Members: Cheng Ming Hay (4D) Cheung Tai Kam (4D) Queen Elizabeth School Level: Certificate Level.

Members:Cheng Ming Hay (4D)Cheung Tai Kam (4D)

Queen Elizabeth School

Level:

Certificate Level

Definition:

Wages are the payment to workers for providing labour services.

There are four common methods of wage payment: Time rate

Piece rate Basic Salary plus commission

Profit-sharing scheme

ExampleExample

Time RateThe worker’s wage is paid according to the the length of time worked, and it is often expressed as dollars per hour, per day or per month.What are the advantages and disadvantages

of time rate?

Which jobs are suitable for adopting time rate?

Let’s look at an example:Let’s look at an example:

For news reporters,For news reporters, it is very suitable toit is very suitable to use "time rate".use "time rate".

(please click the picture)

It is because their contribution is difficult to measure, It is because their contribution is difficult to measure, so the cost of measuring output can be minimized. so the cost of measuring output can be minimized.

However, they may have a low working incentive since However, they may have a low working incentive since they get the same payment.they get the same payment.

News reporters

Time rate

Piece rate

The worker's wage is paid according to The worker's wage is paid according to the quantity of output producedthe quantity of output produced, and it i, and it is oftens often expressed as dollars per piece.expressed as dollars per piece.

What are the advantages and disadvantages What are the advantages and disadvantages of piece rate?of piece rate?Which jobs are suitable for adopting piece rate?Which jobs are suitable for adopting piece rate?

For factory workers, it is very suitable to use For factory workers, it is very suitable to use "piece rate". "piece rate".

Let’s look at an example:

It is because the productivity of the factory can beIt is because the productivity of the factory can be increased since they have a high working incentive. increased since they have a high working incentive. They earn more if they make more products. They earn more if they make more products. Therefore the cost of monitoring can be minimized. Therefore the cost of monitoring can be minimized.

However, the cost of checking output (quality control)However, the cost of checking output (quality control) may increase since the workers over-emphasis on may increase since the workers over-emphasis on quantity rather than quality. quantity rather than quality.

Factory workers

Piece rate

Basic salary plus commissionBasic salary plus commission

This method is a combination of time and piece rates.This method is a combination of time and piece rates.- Basic salary : constant

- Commission : based on workers’ performance

e.g. salesgirl in a e.g. salesgirl in a department storedepartment store

It is more suitable to adopt It is more suitable to adopt “basic salary plus commission”“basic salary plus commission”to employ a delivery man in a to employ a delivery man in a delivery company.delivery company.

(please click the picture)(please click the picture)

Let’s look at an example:

It is because the efficiency of the delivery can be It is because the efficiency of the delivery can be increased since they have a high working incentive. increased since they have a high working incentive. They earn more as they receive more orders from They earn more as they receive more orders from clients. Therefore the cost of monitoring can clients. Therefore the cost of monitoring can be minimized. be minimized.

However, the income may become fluctuatingHowever, the income may become fluctuating if the number of orders varies from time to time. if the number of orders varies from time to time.

Delivery company

Basic salary plus commission

Profit-sharing scheme

Workers are given a basic salary and Workers are given a basic salary and a certain percentage of profit as year-end bonus a certain percentage of profit as year-end bonus earned by the firm. earned by the firm.

Workers with better performance will reWorkers with better performance will receiveceive more bonus. more bonus. This method is often used along with any This method is often used along with any of theof the following payment method: following payment method: (1) time rate (1) time rate (2) piece rate (2) piece rate (3) Basic salary plus commission (3) Basic salary plus commission

TVB earned a huge profit at the TVB earned a huge profit at the year end.year end.To motivate the working spirit of To motivate the working spirit of TVB staff, the company took part TVB staff, the company took part of the profit as bonus to award of the profit as bonus to award its staff.its staff.Every staff was happy to have an Every staff was happy to have an additional monthly salary at the additional monthly salary at the year end. year end.

Profit-sharing scheme

Let’s look at World Cup asas an example

(please click the picture)(please click the picture)

What would happen if the football team adopts piece rate?What would happen if the football team adopts piece rate?

Each player will prefer to shoot the ball Each player will prefer to shoot the ball themselves, themselves, instead of passing the ball to their team instead of passing the ball to their team members. members. This affects the co-operation of the team.This affects the co-operation of the team.

(please click the picture)Some people think that piece rate is suitable for football players, because they will have higher incentives.

But the video shows there are disadvantages for adopting piece rate:

Difficult to decide who should pay more.Difficult to decide who should pay more. Since the game is a team work, Since the game is a team work, it is hard to measure each player’s contrib it is hard to measure each player’s contribution.ution. For example, A centre forward or a goal kee For example, A centre forward or a goal keeperper should be paid more? should be paid more?

Other disadvantages:

Players will have unstable incomes.Players will have unstable incomes. For example, if a football player was broken his For example, if a football player was broken his leg during the match, he would suffer a financial leg during the match, he would suffer a financial difficulty. difficulty.

What would happen if the football team adopts time rate?What would happen if the football team adopts time rate?

(please click the picture)(please click the picture)

Advantage:

The cost for adopting the time rate is greater than piece rate.The cost for adopting the time rate is greater than piece rate.Each player does not only work for oneself, Each player does not only work for oneself, but the whole team.but the whole team.

(please click the picture)(please click the picture)

Other advantages:

Time rate saves much cost of Time rate saves much cost of measuring the measuring the football players’ contribution to football players’ contribution to the match.the match.

The most important is that playing football is a team work, time rate is more suitable thanpiece rate and basic salary plus commission.

Football players can get a stable Football players can get a stable income.income.

Conclusion: Different jobs adopt different wage payment methods.Different jobs adopt different wage payment methods.

To adopt the most suitable payment method, we have to consider (1) the nature of each job and (2) the cost of adopting different payment methods.