Wage System

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-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. Haste is avoided and hence improper and excessive use of machinery is avoided. Suitable for industries where measuring output is impossible. Wages payable are 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-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
Workers

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

Monetary Incentives

Non-Monetary
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
MEANING
Incentives not based on money are non-monetary incentives. Non-monetary incentives are useful in increasing production and efficiency.

Types of 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.

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