bonus schemes.

EARNINGS α OUTPUT• Any gains or losses resulting directly from a worker’s output accrue

to him; employer – gains / losses in overhead costs / unit.

• Output measurement- extremely accurate.

• Straight piece – work : rate/ unit is fixed & total earnings = output *

rate/ unit.

• Worker’s time rate – modification of the above. Yield earnings below

the expected avg.earnings . Protects the worker when he fails to

produce the requirements.

• Standard hour System : standard time for job completion is fixed.

Rate /hr – determined . Worker paid for standard time or less .

• Condition : Workers are paid same wages if they take more than

standard time , unless there is guarantee of time wages.

EARNINGS < α OUTPUT • Time is used as a measure of output.

• Bonus is paid on time saved ie , Standard time set for job – actual time taken.

• Also called “Gain sharing schemes”. Applied where output measurement is

difficult.

• Employee – paid half of time saved; employer – remaining.

• HALSEY SYSTEM : standard time & rate – fixed. Min. wages are thus ensured –

output less.

BONUS = ½ (time saved / time taken ) * Daily wage.

• ROWAN SYSTEM : similar to HALSEY ‘s.

BONUS = [time saved / time allowed ]* time taken * hourly rate.

• BEDAUX POINT SYSTEM: standard time set is divided into no.of points at the

rate of one minute per point.

BONUS = 75% (Bonus earned in excess of 60/hr ) .

EARNINGS > α OUTPUT

• 2 categories.

• 1. High piece rate – earnings are in proportion

to output & increment in earnings for each unit

of output above standard is greater.

• 2. High Standard Hour System : similar to the

above method.

EARNINGS DIFFERING AT DIFF. LEVELS OF OUTPUT.

• Earnings vary from min to max levels of output.

• The Taylor Differential Piece-Rate system :

1. who reach the standard - higher rate ; 2. below standard –

lower rate to motivate them to perform higher.

• The Merrick Differential Piece- Rate : slight modification of the

Taylor system.

• One large step is broken into 2 , to encourage new & avg. workers.

• 83% of standard output = Standard piece-rate; Bonus = 10% of

time rate.

• 100% = High piece rates ; Bonus = 10% of time rate +extra 10%.

CONTD…..

• Profit Sharing System.

• Emerson’s Plan: standard time fixed & efficiency

of each worker is determined .

• Efficiency = time taken / standard time.

• 67% of efficiency = time rate. after 67% ,

bonus= graduated bonus upto 20% at 100%

efficiency.

After 100% = 1% added for additional 1% efficiency.

OTHERS

• Skill Based Pay – 1. Conventional job slotting – unskilled,

skilled, semi-skilled.

2 . Progression of skills = progression to the acquisition of

skills.

• Employee Stock Options :Opportunities to buy stock at a set

price immediately or in the future.

• It is a variable compensation pay.

• Infosys, Wipro, Godrej , GE, P & G, Dr.Reddy’s, Global Trust

Bank, Starbucks.

• Economic Value Added (EVA):The return on a company’s

capital - the cost of capital.

• Calculated by a combination of 3 basic

factors – net operating after taxes, capital

& cost of capital.

• EVA = positive ; Co has created value for

shareholders.

• EVA= negative ; it is contrary.

• EVA links individual performance to Co.

profits and vice versa.

FINE POINTS !!!

• Benefits & Services are Indirect Compensation.

• Extended as condition of employment or with intention of

inducement or motivation.

• Benefits – Substantial elements of compensation provided to

employee in non- cash form. - Perquisites, fringe benefits

• Applies to those items for which a direct monetary value to the

employees can be ascertained – pension, insurance…

• Services – Direct monetary value cannot be ascertained – Co.

holiday homes etc.

• Perks – something in addition to payment – Car fuel.

• Allowance – sum of money given at regular intervals to cover

special circumstances – canteen allowance….

WHY BENEFITS???• Altruistic / Paternalistic consideration.

• Statutory requirements

• Concern for well being

• Tax planning consideration

• Quality of work life

• Build company image

• Reduce attrition

• Attract ,retain , motivate employees

• Discourage labour unrest

• Hazards of industrial working…

STATUTORY EMPLOYEE BENEFITS

• Employee benefits are given under 7 major groups;

• 1. Disability income continuation : accident or health related

problem . Provide weekly / monthly payments.

