Incentive Plans

Topics: Performance-related pay, Incentive, Piece work Pages: 2 (436 words) Published: March 31, 2011
According to Bohlander & Snell (2007), in today’s competitive world, one word, flexibility, describes the design of individual incentive plans. (p.442) One of the oldest incentive plans is based on piecework (Bohlaander & Snell 2007). There are two type of piecework Straight piecework- this is like production work the incentive is based on the amount of unit produce. Differential piece rate this is according to production as well but their output is higher than the average workers are. Piecework advantage is that payments are based on the employee’s performances. Nevertheless, piecework has several disadvantages. Piecework might not affect employees particularly when employees consider that the exceeding typical performance will provoke disapproval between the associated coworkers. Furthermore, this plan does not apply for those situations "when quality is more important than quantity" (Bohlander, 2007, p. 443). Three basic disadvantages to piecework:

• (i) with the emphasis so completely on quantity, quality may be neglected; • (ii) despite its understandability, piecework does at times give rise to definite problems in its administration (i.e., more clerical work) • (iii) employer-employee relations will be worsened rather than improved under such an arrangement. (i.e. workers will resist innovation due to time-motion study (Dowling, Schuler, Welch 1994). I. Individual incentive plans:

– Piecework pay – oldest and most widely used
– Sharing plans – employees share the gains with the employer based on some predetermined formula. For example, giving bonus for the higher productivity within the same time duration, etc. (Dowling, Schuler, Welch 1994).

II. Group incentive plans:
• Advantages: – may reduce conflicts and resentfulness our individual work assignments; – mutual helpfulness, frequently extending to the voluntary training of new work group members and the sharing of knowledge about short cuts can be expected (Dowling, Schuler, Welch...
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