INTRODUCTION

Wage policy is an important aspect of the personnel

management . It is the monetary compensation which
inspire the people to work ,because money satisfies
the human needs . Though ,there are number of
reasons which motivate the people to work ,yet the
monetary rewards for the services rendered remain
the most potent reason for engaging them in work .
Different wages are given to the workers for different
jobs .so the wage determination is the difficult as well
as important task of the personnel management .

MEANING AND DEFINITION

OF WAGES
Wages means what a worker gets from employer in return , for
the services rendered to him . The adequate payment of wages
without any discrimination to employee keep their morale high
.Wages includes both monetary and non- monetary benefits.

Wages is a sum money paid by the

employers to their employees for rendering
to the services under a contract.

- Benham

Wages Vs. Salaries

The compensation paid to the
workers for putting in the
physical efforts in the process
of production is termed as
wages.
While the fixed remuneration
paid
to
managerial,
supervisory and clerical staff
for a definite period for the
services rendered is known as
salaries .

METHODS OF WAGE
PAYMENTS
Time Rate Or Time Wage
System
Piece Rate Or Piece Wage
System
Incentive Plans Of Wage
Payments

Time Rate Or Time

Wage System
The system in which the wages are paid on the basis of time,is
known as time rate or time wage system .
It is an oldest system of wage payment and the wages are paid
on the predetermined time i.e. hourly, daily, weekly, monthly .
The wages are paid to the workers , on the basis of time for
which they work in the organization.
The output of the workers is immaterial for the purpose of
calculating of wages .
Under this method the performance of the workers is observed
and the efficient ones are promoted and inefficient ones are
discharged .

To be contd.
The rate of wages may be revised from time to time
on the basis of cost of living index or according to the
agreement between the workers and the employers.
It is also called as time rate plan .
The wages under this can be calculated as follows-

Total wages =
No. of hours /days worked * Rate per hour/ day

EXAMPLE

Suppose that a worker is paid at

the rate of rs. 9 per hour and he
has spent 200 hours at work
during a particular month. His
wages for the month will be rs.
1800 .

Suitability Of Time rate Wage System

Quality of work is more important than output.
Supervision of work can be easily done.
It is difficult to measure to output .
specialists are required to performs the job.
The work is not standardized.
Frequent changes take place in nature of job .
Delays and interruptions in work can not be
avoided.
The value of output cannot be increased beyond a
certain limit.

ADVANTAGES
Simple
Security
Beneficial To Fresher's
Quality Production
Acceptable To Unions
Proper Handling Of
Machines And Tools
Satisfactory
Reduces Clerical Work
Equality of Wages

DISADVANTAGES
Lack Of Initiative
Unscientific
Difficult To Determine Cost
Greater Need For Supervision
Lengthening Of The Work
Process
Employer Employee Conflict
Too Much Security

PIECE RATE OR PIECE

WAGE SYSTEM
The system in which the workers are paid wages on the basis of their
output is known as piece rate or piece wage system.
It is also an older system of wage payment .
The wages are calculated exactly in proportion to the physical output
of the workers .
In this system ,the workers are hired to work and not to spend time .
The amout of wages of the worker depends upon the amount of work
done by him .

The wages of workers in piece rate system are

calculated as follows :-

Total Wages = Units Produced * Rate Of Unit

Kinds Of Piece Rate Wage System

Straight Piece Rate

Increasing Piece Rate
Decreasing Piece Rate

Suitability Of Piece Rate Wage System

Work is standerdised .
Quality is not important .
Output can be measured exactly.
Work is repetitive nature.
Competitive conditions exist and cost control
is essential .
Speed is very important .
Employees efforts and output establish clear
relationships.

Advantages Of Piece Rate Wage System

Incentive for higher production
Increase in productivity
Economy
Easy estimation of cost
Lesser supervision
Cordial employer employee
relations
Keep the workers busy

Disadvantages Of Piece Rate Wage System

Low Quality
Insecurity To Workers
Wastage Of Resources
Health Hazard
Impractical
Disunity Among Workers
Low Wages For Beginners
Opposition By Trade Unions

INCENTIVE PLANS OF
WAGE PAYMENT

The system of wage payment which combines the

merits of time and piece rate wage methods is
generally known as Incentive Plans . Incentive is
an inducement for the workers to work hard .

Incentive means that which incites

or has a tendency to incite action .

- George Terry

The main purpose of the incentive plans is

to:-

Increase Productivity.
Decrease Costs.
Increase The Earning
Of The Personnel.

Conditions for Effective Incentives Plans

Plan is clearly communicated
Plan is understood
Rewards are easy to calculate
Employees participate in administering the plan
Employees believe they are being treated fairly
Employees believe they can trust the company
and that they have security
Rewards are awarded as soon as possible after the
desired performance.

TYPES OF INCENTIVE PLANS

INDIVIDUAL INCENTIVE PLAN

INDIVIDUAL INCENTIVE PLAN

ON THE BASIS OF TIME

HALSEY PLAN
Halsey premium plan is a simple combination of time and
speed based of payment.
Under this plan, a minimum time wage is guaranteed to
every worker.
A standard time is fixed for the completion of a job. If a
worker performs his job in less than the standard time ,he is
given bonus . But the is penalty for performing the job in
more than the standard time fixed.
The slow workers is paid the time wages and the efficient
worker is paid some bonus in addition to the time wages .
The bouns is in proportion of the wages which he could have
earned during the time saved .

