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Unit- 11 (Eleven)


Benefits are membership based rewards offered to all employees regardless of performance.
It should not be expected to motivate employees.
Absence of adequate benefit can contribute to employee dissatisfaction and increased absenteeism
and turnover.
Benefits: Something for everybody

Types of benefits

1. Legally required benefits: certain benefits must be supplied by the organizations for its
employees, regardless of whether it wants to or not. Such as social securities,unemployment
compensation, workers compensation, disability
2. Voluntary benefits: rest period, holidays-dashain, tihar, vaccations-paid leave, sick leave, leave of
absence- 14 days, pension & gratuity progarmmes, insurance, study leaves etc.

Those facilities which is provided by the organization at no cost to the employee or a significant
reduction from what might have to be paid without the organizations support. Such as- company
sponsored events, counselling, cultural activities, credit unions, housing, free tea/coffee, discount,
company picnic, educational assistance etc.

Trends in benefits & services:

Cafeteria style of benefits: the cafeteria approach allows employees to pick and choose those
benefits that are desirable. Core benefits are provided to all employees, remainder of the money to
be spent on benefits left to the decision of each employee.

Monetary benefits paid to employees for outstanding performance.
Given in addition to wage & salary
Variable pay linked to performance
Types of incentives

1. Individual incentives: reward linked with the individual performance. Individual incentive
plans are:
a) Piece rate- compensation is based on number of units produced. Used for production worker.
b) Commissions- based on sales performance in terms of value. Used for sales personnel.
c) Bonus- one-time lumpsum payments for meeting performance goal. Used for managerial &
professional employees.
2. Group incentives- reward linked to the combined performance. Where task are interdependent and
requires team work and the output of individual employee canot be measured such incentive is
provided. Bonus, commission, piece rate.

3. Organizational incentives- reward linked with the overall performance of the organization.
a) Scanlon plan- it is based on the ratio of labor cost to productivity. All employees are entitled to a
share of saving in labor cost through bonus payments (productivity gain sharing).
b) Suggestion plan- reward for useful ideas for improvement of organizational effectiveness from the
c) Employee shares some portion of profit.