1. GROUP INCENTIVE PLANS
Presented By:
Nidhi Kumari (2012MB04)
Nitika Gupta (2012MB22)
Nikita Juyal (2012MB41)
Nitin Singh (2012MB54)

2. 
Reward all team members equally based on overall
performance.

Applied when –
 There is a community of interest.
 It is not possible to measure individual
performance.

Examples include assembly line operations, chemical
processes, blast furnace operation etc.

3. 
Generally, smaller groups are better and more
effective.

Dependent on the type of group task.

Large groups may be effective in case of a line
operation.

In case of a welder, group strength may be only two.

5. 
A team based incentive with links to individual
payouts.

Team and individual performance goals are set.

If team hits its goals, team members earn their
incentive only if they also hit their individual goals.

Team incentive is 12% to 15% of monthly base pay.

6. 






Cost Efficiency Bonus Plan
Preistman’s Production Bonus Plan
Rucker Plan
Budgeted Expense Plan
Scanlon Plan
Towne Plan
Co-partnership Plan

7. Steps:
1)
Determines standard cost for the various. elements of cost.
2)
Actual cost incurred by group.
3)
Compare Incurred Cost and Standard Cost.
4)
Finally, pre-determind percentage of the savings is distributed in the form of
bonus to the employees
Ques:
Standard cost = Rs. 3,00,000
Actual Production cost= Rs. 2,70,000
No. of Members=10
Group is eligible for 60% of cost saved as bonus.
Ans: given:
standard cost=3,00,000
actual cost=2,70,000
savings= 3,00,000-2,70,000=30,000
Bonus= (( 60/100)*30,000)= 18,000
Bonus to each member=18000/10=1,800


8. Steps:
1)
Determines standard performance in terms of units or points.
2)
Actual performance in units is measured .
3)
Compare standard performance and Actual performance .
4)
a) actual performance exceeds standard performance, bonus is given based on
excess production achieved and pre-determind percentage of bonus .
b) actual performance below standard performance, no bonus given
Ques:
Standard production=12,000 units
Actual production=15,000 units
Group is eligible for 75% of increase in efficiency as bonus to employees.
Ans:
Actual production= 15,000
Standard production= 12,000
efficiency achieved= 15,000-12,000= 3,000
increase in efficiency = (3,000/12,000) * 100= 25%
Bonus= 75% of 25= 18.75%
Bonus to each member of 10-member group = 18.75 / 10 =1.875%


9. 
Assumption: Pay portion of Value Added remains near constant share
unless drastic change in policy or organisation mismanagement.
Steps:
1)
Calculate value added for given data in defined time period.
2)
Calculate ratio of labour cost to value added.
3)
Calculate value-added of subsequent years and ratio of labour cost to
value added.
4)
Now, if reduction in ratio then certain amount of value added given as
bonus.
Ques: for past 5 years:
for subsequent 5 years:
Labour cost = Rs.2,00,000
Labour cost = Rs. 2,20,000
all cost included = Rs.1,40,000
all cost included = Rs. 1,50,000
PBT = Rs.60,000
PBT = Rs. 80,000
If reduction then 1% of value added given as bonus.


10. Ans: for past 5 years:
value-added = labour cost + all cost included + PBT
value-added = 2,00,000 + 1,40,000 + 60,000
= Rs. 4,00,000
Ratio = (labour cost / value added) * 100
= (2,00,000 / 4,00,000) * 100
= 50%
For subsequent 5 years :
value-added = labour cost + all cost included + PBT
value-added = 2,20,000 + 1,50,000 + 80,000
= Rs. 4,50,000
Ratio = (labour cost / value added) * 100
= (2,20,000 / 4,50,000) * 100
= 48.9%
Now, since ratio is reduced so bonus payable = ( 1% of 4,50,000)
= Rs. 4,500
Bonus to each member of 10-member group = 4,500/10
= Rs. 450

11. 
ADVANTAGE:
1. Increase employee engagement and organizational performance.
2. Cost savings on overheads also.
3. Increased motivation to employee
4. Easy to implement and no cost involved

DISADVANTAGE:
1. Leader dependent plan.
2. More need of Training and Development for employee.

