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Derive a five Methods of wage payment.
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Solution:

Methods of wage payment:

  • (a) Time or Day rate system.

  • (b) Straight piece work rate system.

  • (c) Combination of time rate and piece rate system.

  • (d) Incentives.

  • (e) Profit sharing system.

(a) Time or Day rate system:-

  • This is the most common system found in practice. Under this system worker is paid an hourly, daily, weekly or monthly rate of wages.

  • Thus his remuneration depends upon the number of hours for which he is employed and not upon the amount of his production.

    Advantages:-

  • (i) The wages are fixed from the very beginning, so there is no confusion about the amount of payment.

  • (ii) The quality of the work can be achieved very easily.

  • (iii) No rough handling of machinery.

  • (iv) There are no difficult calculations to made.

  • (v) The interruptions to works due to breakdown of machinery or some other part of the plant will not wake workers to suffer from the loss of wages.

    Disadvantages:-

  • (i) The employee bears the loss resulting from slow and sluggish workers as they are paid the same wages irrespective of their output.

  • (ii) Strict supervision is required.

  • (iii) The system tends to give higher production cost.

  • (iv) This is not suitable in case of lazy workers.

  • (v) In this system, efficient workers may also become inefficient by working with inefficient workers.

    Suitability:

  • It is suitable for factory workers such as foreman, time keepers, cleaners, engineers, store keepers, watchmen etc.

(b) Straight piece work rate System:

  • Under this, a fixed rate of wage is paid for each piece or unit produced. Hence this system is suitable only for the worker repeats a definite operation or produces the same type of products continuously.

    Advantages:

  • (i) This system gives every worker an opportunity to earn more by putting more efforts and at the same time output also increases.

  • (ii) Simple in its working and they can easily calculate their wages.

  • (iii) Workers are paid on their merits.

  • (iv) As supervision will be less, workers for more independent.

  • (v) Output increases and higher profit can be earned.

    Disadvantages:

  • (i) As workers put maximum effects, their health may reduce.

  • (ii) It will cause an increase the waste of material, because the worker will always try to obtain the maximum output.

  • (iii) The quality of work may be reduced.

  • (iv) It may cause over production and may result in losses, if there is limited demand for the product in the market.

  • (v) Accident due to hasty work will be more.

  • (vi) Mis utilisation of machinery.

(c) Combination of day rate and piece rate system:

  • Under this system minimum weekly wages are fixed for all workers, and the minimum weekly wages are paid to him irrespective of his output during the week, provided he has worked for the fell working hours required in a week.

  • If a worker in absent for some length or time during a week, his wages will be deducted proportionately. The piece works system is combined with the day rate system.

  • A job card of each worker is maintained to show the number of pieces of job completed by the worker during a weeks. Piece work rate of each job is fixed in advance.

  • If the piece work wages earned by a worker are in excess than the time wages, the balance is paid to the worker. If the worker is short of time rate, the worker shall have to make more number of products and cover the last weeks short fall.

    Advantages:

  • It provides incentive to workers.

  • Overhead costs of production are lowered.

    Disadvantages:

  • If needs check on quality.

  • The entire benefit of extra payment goes to the worker.

(d) Profit Sharing System:

  • This system has been introduced by the employees in order to encourage their employees and by means of which the workers receive a share of the profit over and above their normal wages.

    Advantages:

  • (i) Better cooperation may be easily expected.

  • (ii) Reduction of supervision, results in reduction of supervision cost.

  • (iii) Non productive labour cost will be reduced.

    Disadvantages:

  • (i) Efficiency of individual is not taken into account, worker, for greater and better output, non financial incentives must also be enforced and worker will also enjoy richer and filler life.

  • Some of the nonfinancial incentives:

  • (i) Personal interest and pride in work to be created in workmen.

  • (ii) Opportunity for quick promotions.

  • (iii) Opportunity for technical training in other technical organisations as well as abroad.

  • (iv) Perfect confidence in the management.

  • (v) Provisions of children welfare, medical aid etc.

  • (vi) Provisions of canteens.

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