Incentives plans provide financial and non-financial rewards to employees who make substantial contributions to organizational effectiveness. – Wendell French (1997:396).
Reasons
The incentive schemes are undertaken with the following specific reasons:
1. Achieving compatibility: The needs of the global competition focus on higher quality product and work life. The traditional pay system does not meet these changing needs. Incentives are designed to achieve the compatibility of pay systems with the growing demands for flexible compensation.
2. Maintaining high motivation and commitment: Higher productivity and commitment of the working people deserves incentives for creative and innovative works as well as higher average output. Incentives will motivate the working people to engage in and to involve with their jobs to provide higher output and to be committed to the job and to the organization. It also helps retaining people in the jobs of the organisation for a long time.
3. Ensuring quality of work and life style: Incentives allow employees to work in quality work environment and to earn more in monetary terms to maintain a good life style and standard of living.
4. Recognition for merit: Incentives are given for meritorious and quality work of the people which have substantial contribution to the organizational performance. Thus, people will be encouraged to work better and to maintain quality of work.
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