• Short term, long term disability, Workers compensation, Social

Security, Sick Leave, Travel accident insurance, Accidental

death…

• 2. Loss of Job Income Continuation : assist workers during

short term periods of unemployment due to lay offs &

termination.

• Consist of Unemployment Insurance, Supplemental

Unemployment Benefit Insurance , Guaranteed Annual

Income, Guaranteed Income Stream.

• Deferred Income : components which help employees accumulate capital & meet

future financial goals.

• Social security, ESOP, Pension plan, Retirement plan….

• Spouse & Family Income Protection : future welfare of dependants.

• life insurance, Social Security, Medicare, Travel Accident Insurance, Health care

coverage…

• Health & Accident Protection: Insurance services to cover medical, surgical &

hospital bills – accident/illness.

• Property & Liability Protection : provide employees with personal property &

liability protection – group home, group umbrella liability, Fidelity bond

insurance…

• Fringe Benefits: wide array of services that enhance the lifestyle of employees.

• ex: grant employees time off with pay.

• Employers get tax benefits.

• 3 major components –

• Pay for time not worked - more paid holidays & longer vacations. Employees

receive daily base pay rate – during time off opportunities.

• Time off from Work without Pay: employees are

provided sabbaticals without pay to pursue some

special interest area.

• Income equivalent Payments & Reimbursements for

Incurred Expenses : these are non-statutory benefits.

• Include most diverse & desirable kinds of goods &

services.

• Introduced due to tax demands & economic changes

for an improved & enjoyable lifestyle.

• Child care, Subsidized food service, Travel

expenses, Car reimbursement , Emergency loans…

NON MONETARY REWARDS• TREATS – free lunches, festival bashes, coffee breaks, picnics,

b’day treats…

• KNICK KNACKS - Decoratives, Wallets, T-shirts, Diaries,

Brooches…

• AWARDS – Trophies, plaques, certificates, Letters of

Appreciation, Scrolls…

• ENVIRONMENT – Flexible hrs, Music..

• SOCIAL ACKNOWLEDGEMENT - Informal recognition,

Recognition at office get togethers, club memberships….

• TOKENS – Movie tickets, Vacation trips, Cupons…

• ON THE JOB REWARDS – job rotation, Special assignments, more

responsibility…

STATUTORY WELFARE PROVISIONS

Amenities that are necessary to be provided to the employees under

diff labour legislations.

Factories Act : washing facilities, facilities for storing & dry clothing,

canteens for more than 250 workers, shelters, rest rooms, creche (30

women ), welfare officer…

Mines Act : crèches (50 women), shelter for food & rest (150

workers), canteens, welfare officer…

Plantation Labour Act : Recreational facilities, canteens, creche,

Educational arrangements, Housing facilities, Medical Aid, welfare

officer (> 300 workers).

Employees State Insurance Act: sickness, maternity, dependants,

funeral….

Motor transport Workers Act: canteen, ventilated rest rooms, uniforms,

medical & first aid facilities…

Contract Labour (Regulation & Abolition Act): canteens, rest rooms, washing

facilities, first aid box.

Labour officer: statutory appointment of welfare officer (>500 workers) –

labour welfare, labour administration , labour relations..

Social Security : protection which society provides against substantial

reduction of earnings from sickness, maternity , employment injury,

unemployment….

Workman’s Compensation Act: Compensation limits for accidents arising out

of & in the course of employment.

Employees Provident Fund & Miscellaneous Act: employees -6.25% - 8%

contribution & equal contribution from employers.

Employees Deposit linked Insurance Scheme

Payment of Gratuity Act : Payable on termination of employment on the

completion of 5 yrs of continuous service. Applicable to workers who do not

draw wages of more than Rs.1600 / month.

VOLUNTARY WELFARE AMENITIES

• Educational facilities

• Housing facilities

• Transport facilities

• Recreational facilities

• Consumer co-operative Socities.- fair

price shops – essential items are available

to all workers.

