How incentive wage systems are beneficial for employees and employers?
How incentive wage systems are beneficial for employees and employers?
Or
Explain the merits and demerits of incentive wages?
Ans.
Benefits of Incentive Wage Systems to Employer
Incentive wage is extra financial motivation to employees. They are designed to stimulate human effort by rewarding the person, over and above the time rated remuneration, for improvements in the present or targeted results. Wage incentive is a system of payment under which the amount payable to an employee is linked with his production.
1. It improves the profit of a firm through a reduction in the unit costs of labour and materials.
2. It minimizes additional capital investment for the expansion of output capacity.
3. It is a useful tool for securing a better utilisation of manpower.
4. Incentive system is a healthy way to strengthen the productive front.
Benefits to Workers
These are as under-
1. It increases a worker’s earnings without dragging the business organisation into a higher wage rate structure regard less of productivity.
2. Incentive wage system reduces the burden of heavy supervision costs.
3. It has been found that the cases of absenteeism are comparatively lower than in other systems.
4. Incentive wage system provides better scope for developing human ingenuity.
5. Incentive system develops the feeling of co-operation.
The main purpose of incentive plans is to induce the workers to work more and to show better performance on work and to share the gains of such increased productivity. Incentive wage plans are in the best interests of the employees.
Demerits of Wage Incentive Schemes
These are as under-
1. Incentive plans are worked out for workers who are directly engaged on production work. Indirect labour who is indirectly associated with production is outside the scope of an incentive plans. It creates bitterness.
2. Incentive plans are designed in a particular set of circumstances. The level of incentives offered under incentive systems may be quite inadequate. In such situation workers have disputes and grievances with the management.
3. Inefficient workers feel that they cannot attain the desired standards to get the benefit of the scheme. So they oppose such scheme on the pretext of its being complicated.
4. For introducing an incentive wage system, standards for work and time are fixed by job-evaluation technique which is a complicated device of evaluating. Labour always charge the management of fixing the standards too difficult.
5. When workers are ready to work to their best but they are prevented to work because of certain reasons e.g., frequent power failures, non availability of materials and equipments etc. Workers oppose incentive wage system because they are at loss.
