PPT - Group Incentive Scheme | Cost Accounting - B Com PDF Download

 Page 1


Group Incentives/Team 
based Compensation
Under individual incentive system workers are paid on 
the basis of their personal performance. Their wages will be 
directly linked to their efforts. A worker may improve his 
remuneration by raising the level of output.
There may be circumstances when individual performance 
may not be measurable. A number of persons may be 
associated in completing a task. The work of one person 
may be influenced by the work of the other. Under such 
conditions, incentives may be offered for raising group
performance.
Page 2


Group Incentives/Team 
based Compensation
Under individual incentive system workers are paid on 
the basis of their personal performance. Their wages will be 
directly linked to their efforts. A worker may improve his 
remuneration by raising the level of output.
There may be circumstances when individual performance 
may not be measurable. A number of persons may be 
associated in completing a task. The work of one person 
may be influenced by the work of the other. Under such 
conditions, incentives may be offered for raising group
performance.
Group incentive schemes are suitable under 
the following situations:
1. When individual performance cannot be measured 
precisely.
2. The workers comprising a group possess the same type 
of skill or ability.
3. The completion of the task is linked with the collective 
efforts of the group.
Page 3


Group Incentives/Team 
based Compensation
Under individual incentive system workers are paid on 
the basis of their personal performance. Their wages will be 
directly linked to their efforts. A worker may improve his 
remuneration by raising the level of output.
There may be circumstances when individual performance 
may not be measurable. A number of persons may be 
associated in completing a task. The work of one person 
may be influenced by the work of the other. Under such 
conditions, incentives may be offered for raising group
performance.
Group incentive schemes are suitable under 
the following situations:
1. When individual performance cannot be measured 
precisely.
2. The workers comprising a group possess the same type 
of skill or ability.
3. The completion of the task is linked with the collective 
efforts of the group.
Features
• Group based or team-based incentives plans reward all 
team members equally based on overall performance of 
the team member.
• Under group based incentive plan, individual out put can’t 
be measured.
• So team performance is evaluated on the basis of time 
taken rather than output produced, if team complete their 
target in well advanced to standard time the team member 
are eligible for incentives.
• Payment to team members may be made in the form of 
cash bonus or in the form of non-cash reward such as 
pleasure trip, times off or luxury items.
• Team based incentives foster cohesiveness among tem 
members.
Page 4


Group Incentives/Team 
based Compensation
Under individual incentive system workers are paid on 
the basis of their personal performance. Their wages will be 
directly linked to their efforts. A worker may improve his 
remuneration by raising the level of output.
There may be circumstances when individual performance 
may not be measurable. A number of persons may be 
associated in completing a task. The work of one person 
may be influenced by the work of the other. Under such 
conditions, incentives may be offered for raising group
performance.
Group incentive schemes are suitable under 
the following situations:
1. When individual performance cannot be measured 
precisely.
2. The workers comprising a group possess the same type 
of skill or ability.
3. The completion of the task is linked with the collective 
efforts of the group.
Features
• Group based or team-based incentives plans reward all 
team members equally based on overall performance of 
the team member.
• Under group based incentive plan, individual out put can’t 
be measured.
• So team performance is evaluated on the basis of time 
taken rather than output produced, if team complete their 
target in well advanced to standard time the team member 
are eligible for incentives.
• Payment to team members may be made in the form of 
cash bonus or in the form of non-cash reward such as 
pleasure trip, times off or luxury items.
• Team based incentives foster cohesiveness among tem 
members.
Type of Group Incentive 
Plans
1. Priest man’s plan:
This system of wage payment was first used by Priestman's of 
Hull in 1917.
• A standard production is fixed for the whole enterprise 
under this plan. If productivity exceeds the standard then 
bonus is paid in accordance with the increase. 
• In case production does not reach the standard then 
workers get minimum wages only. 
• For example, a standard production of 200, 000 units is 
fixed for the year. Actual production during the year is 
240,000 units since production has gone up by 20% 
workers will get 20% higher wages as bonus.
Page 5


Group Incentives/Team 
based Compensation
Under individual incentive system workers are paid on 
the basis of their personal performance. Their wages will be 
directly linked to their efforts. A worker may improve his 
remuneration by raising the level of output.
There may be circumstances when individual performance 
may not be measurable. A number of persons may be 
associated in completing a task. The work of one person 
may be influenced by the work of the other. Under such 
conditions, incentives may be offered for raising group
performance.
Group incentive schemes are suitable under 
the following situations:
1. When individual performance cannot be measured 
precisely.
2. The workers comprising a group possess the same type 
of skill or ability.
3. The completion of the task is linked with the collective 
efforts of the group.
Features
• Group based or team-based incentives plans reward all 
team members equally based on overall performance of 
the team member.
• Under group based incentive plan, individual out put can’t 
be measured.
• So team performance is evaluated on the basis of time 
taken rather than output produced, if team complete their 
target in well advanced to standard time the team member 
are eligible for incentives.
• Payment to team members may be made in the form of 
cash bonus or in the form of non-cash reward such as 
pleasure trip, times off or luxury items.
• Team based incentives foster cohesiveness among tem 
members.
Type of Group Incentive 
Plans
1. Priest man’s plan:
This system of wage payment was first used by Priestman's of 
Hull in 1917.
• A standard production is fixed for the whole enterprise 
under this plan. If productivity exceeds the standard then 
bonus is paid in accordance with the increase. 
• In case production does not reach the standard then 
workers get minimum wages only. 
• For example, a standard production of 200, 000 units is 
fixed for the year. Actual production during the year is 
240,000 units since production has gone up by 20% 
workers will get 20% higher wages as bonus.
• 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.