Disadvantages of Incentive based compensation

Incentives are monetary benefits paid to workmen in recognition of their outstanding performance. They are defined as variable rewards granted according to variations in the achievement of specific results.

Disadvantages of Incentive based compensation

1. Tendency of quality of products deteriorated due to increased output and low cost
2. Employees may oppose introduction of new machines
3. Workers demand for minimum wage limit may go up due to high incentive earnings
4. Sometimes employees may disregard security regulations due to payment by results approach adopted for higher incentive figures
5. Overworking may affect employee health
6. Employee jealousies with respect to high and low performers