Standard Piece Rate with Guaranteed Minimum Wage: Here the minimum guaranteed wage is fixed on hourly basis. Performance shares — grants of actual shares of stock, payment of which is contingent on performance over a multi-year period — are sometimes offered to executives or officers. This plan is criticized by some people because the bonus rates are not uniform. A standard time as fixed for the completion of a job and the bonus is paid on the basis of time saved. For example, for every quarter that the company has no workplace accidents, workers could receive eight hours off with pay at a time of their choice, with supervisor approval.
Quantitative Marketing and Economics, 6 3 , 235-256. The rest 25% goes to the foreman. This wage plan encourages and rewards the employees who are efficient by giving them wages at a higher rate. Minimum time wage is guaranteed to all workers. While there are advantages and disadvantages, an analysis should be undertaken to determine the optimal design for salesperson compensation — which may actually be a combination of base salary, commission rates, and lump-sum bonuses. The standard time for a job is the number of Bs allowed to complete it.
The lower rate for average and less efficient workers who produce less than the standard production and the higher piece rate for the above average or efficient workers. The foreman is motivated to the productivity as 25% of time saved is paid to him. Over 100% 120% of Basic Piece Rate To the workers who are potentially high producer, Merrick plan is good incentive system. Workers must be made to understand the plan. They are given incentive if they produced more number of units than the standard fixed.
Thus, the first worker is penalised at the rate of Rs. For example, suppose the company already contributes 4 percent of each employee's compensation to a 401 k retirement plan. There may be circumstances when individual performance may not be measurable. Bedeaux Point Plan Under this plan, the minute is the time unit described as the standard minute and accounted as Bedeaux point B. Actual production during the year is 240,000 units since production has gone up by 20% workers will get 20% higher wages as bonus. The payment is also collected in installments. But if he completes the task within time he gets extra wages.
They also improve the public image of the organisation. But wait — before we move on … Are Incentives the Same Thing as Bonuses? Keep the numbers — mix of pay incentive as % of base salary and goal ratio of individual to organization — as simple as possible. They are popular all over the world and are known by different names like variable pay, pay for performance, contingent pay, merit pay etc. The amount of a performance unit varies by company. The standard output is determined on the basis of time and motion studies by the specialists and the rates of wages are fixed for different jobs on the basis of job evaluation. Under this method if the efficiency is 100% the bonus would be paid at 20% and above 100% bonus at 30% would be paid.
Minimum time wage is guaranteed to all workers. The total sales for the territory are then split equally among all of the sales reps who worked that territory. There are many wage incentive plans which reward the workers for their better performance. Below, the five elements of a good incentive plan. To Study Methods of Wage Payment and Incentive Plans - Labour Cost, Cost Accounting for B Com this is your one stop solution. The number or persons constituting a group is not large.
In addition, this company offered an employee pension plan which made most long-term employees less likely to leave because the benefits are so rich. Incentive plans are used to motivate employees to increase production. Management share a part of bonus on time saved. This scheme can be successful only if the number of workers in the group is small. It encourages employees to be innovative. If the worker take less time than the standard time his efficiency is more than 100% and he is given wages for the actual time and bonus at the rate of 20%.
This plan is very beneficial to the extraordinary workers. Simultaneously, it is a method of sharing gains in productivity with workers by rewarding them financially for their increased productivity. Inefficient workers share the efforts of efficient workers because increased production benefits all the manpower in the organization. Many employees view the company in a more positive light and subsequently produce higher levels of productivity. Every worker gets wages for the time he has actually devoted at the fixed rate irrespective of his output.
If workers earn different amounts of wages then bonus maybe distributed in proportion to wages earned by them. For example, quality of raw material and equipments, their costs, timeliness of completion of job, etc. Incentive pay plans reward employees according to production or performance, rather than just paying for hours on the clock. Instead of paying for the number of hours worked, employees are paid a set amount of money for every piece they complete. A cash profit sharing plan would work similarly, but the employee would receive the contribution in cash or stock. It should suggest that the employee speak to their Supervisor if they are unclear about the process so they can get any misconceptions cleared up. Bonus is given at an increasing percentage beyond the prescribed level of efficiency usually 66.
Not surprisingly, this visibility gives employees an incentive to figure out how to make improvements. The trade unions prefer bonus to profits sharing as bonus is payable irrespective of profit or loss under the Bonus Act 1965. Do check out the sample questions of Methods of Wage Payment and Incentive Plans - Labour Cost, Cost Accounting for B Com, the answers and examples explain the meaning of chapter in the best manner. A minimum wage is guaranteed to each worker. It is a good idea to lay out the guidelines, including the minimum requirements that are necessary to qualify. The theory behind profit sharing is that management should feel its workers will fulfill their responsibilities more diligently if they realize that their efforts may result in higher profits which will be returned to the workers through profit sharing. Disunity among the slow and the fast workers.