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METHODS OF WAGE

PAYMENT

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Labour is one of the main factors ofproduction. The success of a concerndepends upon the eciency of labour to agreat extent. Low wages do not necessarily

result in low cost of production. Actuallythere should be optimum wages forremunerating labour and any singlemethod cannot be recommened for allbusiness concerns. However there aresome factors which can be considered-

WAGES

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 BENEFIT

EASILY UNDERSTOOD

MINIMUM WAGESSIMPLE OPERATION

FLEXIBILITY 

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In devising system of wage determination thecritical !uestion that emerges is whether the wagewill be lin"ed to time spent on the wor"place oroutput achieved during a speci#ed period. This

results into two types of wages time wage andpiece wage.

 These two basic systems have their own relativemerits and demerits.

In order to avoid hardship to employees acombination of these two methods is followed toensure the payment of minimum wages. Thismethod is "nown as balance method

METHODS OF WAGEPAYMENT

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In time wage method the wage is determined onthe basis of time wor"ed which may be hourlydaily wee"ly monthly or any other time base.

A wor"er is paid wage for the time wor"ed

irrespective of his output during that time. $erhaps this is the oldest and most prevalent

system of wage payment.

1. TIME WAGE METHOD

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%.  There are certain &obs in which outputwithin a speci#ed period is not easilymeasurable. 'or example the &ob of a

peon. In such a case wage payment islin"ed to time.

(. It is !uite easy to understand andcalculate the amount of wages to be paid.

 Thus even an illiterate wor"er canunderstand it.

Merits of Time W!e

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). *oth employers and wor"ers "now well inadvance the amount of wages payableand they can ad&ust their budgets

accordingly.+. It ensures the payment of regular andspeci#c wages which is bene#cial fromsocial point of view.

,. $roductservice !uality tends to be highas wor"ers are not in hurry to producemore without regard to !uality.

"ONTD..

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%. ince there is no direct lin"age betweenperformance and wages employees tend tota"e easy approach.

(.  This system does not di/erentiate betweenecient and inecient wor"ers0 graduallyineciency percolates to ecient wor"erstoo.

). It de-motivates ecient wor"ers for moreoutput as they are put at par with inecientones.

DEMERITS OF TIME WAGE

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+. Labour cost of production becomesdicult to determine in advance becausewages are not lin"ed to output.

,. ince productivity is not a criterion for#xing wages. there is a possibility thatwrong employees are placed on the &ob.

"ONTD..

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1. Where units of output are not measurable precisely like office work.

2. Where individual employees do not have direct control on their outputs

like assembly work.

3. Where quality of work is more pronounced and requires creativeimagination like artistic work.

4. Where machinery and raw materials are quite sophisticated whichrequire handling with utmost care like processing of precious metals.

5. Where work is of highly varied nature and standards of outputs cannotbe ascertained like research work.

. Where workers! unions oppose the introduction of piece rate system.

". Where supervision is good and the supervisors can estimate a fair day!swork.

Time W!e S#stem s$it%&e i't(e fo&&o)i'! sit$tio's

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In piece wage method wor"ers are paidwages according to the !uantity of outputduring a speci#ed period.

 This may be calculated on the basis ofnumber of units produced or thecompletion of a &ob where output is notmeasurable in terms of individual units.

*. Pie+e W!e Met(o,

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%.  There is a direct relationship between output andwages which wor"s as a motivating factor towor"ers to produce more.

(. It di/erentiates ecient and inecient wor"ers

and provides incentives to inecient wor"ers tobecome ecient.

).  This is fair and e!uitable so far as utilisation ofhuman resources is concerned.

Merits of Pie+e W!e

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+. It. re!uires less supervision if there is in-built system for product !uality control.

,. The organi1ation can estimate its cost ofproduction well in advance because wagecost is directly proportional to output.

"ONTD..

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%.  There is a problem in #xing piece rate in theabsence of any standardi1ed procedure.

(.  There is a tendency on the part of the employers

to cut piece rate if wor"ers2 earnings are !uitehigh.

).  The method does not ensure minimum wages as

output may be adversely a/ected by factorsbeyond control.

Demerits of Pie+e W!e

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+. The product !uality and machineryconditions are li"ely to su/er becausewor"ers concentrate more on !uantityrather than !uality.

,. There may be &ealousy and interpersonalcon3ict among wor"ers because of theiruneven earnings at the same wor"place.

4. Trade unions generally oppose this systembecause of the fear of discriminationamong wor"ers based on their wor"ing.

"ONTD..

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%. 5here the output of each individual wor"er canbe measured precisely.

(. 5here the !uantity of output is a direct result ofs"ills and e/orts of individual wor"ers.

). 5hen the 3ow of wor" is regular and wor"interruptions do not occur.

+. 5here production methods are standardi1ed and &ob is of repetitive nature.

,. 5here wor"manship is not re!uired.

Pie+e W!e S#stem s$it%&e i't(e fo&&o)i'! sit$tio's

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*alance method also "nown as debt method isessentially a combination of time wage and piecewage methods.

6nder this method a wor"er is guaranteed a #xed

wage based on time rate with a provision of piecewage method. Thus if a wor"er produces more !uantity in a period

usually on wee"ly or monthly basis and earns morethan his time wage he is given credit for additional

output which is compensated in another period inwhich production !uantity falls below the time wage.

-. B&'+e Met(o,

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 This method provides a sense of security to awor"er so far as his wage earning is concerned.

At the same time he is also motivated to producemore because of inclusion of piece wage system.

 This method has its relevance in a wor"placewhere the wor" 3ow is irregular li"e doc"s.

"ONTD..

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PRESENTATION

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LOHITA/SH01**MANISH0