Chapter 9

Wages And Wages And IncentivesIncentives

Chapter-9Chapter-9

WagesWages

MEANING Wages is the return

given to workers for their mental and physical efforts which they put into the production process.

Elements of an Ideal Wage-Elements of an Ideal Wage-SystemSystem

Guarantee of minimum wages.Guarantee of minimum wages. Based on ability of the worker.Based on ability of the worker. Simple.Simple. Motivating.Motivating. Flexible.Flexible. Regular payment.Regular payment.

Wage Systems

Time Wage System Piece Wage System

Time Wage SystemTime Wage System

MEANING In this system, the workers are

paid wages according to the time spent at the work place. E.g. a day, a week. A month etc. In this system, the work or production done by an employee is not taken into consideration.

This is the oldest type of wage system.

MeritsMerits‡ Clear and simple.Clear and simple.‡ Provides guaranteed minimum wages.Provides guaranteed minimum wages.‡ Quality is maintained.Quality is maintained.‡ Haste is avoided and hence improper and excessive use Haste is avoided and hence improper and excessive use

of machinery is avoided.of machinery is avoided.‡ Suitable for industries where measuring output is Suitable for industries where measuring output is

impossible.impossible.‡ Wages payable are pre-determined.Wages payable are pre-determined.‡ Workers are not exploited which help to maintain Workers are not exploited which help to maintain

harmonious relationship.harmonious relationship.‡ Workers are motivated to work efficiently.Workers are motivated to work efficiently.‡ Reduces labour turnover rate.Reduces labour turnover rate.

DemeritsDemerits

∆ Fails to motivate efficient and industrious Fails to motivate efficient and industrious workers.workers.

∆ Work needs supervision. Thus, cost of Work needs supervision. Thus, cost of supervision increases.supervision increases.

∆ Possibilities of the worker being negligent Possibilities of the worker being negligent towards work or production.towards work or production.

∆ Conflict and jealousy between efficient and Conflict and jealousy between efficient and inefficient workers crops up.inefficient workers crops up.

∆ Nurtures the evil of shirking work.Nurtures the evil of shirking work.∆ Cannot be considered a progressive wage Cannot be considered a progressive wage

system.system.

When is time wage system When is time wage system effective?effective?

♯ Quality of production is more important than the Quality of production is more important than the output.output.

♯ Work is to be done minutely, requiring extreme Work is to be done minutely, requiring extreme care and preciseness.care and preciseness.

♯ Impossible to assess individual performance.Impossible to assess individual performance.♯ Production is automatic i.e. machine-based.Production is automatic i.e. machine-based.♯ Workers are new, apprentices or trainees.Workers are new, apprentices or trainees.♯ Volume of production cannot be clearly measured.Volume of production cannot be clearly measured.

Piece Wage SystemPiece Wage System

MEANING

In this system, wages are paid to workers according to their output. This wage system is directly related to the skill, production capacity, speed and precision of the worker.

This system is also known as ‘PAYMENT BY RESULT SYSTEM’.

MeritsMerits

Worker’s skill is taken into account.Worker’s skill is taken into account. No need for supervision and inspection.No need for supervision and inspection. Efficient workers are given more Efficient workers are given more

incentives and rewards.incentives and rewards. Easy to estimate the cost per unit.Easy to estimate the cost per unit. Easy to calculate wages.Easy to calculate wages. ‘‘More production and best results’More production and best results’ is the is the

motto of this system.motto of this system.

DemeritsDemerits Quality is not maintained.Quality is not maintained. Workers intentionally ignore safety rules, inviting Workers intentionally ignore safety rules, inviting

accidents.accidents. Workers are paid different wages with a wide gulf among Workers are paid different wages with a wide gulf among

them leading to less precision, lessening of their morale them leading to less precision, lessening of their morale and industrial disputes.and industrial disputes.

Trade union oppose this system.Trade union oppose this system. Sense of job satisfaction is less among workers.Sense of job satisfaction is less among workers. Administrative expenses are high.Administrative expenses are high. Workers neglect their health in order to put their Workers neglect their health in order to put their

maximum efforts.maximum efforts. Workers feel a sense of insecurity.Workers feel a sense of insecurity.

When is Piece Wage System When is Piece Wage System Suitable?Suitable?

Measurement of units produced is easy.Measurement of units produced is easy. Efficiency, skill and concentration of Efficiency, skill and concentration of

worker is high and productivity depends worker is high and productivity depends upon proficiency alone.upon proficiency alone.

Easy to establish standards and flow of Easy to establish standards and flow of work is regular.work is regular.

Only one type of goods are produced.Only one type of goods are produced.

IncentivesIncentives

MEANING Incentives are an

additional remuneration payable to efficient workers for their meritorious performance in terms of time, costs and quality to motivate them to be more productive.

Incentives create aptitude Incentives create aptitude for work among the workers, for work among the workers, increasing their productivity.increasing their productivity.

In the absence of incentives, In the absence of incentives, lethargy, inflexibility, frustration and lethargy, inflexibility, frustration and indifference of the workers leads to indifference of the workers leads to inefficiency in the long run.inefficiency in the long run.

Incentives

Monetary Incentives Non-Monetary Incentives

Monetary Incentives

MEANING

Money is the main element of incentives. It boosts the enthusiasm and self-confidence of the workers. It provides the workers with economic security and gives the worker a social security.

Types of Monetary Incentives

Profit-Sharing Co-Partnership Bonus Suggestions and Advices Commission Prizes

Non-Monetary IncentivesNon-Monetary Incentives

MEANINGMEANING

Incentives not based on Incentives not based on money are non-monetary incentives. money are non-monetary incentives. Non-monetary incentives are useful Non-monetary incentives are useful in increasing production and in increasing production and efficiency.efficiency.

Types of Non-Monetary Types of Non-Monetary IncentivesIncentives

Security of employmentSecurity of employment Recognition of food qualities.Recognition of food qualities. PromotionPromotion AdviserAdviser Assignment of responsibilityAssignment of responsibility Welfare activities and ammenitiesWelfare activities and ammenities Other incentives such as housing Other incentives such as housing

facilities, life insurance, educational and facilities, life insurance, educational and conveyance allowances etc.conveyance allowances etc.

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