Top Management Story

Writen by Ken Marlborough

According to Dale Yoder, incentive wages relate earnings to productivity and may use premiums, bonuses or a variety of rates to reward for superior performance. The incentive programs involve an attraction of extra payment for efficiency. An efficient program must provide for minimum guaranteed wage based on hourly rate and extra remuneration for increased output. In other words, an incentive program contains the characteristics of time based and output based systems of wage payment.

Sound incentive program must be easily understood. It should be acceptable to the employees. It must benefit employees as well as employer. It should not be costly to operate. It should stimulate the interest among the workers. It should assist in supervision.

There are two types of incentive programs: Halsey premium bonus plan and Bedeaux point premium plan. In Halsey premium bonus plan, a minimum time wage is guaranteed. The time allowed for completing the job is set from the records of previous performance rather than by time and motion studies. The amount of time saved multiplied by the hourly rate forms the sum that is shared between the worker and the owners according to the ratio agreed upon equally. Because of this fixed proportion of sharing bonus, Hasley's plan can be called a constant bonus-sharing plan. The standard length of time for doing a job, not being derived through the use of time and motion study is usually greater than would be the case under more scientifically measured procedure.

Under Bedeaux's point premium plan, the standard time for each job is fixed after undertaking time and motion study. The workers who are not able to or just able to complete the program within standard time are paid at the normal time rate. Those who are able to complete their work earlier are paid bonus equal to the wages for time saved. Generally, the bonus paid to the worker is 75 per cent of the wages for time saved. The remaining 25 per cent goes to the foreman.

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