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types of wage payment

Minimum Wage 2. Continuous effort by employees to produce more may result in over production. Employee stock ownership plans (ESOPs) have become popular in business firms of USA and Japan (Miller and Christopher, 1987). Pay is not related to effort or output but merely to the time spent at work. These are time plan and incentive plans. It is important to note that almost all the systems incentive wages provide for minimum guaranteed wages to the workers. 7. Piece Rate System 3. 4. It facilitates communication across the organization because people gain a better understanding of other’s jobs. Day work refers to all time – payment plans used in paying workers, although the hour is the time unit most commonly employed. Fair assessment and fair compensation, however, are essential to developing workers with a variety of intellectual skills. It increases their remuneration also which improves their standard of living. If wage rate is Rs. Worker sinter personal relationship suffers. Further, it requires proper setting of standards if desired results are to be achieved. Management becomes more alert in areas such as flow of process materials, adequate spares, etc. It promotes employees to use the resources carefully and avoid wastage as small as switching the lights and fans when not in use or keeping the machinery off when material is not being processed. Content Filtrations 6. (f) Where production is time consuming because of frequent movement of goods from one machine to the other. Where output can be determined in terms of number of units. @ 75 P.). We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. 800 (Rs. Under this plan, the number of pieces or units of work that are completed determine wages. It provides security of return as employees are sure to get a fixed amount of salary. Thus, workers are paid according to their merits and there is a positive incentive for improvement of performance by the workers. Its main disadvantage is its lack of motivation. The focus is more on individual performance than group performance which is essential to deal with complex and interdependent business situations. There is tendency among the workers to sacrifice quality for the sake of quantity. Our mission is to provide an online platform to help students to discuss anything and everything about Economics. One likely effect of this is the splitting up of trade unions. 1. This promotes unity amongst them. Instead they are computed in terms of some time unit. It is easy to compute and to understand. iii. Wages are determined on the basis of time spent by employees on the job. You can change your ad preferences anytime. As a part owner, workers have a lot to say about their areas of expertise. When there is a great need of increase in the production. Output cannot be easily measured in certain jobs like service sector and managerial jobs. To earn more, an employee must expend effort to produce more, to sell more or to reduce cost, or to utilize various resources more effectively, as the case may be. (b) High day rate or time rate at high wage level. Where work delays are frequent and beyond control of employees. But this method suffers from the following disadvantages which outweigh its advantages: 1. 10. Fair Wage 4. This system of payment can make the wage costs variable. Incentives are linked to targets as well as quality of performance as desired by the superiors. Some of the most important methods of wages payment are as follows: 1. This system of wage payment does not pay any attention on the quality of production. 4. Account Disable 12. However, there is increase in salary as there is a scale of pay along which the employee moves with increments every year until he reaches the maximum of the scale. Workers value teamwork and the opportunity to participate. Definition: A Wage is a monetary compensation given by the employer to the employee (labor) for the amount of work done on an hourly, weekly or monthly basis. Minimum Wage Method: Under this method, the minimum amount of wage is paid to the employee irrespective of the employer’s paying ability. 3. It makes proper distinction between efficient and inefficient working staff of the enterprise. Companies also conduct training programmes for them preferably outside the company premises to break monotony on the job and make them feel part of the company team. iv. Time rate system of wage payment has the following merits: It is simple to understand. But this method suffers from the drawback that there is no additional remuneration for any improvement in the level of performance initially fixed. Under this method, workers are paid at a flat rate on the basis of time they are employed. 1,200 (10 x 120). Cost of production is also spread over larger number of units. Wage payment concept is not only important for the employees but also for the employers as they are interesting in paying fewer wages. This system does not consider the production of the employees during this time. Employees receive a bonus that is normally based on some percentage (e.g., 10 to 30 percent) of the company’s profit. It must be helpful in increasing the production as well as productivity. If you continue browsing the site, you agree to the use of cookies on this website. Some managers may feel they are giving up their prerogatives. The same is pursued by the few Bangladeshi business organizations, (i.e., Beximco Group and Singer Bangladesh Ltd). 4. A number of studies have investigated the use and effectiveness of skilled-based pay. There is effective reduction in the supervision costs Closer supervision of employees becomes unnecessary because workers become more responsible. This drawback is overcome by adopting high day rate which is usually higher than the average wage rate of the industry. In certain types of jobs, a worker may have to carry out different tasks. They make the best Utilisation of the factors of production. A Wage is the monetary compensation given by the employer to the employee (labor) for the amount of work done on hourly, weekly or monthly basis. 1,000 (10 x 100). This method is preferred by employers when their products have an inelastic demand because rise in wages can be shifted to consumers through higher prices. Under this system of wage payment, it is very difficult to measure the efficiency of workers because all the workers of equal status are paid the wages at equal rate. Most unions also prefer it because the plan does not stimulate speedups or penalize the average worker. The introduction of a system by results increases the amount and cost of clerical work since it involves considerably more bookkeeping. It is important to distinguish gain sharing from profit sharing. Piece rate system of wage payment can take the following forms: In this method, workers are paid according to the number of units produced by them. These awards are given by famous dignitaries which gives the necessary boost to the employees. This system lacks the unity and mutual co-operation among workers. In one survey of over 1100 ESOP companies, about 60% said productivity had increased, and 68% said financial performance was higher since converting to an ESOP (Gates, 1998). “Wages is the payment to labour for its assistance to production.” -A.H. Hansen ‘Wage rate is the price paid for the use of labour.” -Mc Connell.

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