INCENTIVES AND BENEFITS

SUBMITTED TO: AMITA SHARMA

SUBMITTED BY: ADITYA KUMAR
SECTION- A
ENROLLMENT NO. – 16FLICDDNO1006
Benefits
It refers to membership- based non- financial rewards given to
employees
Cockman describes employees benefit as “those benefits which are
supplied by an employer for the benefit of an employee, and which
are not in the form of wages, salaries and time related payments.
Benefits differ from incentives in the sense that these are non-
financial and membership based. While incentives are paid to
specific employees whose work performance is above standard,
where as benefit are available to all the employees based on their
membership in the organisation.
Like incentives the main reason behind offering benefits and services
if to attract and retain efficient contended employees. As per the
motivation theories, provision of benefits acts as maintenance
only and does not stimulate employees to work more but its
absence contributes to employee dissatisfaction.
TYPES OF BENEFITS
Various benefits provided to the employees may be classified in terms of
statutory and voluntary benefits.
1. STATUTORY BENEFITS
These are mandatory provided under the provisions of various acts as
discussed below:
 The Factories Act,1948: this act includes areas of health, welfare,

safety, working hours etc. the various benefits under this are as
follows: (a)no adult worker shall be required to work in a factory for
more than 48 hours in any week(sec51) (b)the working hours shall be
restricted to 9 hours on any day(sec54) (c)an adult worker shall have
weekly paid holiday preferably Sunday (d)a worker deprived of weekly
holidays is eligible for compensatory holiday of the same no. in the
same month (e)provision for double salary to the workers working
during the holidays (f)a provision for canteen employing more than 250
workers and crèches where more than 30 women employees are
working.
 Mines Act, 1952: Apart from provision of canteen and crèches ,
this act specifies that there should be provision for first-aid
boxes and first-aid rooms in mines employing more than 150
workers and appointment of a welfare officer in mines employing
more than 500 workers.
 Workmen’s compensation act 1923: In addition to safety and
health measures, provision for the payment of compensation has
also been made under this act. The act covers the employees
whose wages are less than Rs. 500 per month. Amount of
compensation depends on nature of injury and the monthly
wages of employee. In case of death of the employee the
dependents are eligible for compensation.
 Employees state insurance act, 1948 : This act deals
comprehensively about the health benefits to be provided to the
employees working in factories, establishments running with
power and employing 20 or more workers. The main benefits
provided under this act include sickness benefits for 56 days in a
year, maternity benefits , disablement benefits, dependant’s
benefit, medical benefit, etc.
 2. VOLUNTARY BENEFITS
Voluntary benefits are determined and provided by the individual
organisation at their own. These benefits may include
educational facilities, transportation facilities, recreational
facilities, consumer cooperative societies, subsidised
lunch/refreshment, childcare, etc. Since providing these facilities
is obligatory on the part of employers, hence the level and
degree of facilities provided vary across the organisations.
U.S. chamber of commerce has classified employee benefits into
four categories as follows:
 Legally- required payments:

i. Old age pension

ii. Disability pension
iii. Unemployment insurance
iv. Workers compensation
  Contigent and deferred benefits:
i. Pension plans
ii. Group life insurance
iii. Maternity leave
 Payment for the time not worked:
i. Vacation
ii. Holidays
iii. Voting pay allowance
 Paid rest periods:
i. Waste-up time
ii. Lunch periods
INCENTIVES
INTRODUCTION
In simple words , incentive is anything that attracts a worker and
stimulates him to work. According to National Commission on
Labour, “Wage incentives are extra financial motivation. They
are designed to stimulate human effort by rewarding the
person, over and above the time rated remuneration, for
improvements in the present or targeted results.”

