Incentive Schemes
- rewards
- Managers have varied job responsibilities depending on
their industry. One common job duty regardless of sector,
is motivating a group of team members to produce high-
quality work. Incentive schemes can be a useful
managerial tool for increasing team members productivity
and performance once you motivate your people it
produce productivity.
What is an incentive scheme?
- An incentive scheme is a program that managers or
other company lenders can use to motivate and retain
team members. Incentive schemes can take a variety of
forms including..
•Prizes or rewards
•Special privileges
•Public regulation
•Increased perks or benefits
Mandated
> Newly hired
> Probationary
> Regular
Benefits ( fringe benefits)
> Regular employee
- based on their discretion
- considered fairness when making policy
Purpose of incentive schemes
- incentive schemes can help team members develop
loyalty to the organization and maximize their desire to
produce excellent work. Some incentive schemes are
short term and project-based, like motivating team
members to reach a certain quota during a set time period,
while others are continuous and long-term like a monthly
reward for meeting a specific metric.
EI ( Employer Incentive )
> Based salary
> Commission
> Incentive
> Pro sharing
Incentives > performance> revenue> profit > loyal
Do employees incentive programs work?
According to statistics
> 90% of the highest performing companies use
incentives and rewards to retain and encourage employees
> 99% of employees have unique reward preferences,
which makes incentives a good alternative to a traditional
reward system.
> 80% of employees prefer strong incentives over a
bigger paycheck.
> 78% of employees are willing to remain with their
current company due to the competitive perks and
incentives it offers.
In addition to these stats, here is a table that simplifies the
difference between companies that offer incentives, and
those that don't.
Officer Incentives
> Attract talented and self aware professionals
> Experience greater business growth in short terms
> Retain top talent due to employee loyalty
> Become sustainable and self reliant sooner
Don't offer incentives
> Attract substandard, disengaged talent
> Growth becomes stagnant and then non-exist overtime
> Experience poor retention rates and lack of employee
loyalty
> Often struggle with bottom lines, even after years in 2. Non- monetary or non-financial incentives
operation
- job security

- praise and recognition

With better incentivized employees, you can expect better
engagement and superb retention in the long run. - career development

- management development

- Incentives are effective motivation when the objectives

to be met are clearly started upfront and when incentives
offered are desirable. A company that provides various
types of incentives, tailored to individual workers,
motivate employees to consistently do their best.
Incentives definition
Monetary or financial incentives
- Money is the determinant factor of all incentives. In
order to increase the efficiency of the laborer, various
financial incentives: good wage, bonus, allowances, and
money related income items ( free medical assistance,
free educational, etc. are very essential

( hindi ko nasulat kasi nilipat agad ) - financial incentives impart self confidence and give
sense of security to the workers. They take more interest
in work and produce more in the hope of getting still
more monetary benefits.
Incentive schemes
- Financial incentives also include such economic
> An incentive of "reward" can be anything that attracts incentives as are given collectively to the employees.
an employees.

A. Allowances
Incentives can
> Is made to the employees under wages/pay packet. It is
> Increase productivity paid by the employees to the employees in order to
provide relief to the latter against ever rising prices of
> Encourage teamwork consumer goods
> Thank employees for doing their work well > This incentives is given to compensation for rising
prices or consumer price index.
> Keep employees happy
> It is an important part of the wages paid to the
> Reward high achieving employees employees. Today, allowance is given to all government
and most of the private sector employees.
> Build trust with employees
> Initially allowances was kept separate from the basis
> Problem of absentism
salary

> Presently, allowance used to be treated as an additional

Types of incentives

B. Profit sharing
1. Monetary of Financial incentives
> Is an arrangement entered into by which the employees
- Allowances review a share, fixed in advance of profits.

- Profit sharing > It is a scheme where by a certain percentage of the

profits is distributed at fixed interval, usually annually or
- bonus semi annually in some definite ratio to all employees who
have been in employment of the form for stated term.
C. Bonus
> To motivate the workers payment of bonus
Non- monetary/non-financial incentives
> Non- monetary incentives include all those non-
financial, social and psychological factors for which
employees get incentives for maximum.
1. Job security
> Every employee wants his job to be stable and secure.
Security of service inspires him to perform his duty
efficiently.
2. Opportunity in Progress
> Every employee looks for an opportunity to make
progress. It is therefore essential that everybody should
have ample opportunities for advancement. It is possible
that one may not be able to take advantage of the
opportunity when it arises, but they do hope for the
opportunity. Everyone aspires to higher positions for
financial gain.
3. Sound policy
> An employee expects justice and fair treatment in the
company. In matters of promotion or transfer, etc. the
management must play fair. Workers lose confidence in
management when the latter exercises discrimination.
Besides their enthusiasm for work becomes weak.
4. Workers participation in management
> Workers should have the right to participate in
management
5. Praise
> Everybody likes that his good works be appreciated. It
is the weakness of an ordinary person that he feels greatly
flattered at his praise. It satisfies his ego.
> Praise has great motivational force. It constantly
inspires the workers to take keen interest in the work and
adds to his productivity.
6. Knowledge of results
> The workers must be aware
7. Recognition
Recognition incentives
> These incentives are actions like thanking, praising,
presenting employees with a certificate of achievement or
a announcing an accomplishment at a company meeting.
This can be used for individual or even in the use of the
whole company.
Appreciation incentives
> These are the type of incentives that were mentioned
above. Parties, family, gathering for the employees like
picnics, and just general celebrations for good employee
work. Showing recognition through food and celebration
is a great way.
Types of incentives plan
1. Individual incentive plan
2. Group incentives plan
3. Organizational level plans; and
4. Incentives to professional employee
1. Individuals incentive plans
> This incentives plans are influenced by many factors
such as: technology, job tasks/duties and/or organizational
goals.
Types of individual incentive plan
1. Piece work
> It is one of the oldest incentives plans. In straight piece
work incentive plan, the employees receive a certain rate
for each unit produced. Compensation is determined by
the total member of unit is produced during a particular
period.
2. Standard hour plan Total sales amount = ₱90,000.00 + ₱45,000.00 =
₱135,000.00
- payment is determined based on the completion of a job
in a predetermined standard time. Now, let's find 25% of ₱135,000.00:

