INDIVIDUAL AND GROUP INCENTIVES

REWARD SYSTEMS
FINANCIAL
Direct payments (salaries) Indirect payments (benefits / incentives)

AN OVERVIEW

NON-FINANCIAL
Protection Programmes Employee involvement in decision making Recognition Training Opportunities Nurturing and supportive company culture

Performance Appraisal and Compensation

30th April 2004

REWARD SYSTEMS
HARD VARIABLES 
   

CONTD.

SOFT VARIABLES 
 

Salary Augmented Pay (overtime, etc) Indirect Pay (fringe benefits) Works Pay (uniform allowance, etc.) Perks Pay (discounts on company products, etc. 

Opportunity for advancement Opportunity for growth Psychic Income (doing personally meaningful work) Quality of Life (workplace flexibility, etc.)
30th April 2004

Performance Appraisal and Compensation

EFFECTIVE REWARD SYSTEMS ARE MEASURABLE Effective Reward Systems SPECIFIC ATTAINABLE SIMPLE Performance Appraisal and Compensation 30th April 2004 .

INCENTIVE SYSTEMS  Individual Incentives: give income over and above base salary to individual who meets specific individual performance standards Group Incentives: all team members rewarded when team collectively meets specific performance standard Organization-wide Incentives: applicable to all employees in an organization 30th April 2004   Performance Appraisal and Compensation .

Levi Strauss) Commission Awards Bonus Other Perks 30th April 2004 Performance Appraisal and Compensation . Variable Pay Piecework Incentives Differential Piece-rate Systems Production Bonus (Eg.INDIVIDUAL INCENTIVES         EGS.

VARIABLE PAY  BASIC BELIEFS Some jobs contribute more to the organization than others Some people perform better than others Employees who perform better should receive more compensation   Performance Appraisal and Compensation 30th April 2004 .

group.VARIABLE PAY IS    Not a part of salary Not guaranteed Based on individual. or organizational performance Performance Appraisal and Compensation 30th April 2004 .

ADVANTAGES OF VARIABLE PAY  Offers flexibility to target specific outcomes Can be used to drive performance Helps increase the involvement of employees in business success   Performance Appraisal and Compensation 30th April 2004 .

SUCCESSFUL VARIABLE PAY PLANS Performance Appraisal and Compensation 30th April 2004 .

FORMS OF VARIABLE PAY Performance Appraisal and Compensation 30th April 2004 .

PIECE-WORK INCENTIVES    Employee is paid for each unit of output Works for only certain kinds of jobs Declining in popularity because does not always result in higher productivity DIFFERENTIAL PIECE-RATE SYSTEMS  Employees paid one piece-rate for units produced upto a standard output and higher piece-rate wage for units produced over the standard Performance Appraisal and Compensation 30th April 2004 .

or produces more units in a given time period.PRODUCTION BONUS  Incentives that reward extra effort in the work place When an employee either saves time on a given production run. he is given a monetary reward per extra unit Very similar to piecework. except that the employee still earns a base salary 30th April 2004   Performance Appraisal and Compensation .

COMMISSION  A percentage of the selling price given to the seller / sales person Minimal base salary + commission as a way to make the employee a more aggressive seller Usually employed only in sales-related jobs   Performance Appraisal and Compensation 30th April 2004 .

AWARDS  Cash or merchandise used as incentives ENHANCED COMPENSATION AWARD  Agencies that meet certain performance criteria grant awards to employees who directly contribute to these performance standards SERVICE AWARD  Rewards to employees for lengthy service to an organization 30th April 2004 Performance Appraisal and Compensation .

BONUS  One time payment that does not become part of the employees base pay RETENTION BONUS  Bonus paid in order to retain employees Performance Appraisal and Compensation 30th April 2004 .

TEAM INCENTIVES Performance Appraisal and Compensation 30th April 2004 .

WHAT ARE TEAM INCENTIVES?  Payments or other non-financial rewards given to members of a formally established team which are linked with the performance of that team Rewards are shared among members of the teams according to a pre-determined formula. or on an ad hoc basis  Performance Appraisal and Compensation 30th April 2004 .

WHY THE NEED FOR TEAM INCENTIVES? Enhance productivity Tie earnings to team productivity Improve Quality Aid recruiting and retention of employees Improve employee morale Performance Appraisal and Compensation 30th April 2004 .

not competition among employees Enhance flexibility and encourage multiple skills and talents Encourage less effective performers to improve in order to meet team standards To develop self-managed and self-directed teams Performance Appraisal and Compensation 30th April 2004 .Encourage co-operation.

CONDITIONS FOR SUCCESSFUL TEAM INCENTIVES Performance Appraisal and Compensation 30th April 2004 .

A certain amount of finance shared by team members Outings such as picnics. dinners Better access to equipment and facilities in workplace or provision with private/ own facilities at specific place of work   Performance Appraisal and Compensation 30th April 2004 .TEAM INCENTIVES  EGS. movies.

ORGANIZATION-WIDE INCENTIVES Performance Appraisal and Compensation 30th April 2004 .

participation) An involvement system (the structure and process for improving organizational productivity) 30th April 2004 1. 2. Performance Appraisal and Compensation .GAIN SHARING  A formal reward system that comprises 2 main elements: A philosophy of co-operation (organizational climate characterized by high levels of trust. 2-way communication.

these benefits are not fixed 30th April 2004   Performance Appraisal and Compensation .g.PROFIT SHARING  Employees receive a bonus that is normally based on some percentage (e. 10% to 30%) of the company s profits beyond some minimum level Company pays only if it makes a profit hence compensation is more variable and dependent on extrinsic conditions Thus.

DIFFERENCES BETWEEN GAIN SHARING Based on a measure of productivity Current distribution plans / frequent distribution True incentive plans Directly related to individual behaviour and can therefore more effectively motivate worker productivity Performance Appraisal and Compensation PROFIT SHARING Based on a global profiting measure Deferred payment plans Annual measures and rewards after determining profit Employee benefit plans Related to overall company performance and therefore may be a little more difficult to relate to individual behaviour 30th April 2004 .

NON-FINANCIAL INCENTIVES CAN BE IN THE FORM OF:      Achievement Recognition Responsibility Influence Personal Growth 30th April 2004 Performance Appraisal and Compensation .

NON-FINANCIAL INCENTIVES    EGS. Positive feedback Praise from a higher authority Recognition in company s magazine/ newsletter/notice boards/special events Special events holidays/dinners/movies    Travel abroad to other branches of the company Opportunities to represent the company at regional/national/international conferences 30th April 2004 Performance Appraisal and Compensation .

EXAMPLE Performance Appraisal and Compensation 30th April 2004 .

Performance Appraisal and Compensation 30th April 2004 .

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