Types of Incentive Schemes

Incentive schemes exist for all types of people working in an organisation – manual, managerial, and professional employees. The most common incentive schemes are stated below:

1. Individual Bonus schemes

Types of incentives are discussed below:
(i) Piecework: A system of pay based on the number of items processed by each individual worker in a unit of time, such as items per hour or per day. There are two types of piece rate plan. One is straight piecework plan that pays a set payment for each piece produced or processed in a factory or shop and another is guaranteed piecework plan that pays a minimum hourly wage plus an incentive for each piece produced above a set number of pieces per hour.
(ii) Output and target-based bonuses: This scheme suggests that an employee will get an hourly rate plus a bonus when the employee exceeds the standard output target. The bonus usually equals approximately 50 percent of the labour saved. Halsey premium plan and Rowan premium bonus plan are such incentive schemes. This is also known as production bonus.
(iii) Commission bonuses based on sales: A commission is paid on a percentage of sales in units or taka. It may be paid as a flat amount for each unit sold. When no base compensation is paid, total earnings come from commissions. A sales variation of the production bonus system pays the sales person a small salary and a commission or bonus when he or she exceeds the budgeted sales goals; and
(iv) Bonus measured day work: This bonus scheme suggests that an employee will get a day wages plus a bonus for excess output produced or processed in that day. The output range or level is predetermined. Spot bonus is awarded to individual employees for accomplishments that are not readily measured by standard (Dessler, 2000:471).

2. Group/ Team Bonus Schemes
Group bonus schemes or incentive schemes are designed to motivate the team/group of people to work jointly in collaboration with others as an integrated whole and thus; incentives are given to the team to achieve its target or to contribute significantly to the organizational performance.

3. OrganisationwideIncentives Schemes
This is an incentive scheme is based on total profits of the organisation generated over a year. This is a much more common incentive reward than individual or group incentives. Three approaches to incentive plans are used at the organization-wide level:
1) Suggestion scheme
2) Gain sharing
3) Profit sharing.

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