Material Incentive Fund

in the USSR, one of the economic incentive funds. The purpose of the material incentive fund is to award bonuses and render material assistance to the personnel of enterprises, production associations, and organizations in industry and other sectors of the national economy. The material incentive fund is formed from the profits of enterprises and production associations. It also takes into account bonuses that are paid to industrial workers from the wages fund. Payments into the fund in industry are determined on the basis of standard deductions from profit for each percentage point of increase in the volume of sales or production, profitability, labor productivity, and the share of top-quality output in total output. The standard deductions are a fixed percentage of the projected material incentive fund in the year preceding the five-year plan. This system motivates enterprises and production associations to adopt and fulfill intensive plans and to make counterplan commitments above and beyond those set by the annual plans, which make the five-year plans operational.

From the material incentive fund comes the money to give bonuses to industrial workers, engineers, technicians, office workers, and other working people as a reward for fulfilling and overfulfilling production and sales plans, increasing productivity, applying technically substantiated output quotas, improving product quality, and economizing on the use of raw materials, supplies, and tools. The fund also provides the money for bonuses (usually quarterly bonuses) awarded in accordance with established bonus systems, for one-time awards for excellence in the fulfillment of priority production targets, for one-time aid grants, and for bonuses awarded for success in intraplant socialist competition and excellent yearly performance. Awards based on performance for the year vary according to the employee’s length of service at a given enterprise.

A proper ratio must be maintained between the growth of labor productivity and the average wage, which includes sums from the material incentive fund. If the rise in the average wage exceeds the growth of labor productivity, a corresponding percentage of the material incentive fund is either held over to the next year to be used to encourage the increase of labor productivity and the efficiency of production or else channeled into the fund for sociocultural measures and housing construction in the current year.

Working within the limits of the amounts approved for them, the ministries or departments determine the amount of the material incentive funds to go to individual enterprises or production associations over a five-year period, broken down by years. Up to 10 percent of the total funds are put into centralized reserves. Advantages accrue to enterprises that make better use of fixed capital stock and working capital, master new technologies in a shorter time, and attain higher growth rates in labor productivity and improvement of product quality. The amount of the material incentive fund set aside for use during the five-year plan may be modified in the process of updating annual plans in accordance with increases or decreases in the fund-forming indicators compared with the targets of the five-year plan for a given year.

Rigorous economic substantiation of the system for forming and using the material incentive fund plays an important part in the general system of material and moral stimulation.