Commission = 25% of ₱135,000.00

3. Bonus Commission = 0.25 * ₱135,000.00 = ₱33,750.00

> It is an incentive plan given to an employee in addition Therefore, Juan Dela Cruz makes ₱33,750.00 in
to one's normal basic pay. commission.

4. Merit pay Salary plus commission

> Based on performance > Employee x works for a company which pay him for
total net of 14,543,50 per month pay 5% of any sales
> Lump-sum merit pay above 50,000.00. If he sold goods worth Php. 100, 000.00
he will received a total income of ______?
> Special contributions are merchandise awards
personalized vacations, gift vouchers. Research showed Salary=14,543.50
that non-cash incentive awards along with regulation
program. Commission= 100, 000.00-50,000.00=50,000×5%
=2,500.00

1. Sales incentives
Graduated commission
> As sales job requires done and enthusiasm depends in
sales volume. > Employee Y works as sales executive for a company
that pay him 1% on the first 5,000.00 sold 2% on the next
15,000.00 sold and 3% on all sales over 20,000. What is
his gross pay if he sells 25,000.00?
Types of sales incentive plan
5,000.00×1%=50.00
1. Straight salary
25,000.00-5,000.00=20,000.000
2. Straight commission

3. Combined salary and commission plan

15,000.00×2%=300.00

20,000.00-15,000.00=5,000.00
Straight commission

> Juan Dela Crush receives 25% commission on the

appliances sells. If he sells a iphone pro max 256GB for 5,000×3%=150.00
90,000.00. An Iphone 13 128GB for 45,000.00. How
much does Juan Dela Cruz make in commission? 50.00+300.00+150.00=500.00

To calculate Juan Dela Cruz's commission, we need to

find 25% of the total sales amount.
2. Group incentives
First, let's find the total sales amount:
Types of group incentives plan
- iPhone Pro Max 256GB: ₱90,000.00
1. Team compensation plan
- iPhone 13 128GB: ₱45,000.00
> These plans reward team members with incentive bonus
when the performance standards are met or exceeded.
 3. Value added 45,000

2. Grain-sharing plan 4. Rucker standard ( 30% of #3) 13,500

> These organizational plans to increase productivity or 5. Actual labor costs 10,000
decrease labor cost and share the gains obtained through
higher productivity or reduced waste, with the employees. 6. Bonus pool 3,500

> In contrast to profit-sharing. 7. Company share (50%} 1,750

3 types of gain sharing plan 8. Employee share ( less 20% for deficit) 1,750

1. Scanlon plan

> identify and cooperation 3. Improshare

Ex. 2005 data( base year) for Alton Ctd > Bonuses based on the overall productivity of the team.

Sales value of production (SVOP) =$10,000.00 3. Organizational level

Total wage bill = 4,000.00 > Include all the employees respective of teams/groups
are based on the success of the organizations as a whole
Total wage bill/SVOP = 4,000.000/10,000,000 over a period of time.

= 40=40%

Operating month March 2006 4. Incentives to professional employees

> Professional employees cannot advance beyond a

certain point of salary structure in some organization
SVOP = $950,000 unless they are willing to become administrators.

> Allowable wage bill = 40(950,000) = 380,000

Actual wage bill ( August ) = $330,000 The best 23 employee incentive programs for the
Modern enterprise
Savings = $50,000

50,000 available for distribution as a bonus

1. Customized paid vacation

2. Green transport service

2. Rucker plan
3. On-site entertainment
> The financial incentive is based on the historic
relationship between the total earnings of hourly 4. Unlimited sick leave
employees and the production value that employees create.
5. Free online skill development courses
> Both scalon and Rucker plan prove that any
management expecting to gain the operation. 6. Free e learning program

Ex. 7. One-on-one mentoring

8. Fast food catering on specific weekdays

$100,000
9. Free healthy snacks
1. Value of services
10. Stationary and equipment personalization
2. Less outside purchases ( materials, supplies, energy,
etc.) 55,000 11. Health and wellness program
12. Club and society membership

13. Rest and relaxation rooms

14. Streaming service subscription

15. Department Activities

16. Gamification of tasks

17. Profit sharing among employees

18. Working remotely, whenever work from home

19. Elimination of degree requirements

20. Unlimited medical insurance coverage

21. Vehicle financing assistance

22. Consumer goods financing assistance

23. Student loan debt assistance