Reward System


A reward can be anything that attracts an employee’s attention and stimulate him to work.An incentive scheme is a plan to motivate individual or group performance.

The effective use of incentives depend on three variables:

1) The individual
Employees view rewards differently because of age, marital status, economic need etc.
2)Work situation
The work situation is made up of four elements such as work system/technology, satisfying job assignment, feedback system, and equity.
3) Incentive plan
Rewards are classified into two types
1) Direct compensation: It includes wages, overtime work., bonus based on performance, profit sharing and opportunities to purchase stock options.
2) Indirect compensation: It includes insurance plans pensions etc.

Objectives of reward system
1) To improve the profit through reduction in the unit costs of labour and materials.
2) To increase productivity.
3) To avoid or minimise additional capital investments for expansion of production.

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