Incentive is a additional pay for higher performer to enhance motivation level. In other words, it is monetary benefits paid to employees for outstanding performance .E.g. gain sharing, commission, bonus, piece work plans etc.

Types of incentive plans

  1. Individual incentive plans: It is concerned with individual performance on work sites. Under this, following types of rewards are provided to an individual.
  1. Piece rate (piece work) pay: Usually, it is provided to manufacturing worker. Under this, standard output is determined first and the workers are paid higher rate for the output produced above that standard output.
  2. Commission plan: Usually, it is provided to the sales person or the mediator who helps in enhancing the organizational effectiveness. It may be direct (i.e. pay commission per unit sold) or indirect (i.e. pay on overall sales by adding with the salary paid)
  3. Bonus plan: It is a onetime lump-sum amount paid to the management or professional employee for their outstanding performance. Different types of bonus scheme are provided by the organization such as, end of year bonus (i.e. paid at the end of year), spot bonus (i.e. paid on spot once the target is achieved by an individual) etc.

     b. Group Incentive plan: It is concerned with providing the reward for the group They are:

  1. Piece rate
  2. Commission Plan
  3. Bonus

     c. Organizational incentive plan: It is concerned with the improvement of overall organizational performance. Under this, the additional extrinsic reward is provided to all of the employees to appreciate their efforts. Following are the types of organizational incentive plan:

  1. Productivity gain sharing: It is related to productivity improvement. The cost that has been saved on production or operation because of outstanding efficiency improvement is distributed as bonus to the employees.
  2. Profit sharing: Under this, certain percentage of profit is distributed as bonus to all the employees as bonus for their effective performance.
  3. Employee share ownership: Under this employees are given opportunity to participate in ownership by providing shares either as a gift or below the market This type of incentive helps to build belongingness towards organization and boost up motivation level.