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Study and compare the wage incentive schemes prevalent in the service sector.

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Objectives of this study To study and compare the wage incentive schemes prevalent in the service sector. Plan of work This project essentially consisted of two parts : The first was a literature review where we observed the existing studies on compensation plans, wage incentives, their relevance and the problems faced. The second consisted of interviewing employees of different firms in the major service industries in India to disseminate particulars of the incentive schemes offered in the respective organisations. This report is the culmination of our findings and learnings. Herein we showcase the data provided and also give our inferences regarding these. Literature Review Compensation by Milkovich, George T ; Newman, Jerry M is largely based on the concept of equity. This book illustrates various pay models in which equity takes on many and varied forms. Different sections of the book take up a different component of equity (Internal, External and Employee Equity) and discusses the major compensation issues requiring resolution. It also covers employee benefits and the administrative issues in compensation. Compensation Management by Henderson, Richard I is divided into three parts. Part 1 provides a big picture review of compensation management and the reward system of an organisation. Part 2 contains a micro-analysis of compensation in organisations. I describes how job requirements are identified, defined, valued and ultimately integrated into a pay system. Part 3 combines the above two and explains how a base pay program is expanded into a total compensation system that includes various short and long term incentives. Financial Incentives by Currie, RM is a general introductory work for students and for those embarking for the first time on the application of work study in a firm or other undertaking. Types of schemes described in this book have the practical endorsement of progressive trade unionists. A connection between this work and its reward is established here. Paying for contribution by Brown, Duncan ; Armstrong, Michael - This book examines and provides solutions to some of the perennial problems of performance related pay. ...read more.


2. All orders dated for the quarter and received at H.O. latest by 3rd of the first month of the next quarter will be treated as order booking for the quarter subject to order acceptance by H.O. Normally order will be accepted by H.O. if: (i) Order is received with minimum of 25% of equipment price as advance. OR Formal P.0 is received from Govt. Organizations / departments or PSU'S. AND (ii) Other commercial terms and conditions are as per our standard norms. AND (iii) No technical over commitments are made. 3. Order value will include: (i) Equipment price (ii) One time charges (iii) First year fixed recurring charges payable annually in advance. 4. Quarterly order booking incentive will be as follows as percentages of order booking value in staircase manner. (Percentages indicated are applicable on the amount in that slab). TARGET ACHIEVEMENT SLAB 120 LACS x N 90 LACS x N Up to 50% 0% 0% Between 50% and 100% 1.0% / N 0.4 % / N More than 100% 1.2% / N 0.6% / N Achievements vs. Incentive payable for few specific quarterly (achievement) value are given below: TARGETS ACHIEVEMENTS 120 LACS 90 LACS 45 LACS 0 K 0 K 60 LACS 0 K 6 K 70 LACS 10 K 10 K 90 LACS 30 K 18 K 120 LACS 60 K 36 K 150 LACS 96 K 54 K 200 LACS 156 K 84 K 6. Incentive amount will be paid along with salary of the first month of next quarter after adjustment of amount for order cancellation (if any) for which incentive was paid earlier. 7. Incentive earned by all sales staff (Account Managers / RM's) will be split as follows: ( (i) 75% of Incentive Paid to the sales staff (ii) 15% of Incentive Accumulated in Regional Fund (iii) 1 0% of Incentive Accumulated in National Fund. 8. Amounts accumulated in Regional and National Funds will be apportioned to Pre-sales support staff as follows: (i) ...read more.


* The risk of accidents may be increased. * Inaccurate rate setting under an incentive scheme or wide differences in the ability or capacity of workers working in close proximity may lead to large differences in earnings and ill-feelings between the workers. * Additional expense involved in employing the personnel required installing and administering a system of payment of results; in some cases this expense might be out of proportion to the potential savings in costs. * Workers may tend to oppose the introduction of new machinery or methods, or other changes in conditions of production, which would necessitate a restudy of the job. Source: Pinhas Schwinger, Wage Incentive Systems (New York: Halsted, 1975). Challenges, Problems and Issues Involved with Wage Incentive Plans: * What incentive should be offered to encourage higher productivity ? * Can non-financial rewards encourage desired performance ? If leadership style shifts towards praise and recognition for superior performance, will the reward be adequate in the long run if profits increase ? * How will productivity and quality be measured ? * Will cooperation and productive relationships among workers and groups be threatened by reward system * How will traditional pay differential between supervisors and employees be affected if employees can earn extra pay for producing more ? * Is there sufficient trust between management and workers to implement an incentive system ? Will the plan be viewed positively by employees, or will they perceive it as a pressure to work harder without a corresponding increase in compensation ? * If not monitored carefully, it slips into an annual increment exercise. * Criteria need to be restructured every couple of years. * Schemes must be transparent enough. * It should be merged with the annual increment exercise. * Avoid nominal incentives. * It should have scope for review. * It should not generate suspicion among workers. * It should not be used as a compensation for low wages. A GOOD INCENTIVE PLAN MUST PROTECT ORGANIZATIONAL INTERESTS. ...read more.

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