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Unit 4: Costing and Control of Labour




          4.3 Methods of Wages, Payments and Incentive Plans                                    Notes

          Remuneration and incentive systems, according to their characteristics, fall under the following
          broad categories:
          1.   Time rates
          2.   Piece rates

          3.   Bonus system
          4.   Indirect monetary incentives and
          5.   Non-monetary incentives

          Time Rates at Ordinary Levels

          Payment is made at a rate on attendance by hour, day, week or a month regardless of output.
          Time Rates at High Wages Levels: Under this system, wages are paid at an appreciably higher
          rate than the normal wage for the industry and return a much higher stand of performance and
          output from the workers are expected.
          Graduated Time Rates: This takes the form of wage rate which varies with changes in the local
          cost of living index.
          Straight Piece Rates: This is a payment of a fi xed sum per fi xed unit produced without regard
          to time taken.
          Piece Rates

          Piece rates with guaranteed day rates:

          A piece rate system with the guaranteed minimum wage may take one of the following forms:
          1.   Piece work with a guaranteed day rate: If earning according to piece rates is less than the
               worker’s time pay, he gets his time pay. If the piece work earning is more, then of course,
               he gets more than his time pay.

          2.   Piece work with a flat cost of living bonus or dearness allowance.
          3.   A guaranteed rate per hour, day of week worked plus a piece rate payment for output
               above a required minimum.


             Did u know? What is Differential Piece Rate?

             Under such scheme, earnings vary at different stages in the range of output, sometimes
             proportionally more, sometimes less, or sometimes in proportion to output, designed to


             reward efficient workers with the further object of encouraging less efficient workers or a
             trainee to improve.
          Premium and Bonus Plan

          The object of a premium plan is to increase the production by giving an inducement to the
          workers in the form of higher wages for less time worked.

          Some of the important premium plans are as follows:






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