A company has grown fast because of its good reputation. To recognise the work of its employees and to motivate them to keep up the good work, the company decided that every year a fixed part of its net earnings, left after meeting all expenses, would be distributed among the employees.
Identify the financial incentive adopted by the company.
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Profit Sharing
Option (1) Productivity linked wage incentive — Incorrect. These plans link wages to the output of a worker or a group. Here the payment depends on the company’s profit.
Option (2) Profit Sharing — Correct. Profit sharing gives employees a share in the profits of the organisation. The part of net earnings left after all expenses is profit, and the company shares a fixed part of it with employees every year.
Option (3) Co-partnership — Incorrect. Under co-partnership, employees are offered company shares at a price lower than the market price. Here employees get a part of the profit.
Option (4) Perquisites — Incorrect. Perquisites are fringe benefits like car allowance, housing, medical aid and children’s education. They do not depend on the year’s profit.
NCERT (2026-27 Edition): “(ii) Productivity linked wage incentives: Several wage incentive plans aims at linking payment of wages to increase in productivity at individual or group level. “(v) Co-partnership/ Stock option: Under these incentive schemes, employees are offered company shares at a set price which is lower than market price. …” “(vii) Perquisites: In many companies perquisites and fringe benefits are offered such as car allowance, housing, medical aid, and education to the children, etc., over and above the salary. These measures help to provide motivation to the employees/ managers.” |