They motivate employees to work more and help attract and

retain employees in the organization.
 TYPES OF INCENTIVES SCHEMES
Financial Incentives may be further classified as individual incentives
and group incentives.
1. INDIVIDUAL INCENTIVES SCHEMES(PBR)
Under this plan, employees are paid on basis of result, the chief
incentives plan are discussed below-
 Taylor’s Differential Piece Rate Plan: This plan was developed by

F.W. Taylor, the father of scientific management. Taylor prescribed

two piece work rate. One, a higher wage rate for those who reach
the standard work. Second, a lower wage rate for those whose
performance is below the standard. The standard work is
determined on the basis of time and motion studies. This wage
plan encourages and rewards the employees who are efficient by
giving them wages at a higher rate. At the same time, the plan
penalizes those who are slow performers by paying them at a low
wage rate.
 Emerson Efficiency Plan: Under this scheme, both standard work
and day wage are fixed. Bonus is paid on the basis of worker’s
efficiency. A worker becomes entitled to get bonus only when
his/her efficiency reaches to 67%. The rate of bonus goes on
increasing till he achieves 100%efficiency. Above 100%efficiency,
bonus will be 20%of the basic rate plus 1%for each 1%increase in
efficiency, a worker receives a bonus of 40% and at 140%
efficiency, a worker gets 60% of the day wage as bonus.
 Gantt Task and Bonus Plan: This plan is devised by H.L.Gantt.
This plan combines time, piece wage and bonus. Standard time,
piece wage and high rate per piece are determined. A worker
who cannot complete standard work within standard time is paid
only the minimum guaranteed wage
It indicates that the incentive may vary along with variation in earning
with changes in performance or output. Thus, based on linkages
between performance and incentive, the various incentive
schemes(PBR) may be classified into the four types as follows:
 Incentives in the same proportion as performance.

 Incentives varying proportionately less than performance.

 Incentives varying proportionately more than performance.

 Incentives varying proportionately that vary with the levels of

performance.
The first of the above mentioned schemes is called the straight
proportioned scheme while the rest are nomenclatured as
differential or geared incentive scheme.
2. GROUP INCENTIVE SCHEMES
The incentive schemes discussed earlier can be applied on a group basis
also. Group incentive schemes are appropriate where jobs are
interdependent. The few important schemes are discussed below:
• Profit sharing: This concept suggest the sharing of profit among the
employees. The basic reason behind this concept is that the
organisational profit is an outcome of the coperative efforts of
various parties thus employees should also have share in profits as
shareholders share by getting dividend on their investment , thus
strengthing the loyality of employees to the organisation. It is
considered as a stepping stone to industrial democracy. Both the
percentage of profit to be shared by the employee and mechanism
for its distribution are determined and known to the person in
advance. The person should have attained certain seniority as per
organisation.
• METZGER classified this into 3 categories:
 Current: In this profit are paid in cash or cheque or in form of
stock option immediately after determination of profit
 Deferred: Under this profits are credited to employees account ,
to be paid at the time of retirement or at his dissociation from
the organisation due to reasons like disability, death,
withdrawal from service etc
 Combination: in this, a part of employees profit paid in cash or
cheque or stock and the remaining part is deferred and credited
to his account.
 Co-partnership : It is an improvement over profit sharing. Under
this employees also participate in the equity capital of the company.
They can have shares on the basis of cash payment or in lieu of
other incentives payable in cash like bonus. The employees become
shareholders and can participate in both profit and manangement
of the company. The benefit of this is that it recognize the dignity
of labour and develop a sense of belongliness among the
employees.
Making incentives and benefits more
effective
Following are some measures that may help make incentives and
benefits programmes more effective:
1. Both incentives and benefits should be treated as an instrument in
human resources management.
2. These benefits should be aligned with the basic requirements of
the workers. Benefits should also be comparable with benefits
provided by other organisation both at the national and
international levels.
3. The package should be flexible one as per the requirement of a
given perspective. That inflexibility breeds stagnation needs to be
recognised.
4. Employees should be involved in the process of devising incentive
and benefits packages.
5. Addition incetive and benefit be introduced after a through
evaluation of the same.