Page 138 - DCOM202_COST_ACCOUNTING_I

Cost Accounting – I

Notes 7.2 Methods of Remuneration or Wage Payment

There are three basic methods of wage payment or remuneration, i.e.:

1. Time Rate Method,
2. Piece Rate Method, and
3. Incentive Plans/Schemes.

Methods of
Remuneration or Wage
Payment

Incentive
Time Rate Method Piece Rate Method
Plans/Schemes

• Flat Time Rate • Straight Piece Rate • Combination of
Method Method Time and Piece
Rates
• High Day Rate • Taylor Differential • Premium Bonus
Method Piece Rate Method Schemes
• Graduated Time • Piece Graduated • Group Bonus
rate Method Time Rates Schemes
• Merrick Multiple • Other Incentive
Piece Rate Method Plans

7.2.1 Time Rate Method

Under time rate method of wage payment, the worker is paid at an hourly, daily, weekly and
monthly rate. The general features of all the time rate method is that the workers do not get
anything beyond their time wages. There are three types of this method, they are as follows:
(i) Flat Time Rate Method: It is the oldest method of wage payment. Under this method,
workers or employees are paid at a flat rate on the basis of time they are employed.
!

Caution The flat rate may be hour, day, week and month basis.
This method of wage payment is most suitable for the skilled and unskilled workers. When
payment is made on the basis of hours worked by the employees, wages are to be calculated
from the following formula:
Wages = Hours worked × Rate per hour

(ii) High Rate Method: This method is similar to the previous method except that the day rates
are made high enough, so that in return a much higher standard of performance from
the workers is ensured. According to Henry Ford, the time rates at high wage levels are
equally effective like other incentive plans.
(iii) Graduated Time Rate Method: Under this method, the wages are paid at time rates which
vary with changes in local cost of living index. In India, the basic wage rates normally
remain fixed and it is the dearness allowance, other allowances, etc. that varies with the

132 LOVELY PROFESSIONAL UNIVERSITY