Wage Plans

There are Two basic methods of Wage Payment:

• First method relates to the hours the employee is at work, regardless of his output (time rate system).
• Second method relates to the production or output, regardless of the time taken for production (piece rate system).

Time Wage System

• In this system, the worker is paid on the basis of time spent on the work irrespective of the amount of work done.
• The basis of this time may be hour, day, week or month.
• This is the oldest and widely employed system in organizations where:

1. Quality is important than quantity
2. Measurement of work is inconvenient
3. Production involves delay and interruptions due to uncontrollable factors
4. Work requires high degree of skill
5. Where work is of such nature that efficiency can be measured by close supervision

High wage plan
It is improved version of simple time wage plan except that the time rate is high, higher than the time rate at ordinary level, in order to ensure a higher standard of performance from skilled and efficient workers.

Guaranteed time rate

• In this system, payment is at time rates but adjusted to cost of living.
• Merit awards are considered for personal qualities, skill, ability, punctuality etc.
• Employer compensate high labour cost by increasing the price of the products.

Piece Rate System

• In this system the workers are paid at a stipulated rate per piece or per unit of output.
• Speed is the basis of payment instead of time
• Rate is fixed for piece of work and workers are paid according to volume of work done irrespective of time taken
• Efficiency is recognized in this system
• This method is applicable where

1. Quality is not important
2. Work is of repetitive nature
3. Job rate can be fixed satisfactorily
4. There is sufficient demand for output to guarantee continuous work.

Types of piece rate System

• Straight piece rate: Payment is made on the basis of fixed amount per fixed units produced without regard to time taken
• Earnings = no. of units x rate per unit
• The fixation of piece rate depends upon:

1. The comparable time rate for the same class of workers
2. The expected output in given time

• Piece Rate with Guaranteed time rate

- Workers are paid minimum wages on the basis of time rates
- A piece rate system with guaranteed time rate may include any one of the following

• If earnings on the basis of piece rate is less than the guaranteed minimum wages, worker will be paid on the basis of Time rate. If earnings on the basis of piece rate is more, worker will get more.
• Guaranteed wages according to Time rate plus Piece rate payment for units above a required minimum.
• Piece rate with a fixed dearness allowance or cost of living bonus.

Differential Piece Rate

• The rate per piece is increased, as the output level is increased.
• There is more than one piece rate system that is increase in rate proportionate to increase in output.
• Inefficient workers are encouraged to earn more
• This system is suitable where

- The work is of repetitive nature
- Output can be identified with individual workers