Chapter--9

Chapter

Wages And
Incentives
 Wages
MEANING
Wages is the return
given to workers for their mental
and physical efforts which they
put into the production process.
Elements of an Ideal Wage-
Wage-System

 Guarantee of minimum wages.

 Based on ability of the worker.
 Simple.
 Motivating.
 Flexible.
 Regular payment.
 Wage Systems

Time Wage System Piece Wage System

 Time Wage System
MEANING
In this system, the workers are
paid wages according to the time spent at
the work place. E.g. a day, a week. A
month etc. In this system, the work or
production done by an employee is not
taken into consideration.
This is the oldest type of wage
system.
 Merits
‡ Clear and simple.
‡ Provides guaranteed minimum wages.
‡ Quality is maintained.
‡ Waste is avoided and hence improper and excessive
use of machinery is avoided.
‡ Suitable for industries where measuring output is
impossible.
‡ Wages payable are pre-pre-determined.
‡ Workers are not exploited which help to maintain
harmonious relationship.
‡ Workers are motivated to work efficiently.
‡ Reduces labour turnover rate.
 Demerits
∆ Fails to motivate efficient and industrious
workers.
∆ Work needs supervision. Thus, cost of
supervision increases.
∆ Possibilities of the worker being negligent
towards work or production.
∆ Conflict and jealousy between efficient and
inefficient workers crops up.
∆ Nurtures the evil of shirking work.
∆ Cannot be considered a progressive wage
system.
 When is time wage system
effective?
♯ Quality of production is more important than the
output.
♯ Work is to be done minutely, requiring extreme
care and preciseness.
♯ Impossible to assess individual performance.
♯ Production is automatic i.e. machine-
machine-based.
♯ Workers are new, apprentices or trainees.
♯ Volume of production cannot be clearly measured.
 Piece Wage System
MEANING
In this system, wages are paid
to workers according to their output. This
wage system is directly related to the skill,
production capacity, speed and precision
of the worker.
This system is also known as
‘PAYMENT BY RESULT SYSTEM’.
 Merits
 Worker’s skill is taken into account.
 No need for supervision and inspection.
 Efficient workers are given more
incentives and rewards.
 Easy to estimate the cost per unit.
 Easy to calculate wages.
 ‘More production and best results’ is the
motto of this system.
 Demerits
 Quality is not maintained.
 Workers intentionally ignore safety rules, inviting
accidents.
 Workers are paid different wages with a wide gulf among
them leading to less precision, lessening of their morale
and industrial disputes.
 Trade union oppose this system.
 Sense of job satisfaction is less among workers.
 Administrative expenses are high.
 Workers neglect their health in order to put their
maximum efforts.
 Workers feel a sense of insecurity.
 When is Piece Wage System
Suitable?
 Measurement of units produced is easy.
 Efficiency, skill and concentration of
worker is high and productivity depends
upon proficiency alone.
 Easy to establish standards and flow of
work is regular.
 Only one type of goods are produced.
 Incentives
MEANING
Incentives are an additional
remuneration payable to efficient workers
for their meritorious performance in terms
of time, costs and quality to motivate
them to be more productive.
 Incentives create aptitude for
work among the workers, increasing their
productivity.
In the absence of incentives,
lethargy, inflexibility, frustration and
indifference of the workers leads to
inefficiency in the long run.
 Incentives

Non-Monetary
Monetary Incentives
Incentives
Monetary Incentives

MEANING
Money is the main
element of incentives. It boosts the
enthusiasm and self-confidence of the
workers. It provides the workers with
economic security and gives the worker
a social security.
 Types of Monetary Incentives

 Profit-Sharing
 Co-Partnership
 Bonus
 Suggestions and Advices
 Commission
 Prizes
 Non--Monetary Incentives
Non

MEANING
Incentives not based on money
are non-
non-monetary incentives. Non-
Non-monetary
incentives are useful in increasing production
and efficiency.
 Types of Non-
Non-Monetary Incentives
 Security of employment
 Recognition of food qualities.
 Promotion
 Adviser
 Assignment of responsibility
 Welfare activities and ammenities
 Other incentives such as housing facilities, life
insurance, educational and conveyance allowances etc.
 Wage Incentive Plans
• Straight piece rate system
• Taylor’s differential piece rate system
• Merrick diiferential or multiple piece rate system
• Gantt task and bonus system
• Halsey incentive pan
• The rowan system
• The Bedaux point system
• Emerson efficient plan
• Group incentive plan