Individual Incentive Plans: Types and Examples
Under individual incentive plans, employees receive incentives based on their individual performance or output. Employers pay incentives to employees who exceed standard output levels. These plans can be either time-based or production-based.
Time-Based Incentive Plans
In time-based plans, a standard time is determined for completing a job. Workers who complete the job in less than the standard time are considered efficient and receive incentives.
- Halsey Incentive Plan: A standard time is fixed, and a minimum base wage is guaranteed. Workers completing the job in less than the standard time receive an incentive equal to 50% of the wages for the time saved.
- Rowan Plan: Similar to the Halsey plan, but the incentive calculation differs. Workers receive a guaranteed minimum wage. The incentive is paid based on the ratio of time saved to standard time.
- Emerson’s Efficiency Plan: A minimum wage is guaranteed, and incentives are based on efficiency, determined by the ratio of time taken to standard time. Incentives are given to workers who achieve more than 66.67% efficiency.
- Bedeaux Point Plan: Also called the “units” or “point” system, this plan guarantees a minimum base wage. Standard time and time taken for each job are measured in minutes, with each minute referred to as a ‘B’ (1 hour = 60B’s). Workers completing the job within the standard time are paid at the normal time rate. Those who complete the job in less time receive a bonus equal to 75% of the wages for the time saved.
Production-Based Incentive Plans
- Taylor’s Differential Piece Rate System: Introduced by F.W. Taylor, this system uses two wage rates: a lower rate for workers who do not meet the standard output and a higher rate for those who do.
- Merrick’s multiple piece rate plan: Not in the text, but it is a type of production-based plan.
- Gantt’s Task and Bonus Plan: Combines time rate, piece rate, and bonus. A standard time is fixed. If a worker takes more than the standard time (efficiency below 100%), they receive only wages for the time taken. If a worker completes the job within the standard time, a bonus is given.