Insensitive:
• Monetary benefits paid to employees for outstanding performance.
• Given in addition to wage & salary
• Variable pay linked to performance
Types of Incentives
1. Individual Incentives: Reward linked with the individual performance. Individual incentive plans are:
a) Piece Rate: Compensation is based on number of units produced. Used for production worker.
b) Commissions: Based on sales performance in terms of value. Used for sales personnel.
c) Bonus: One-time lumpsum payments for meeting performance goal. Used for managerial & professional employees.
2. Group Incentives: Reward linked to the combined performance. Where task are interdependent and requires team work and the output of individual employee canot be measured such incentive is provided. Bonus, commission, piece rate.
3. Organizational Incentives: Reward linked with the overall performance of the organization.
a) Scanlon Plan: It is based on the ratio of labor cost to productivity. All employees are entitled to a share of saving in labor cost through bonus payments (productivity gain sharing).
b) Suggestion plan: Reward for useful ideas for improvement of organizational effectiveness from the employees.
c) Employee shares some portion of profit.