Published on March 6, 2014
Employee motivation, Incentives and Fringe Benefits
FICCI CE Employee motivation Individual Performance=f(ability*motivation) Motivation is defined as an innate need or desire with a physiological or psychological basis that propels an individual to undertake an activity to satisfy the need or desire.
FICCI CE Employee motivation Motivational Process: 1. Awareness on the part of the individual that a need is operating. 2. Identifying mechanisms to satisfy the need. 3. Drive mechanism implementation. 4. Attainment of goals.
FICCI CE Employee motivation • • • • • • • Freud’s Defense Mechanisms Repression Reaction Formation Projection Rationalization Intellectualization Displacement Regression
FICCI CE Employee motivation Functions of Work: Work is instrumental for survival. Contributes to personal identity Provides opportunities for interaction with others. Status and self-respect. Growth and Development. Generates self-confidence. Relate to and contribute towards society.
FICCI CE Chris Argyris’ Immaturity-Maturity Theory: Immaturity Characteristics • Passivity • Dependence • Capable of behaving in few ways • Shallow interest • Short-term perspective • Subordinate position • Lack of Self-Awareness Maturity Characteristics • Active • Independence • Capable of behaving in many ways • Deep interest • Long-term perspective • Super ordinate position • Self-Awareness and Control
FICCI CE Content Theories of Work Motivation • • • • These theories attempt to determine what motivates people at work and are concerned with identifying and prioritizing needs. Maslow’s need-hierarchy theory Herzberg’s Two-Factor theory Alderfer’s ERG theory McClelland’s Achievement motivation theory
FICCI CE Maslow’s Need-Hierarchy Theory Growth needs(G needs): Self-Actualization Esteem Belongingness Basic needs(B needs): Safety Physiological
FICCI CE Maslow’s Model in a work situation Self-Actualization Esteem Social Security Pay
FICCI CE Herzberg’s Two-Factor Theory Hygiene Factors Company policy and administration Supervision, Technical Salary Interpersonal Relations Short-term perspective Working Conditions Advancement Motivators Achievement Recognition Work itself Responsibility
FICCI CE Alderfer’s ERG Theory ERG stands for Existence, Relatedness and Growth. It is a more practical theory compared to Maslow’s Theory as it explains individual differences in pursuit of development regardless of whether or not other needs are satisfied. But the main drawback is we are not sure as to what motivates an individual.
FICCI CE McClelland’s Achievement Motive Theory A brief description is as follows: Need for Achievement Need for Power Need for Affiliation
FICCI CE Process theories of Work Motivation •Vroom’s Expectancy Model •Adam’s Equity Theory •Porter-Lawler’s performance-satisfaction Model
FICCI CE Incentives And Fringe benefits
FICCI CE Meaning Incentives are the rewards to an employee, over and above his base wage or salary, in recognition of his performance and contribution. “ An incentive scheme is a plan or programmes to motivate individual or group performance. An incentive programme is most frequently built on monetary rewards but may also include a variety of non-monetary rewards or prizes.” By- Burack and Smith
FICCI CE Pre-requirements For Effective Incentive System Incentive plan should be simple so that it may be easily understood by the workers. The plans should be acceptable to the workers, trade unions and management. The incentives rates should be made attractive so as to encourage the worker to give his best results. All incentives should guarantee a minimum day’s wages.
FICCI CE The scheme should be explained and discussed with all employees and supervisors before it is implemented. Standards once fixed should not be changed unless it is necessary.
FICCI CE Two Types Of Incentives 1. Financial Incentives 2. Non-Financial Incentives
FICCI CE Group Incentive/ Bonus Plan It is a plan in which a production standard is set for a specific work group and its members are paid incentives if the group exceeds the production standard.
FICCI CE Profit Sharing Scheme It is an incentive plan that engages many or all employees in a common effort to achieve a company’s productivity and any resulting incremental cost-savings gains are shared among employees and the company.
FICCI CE At-Risky Pay plan These are some times called variable pay plans but are essentially plans that put some portion of the employee’s pay at risk, subject to the firm’s meeting its financial goals.
FICCI CE Salary plan Salary plan varies from organization to organization. Some firms pay sales people fixed salaries and no specific commission or bonus schemes are paid on achieving the sales targets. The emphasis being on customer service rather on high pressure selling.
FICCI CE Commission Plan Commission plans provide sales representatives with payment based on a percentage of sales turnovers they generate.
