It is widely used in United States and Britain. In this reward practice the management rewards employees depending on the group effort and group collaboration. The employees are paid a bonus if the firm achieves increased production. In this case, the bonus is seen as coming about as a result of improved employee performance. This is accurately determined using ratios relating to productivity to labor performance. This bonus can be paid in intervals to employees which can be yearly, quarterly and even half yearly .
the principle is that once the firm performance is more than the stated standard output the extra output is paid to the employees as bonus at any interval as they agree (Robbins S, 2005); . There are two main schemes that are used; a. The SCANLON plan- This is based on a share of production plan b. The RUCKER plan- This is based on labor costs and added value. They both use the extra or additional output ratio of productivity which is associated between inputs and outputs and the difference is the value added productivity whose agreed proportion is put aside for the bonus funds to pay out.
Advantages (Lundy O. & Cowling A. 2000). 1. It encourages collaboration since inter group competition is reduced. 2. It encourages employees and management cooperation as it involves high consultations and negotiations between parties and results on its acceptability are also assessed. 3. It produces recommendable cost savings as it is cheaper to reward a group than individuals 4. It is applicable to both indirect and direct employees 5. By use of productivity measures limits the issue of arguing about rates. 6. Encourages efficiency in production to achieve high results.
Disadvantages( Lundy O. & Cowling A. 2000). 1. The incentive does not recognize individual efforts which may reduce self satisfaction hence the employees may not be motivated to produce high as individuals. 2. It is not always clear how much a particular productivity measure reflects the contribution of the labor force rather than other factors. 3. It is complex to operate hence not widely used. 4. Labor cost may not be possible to control hence no cost savings. This because there is a lot of supervision required for the task to be performed
This method or practice of employee rewarding is not widely used in other countries because of its complexity. In this method, the company must perform well overall for the staff to be rewarded. If the company is not performing well, then no employee is rewarded. This discourages individual staff as they know that their efforts are not recognized and they may not accept the method. Further the management may not be able to clearly establish productivity measure to use in rewarding making the whole process difficult hence choose to use a different practice which is reliable (Hom, P. W. & Griffeth, R. W. , & Sellaro, C. L. , 1984).