WAGES AND INCENTIVES

WAGES AND INCENTIVES

Introduction

Concept of wages

nNominal Wage

nReal Wage

nMinimum Wage, Fair  Wage and Living Wage 

n

WAGES AND INCENTIVES

Desirable Characteristics of Good Wage System 

nGuarantee an adequate minimum wage

nSimple and easy system

nFair for both employee and employer

nReward the worker according to his efficiency and merit

nBonus should not be left for future periods

WAGES AND INCENTIVES

Factors affecting Wages

nDemand and Supply Position in Labor Market

nLegal or Statutory Provisions

nCapacity of Bargain

nCost of Living Index

nNature of Employment

WAGES AND INCENTIVES

Factors affecting Wages

nOrganization’s Ability

nRegularity and Irregularity of Employment

nSupplementary Incomes

nWorking Hours

nProspects of Promotion

WAGES AND INCENTIVES

Types of wage Plans

nTime Rate System

nAdvantages, Disadvantages and Applications

n

n Piece Rate System

nAdvantages, Disadvantages and applications

n

n Combination of Piece Rate and Time Rate System

WAGES AND INCENTIVES

Incentives

nIncentives is an inducement or reward given to the worker for his efficiency and hard work.

nAn incentive scheme may be defined as a system of wage payment under which earnings of an employee or a group of employees or all employees in an organization is directly related to the output of an acceptable quality and over and above a standard laid down by means of predetermined formula.

WAGES AND INCENTIVES

Incentives

nFinancial Incentives

nBonus and Profit Sharing

nNon Financial Incentives

n Semi – Financial Incentives\

nIncentive Schemes

nIndividual Incentive Scheme

nGroup Incentive Scheme

WAGES AND INCENTIVES

Wage Incentive Plan

nStraight Piece Rate System

nAdvantages and Disadvantages

nTaylor’s Differential Piece Rate System

nAdvantages and Disadvantages

nMerrick Differential or Multiple Piece Rate  

  Plan

WAGES AND INCENTIVES

WAGES AND INCENTIVES

WAGES AND INCENTIVES

Gantt Task and Bonus System

 Halsey Incentive Plan

nTime Saved = (Ts – Ta)  

nBonus Earned = (Ts – Ta) × (50/100) × R

nWages Earned = Ta × R + ½ R (Ts – Ta)

nAdvantages and Disadvantages  

WAGES AND INCENTIVES

WAGES AND INCENTIVES

The Rowan System

nBonus = {(Standard Time – Actual Time)/Standard Time} × Actual time × Ratio

nEarning = Ta × R + {(Ts – Ta )/Ts} × R

nR – Hourly Rate (Rs.)

nTs – Standard Time (Hrs)

nTa – Time actually taken (Hrs)

n

nAdvantages and Disadvantages

n

WAGES AND INCENTIVES

The Bedaux Point System

nE = R × Ta + 0.75 (Ts – Ta)

nAdvantages and Disadvantages

WAGES AND INCENTIVES

Emersion Efficiency Plan

nEfficiency = (Actual Output for the period/Standard Output for the period) × 100

n= Actual Time taken/ Standard Time × 100

nη < 66.76 % = Only Time wages

n66.76 < η < 100 % = Time wages + Bonus at different percentages increasing rapidly to 10% at 90% efficiency and 20% at 100%

nη > 100% = Time wage + 20% Bonus + 1 % bonus for each 1 % increase in efficiency beyond 100 %

WAGES AND INCENTIVES

Group Incentive

nAdvantages

nBetter co – operation among workers

nLess Supervision

nEqual distribution of bonus

nDis advantages

nNo equality

nDifficult if members are at different capacity

WAGES AND INCENTIVES

 The Scanlon Plan

nLabor cost during base month = Lb

nLabor cost for the assessment month = La

nTotal Sales during the base month = Sa

nTotal Sales during the assessment month = Sb

n% reduction in the labor index = [{(Lb /Sb) – (La/Sa)} / (Lb/Sb) ] × 100

n (Lb/Sb)×100> (La/Sa)×100

WAGES AND INCENTIVES

The Priestman Production Plan

nStandard Production in the base month = Pb

nActual output during the assessment month = Pa

nNumber of workers in employment during the base month = Wb

nNumber of worker in employment during the assessment month = Wa

WAGES AND INCENTIVES

The Priestman Production Plan

nStandard Production per worker during base month = Pb/Wb

nActual Production per worker during the assessment month = Pa/Wa

nBonus Payable if, Pa/ Wa > Pb/Wb

n

n% Productivity bonus payable to each employee = [{(Pa/Wa) – (Pb/Wb)} / (Pb/Wb) ] × 100

WAGES AND INCENTIVES

Profit Sharing

nAdvantages

nImproved Industrial Relations

nGreater Productivity

nReduction in labor turnover, absenteeism, irregularities

nDisadvantages

nEqual share irrespective of efficiency

nNo sharing of losses

WAGES AND INCENTIVES

Incentive Payment

nAdvantages

nMotivation to workers

nMaximum cooperation

nEffective use of materials

nDisadvantages

nInvolves extra cost

nDisputes between labor and management

nDelay may cause suspicion among workers

QUESTIONS?

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