Group Incentive Scheme | Cost Accounting - B Com PDF Download

Group Incentive Plans: Suitability, Methods and Types!
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.

Suitability:
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.
4. The aim is to provide incentive to indirect workers rather than direct workers.
5. The number or persons constituting a group is not large.

Method s of Distributing Group Bonus:
Many methods are used for distributing bonus some of the commonly used criterion are as follows:
1. If all the persons in the group possess the same type of ability or skill then bonus may be distributed equally among them.
2. When group members are paid wages according to same time scale, bonus may also be divided according to that time scale.
3. If workers earn different amounts of wages then bonus maybe distributed in proportion to wages earned by them.
4. Bonus may also be paid on the basis of certain percentage, fixed on the basis of the experience, skill and wages earned by worker.

Type of Group Incentive Plans:
There may be different schemes for paying group bonus, some of these are discussed as follows:
1. Priest man’s plan:
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.
The workers get sufficient incentive to raise their performance. A team spirit is visible among the workers because production will increase with the collective efforts of various limbs of the organization. This method does not offer incentive to individual workers. Inefficient workers share the efforts of efficient workers because increased production benefits all the manpower in the organization.

2. Scalon plan:
This method is named after Joseph Scalon. There is a payment of one percent participating bonus for every one percent increase in productivity under this plan. The bonus is available to all workers except top management.
The entitle amount or bonus is not paid every month. A reserve fund of one-half of first fifteen percent is created for off-setting any change in labour cost. In case, this reserve remains unused at the end of the year then this amount is also distributed among workers in the last month of the year and a fresh reserve is created in the year.

3. Co-partnership:
The employees are offered shares of the enterprise at reduced rates in this plan. The payment is also collected in installments. The employees share profits of the enterprise as its members. The underlying idea of this method is to make workers feel as a part of the organization and understand view point of the management. As co-partners they will behave in a responsible manner and will try to make the concern more and more profitable and successful.

4. Profit sharing:
When shareholders share profits for contributing towards capital then workers should also get a part of profits for contributing their labour. The workers are an integral part of any organization and their contribution to its prosperity should also be rewarded by making them the recipients of profits.
This realization that employees/workers contribute significantly to increase profit has encouraged the adoption of this system. Profit sharing is a method of remuneration under which an employer undertakes to pay his employees a share in the net profits of an enterprise, in addition to regular wages.