Incentive Scheme: Type # 1. Halsey Premium Plan:
This plan was introduced by F. A. Halsey, an American engineer, in 1891. It recognises individual
efficiency and pays bonus on the basis of lime saved. Under the method a worker is given wages at the
time rate for the time he actually worked and also paid a bonus if he can complete the work in less than
the time allotted to do the work.
The bonus is paid at a fixed percentage of the time saved, usually 50%, (though the percentage varies
from 30% to 70% of time saved). The remaining 50% of the time saved is shared by the employer.
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Thus,
Total Earnings = T.T. × H.R. + 50% (T.S. × H.R.)
where, T.T. = Time Taken
H.R. = Hourly Rate
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T.S. = Time Saved
The main advantages of the method are:
(i) The method is simple to operate and easy to understand.
(ii) The slow workers are not penalised, as time wage is guaranteed.
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(iii) It provides incentives to more efficient workers.
(iv) Worker’s efficiency means reduction in cost per unit.
(v) The benefit of time saved is shared between employer and employee equally.
The main disadvantages of the method are:
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(i) Many employees organisations do not like to share the benefit of time saved equally.
(ii) Attraction of bonus reduces the quality of work.
(iii) Reduction of quality means chances of more wastage, spoilage, defective and break down etc. and
more supervision cost.
(iv) It is not so much attractive as in the case of piece rate payments.
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(v) It offers less incentive to the workers as compared to other incentive plans.
(vi) If the time rate is not fixed properly, this may lead to a higher bonus.
Incentive Scheme: Type # 2. Halsey-Weir Premium Scheme:
The scheme was introduced by Weir Ltd. of Glasgow in about 1900. It is similar to Halsey Scheme except
that under this scheme the employee gets 33⅓% (often 30%) of the time saved as bonus and the
remaining 66⅔% goes to the employer.
Thus:
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Total Earnings = T.T. × H.R. + 33⅓% (T.S. × H.R.)
where, T.T. = Time Taken
H.R. = Hourly Rate
T.S. = Time Saved
Incentive Scheme: Type # 3. Rowan Plan:
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Grames Rowan first introduced this plan in Glasgow in 1898. Under this scheme also the worker gets his
guaranteed time wages for the hours of his actual work, like Halsey Scheme. But here the premium is
calculated by a different method.
If the worker can complete the job in less than the time allowed, his bonus becomes equal to his time
wages for that proportion of the time taken as the time saved bears to the time allowed.
Thus, the bonus is calculated as:
and, Total Earnings = T.T × H.R. + (T.T. × H.R.) × T.S./T.A.
where, T.T. = Time Taken
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H.R. = Hourly Rate
T.S. = Time Saved
T.A. = Time Allowed
The following are the main advantages of the scheme:
(i) It provides incentives to learners and slow workers.
(ii) Since the premium is proportionate to the time saved, the employers get protection if the rate is not
fixed properly.
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(iii) From the point of view of employer the Rowan Scheme is safer than the Halsey Scheme.
(iv) Up to 50% of the time saved, bonus under the scheme is higher than that under Halsey Scheme.
(v) As the bonus increases at a decreasing rate; the employees do not rush for rapid completion of job,
hence lesser chances of wastage etc.
(vi) Due to higher output, fixed overhead per unit will be lower.
The main disadvantages are:
(i) Method is complicated.
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(ii) At the level of higher production, incentive is low.
(iii) Employees are not willing to share their time savings with their employers.
Comparison between Halsey and Rowan Scheme:
(1) Up to 50% of time saved, the premium will be same under the two schemes.
(2) Under Rowan Scheme bonus rises faster than Halsey Scheme until the job performed in half than the
standard time.
(3) But when the time taken to perform the work is less than half of the standard time, premium and
total earnings under the Halsey Scheme are both greater than those under Rowan Scheme.
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(4) On the other hand, when the time taken to perform the work is more than half of the standard time,
bonus and total earning under the Rowan Scheme are both greater than those under the Halsey Scheme.
(5) The Halsey Scheme provides more incentive to speed up production but there is an automatic check
under the Rowan Scheme after certain stage.
(6) Halsey Scheme proves to be costlier if more than half the time is saved, while Rowan Scheme is
costlier if less than half the standard time is saved.
Incentive Scheme: Type # 4. Taylor’s Differential Piece Rate System:
This system was first introduced by F. W. Taylor, the Father of Scientific Management. This system
provides no minimum guaranteed time wages.
But under the system two piece rates are fixed:
(a) A low piece rate for output below the standard is paid to the workers, and
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(b) A higher rate is paid to the workers who produce equal or more than the standard. Thus, this system
penalises the inefficient workers and rewards the efficient workers.
The efficiency of a worker may be determined as a percentage, either:
(i) Of the time allowed for a job to the actual time taken, or
(ii) Of actual output to the standard output, within a specified time.
Incentive Scheme: Type # 5. Merrick Differential Piece Rate Plan:
This is a slight modification of Taylor’s System and uses three rates instead of two. Under this system
also day wages are not guaranteed.
The three piece rates are:
Efficiency – Piece rate applicable
Up to 83% – Normal rate
Up to 100% – 10% above normal rate
Above 100% – 20% above normal rate
The main feature of this system is that it does not penalise the workers who produce below the
standard output up to 83% and the earnings increase with increased efficiency at two stages.
Incentive Scheme: Type # 6. Gantt Task and Bonus Plan:
The plan is a good combination of time-work and piecework. Under the scheme the day wages of the
worker are guaranteed.
The main features of the bonus scheme are:
Output – Bonus
At 100% – 20% on the total output
Above 100% – 20% of the wages of the standard time, or High piece rate on the worker’s whole output.
This scheme protects and encourages the less efficient workers who cannot produce the standard
output. It offers a good incentive to the efficient workers.
Incentive Scheme: Type # 7. Emerson’s Efficiency Plan:
This scheme is also a combination of time wage, piece rate wage and bonus plans. Under this method a
standard time is set for each job, or task or volume of output is fixed as the standard. The standard
efficiency is set at 66⅔ or 67%. For efficiency up to 67% the worker gets his day wage only.
If he crosses the standard task, he becomes entitled to bonus and the rate of bonus increases with the
increase in efficiency. At 100% level of efficiency, the bonus becomes 20%. Again, if the efficiency
exceeds 100%, bonus increases by 1% for every 1% increase of efficiency above 100%.
Incentive Scheme: Type # 8. Group Bonus Plans:
The incentive schemes explained so far are applicable to individual workers only. But, sometimes it
becomes necessary to introduce Group Bonus Scheme. Under the scheme bonus is paid to the group as
a whole, depending upon the performance of the group and the amount of bonus is shared by
themselves equally or at an agreed proportion.
The group bonus is suitable in the following circumstances:
(a) When it is very difficult to measure the performance of individual worker, but the production
through collective efforts of a group of workers can be measured.
(b) The nature of the work requires collective effort.
(c) Where it is desirable to develop a team spirit.
(d) Where both the direct and indirect workers are to be rewarded.
(e) When bonus scheme cannot be operated successfully for individual workers.
However, before introducing a group bonus scheme, following points must be considered very carefully:
(i) Well combination among the group.
(ii) The size of the group should be economic.
(iii) The group should be homogeneous.
(iv) The production of the group should be within its control.
Thus, a group bonus scheme encourages team spirit, reduces wastage, assures cooperation, lessens
supervisory work and reduces overall costs.