FICCI CE Combination Plan Most companies pay their salespeople a combination of salary and commission. A portion of total earnings is paid in form of fixed salary.
FICCI CE Bonus Scheme And Awards Bonus scheme provide pay in addition to basic salary which is related to the achievement of defined and preferably agreed targets. These may refer simply to sales volume or profit.
FICCI CE Base Salary Decisions on the base salary of directors and senior executives are usually formed on the basis of market worth of the individuals. Remuneration on joining the company is usually settled by negotiation, often subject to the approval of a remuneration committee
FICCI CE The Annual Bonus Annual bonus plans are those which are aimed at motivating the short term performance of their managers and executives and are given on the basis of the profitability of the company.
FICCI CE Stock Option A stock option is the right purchase a specific number shares of company stock at specific price during a period time. to of a of
FICCI CE Book Value Plan Managers are permitted to purchase stock at current book value. Executives can earn dividend on the stock they own, as the company grows the book value of their shares may grow too.
FICCI CE Stock Appreciation Rights The employee is given the appreciation in the value of shares from the date the option was granted till the date it was relinquished. He earns without investing any money in buying the options.
FICCI CE Restricted Stock Plans Shares are usually awarded without cost to the executive but with certain restrictions. One of the major restrictions is that the shares may be forfeited if they are not earned out over a specified period of time.
FICCI CE Phantom Stock Plan Executives receive not shares but “units” that are similar to shares of company stock. Then at some future time they receive value equal to the appreciation of the “phantom” stock they own.
FICCI CE Employee Stock Option Plan: A company contributes shares of its own stock or cash to be used to purchase such stock to a trust. The trust holds the stock in individual employee accounts and distributes it to employees upon their retirement or at the time of separation from service.
FICCI CE Employee Stock Purchase Plan The employees are given the right to acquire shares of the company, normally at a price lower than the prevailing market price.
FICCI CE Non-Financial Incentives Materialistic Incentives Canteens Housing Facilities Education Facilities Pension Provident Fund Schemes Non-Materialistic Incentives Recognition and praise Good working environment Cordial human relations Job satisfaction
FICCI CE Fringe Benefits For Employees
FICCI CE “Imagine life as a game in which you are juggling some five balls in the air. You name them - work, family, health, friends and spirit - and you're keeping all of these in the air. You will soon understand that work is a rubber ball. If you drop it, it will bounce back. But the other four balls - family, health, friends and spirit - are made of glass. If you drop one of these, they will be irrevocably scuffed, marked, nicked, damaged or even shattered. They will never be the same. You must understand that and strive for balance in your life.” -Brian G. Dyson President and CEO Coca-Cola Enterprises
FICCI CE Definition Fringe benefits are those monetary and non monetary benefits given to the employee during and postemployment period which are connected with employment but not to the employees contribution to the organization.
FICCI CE For Example You Could receive a benefit when you • • • • Use a work car for private purposes. Are provided with a cheap loan. Are provided with free private health insurance. Are provided with cleaning services for your private residence or enter in to a salary sacrifice arrangement.
FICCI Need & Importance of Fringe Benefits: • To retain the employees. • To motivate performance. • As a social security. • Trade Union demand. • Skill shortage. • Employee Demand. CE
FICCI CE Principles of Fringe Benefits • • • • • • Satisfaction of Real Needs. Flexibility. Proper Communication. Educate the workers. Corporate Tools. Participation
FICCI Fringe Benefits Categories : • • • • • • • • Car Fringe benefits. Loan Fringe Benefits. Expenses Payment Fringe Benefits. Housing Fringe Benefits. Airline Transport Fringe benefits. Living-Away-from-Home allowance fringe benefits. Car Parking Fringe Benefits. Property Fringe Benefits. CE
FICCI CE Fringe Benefits In India : • • • • Payment for Time not Worked. Voluntary Benefits. Payment For Special Duties. Payment For Health and Security Benefits.
FICCI CE Conclusion: • Basically, a fringe benefit is a benefit provided to an employee or an associate (For Example: Family, Spouse and children) because of his employment. • Fringe Benefits provide output in terms of employee loyalty and co-operation, employee welfare and create Organizational image.
FICCI CE References 1.Ajai Kumar Singhal,“Human Resource Management.” 2.Gary Dessler & Biju Varkkey, “Human Resource Management.” 3. Google
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