WAGES AND INCENTIVES

By: NAMRATA GUPTA

Wagesy Definition:y Payment for labour or services to a worker,

especially remuneration on hourly, daily or weekly basis. y Wage payment is a matter of great importance to workers. y It determines their standard of living, their attitude towards the company and influences their motivation to work.

Characteristics of Wage systemy Simple & Equitable y Guaranteed minimum wage y Incentive-oriented y Cost-effective y Certainty

Methods of Wage Paymenty Time Wage System y Piece Rate System

Time Wage Systemy In this system, the worker is paid on the basis of

time spent on the work irrespective of the amount of work done. y The basis of this time may be hour, day, week or month. y It is widely employed in those organizations where: i. quality of work is more important that the volume; ii. production involves delay and interruption due to uncontrollable factors; iii. where the work requires a high degree of skills; iv. where work is of such nature that efficiency can only be measured by close supervision.

Piece Rate Systemy Under this system, the workers are paid at a

stipulated rate per piece or unit of output. y Here speed is the basis of payment, instead of time. y The method is applicable where: i. quality of work is not important; ii. work is of a repetitive nature; iii. job rate can be fixed satisfactorily; iv. there is sufficient demand for output to guarantee continuous work;

INCENTIVESy Definition: y Incentives are variable rewards or extra

payment granted to employees according to variations in their performance.y The other name for incentives is payment by

results .

Incentive Plansy Incentive plans foresee a basic rate usually on

time basis applicable to all workers and incentive rates payable to the more efficient among them as extra compensation for their meritorious performance in terms of time, costs and quality.

Features of Incentive Plans1. Minimum wages are guaranteed to all

workers. 2. Incentives by way of bonus, etc., are offered to efficient workers for the time saved. 3. A standard time is fixed and the worker is expected to perform the given work within the standard time.

Types of Incentive Plans

Piece work plans; Standard hour plans