This will be helpful in identifying different types of incentives in wages and payment section. It will be useful for HR and IR students.

1. Incentive System of Payment
Dr. Minisha Gupta
Academician & Researcher

3. 2018 2017
Rank Country Gross Net TAX NET %
1 Denmark €5,191.00 €3,270.00 37.01% €3,095.00 5.35%
2 Luxembourg €4,412.00 €3,159.00 28.40% €3,009.00 4.75%
3 Sweden €3,340.00 €2,570.00 23.05% €2,465.00 4.09%
4 Finland €3,380.00 €2,509.00 25.77% €2,509.00 0.00%
5 Ireland €3,133.00 €2,479.00 20.87% €2,464.00 0.61%
6 Austria €3,632.00 €2,324.00 36.01% €2,009.00 13.55%
7 Germany €3,703.00 €2,270.00 38.70% €2,270.00 0.00%
8 France €2,957.00 €2,225.00 24.75% €2,157.00 3.06%
9 Netherlands €2,855.00 €2,155.00 24.52% €2,263.00 -5.01%
10 United Kingdom €2,498.00 €1,990.00 20.34% €2,102.00 -5.63%
A comparative analysis of salary
from top ten European countries

4. Concept of Incentives
 Incentive is a compensation that rewards an employee for
performance beyond the normal expectations.
◦ For Example: Exceeding target sales, Attracting more customers.
 Incentives are rewards given to the employees to motivate them for
performing more than they are expected to.
 It is a method of rewarding employees on the basis of their output
such as sales or profit.
 It is a variable pay granted on the basis of variation of results
achieved by the employees.
 Incentives attract potential employees to an organization and
encourage company’s loyalty.

5. Importance of Incentives
 Workers are likely to work at their best when they are offered
monetary rewards for good performance.
 Provide opportunity for hard-working and ambitious employees
to earn more.
 To improve work-flow, work methods & man – machine
relationship.
 To bring employee involvement to make employee innovative.
 Incentives are the sound technique of improving productivity.
 Help to improve discipline and industrial relation.
 The cost of supervision are reduced.
 To obtain desired result.

6. Why incentives are beneficial for
employers?
 Helps in retaining hard working and talented
employees.
 Saving costs of supervision and improve
work flow productivity.
 Motivates employees and make them loyal.
 Organizations can achieve the pre-
established goals.

7. Top 12 Employee Incentive programs in
2020
1. Remote Working
2. Unlimited Paid Time off
3. Employee Profit Sharing
4. In-House Entertainment
5. Skill Development and Training Courses
6. Mandatory Mentorship Programs
7. Value-Added Benefits
8. Health- Related Programs
9. Financial Assistance
10. Paid Vacations
11. No Limit on Sick Leaves
12. Career Road Mapping

8. Classification of Incentives System
Individual
Incentive
Group
Incentive
Organizational
Incentive

9. Individual Incentive
System
 Piece Work System : Used for Production or
Manufacturing worker.
 Commission System: Used for sales person
People who are selling LIC policies, loan plans,
personalized loan offers, products using supply
chain or for companies like Tupperware, Oriflame,
Amway

10.  Bonus: Used for Managerial and Professional
employee and also for production workers on
special occasions like festivals, Christmas or
New Year.
Daimler, the Stuttgart-based carmaker and owner of
the Mercedes-Benz brand, will pay €1000 as bonus
to its 160,000 employees in Germany. This is to
compensate for working from home and having to
wear a mask.
Walmart, the American multinational retail company
is paying its employees bonuses which collectively
amount to over $700 million. This comes as a

11. Group Incentive System
 Piece Work System: Used for a group of
production workers. Manufacturing units mostly
employ it.
 Commission System: Used for a group of sales
person or sales team.
 Bonus: Used for group of managerial &
professional employee and also for production
workers.
 Production: If a group of workers exceed

12. Advantages and
Disadvantages

13. Organizational Incentive
System
 Reward is link to the overall performance of
organization.
 The goal is to direct the efforts of all employees
towards improving organizational goals.
 All employees shares the reward.

14.  Profit sharing system: Employees share some portion of
organizational profit.
 Suggestion system: Employees are rewarded for providing useful
ideas for improving organizational effectiveness. Suggestions can
be for reducing cost, improving quality & productivity, increasing
safety etc.
 Employee share ownership system: Organizations allows
employee to buy shares at stated price which generally below
market price.
◦ Swiggy, which was forced to lay off its employees in May and July this
year, due to the pandemic-induced lockdown and slump, is now
recovering fast and how. It is offering its employees an employee stock
ownership plan (ESOP) liquidity programme, worth about seven to
nine million dollars.
 Productivity gain sharing plan: It allows all employees to share in

15. What makes an Incentive plan
effective?
 In the absence of mutual trust between management and workers,
incentives may be viewed as an attempt to improve production/
profit only.
 Incentive plan should be installed in consultation with workers and
union. As well as Review by labour consultant/attorney.
 Payment of incentives should be free from bias & established
through scientific/ proper work study.
 To implement incentives plane effectively minimum wages should
be guaranteed to every workers.
 It should be easy to understand and simple to operate so that
employee can calculate their own earnings.

16. Contd..
 It should provide equal opportunity to all workers
to earn incentives pay.
 Plan should not be very costly in operation.
 Plan should be flexible to adopt any changes
later on.
 Payment of incentives should be prompt i.e. as
early as possible.
 It should be adequate to motivate each
employees.

17. Other Incentive plan systems: