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# HRM

Chapter-4
Motivational Strategies
Types of Incentives Schemes
Incentive
Schemes

Earnings vary in
The same proportion
As output
Earnings vary less
Proportionately
Than output
Earnings vary proportionately
More than output
Earnings differ at
Different levels of output
1.Straight
Piece Work

2. Standard
Hour

1. Hasley Plan
2. Rowan Plan
3. Barth Scheme
4. Bedaux Plan

1. High piece
rate
2. High standard
hour

1. Taylors
Differential Piece rate
2. Merrick Differential
Piece rate
System
4. Emersons efficiency
plan
1. Straight piece-work
Straight piece-work method is the oldest,
simplest and the most commonly used
method.
Here, the rate per unit of output is fixed,
and the total earnings of a worker arrived
at by multiplying the total output (
measured in terms of units) by the rate per
unit.
Example
If the rate per unit is 10 paisa and the total
output of an employee is 100 units, his or
her earnings will be

100 * 0.10= Rs.10.00
Extending the logic of the piece-rate
system, a worker has to go without wages
if he or she fails to turn out the required
goods.
For this reason, the system is modified in
one respect the workers time rate is
guaranteed.

2. Standard hour system
( 100 % gains sharing)
Standard
Hour system
Wages
Are not
guaranteed
Wages are
guaranteed
Example
(Wages Are not guaranteed)

Standard time = 10 hours
Rate per hour = Re 1

Case (i)
Time taken =8 hours
Earnings = 10*1= Rs.10
Example
(Wages Are guaranteed)

Standard time = 10 hours
Rate per hour = Re 1

Case (ii)
Time taken =12 hours
Earnings = 12*1= Rs.12

1. Hasley Plan
Standard time is fixed for the completion of
a job and the rate per hour is determined.
If the worker takes the standard time or
more to complete the job, he or she gets
paid at the time rate.
In other words, time wages are
guaranteed even if the output of the
worker is below standard.
When the work is done in less than the
standard time, he or she gets paid for the
actual time, at the time rate plus a bonus
which is calculated as at or as a specified
percentage of the saved time.
The percentage varies from 30-70 percent.
The usual share is 50 percent, the
remaining going to the employer.
Example
Standard time = 10 hours
Rate per hour = Re 1

Case (i)
Time taken =10 hours
Earnings = 10*1= Rs.10

Standard time = 10 hours
Rate per hour = Re 1

Case (ii)
Time taken =12 hours
Earnings = 12*1= Rs.12

Standard time = 10 hours
Rate per hour = Re 1

Case (iii)
Time taken = 8 hours
Earnings = 8*1= Rs.8 ( Time wages)
Bonus = *2*1= Rs.1
Total = Rs. 9

2. Rowan System
Standard time and rate per hour are fixed.
If the time taken to complete the job is
equal to or exceeds the standard time, the
employee is paid for the time taken at the
rate per hour.
If the time taken is less than the standard
time, the employee is entitled to bonus, in
addition to the time wages.

The bonus takes the form of a percentage
of the workers time-rate.
This percentage is equal to the proportion
of the saved time, to the standard time.

Example
Standard time = 10 hours
Rate per hour = Re 1

Case (i)
Time taken =10 hours
Earnings = 10*1= Rs.10

Standard time = 10 hours
Rate per hour = Re 1

Case (ii)
Time taken =12 hours
Earnings = 12*1= Rs.12

Standard time = 10 hours
Rate per hour = Re 1

Case (iii)
Time taken = 8 hours
Earnings = 8*1= Rs.8 ( Time wages)
Bonus = 2/10*8=Rs.1.6
Total =Rs. 9.60

3. Barth System
The barth system does not guaranteed the
time-rate.
The workers pay is ascertained by
multiplying the standard hour by the
number of hours actually taken to do the
job, taking the square root of the product
and multiplying it by the workers hourly
rate.
Example
Standard time = 10 hours
Rate per hour = Re 1

Case (i)
Time taken =12 hours
Earnings = 12*10 (square root)
= 10.95 * 1 = Rs. 10.95

Standard time = 10 hours
Rate per hour = Re 1

Case (ii)
Time taken =10 hours
Earnings = 10*10 (square root)
= 10 * 1 = Rs. 10.00

Standard time = 10 hours
Rate per hour = Re 1

Case (ii)
Time taken = 8 hours
Earnings = 8*10 (square root)
= 8.94 * 1 = Rs. 10.00

4. Bedaux Scheme
The standard time for a job is determined.
Each minute of the allowed time is called a point
or B.
Thus, there are 60 Bs in one hour.
Each job has a standard number of Bs.
The rate per hour is also determined.
The workers receives, in addition to his or her
hourly rate, a bonus which under the original
plan is equal to 75% of the no. of points earned,
in excess of 60 per hour, multiplied by one-
sixtieth of the workers hourly rate.
If a worker does not reach his or her
standard, he or she is paid at the time
rate.
Example
Standard time = 10 hours
Rate per hour = Re 1

