Incentives refer to rewards given to employees in monetary on non-monetary form in order to motivate them to work more efficiently.
It is also known as payment by results (PBR) as they are paid in lieu of outstanding performance by an employee. An employee is paid an incentive in monetary or non-monetary form on the basis of his individual performance. Incentive vary for individuals at different positions in an organizations hierarchy and for different time periods and situations.
Types of Incentives
|
Monetary Incentives |
Non-Monetary Incentives |
| Bonus | Flexible Hours |
| Promotion (Increment in Pay) | Job Enrichment |
| Financial Incentives | Job Security |
| Stock Options | Good Working Conditions |
| Medical And Child Education Benefits | Coffee and Lunch breaks |
| Profit Sharing or Commissions | Jobs with more Responsibility |
| Corporate Discounts | Gifts |
| Insurance Benefits | Appreciation and Recognition |
| Contribution to Employee Provident Fund | Promotion(Better Status or Designation) |
| Holiday Packages |
Types of Incentives Schemes
Individual Incentive Scheme – Under this scheme an Incentive is paid to employees on the basis of their individual performance. E.g. Rowan plan, Halsey plan, Straight piece work, Emerson plan etc.
Group Incentive Scheme – Under this scheme Incentives are paid to all employees on a collective basis i.e. on the basis of group performance. E.g. Priestman production plan, Towne plan, Gain-sharing plan etc.
Enterprise Incentive Scheme – Under this scheme Incentives are paid to all organizational members on the basis of organizational success over a period of time, usually one year. E.g. ESOP, Stock options, Profit-sharing plan etc.
Prerequisites of an Effective Incentive Plan
- Cooperation of workers must be obtained beforehand
- Performance evaluation must be done scientifically
- Realistic work standards must be set for employees
- Employees must be motivated to give better performance than before
- Employees must be provided with adequate resources to conduct their work effectively
- Indirect workers like Foreman, Supervisors, Clerical, Store keepers must also form a part of an incentive scheme
- Distribution of Incentive must be Just and Equitable
- It must have the ability to attract and retain employees.