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Incentive Plans

Organizations can opt for an effective incentive plans from the various alternatives available. The organizations usually opt for that incentive plans which suits its requirement the most. As incentives covers the financial matters, organizations need to be very focused in choosing the best alternative that is in alignment to the business goals and objectives.

The various incentives plans available are:

Piece Rate
Piece rate incentive is given to the employees based on the number of units produced. This plan is practiced in the sectors dealing with manufacturing of products such as engineering – automobile, telecommunication, FMCG, etc. Commissions
Commission is a variable component of compensation package. It is given on the basis of business generated by the employee. Commission is a pre fixed component say 5% of the total sales done by the employee. It is practiced in the retail, FMCG and other sectors in the marketing and sales segment.

Figure: Incentive Plans

Bonuses are given to employees on a pre established goal or criteria. The organizations set policies regarding the bonuses. Usually bonuses are provided during the festive season.

Merit Raises
Merit raises are given on the basis of predetermined policies. The employees are given raise on the basis of their performance. The performance standards are set by the organizations much in advance.

Standard Hour Pay
Standard hour plan provides incentives to employees based on the time saved by them during the job course. Employees’ productivity and quality is evaluated with respect to the set standards.

Maturity Curves
Maturity curve incentive plan considers the experience and performance of an employee for giving out the incentives. It is practiced in all the industries. Experience is always given a weight-age as experienced people can produce better quality results.

Gain Sharing
Gain sharing incentive plans undertake those employees who give outstanding performances and provide for cost saving measures. Organizations believe in sharing the profits with the employees who are responsible for producing those results.

Profit Sharing
Profit sharing incentive plans are practiced in retail and FMCG sectors. Other sectors too implement the plan based on organizational policies. It refers to giving out the share of profits the organization earned to all the employees. Indirectly all the organizations follow the plan by giving out the dividends.

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