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3.wage Incentive Plan
3.wage Incentive Plan
• Under the straight piece rate plan workers are paid based on their
output.
For example, if the piece rate is Rs. 4 per piece of the product, then a
worker who turns out 40 pieces/day earns Rs. 160 (Rs. 4 x 40) as his
wage for that day.
Whereas another employee who produces 32 pieces/ day earns Rs. 128
(Rs. 4 x 32 pieces). Hence a fast worker earns more compared to the
slow worker.
Advantages:
• Improve productivity.
Disadvantages:
Here the minimum guaranteed wage is fixed on hourly basis. A worker gets the
minimum fixed wage/day plus the incentive for the number of pieces produced.
To illustrate this, assume that there is 8 hour’s shift the piece rate is Rs 4 and a
minimum fixed wage of Rs 16/ hours (Rs 16 x 8 hours = Rs. 128 per day). The
standard time/piece is 15 min.
Now, there are two workers A and B. (If worker A produces 25 pieces/day then he
earns: Rs. 128 (min. guaranteed wage) + Rs. 100 (Rs. 4 x 25 pcs) = Rs. 228/ day
If worker B produces 40 pieces / day then he earns
Rs. 128 (min. guaranteed wage) + Rs. 160 (40 pieces x Rs. 4) = Rs. 288/ day)
Advantages:
Disadvantages:
Φ = 8 x 5+(50/100) x (10 – 8) x 5
Φ = Rs. 45.
(b) Rowan Plan:
• This is possible if a worker completes the task in half the standard time of the
task. If more than 50% time is saved then the bonus he earns decreases.
Φ =8 x 5 + [8 x 5+ (2/10)]
Φ = Rs. 48
(c) Bedeaux Plan:
• This plan is developed by Charles E. Bedeaux in 1911. Here the minimum
time wage is guaranteed to all workers. The workers who complete the job
within or more than the standard time are paid at the normal time rate.
• Workers who complete the job in less than the standard time are paid bonus,
generally 75% of the wage for the time saved
Then:
= 50 + (3.75 x 2)
= 50 + 7.50
Φ = Rs. 57.50
(d) Emerson’s Efficiency Plan:
• Workers are paid different bonus rates as per their efficiency level. Bonus
is given at an increasing percentage beyond the prescribed level of
efficiency (usually 66.67%).
Disadvantages:
• This plan was developed by Henry L. Gantt. Here standard time for
every task is fixed through time and motion study.
• A worker who fails to complete the task within the standard time
receives wages for actual time spent at the specified rate. Workers who
achieve or exceed the standard get extra bonus varying between 20%
to 50% of the hourly rate for the time allowed for the task.
Taylor’s Differential Piece-Rate Plan:
• Here the bonus is calculated for a group of workers and the total
amount is distributed among the group members in proportion to
the wage earned by each.
Priest Man Bonus Plan:
• The group gets bonus when actual output exceeds the standard.
The group supervisor also gets a share on the group bonus.
• This is a group plan where the productivity of the entire work force is
taken into account. In this plan, bonus is paid at the rate of 1 % for
every 1% rise in productivity.
• Workers are not paid the full amount of bonus earned by them in the
same month.