Compensation (Rewards)

Employees believe that those who work harder and produce more should be
rewarded accordingly. If employee see that pay is not distributed on the basis of
merit, they are more likely

-Lack of commitment to the organization

-decrease their level of out put

-Look for employment opportunities elsewhere

Incentive reward system- Assumptions

Hence incentive or reward system is adopted on the basis of three

assumptions:

Individual employee and work team differ in how much they contribute to the
firm

The firms overall performance depends to a larger degree on the

performance of individuals and groups with in the firm

To attract, retain and motivate high performance and to be fair to all

employees, the firm needs to reward employees on the basis of their relative
performance

Definition of incentive:

Incentive is a monetary benefit paid to workers in recognition of their

outstanding performance. They are variable rewards granted according to
variations in the achievements of specific results

Success of incentive scheme depends on

The success of incentive scheme depends on:

Linking pay and performance appropriately

Use pay for performance as a part of broader HRM system and Build
employees trust

Promote the belief that performance mark the difference Use multiple layer of
rewards

Increase employee involvement

Use motivation and non financial incentives

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Pay for performance

Pay for performance consists of Micro level and macro level. In the micro
level we have:

Individual level-which has ,Merit pay, Bonus , Awards, Payment by piece

rate

Team level-where payment is made on the basis of effort put out by team
for which payment is made in the form of Bonus and Awards

In the Macro level we have :

Business unit level-where payment is made in the form of :

Gain sharing, Bonus, Awards

Organization level-where payment is done on the basis of :

Profit sharing, Stock plan

Payment is made on based on out put

Earnings varying in the same proportions as output

Straight piece work system

Standard floor system

Earnings vary less proportionately than output

Halsey plan

Earnings proportionately more than output

High piece rate

High standard hour system

Earnings differ from different level of output

Taylors differential piece rate

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 Merrick differential piece rate

Gantts differential piece rate

Emersions efficiency plan

Other incentives

Stock option plan

Fringe benefits:

Health benefits: Sickness benefit, Matenity benefit, Disablement benefit,

dependant benefit, life insurance, Medical benefit

Other benefits: Accomodation, Hotels and temporary accomodation, Car,

Other nondurable products as a gift , loans, other allownaces, giving personal
attendants for senior executives.

Club membership, transport facility, free meals or subsidized meals, vacation

holidays for family, giving gift vouchers, presents, Giving festival advances
,loan without interest or with lowest interest and so on

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