Page 136 - DCOM202_COST_ACCOUNTING_I

Cost Accounting – I Sukhpreet Kaur, Lovely Professional University

Notes Unit 7: Remuneration and Incentives

CONTENTS

Objectives
Introduction
7.1 Types of Wages
7.2 Methods of Remuneration or Wage payment
7.3 prevention of Fraud in Wage payment
7.4 Summary

7.5 Keywords
7.6 Review Questions
7.7 Further Readings

Objectives

After studying this unit, you will be able to:
z z Know the types of wages;
z z Understand the methods of remuneration;
z z Describe the prevention of fraud.

Introduction

Remuneration to workers is the most complex problem in a democratic country like India
because there is no effective single method of wage payment which is acceptable both to the
employers and the workers. Wages as a means of providing income for the workers become the
only source of income which determines their economic survival in the society, so they try to
force the employers to follow a method of wage or remuneration payment.

Did u know? Remuneration for labour is wages as remuneration for capital is interest, for
land is rent and for organization is profit.
Both direct and indirect labour employed in a factory or industry will have to be paid remuneration
for the services rendered by them. The amount of wages or remuneration payable to each of the
employees depends on a number of factors. The terms of employment generally specify the rate
or pay scale and other allowances payable to workers. In the modern industrial organisation of
mass production, a worker’s wages are eased upon incentive, job evaluation, negotiated labour
contracts, wages plans and profit-sharing, etc.

7.1 Types of Wages

Wages may be of different types such as real wages, minimum wages, living wages, and fair
wages. Their brief description is as follows:
(i) Real Wages: The term ‘real wages’ refers to the purchasing power of money wages. Real
wages represent the actual exchange value of wage rates or of earning. In the most common

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