What are the different types of Group Incentive Wage Plan?

[rms]

Explain the various Group Incentive Wage Plans

[nbm]

Group incentive wage plans motivate the group to produce more under individual incentive plans, bonus is paid to the workers on the basis of individual performance and the amount of bonus payable to a worker is not affected by the performance of another or other workers. But there are certain situations where it is difficult to measure the output of an individual worker conveniently or the performance of one worker is affected by the performance of other workers. In such situations, group incentive bonus schemes are introduced. Under this scheme, bonus is made payable to all the workers on a collective basis. This bonus is promised by management in advance of the commencement of work for securing in effective teamwork. In all cases, a fixed standard of performance is established and the bonus is given for the results shown over the standard performance.

There are different types of group incentive schemes. Important among them are as follows:
(1) Priestman Plan—This system of wage payment was first used by Priestman's of Hull in 1917. It is applied to workers who work in groups. It provides for payment of group bonus in addition to the ordinary time rate to the individual workers. Thus if during a year, an enterprise is able to reach the predetermined standard output or exceed the previous year's output, workers are paid increased wages in the same ratio in which output has increased. For example, if in 1990, the output per worker-hour was 10 units and in 1991, it rises to 11 units per worker-hour, the wages in 1991 would be 10% higher than those in 1990.
An advantage of the system is that it brings about team-spirit among the workers of a group. If the group as a whole works well, this is bound to add to overall output of the enterprise and in that case all the workers would stand to benefit.
But its disadvantage is that it may be insufficient to motivate individual workers, particularly these who possess greater skills and experience.
(2) Scanlon Plan—Named after Mr. Joseph Scanlon of United States, this plan is the most popular for shaving the gains from increase in productivity. It provides for payment of 10% participating bonus for every 10% increase in productivity. The benefit is extended to all employees except the members of top management.
Under the plan, workers are not paid the entire amount of bonus earned by them in any month. One half of the first 15% of such bonus is set apart for the creation of a reserve fund. This fund is used to neutralise the effects of any fluctuations in labour costs. In case a part of such fund remains unused, it too is distributed among the workers in the last month of the year and then a new fund is a created for the New Year.
(3) Productive Bargaining—Management and workers of an enterprise may reach an agreement under which workers agree to give up unproductive wasteful practices such as go-slow and work to rule and in return, the management agrees to link the wages and concessions of increase in productivity.
For this, it is necessary that there should be a strong trade union to force the workers to honour the agreement. In case there are too many unions not cooperating with one another such agreement has little chance of succeeding.
(4) Co-partnership—Under this certain employees are given the option of buying the shares of the enterprise at reduced price in installments. The employees are choosen on the basis of seniority or wage levels. Its assumption is that as a shareholder of the company. An employee is likely to show greater understanding of the company's viewpoint and behave more responsibly.
As for management, it can cite such schemes as proof of its enlightened outlook and thus brighten the public image of the enterprise.
(5) Profit sharing: It is an agreement (formal or informal) freely entered into, by which an employee receives a share fixed in advance of the profits