- Under individual incentive plans earnings are related directly to the performance of individual worker.
- Individual incentives may be based on time or output.
- Under time based plans, standard time is determined and bonus is given if a worker completes the job in less than standard time.
- Under output based plans, a standard output is determined and workers producing more than the standard output are given bonus.
Various Types of Individual Incentives Plans are:
·
Based on
Time:
1.
Halsey Plan
2.
Rowan Plan
3.
Emerson Efficiency Plan
4.
Bedeaux Point Plan
·
Based on
Output:
1.
Taylors’ Differential Piece Rate Plan
2.
Merrick’s Multiple Piece Rate Plan
3.
Gantt’s Task and Bonus Plan
Halsey Plan:
Under this plan, a standard time is fixed on basis of past
performance record.
A worker who completes his job within or more than the
standard time is paid a guaranteed time wage at the normal rate.
A bonus usually 50% of the time saved is paid to a worker
who completes his job in less than standard time.
Illustration:
Standard Time (S) = 8 Hrs
Time taken (T) = 6 Hrs
Rate of Wages (R) = 20/Hr
Bonus (P) = 50% of the time saved
Total wages (W) = (T x R) +
(50 % x (S - T) x R)
= (6 x 20) + (50 x (8 – 6) x 20)/100
= 120 + (0.5 x 2 x 20)
= 120 + (1 x 20)
= 120 + 20
= Rs.140
Rowan Plan:
This is a modified form of Halsey
Plan.
Under this plan, a minimum time
wage is guaranteed to every worker at the normal rate.
A standard time is determined in
advance.
The bonus is that proportion of
the wages which the time saved bears to the standard time.
Illustration:
Let us use the same data given
above under Halsey Plan:
Standard Time (S) = 8 Hrs
Time taken (T) = 6 Hrs
Rate of Wages (R) = 20/Hr
Total Wages= (T x R) + {T x R x
(Time Saved)}
Standard Time
(6 x 20) + {6 x 20 x (2)}/8
= 120 + (120 x 1)/4
= 120 + 30
= Rs.150
Note: In this method, Rs. 10 is earned more than the earlier method
(Halsey plan), i.e. Rs. 150 – Rs. 140.
Emerson Efficiency Plan:
·
Under this plan, standard time for a job is
determined scientifically and
a minimum time wage is guaranteed to all workers at the normal time rate.
·
Bonus is given at an increasing percentage
beyond the prescribed level of efficiency (*usually 66.67 % of efficiency).
·
Efficiency of each worker is determined by
dividing the standard time by the time taken.
*Efficiency =
(Std. Time) x 100/Time Taken
= (8) x 100/12
= 66.67 %
Illustration:
For example, a workman takes 6
Hrs to complete the work instead of 8 Hrs.
The efficiency is measures as
follows:
Standard Time(S) = 8 Hrs
Time taken (T) = 6 Hrs
Rate of Wages (R) = 20/Hr
Bonus:
·
10% upto 75% efficiency i.e.,
(8/x) x 100 =
75
800/75 =x
i.e. x = 10.66
Hrs.
·
20% upto 100 % efficiency
(8/x) x 100 =
100
800/100 = x
i.e. x = 8
Hrs.
·
30% beyond 100 % efficiency
In this case the efficiency level
is 8/6 x 100= 133.33%, therefore bonus at 30% is payable.
Total Wages (W) = (T x R) + (%
of bonus x T x R)
= (6 x 20) + (30 x 6 x 20)/100
= 120 + (3600)/100
= 120 + 36
= Rs. 156
Bedeaux Point Plan:
·
Under this plan, standard time for the job is
set scientifically and it is expressed in terms of B.
·
For instance, a standard time of 240 B means
that the job should be completed within 240 minutes.
·
In determining the Bs, the time of operation and
the rest time both are taken into account.
·
Minimum time wage is guaranteed to all workers.
·
The workers who complete the job within or more
than the standard time are paid at the normal time rate.
·
Those who complete the job in less than the
standard time are paid bonus for the time saved.
·
Generally, 75% of the wages for the time saved
are paid as bonus to the worker and 25% to the foreman.
Illustration
Standard time (S) = 480 Bs (8 Hrs)
Actual time (T) = 360 Bs (6 Hrs)
Rate of wage (R) = Rs 0.35 per B
Time saved = S - T
= 480 - 360 = 120
Total wages = (S x R) + {75% of R
x (S - T)}
= (480 x 0.35) + {75 x 0.35 x
(480 - 360)}/100
= 168 + {3 x 0.35 x (120)}/4
= 168 + 31.50
= Rs. 199.50
Wage for the workman is Rs.
199.50.
Foreman’s share from this workman
is Rs. 25% i.e.
Bonus = {25 x 0.35 x (480 -
360)}/100
= Rs. 10.50
Based
on Output
Taylors’
Differential Piece Rate Plan:
·
F.W. Taylor, the father of Scientific Management
devised this plan.
·
Under this system, standard task is established
through time and motion study.
·
Two piece rates are laid down.
·
The lower rate for those workers who fail to
complete the standard task within the allotted time and the higher rate for
those who complete the task within or less than the allotted time.
·
The objective is to provide sufficient incentive
to workers to work hard and achieve the standard.
Illustration:
Suppose the standard output is 50 units per day. The piece
rates fixed are Rs. 3 and Rs. 4 per unit. Three workers A, B and C produce 40,
50, 60 units respectively during a day.
Their total wages will be as follows:
A = 40 x 3 = Rs. 120
B = 50 x 4 = Rs. 200
C = 60 x 4 = Rs. 240
In this way, an inefficient worker is penalized as he gets
a lower rate per unit.
Merrick’s
Multiple Piece Rate Plan:
·
This plan was developed to overcome a drawback
in Taylor’s Plan.
·
This drawback relates to an abrupt change in
piece rate.
·
Under it, three graded piece rates are
prescribed.
·
Workers producing less than 83% of the standard output
are paid at a basic piece rate.
·
Those producing from 83% to 100% of the standard
output are paid 110% of the basic piece rate.
·
Workers producing more than the standard output are
paid at 120% of the basic piece rate.
Illustration:
Suppose the standard output is 50 units per day. The piece
rates fixed are Rs. 3 per unit for 83% production (basic piece rate; 42
pieces); Rs. 3.30 per unit for 84%-100% production (110% of the basic piece
rate; 43-50 pieces) and Rs 3.60 per unit for more than 100% production (120% of
the basic piece rate; more than 50 pieces).
Three workers A, B and C produce 40, 50, 60 units
respectively during a day. Their total wages will be as follows:
A = 40 x 3.00 = Rs. 120
B = 50 x 3.30 = Rs. 165
C = 60 x 3.60 = Rs. 216
Gantt’s Task and
Bonus Plan:
·
Under this plan, standard time for every task is
fixed through time and motion study.
·
Minimum time wage is guaranteed to all workers.
·
A worker who fails to complete the task within
the standard time receives wage for actual time spent at the specified rate.
·
Workers who achieve or exceed the standard get extra
bonus varying between 20% to 50% of the hourly rate for the time allowed for
the task.
Illustration:
Suppose the standard time fixed for the job is 8 hours and
the time rated is Rs. 20 per hour and the rate of bonus is 25%.
A worker who completes the task in 10 hours, he will be
paid Rs. 160 (8 x Rs. 20) only.
On the other hand, the worker who completes the task in 6
hours will receive Rs. 200 (Rs. 160 + 25% of Rs. 160).
