METHODS OF DETERMINING WAGES

METHODS OF DETERMINING WAGES & SALARIES

Time Wage System : In this system worker is paid on the basis of time spent on work irrespective of the amount of work done. The basis of this time may be hour, day, week or month. Wages = Number of hour worked * Rate per hour

Suitability of the Time Wage System:

Quality of work is more important that the volume Measurement of work is not convenient Production includes delay and interruption due to uncontrollable factors Where work require high degree of skill and dexterity Where work is of such nature that efficiency can only be measured by close supervision

MERITS AND DEMERITS OF TIME WAGE SYSTEM

MERITS DEMERITS

Its easy to understand & simple to It makes no distinction between efficient operate and inefficient worker Workers are assured of minimum It offers very little wages irrespective of the output increased production incentives for

Suitable for beginners and learners

Management have to spend more time on assuring close supervision and thereby prevent wastage of time Workers try to work last as long as possible so that they can earn more. Thus, labor cost per unit is increased The system is unfair since wages and productivity are not correlated

This help maintain the quality of work

It is favored by trade unions

METHODS OF WAGES & SALARIES PAYMENT

Piece Wage System : In this system workers are paid at a stipulated rate per piece or unit of output. Here speed is the basis of payment instead of time. Wages = Number of units produced * Rate per unit Suitability of the Piece wage system

1.

When methods of production are standardized and the job is of repetitive nature.

2. 3.

When the job involves more physical work than the mental work. Where output can be measured and quality control system exists to discourage low quality production.

4.

Where work does not require personal skill of higher order.

MERITS AND DEMERITS OF PIECE WAGE SYSTEM

MERITS It provides encouragement Dexterity and skill of the workers are enhanced It is easy to prepare quotations and estimates and budget Idle time will be reduced to the minimum DEMERITS No minimum remuneration is guaranteed. Not suitable for beginners Quantity will be over-emphasized at the cost of quality unless close supervision is maintained Sometimes workers start overwork which adversely effect their health As the workers have different capacity which leads to different earnings so this leads to their dissatisfaction Trade unions does not like this system as it destroy brotherly feelings.

Workers take great care in maintaining tool & machinery

Cost supervision is less

TYPES OF PIECE RATE SYSTEM

Straight

Piece Rate in this payment is made on the basis

of a fixed amount per fixed units produced without regard to the time taken. Thus,

Earnings = No of Units * rate per unit piece rate: In this system, rate per piece is

Differential

increased, as the output level is increased. That is there is

more than one-piece rate system. In other words the

increase in rates may be proportionate to increase in output.

TYPES OF PIECE RATE SYSTEM

Piece rate with guaranteed time rate : Workers are paid minimum wages on the basis of time rates. It include any one of the following:

If earnings on the basis of piece rate is less than the guaranteed

minimum wages, the worker will be paid on the basis of time rate. On the other hand, if earnings according to piece rate is

more, the workers will get more

Guaranteed wages according to time rate plus a piece rate payment for units above a required minimum.

Piece rate with a fixed dearness allowance or cost of living bonus

FRINGE BENEFITS

DEFINITION

Extra benefits provided to employees in addition to the normal compensation paid in the form of wage or salary.

Features
-

Supplementary forms of compensation

Paid to all employees

Indirect compensation Raise the living conditions of employees May be statutory or voluntary

NEED FOR FRINGE BENEFITS

1.

Employee demands- in view of the sharp increase in cost of living and for reduction in tax burden

2. 3.

Trade union demands Employers preferenceemployees prefer fringe

benefits to pay hike as it keeps them motivated

4. 5.

Social security- against accidents, medical facilities etc. To improve human relations

OBJECTIVES OF FRINGE BENEFITS

To improve industrial relations To motivate the employees by identifying and satisfying their unsatisfied needs

To provide security to the employees- old age benefits etc.

To protect the health

To promote employees welfare To create a sense of belongingness To meet the requirements of various legislations

TYPES OF FRINGE BENEFITS

1.

Payment for time not worked Hours of work- Factories Act 1948- no more than 48 hours per week and not more than 9 hours per day

Paid holiday- one weekly off preferably Sunday

Shift premium Holiday pay- double the normal during holidays Paid vacation- In mining, manufacturing and plantations, employees who have worked for 240 days in a calendar year are

eligible for a paid vacation at the rate of one vacation every 20

days

2. Employee security

Retrenchment compensation Lay-off compensation

3. Safety and health-under factories act 1948.

Safety measures Workmens compensation

Health benefits
-

Sickness benefits Maternity benefits Disablement benefits Dependents benefit

4. Welfare and recreational facilities:

Canteens-Factories Act 1948- more than 250 workers. Consumer stores Credit societies Housing Legal aid Employee counseling Welfare officers Holiday homes

Educational facilities
Transportation Parties and picnics

5. Old age and retirement benefits:

Provident fund-basic 12 percent employer and 12 percent employee.

Pension-out of 12 percent employers contribution 8.33 goes to

PF and 3.67 goes to the pension scheme.

Gratuity-at the rate of 15 completed year of service.

days of

wages for every one

Medical benefit

THANK YOU