Types of Incentive Plans


Incentives are monetary benefits to workers in recognition of their outstanding performance in their job.

According to Dale Yoder, ” Incentive wages relate earnings to productivity and may use premiums, bonuses or a variety of rates to compensate for superior performance”.


There is a number of incentive plans used in enterprises or industries, There are both individuals as well as group-based incentive plans. The detailed explanation about different types of incentive plans are as follows,

  • Individual Incentive Systems
  • Group Incentive System.


In Individual incentive plans payments are made on the basis of time and percentage of time saved. These are plans where payments are made to the person for his performance. The individual incentive system is again divided into two types as follows,

  • (i) Time-Based Systems
  • (ii) Production Based Systems


The time-based systems are based on the productivity and the time taken by an employee to complete a task. the following are the different systems involved in time-based systems

(a) Hasley Plan

The following is the procedure for calculating the incentives under this plan

  • time allowed for a task
  • Actual time¬†taken
  • Hasley rate of pay

(b) Rowan Plan

This system is similar to Hasley plan but a worker is guaranteed with minimum wage rate for the time spent for the job.

(c) Emerson Plan

A standard output is fixed for determining the efficiency of workers. Wage rate is fixed and calculated according to the productivity of the employee.

(d) Bedeaux plan

This is paid to the employee by the time saved by the team of workers and supervisors. It seeks to provide comparable standards for all workers. The benefits of time saved go both to the worker and his supervisor.


The following are the different types of incentive plans involved in production based system,

(a) Taylor’s differential Piece-rate system

The underlined principle of this system is to reward an efficient worker and penalize the inefficient person. If a worker completes the task in the standard time he is paid at a higher rate and lower rate is paid if more than standard time is taken.

(b) Gantt’s Task and Bonus Plan

This method is closely associated with Taylor’s system and is tried to improve Taylor’s system. A person taking less than standard time gets wages and bonus also. A worker taking standard or more time gets wages at an hourly rate.


A number of persons associated with completing a task come under a group incentive system. The following are the different types of group incentive systems,

(a) Priestman’s Plan

If productivity exceeds the standard time, the bonus is paid in accordance with the increase. In case production does not reach the standard then workers get minimum wages only.

(b) Scanlon Plan

There is a payment of one present participating bonus for every one percent increase in productivity. This bonus is available to all employees except top management.

(c) profit sharing plan

profit sharing is another incentive plan where the company sets aside a portion of their pre-tax profits and distributes that money to the employees. usually, an employee must qualify to receive profit sharing by meeting company performance metrics.

essentials of a good incentive plan

Incentive Schemes

types of interviews

Types of Interviews