Methods of wage payment

Methods of wage payment

1. Time Rate System:

2. Piece Rate System:

3. Incentive Wage System:

2 types or kinds or methods of incentive plans

1) Individual incentive plan

2) Group incentive plan

It may either be time based or production based. Under time based plan a standard time is fixed for doing the job. A worker is said to be efficient if he completes the job in time and he is given the reward for his efficiency.

Individual Incentive Plans:

(a)   Halsey Plan:

F.A. Halsey, an American engineer has suggested this wage incentive plan in the year 1891.

·            Min. wage is guaranteed.

·            Additional bonus is provided to workers who complete the job in less than the “standard time”. Bonus is a certain proportion to the time saved. This proportion is fixed at 50% in this plan.

·            But no penalty if they fails to do finish the work before standard time

The total wage is calculated as:

Total wages = (Time taken x Hourly rate) + [50/100 x Time saved x hourly rate] or

or

T x R + 50% (S – T) x R

Where T – time taken

            R – Rate of wage

           S – Standard time

          50% – The bonus percentage.

Illustration: 1

S = 10 hours, T = 8 hours; R = Rs. 5 / Hr; Bonus = 50%

Total Wages = 8 x 5+(50/100) x (10 – 8) x 5

                    =40 + 1X5

                    = Rs. 45.

Illustration 2

A worker is allowed 60 hours time for completion of the job and the hourly rate is Rs. 4. The actual time taken by the worker is 40 hours.

Calculate the wages of worker under Halsey plan.

Solution:

Time saved = Time allowed – Time taken = 60 hrs. – 40 hrs. = 20 hours

Total wages = (40 hrs. x Rs. 4) + [50/100 (20 hrs. x Rs.4] = Rs. 160 + Rs. 40 = Rs. 200 

Illustration 3

Standard time(S) =15 hours

Time taken (T) = 10 hours

Rate of wages(R) =Rs 10 per hour

Bonus (P) = wages of 50% of time saved

Than wages= 10X10+50 %X( 15-10)X10 = Rs 125