Case (i)
Time taken =12 hours
Earnings = 12*1= Rs.12

Case (ii)
Actual time = 8 Hours
Earnings: Time wages = 8*1= Rs. 8
Bonus:
Standard Bs = 10* 60 = 600
Actual Bs = 8*60 = 480
Bs saved = 120
Bonus = 75/100*120*1/60 = Rs. 1.50
Total earnings = 8+1.5
= Rs. 9.5
1. The high piece rate and
2. The high standard hour
system
Under this, the earnings of the worker are
in proportion to his or her output, as in
straight piece-work, but the increment in
earnings for each of the output above the
standard is greater.
Example:- for each one percent increase
in output in earnings under the straight
piece-rate system.
Example
Standard time = 10 hours
Rate per hour = Re 1

Case (i)
Time taken =12 hours
Earnings = 12*1=12 hours
Increase in output=1.2*1*4/3=1.6
Total =13.6

1. Taylors Differential piece-rate
system
There is a low rate for output below the
standard, and a higher piece-rate for
output above the standard.
Differentials to be applied:
120% of piece-rate at or above the
standard
80% of piece-rate when below the
standard

Example
Standard output = 100 units
Rate per unit = 10 paisa

Differentials to be applied:
120% of piece-rate at or above the
standard
80% of piece-rate when below the
standard
Case (i)
Output =120 units
Earnings =120*120/100*0.10=
Rs.14.40

Case (ii) = 90 units
Earnings = 90*80/100*0.10=
Rs. 7.20
2. Merrick differential piece-rate
system
Is a modification of the Taylor system, with
three instead of two-rates.
So, as to encourage new and average
workers.
Straight piece-rates are paid up to 83% of
the standard output, at which a bonus of
10% of the time-rate is payable, with a
further 10% bonus on reaching the
standard output.
Differentials to be applied:
As the efficiency is more than 83% but
less than 100%,110% of the base piece-
rate applies
As the efficiency exceeds 100%, 120% of
the base piece-rate applies
Example
Standard output = 100 units
Rate per unit = Re 1

Case (i)
output =80 units
Earnings = 80/100*100 = Rs.80%
As the efficiency is less than 83%, only the base
piece-rate applies
80*0.10=Rs. 80

Case (ii)
Output =90 units
Efficiency = 90/100*100=90%
As the efficiency is more than 83% but less
than 100%, 110% of the base-rate applies
90*110/100*0.10= RS.9.90

Case (iii)
Output =110 units
Efficiency = 110/100*100=110%
As the efficiency is more than 100%, 120%
of the base-rate applies
110*120/100*0.10= RS.13.20

3. Gantt Task System
The worker is guaranteed his of her time-
rate for output below the standard.
On reach in the output or task, which is set
at a high level, the worker is entitled to a
bonus of 20% of the time wages.
For outputs above the task, high piece-
rates are paid.
Example
Standard output = 80 units
Time taken = 8 hrs
Rate per hour= Re 0.50
High piece-rate=Re. 0.10
Case (i)
Time taken =70 units
As the output is less than the standard, only time
wages are paid to workers
8*0.50=Rs.4.0

Case (ii)
Time taken =80 units
As the output is equal to the standard, the
worker is entitled to time wages plus 20%
of the time wages as bonus.
Time wages = 80*0.50=Rs.4.0
Bonus = 20/100*4=Rs0.80
Total earnings = Rs. 4.80

Case (iii)
Output earnings = 110 units
As the output is more than the standard,
the worker is entitled to a high piece-rate.
110*0.10= Rs. 11.00
4. Emersons Plan
A standard time is set for each job, and the
efficiency of each worker is determined by
dividing the time taken by the standard time.
Up to 67% of efficiency, the worker is paid by
time-rate.
Thereafter, a graduated bonus, which amounts
to a 20% bonus at 100% efficiency is paid to the
worker. Thereafter, an additional bonus of 1% is
added for each 1% efficiency.
Example
Case (i)
Standard output = 100 units
Rate per hour = Re 1
Case (i)
Output in 10 hrs = 50 units
Earnings
Efficiency = 50 percent
As the efficiency is below 67% the worker is
entitled to time wages only.
Earnings =10*1 = Rs. 10

Case (ii)
Output in 10 hrs = 100 units
Earnings
Efficiency = 100 percent
The worker is entitled to time wages plus
20% of time wages as bonus
Time wages =10*1 = Rs. 10
Bonus = 20/100*10=Rs.2
Earnings = Rs. 12

Case (iii)
Output in 10 hrs = 130 units
Earnings
Efficiency = 130 percent
The worker is entitled to time wages plus
20% of time wages as bonus
Time wages =10*1 = Rs. 10
Bonus = 50/100*10=Rs.5
Earnings = Rs. 15