The simplest way in which to pay wages is to pay time rates; in this system the appropriate amount is paid for each hour, day or week spent at work irrespective of the amount produced. This has the advantage of simplicity; all the wages clerk needs to do in order to find the amount due to a worker is to multiply the number of hours spent at work by the rate per hour. Time rates are usually paid where the quality of work is of greater importance that output, where it is difficult to measure output, or where the worker cannot easily vary his output. Bus conductors, clerks and shop assistants are examples of people paid in this way.
The disadvantage of time rates is that they reward good and bad workers equally and so provide no incentive to work hard or efficiently. It is possible partially to overcome this disadvantage by introducing merit-rating, that is to say to grade workers and pay those thought to be efficient more than those thought to be less efficient; but merit-rating is not generally popular as it is difficult in practice to grade objectively and ill-feeling is often caused by real or imagined favouritism.
Where the output of a worker can be measured and where he can affect this output by working quickly or slowly, his wages can be made to vary with his output by adopting one of the various incentive schemes of payment. The simplest of these schemes is that of straight piecework, in which a worker is paid a fixed price for each ‘piece’ of work done. Workers engaged in packing goods into boxes might, for example, be paid a certain price for each box packed. In practice it is usual also to have a time guarantee, that is to say to guarantee a relatively small fixed wage irrespective of the amount of work done. The incentive then begins only after performance reaches the level represented by the guaranteed wage.
In most kinds of machine work, where there are variations in the work done from one day to another, it is usual to adopt one of the various premium bonus systems. For each job to be done a standard time is determined, either estimated by a ratefixer, or determined more scientifically by a work study officer. If the machinist completes the job in less than the standard time he receives a bonus calculated as a fraction of the time saved. The standard times are usually so calculated that a worker of average efficiency can earn a wage which is about one-third higher than he would have received on time rate. This is partly in order to induce workers to accept the bonus system, and partly as compensation for the higher speed of work normally expected when incentive rates are paid. In some systems the worker is paid a constant proportion of the time saved and in others he receives a diminishing proportion of the time saved.
The main disadvantage of incentive systems is that there is a temptation for workers to put speed of work before quality, but provided the right kind of work is chosen and there is adequate inspection and quality control, this disadvantage is not serious in practice.
Incentive systems should not be introduced without proper time study of the work to be done. If standard times are carelessly determined it will either be impossible for the average worker to earn a reasonable bonus or he will be able to earn excessive sums without difficultly. In the latter case there is a danger that workers will work below capacity, suspecting that if they are seen to be earning wages which the management considers excessive the standard time will be reduced. Incentive systems should therefore be introduced only in those factories which have an adequate work study staff. Nearly all difficulties with incentive systems arise out of an inadequate study of the work concerned.
In some instances, workers perform their duties in teams and a bonus is paid on the basis of the work done by the whole team. Such bonuses are known as group or gang bonuses. In large assembly plants, such as are found in the motor industry, the work is done on a moving track and each worker must work at the speed of the track. An overall bonus is often paid in these circumstances, based on the output from the track. This enables the management to increase the speed of the track where necessary; without the bonus such an increase in the speed of work would not be accepted by the men. Some motor firms, however, have standardised the track speed and have reverted to time working. The Vauxhall factory at Luton is an example of this.
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