Group Incentive Plans

Group incentive plans- Group incentive is any wage incentive applied to more than one employee who is engaged in group work characterized by an interdependent relationship between operations with consequent physical proximity and unification of interest. This is a plan in which production standard is set for a specific workgroup, and its member is paid incentives if the group exceeds the production standard. Firms increasingly rely on teams or groups to manage their work. They, therefore, need incentive plans that encourage term work and focus term member attention on performance. The main question here is how to reward the group’s performance.

One approach is to tie rewards to some overall standard of group performance such as total labor hours per piece. Doing so avoids the need for a precisely engineered piecework standard. Some set an engineered production standard based on the output of the group. This approach can use the piece rate or standard hour plan, but the latter is more prevalent. All members then typically receive the same share of the team’s incentive pay. Occasionally the employer may want to pay all team members according to some other formula. For instance, instead of paying everyone on the team based on how well the team as a whole does, he may pay everyone based on how well the best team member does. This counterintuitive sounding option may make sense when an employer has reason to believe the new team incentive plan might de-motivate high performing team members.

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