Calculation Of Wages Under Halsey

Premium Plan
Standard time (S)
=
Time taken by a work (T ) =
Rate of wages (R )
=
Bonus ( P)
=

12 hours
8 hours
R.s. 9 per hour
wages for 50% of the
time saved

Total wages (W) = T * R + 50% of (S-T) * R

= 8*9 + 50% * (12-8) * 9

= Rs.90

ROWAN PLAN
The rowan plan is a modification of the HALSAY PLAN.
It also guarantees the minimum time wages and does not
penalized a slow worker .
A standard time is fixed for completion of a job and bonus is
paid to a worker on the basis of time saved .
Here , the bonus is that proportion of wages for the time
taken which the time saved bears to the standard time .
Efficiency is thus measured as,
Time Saved / Standard Time
As the time saved increases, time taken will be reduced and
as such the bonus would increases at a diminishing rate .
This will check over-speeding and overcome the major
drawback of HALSEY PLAN .

Calculation Of
Rowan

Wages Under
Plan

Standard time (S)

=
Time taken by a work (T ) =
Rate of wages (R )
=

12 hours
8 hours
R.s. 9 per hour

Total wages (W) =

T * R + [T * R * Time Saved/Standard Time]

= 8*9 +[8*9* 4/12]

= Rs.96

EMERSONS EFFICIENCY PLAN

In this plan, Emerson suggested guaranteed wage
payment to all worker on time rate basis.
In addition ,bonus or extra payment suggested to
those who proved be efficient .
For determining efficiently , standard output per unit
of time or standard time for the job is determined .
Efficiency is to be measured on the basis of
comparison of actual performance with the standard
fixed .

Calculation Of Bonus Under

Emerson Plan

At the efficiency of 66 2/3 % the worker is paid

daily wage rate without any bonus . Bonus increases
in direct proportion to the increase in efficiency
beyond 100 % . It implies that there is 1% increases in
bonus with 1% increase in efficiency beyond 100% .

BEDEAUX POINT PLAN

In this plan, the standard time and time taken for each task is
reduced to minutes and each minute is referred as a B point .
There is a standard unit known as B for all types of work in
factory .
The basic purpose of this plan is that no worker should be
penalized in terms of earning when he is shifted from one
department to other in same factory .
Under this plan , a workers receives only wages if he takes
more tome than the standard time . In case he saves time , the
benefit is divided between the workers and the employer in
the ratio of 3:1 . ( 75% -25%).

Calculation Of Wages Under

Bedeaux Plan
Standard time (S)
=
Time taken by a work (T ) =
Rate of wages (R )
=
60 Bs
=

300 Bs ( 5 hours )
240 Bs (4hours )
R.s. 8 per hour
1 hour

Total wages (W) = T * R + 75% of (S-T) * R

= 5*8 + 75% * ( 5- 4) * 8
= Rs.46

INDIVIDUAL INCENTIVE PLAN

BASED ON PRODUCTIVITY

TAYLORS DIFFERENTIAL WAGES

PLAN
F. W .Taylor , he father of the scientific management ,
propounded the differential wage plan for determining the
remuneration of workers .
He believed that standard time can be fixed for standard task.
He suggested two piece rates .
If a worker does not perform the standard task within
standard time , he is paid lower piece rate . In case he does
the standard work within time . He is paid the higher piece
rate.
There is no provision of minimum wages in method .
The main objective of Taylor was to motivate the workers
for achieving the standard laid down.

Calculation Of Wages Under

Taylors Plan
Example :The standard task is to produced 10 units in 8 hours . the piece
rate per uint is R.S. 5/- for the workers who achieve the set
standards and R .S. 4/- for those who does not reach the
standard .Let us suppose A produces 12 units in 8 hours , b
produces 9 units 8 hours . the total earnings would be -

Total earning of A = 12*5

= R.s. 60/Total earning of B = 9*4
= R.s. 36/-

Merricks Multiple Piece Rate Plan

In this plan an attempt has been made to improve upon the Taylor s
differential wage plan .
There are three piece rate in this plan instead of twoas in Taylors .
This plan divided the workers into three categories viz : beginners ,
average workers and first class workers.
The wages for these categories are determined as follow:

category of
workers

Performance of
standard task

Wage rate

Below average
Average workers

Below 83%
83% - 100%

Basic piece rate

110% of basic piece
rate

First class workers Above 100%

120% of basic
piece rate

Gantt's Task And Bonus Plan

This plan is also an attempt to remove the drawbacks of
Taylor s differential wage plan.
Under this,a minimum wages are guaranteed to the
workers.
However, the efficient workers are paid bonus ranging
between 20-50 % as a fixed % of the time taken .
If a worker finishes his job within the standard time ,he
is paid bonus @ 20% of the time taken .
If the worker completes his task in less than the standard
time ,then he is paid at higher piece rate in respect of total
output .

GROUP INCENTIVE PLANS

PRIESTMANS BONUS PLAN

This plan provides for
groups bonus instead of
individual bonus . In case
the enterprise is able to
achieve
the
standard
proportion or exceeds it,
then all the workers are paid
the increased bonus in
proportion
to
overall
increased in output .

PROFIT SHARING SCHEME

The profit of an organization is only
the result of the efforts of the
management alone . The workers also
play a significant role in the earning of
profits . So the workers are entitled to
share the profits of the organization .
The share in the profits is determined
according to the agreement between
the management and the workers .
Thus the workers get share in profits
in
addition
to
the
normal
remuneration.