REWARDS USED IN DIFF. INDUSTRIES

HOSPITALITY INDUSTRY

OBEROI• Outstanding Performance

Award

• Employee in Spotlight

• Peer Recognition Program

• Star of The Month

• Champions Programme

• Roll of Honour

• WOW Awards

TAJ• TAJ people philosophy

• Special thanks &

Recognition loyalty

program (STARS)

• TAJ Charter-

communication

transperancy, Balanced

Score Card, Employee

Satisfaction & tracking

system.

• Hermes Award.

FOOD & BEVERAGE INDUSTRY

COCA COLA

• Johnston Legacy

scholarship program –

youth development

• Educational Assistance

Program – reimbursements

for employee education &

training.

• Employee homes loans

• Awards for Safe

workplace.

PEPSICO

• Chairman’s Award

• Educational facilities

• Medical assessments

• New smoking cessation

program – rewards

• Fitness, nutrition & stress

management programs –

rewards & opportunities.

MEDICAL SECTOR

• A floater policy of insurance – dependants – min.

1 lakh

• Co funds 70% of premium

• Maternity coverage

• Credit Card facilities

• Coupons

• Reimbursement options – bills.

- Dr. H.K. Venkatesh.

MANUFACTURING INDUSTRY

• Trophies for best Best Kaizen & OPL of the month,

quarter year.

• Best TPM team of the year. the winners of the yearly

awards get the privilege to dine with the MD .

• Publish articles & contributions of executives & workers

on various creative dimensions in internal company

magazine along with pictures & write-ups in the canteen &

notice boards. 

• workshops for children of employees .

• organise competitions for the kids from time to time at

campus.... 

- Swetha working in a German Manufacturing Plant.

AVIATION INDUSTRY• Indian Air force – more incentives to attract pilots.

• Each year, the air force will allow an unspecified number of senior pilots

(including generals, who are still qualified to fly) to leave the service and take

an airline job. An air force general in his mid 50s makes about $17,000 a year

(after taxes), but can quickly make twice that as a co-pilot in an airliner. The

older air force pilots can fly commercial aircraft until they are 65.

• The higher pay, plus their military pension, gives younger military pilots

something to look forward to.

• Experience appreciated more & increasing morale of military pilots.

• Program has been initiated to combat the morale & severe shortage of

airliner pilots worldwide. In many countries, including the United States, this

is forcing airlines to cancel an increasing number of flights.

BANKING INDUSTRY• Kotak Mahindra Bank & i-mint partner to launch employee rewards program for

KOTAK employees.

• B2E (Business-to-Employee): the new way to employ, engage and manage talent.

• “The STARS” and will be launched with a co-branded card. Kotak’s9000+

employees will be eligible to receive i-mint (STARS) points as a part of the

“Appreciation and Recognition” program.

• They can earn points across the i-mint network of brands and merchant partners

such as HPCL, Bookmyshow.com, Enrich, Monginis, Makemytrip.com,

Zoomin.com, Ferns and Petals, Planet Fashion etc

• Employees will be able to redeem their points from a large array of

products/services listed on the catalogue on the Kotak customized micro-site.

• Also being introduced in the BPO industry by INFOSYS in partnership with i-

mint.

SOFTWARE INDUSTRY TCS

• Knick Knacks

• Insurance

• Reimbursement options

• Education facilities

• new practices:

• 1. Flexible work hours option

• 2. Work from home.

• ALSO USED BY COGNIZANT &

MPHASIS

INFOSYS

• Educational facilities

• Fitness program

• Memberships

• Reimburesments.

• ESOP

• Also followed by

Starbucks & Dr.

Reddy’s Lab.

FUTURE REWARDS & INCENTIVES PROGRAMS

• 1. NANO – ANTIDOTE TO BEAT RECESSION .

• Shree Cement – 1000 cars advance bookings on Wednesday – burn min. fuel.

• Allotted to employees as part of HR strategy

• Employees – Nano instead of 2- wheelers with allowance.

• Linc Pen – 11 Nano’s on Monday.

• IT, FMCG, Pharma, Telecom, Healthcare – Nano instead of foreign tours .

• Financial sector – estimated to order 1000- 1500 Nano’s .

• 2. Karma Yatra – imbibing song & dance into the confines of work.

• Essentially involves getting the employees and their families to participate in

various events like singing, dancing, plays and games.

• Reduces employee attrition & motivation – promotion close communication with

peers & senior management.

THANK YOU