Incentive Meaning, Type of Incentive

            Incentives are monetary benefits paid to workers for recognizing of their outstanding performance. According to the 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 present or targeted results.

Merits of the Incentives:

1. Incentive system is a healthy way to strengthen the productive front of the industry.
2. Employers as well as workers, both are at advantage.
3. Incentive system reduces the burden of heavy supervisory costs.
4. It has been found that the cases of absenteeism are comparatively lower than in other system of wage payment.
5. It develops healthy industrial relations and reduces chances of disputes between the workers and the employers.
6. Incentives system provides better scope for developing human ingenuity.
7. Incentive system develops the feeling co-operation among the workers.

Demerits:

1. If there is no ceiling on incentive earnings, some workers may work overtime and spoil their health.
2. For maximizing the output, quantity may be scarified unless a strict check is maintained.
3. Once an incentive plan is introduced, management may face still resistance from workers while revising standards and rates due to changes in technology, methods, machinery and materials.
4. Workers may disregard safely regulations in orders to produce more.

Types of Incentive payments:

            Organization can for an effective incentive plan from the various alternatives available:

1. Piece rate: This incentive is given to the employees based on the number of units produced.
2. Commission: It is given to employees on a pre-established goal or criterion.
3. Bonuses: Bonuses are given to employees on a pre-established goal or criterion.
4. Merit Rises: Merit rises are given on the basis of predetermined policies.
5. Standard hour pay: Provides incentives to employees based on the time saved by them during the job course.
6. Maturity Curves: Considers the experience and performance of an employee for giving out the incentives.
7. Gain sharing: Plans undertake those employees who give outstanding performance and provide for cost saving measures.
8. Profit sharing: Incentive plans are practiced in retail and FMCG sectors. If refers to giving out the share of profits, the organization earned to all the employees.