12. Steps:
1)
Determines total budgeted expense .
2)
Actual total expenditure incurred by group.
3)
Compare total budgeted expense and Actual total expenditure.
4)
Finally, pre-determind percentage of the savings is distributed in the form
of bonus to the employees
Ques:
total budgeted expense = Rs. 3,00,000
Actual total expenditure = Rs. 2,70,000
No. of Members=10
Group is eligible for 60% of savings as bonus.
Ans: given:
total budgeted expense =3,00,000
Actual total expenditure =2,70,000
savings= 3,00,000-2,70,000=30,000
Bonus= (( 60/100)*30,000)= 18,000
Bonus to each member=18000/10=1,800


13. 
Constant proportion of the added value of output is
paid to the workers who are responsible for the
addition of the value.

Ratio of labour cost to sales value of production.

14. Calculation:
1) Calculate current year sales and actual labour cost.
2) Compare current year sales and current year actual labour cost .
3) Calculate ratio of fixing bonus.
4) Finally Standard Labour Cost is computed using ratio.
5) Compare standard labour cost to actual labour cost for bonus payable.
Ques: Given:
average annual sales( for 4 years) = Rs. 4,40,000
average annual labour cost ( for 4 years) = Rs. 1,20,000
Current year sales = Rs. 1,40,000
actual annual labour cost = Rs. 30,000
Ans:
Ratio = (current year sales – actual labour cost) * 100
average annual sales
= 1,40,000 – 30,000/4,40,000
= 25%

15. Standard labour cost = (( current year sales * ratio )/100)
= (1,40,000 * 25)/100
= Rs. 35,000
Actual labour cost current year = Rs. 30,000
Bonus payable = (Standard labour cost – Actual labour cost)
= 35,000 – 30,000
= Rs. 5,000
Bonus to each member of 10-member group = 5,000/ 10
= Rs. 500

16. 

No cost to use the process.
Increase employee
engagement and
organizational performance.
Advantages


Leader dependent plan.
More need of T&D for
employee.
Disadvantages

17. 

Cost reduction by foremen and workers.
Steps:
1. Standard labour cost per unit for a particular period
is determined.
2. If actual labour cost per unit is less than the standard
labour cost, 50% of the saving in labour cost is
distributed among workers and foremen in proportion
to their wages.

18. Calculation:
1)
Calculate Standard Labour Cost per unit.
2)
Calculate Actual Labour Cost per unit.
3)
Compare actual labour cost and standard labour cost to compute savings.
4)
Bonus calculated = 50% of savings
Ques:
Standard Labour cost per unit = Rs. 2,50,000
Actual Labour cost per unit = Rs. 2,00,000
Ans.Savings = Standard Labour Cost per unit – Actual Labour cost
= 2,50,000 – 2,00,000
= Rs. 50,000
Since, actual labour cost less than standard labour cost 50% of savings given as
bonus.
Bonus = (50% of 50,000)
= Rs. 25,000
Bonus to each member of 10-member group = 25,000/10 = Rs. 2,500.

19. 

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Worker gets his usual wages.
Employees share the capital as well as profits.
Improved over all other systems of wage payment.
Offers recognition of the claim of the dignity of
labour.

20. 
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Profit sharing.
Control sharing.
Motivation to work.
Sense of belongingness to workers.

21. 

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Encourages co-operation
Useful when there are no clearly defined individual
goals
Increase of output/productivity
Better quality of work
Less supervision
Increase motivation

22. 



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Bonus shared by all
Bonus fixation & ascertainment is difficult.
Rivalry among the members defeats the purpose of
Team-Work and Co-operation
Equal rewards considered unfair by hard working
employees
Efficient worker may be penalized for inefficiency of
other members in group

23. 
Set quantifiable targets when evaluating team
performance for rewards

Ensure top performers earn highest rewards

Link team performance to company’s profits

Offer uniform non team based incentives to
employees within each grade

24. 1)
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8)
Cost Accounting Theory And Practice 12Th Ed. By Bhabatosh
Banerjee.
Cost Accounting: Principles And Practice By Dutta.
Human Resource Management By Durai Pravin.
http://www.tutorsonnet.com/homework_help/types_of_cost/labor_a
nd_machinery_cost/labour_group_bonus_plans_assignment_help_
online_tutoring.htm
Human Resource Management Approach, Prentice Hall, Inc. ©
2006 By David Oakes.
Human Resource Management By Robert L. Mathis and John H.
Jackson.
Human Resource Management By K. Aswathappa.
Human Resource Management By V S P Rao.

25. THANK YOU..