j
 j


p




  

! !!
 !
 
j
 j

 The International Labor Organization (ILO) classifies
all the schemes of payment by results into four
categories. They are:
1. Schemes where the worker͛s earnings vary in the
same proportion as output.
2. Schemes where earnings vary less proportionately
than output.
3. Schemes where earnings vary proportionately more
than output.
4. Schemes where earnings differ at different levels of
output.
 !!
 !
 j   
 

 The chief characteristics of the schemes where

incomes vary in proportion to output is that any gains
or losses resulting directly from a worker͛s output
accrue to him or her.
 There are two popular incentive schemes which come
under the first category:
 Straight piece-work
 Standard hour system

 !!
 !
 

 It is the simplest, oldest and the most commonly used
method.
 The rate per unit output is fixed, and the total earnings
of a worker are arrived at by multiplying the total
output(measured in terms of unit) by the rate per unit.
 Here, earnings of the worker directly depend upon his
or her performance.
 Example :
 If the rate per unit is 10 paise and the total output of an
employee is 100 units, his or her earnings will be
100 x 0.10 =Rs 10.00
!!
 !
  
 In this system, standard time in terms of hours is fixed
for completion of a job. The rate per hour is then
determined.
 A worker is paid for a standard time at his or her time-
rate if he or she completes the job in the standard time
or less.
 Worker is paid the same wages if he or she takes more
than the standard time, unless he or she is guaranteed
time wages.
 If time wages are guaranteed , he or she gets paid on the
basis of the time taken multiplied by the time-rate.

!!
 !
 The following examples illustrate the method:
 Standard time = 10 hrs
 Rate per hour = Re 1
 Case (i):
Time taken = 8 hrs
Earnings = 10 x 1 = Rs 10.00
Case (ii):
Time taken = 12 hrs
À Earnings if the time wages are not guaranteed
= 10 x 1 = Rs 10
À Earnings if the time wages are guaranteed
= 12 x 1 = Rs 12

 !!
 !
    
  !
 
 In this scheme, time is used as the measure of output
and bonus is paid on the time saved, i.e., the difference
between the standard time-set for the job and the time
actually taken.
 There are four schemes under this method:
 Halsey System
 Rowan System
 Barth Variable Sharing System
 Bedaux System

 !!
 !
  
 nder this system, standard time is fixed for the
completion of a job ,the rate per hour is then determined
and then bonus is paid.
 If the worker takes the standard time or more to
complete the job, he or she gets paid at the time rate.
 Bonus paid to a worker is equal to 50 percent of time
saved multiplied by rate per hour.
 The following examples illustrate the scheme:

 Standard time = 10 hrs

 Rate per hour = Re 1
!!
 !
Case(i) :
Time taken = 10 hrs
Earnings = 10 x 1 = Rs 10.00
Case (ii) :
Time taken = 12 hrs
Earnings = 12 x 1 = Rs 12.00
Case (iii):
Time taken = 8 hrs
Earnings:
Time wages = 8 x 1 = Rs 8.00
Bonus = ½ x 2 x 1 = Rs 1.00
Rs 9.00

 !!
 !
 á" 
 nder this system too, standard time and rate per hour
are fixed.
 If the time taken to complete the job is equal to or
exceeds the standard time, the employee is paid for the
time taken at the rate per hour.
 Bonus paid to the employee is equal to the proportion
of the time saved to the standard time.

 The following examples illustrate the scheme:

! !!
 !
  Standard time = 10 hrs
 Rate per hour = Re 1
Case(i) :
Time taken = 10 hrs
Earnings = 10 x 1 = Rs 10.00
Case(ii):
Time taken = 12 hrs
Earnings = 12 x 1 = Rs 12.00
Case(iii):
Time taken = 8 hrs
Earnings = 8 x 1 = Rs 8.00
Bonus = 2/10 x 8 = Rs 1.60
Rs 9.60

!! !!
 !
 î#  
 This system does not guarantee the time-rate.
 The worker͛s pay is ascertained by multiplying the
standard hour by the number of hours actually taken to
do the job, taking the square root of the product and
multiplying it by the worker͛s hourly rate.

 For example:
 Standard time = 10 hrs
 Rate per hour = Re 1

! !!
 !
Case(i):
Time taken = 12 hrs
Earnings = 12x 10
= 10.95 x 1 = Rs 10.95
Case(ii):
Time taken = 10 hrs
Earnings = 10 x 10
= 10 x 1 = Rs 10.00
Case(iii):
Time taken = 8 hrs
Earnings = 8 x 10
8.94 x 1 = Rs 8.94
! !!
 !
 î$
 nder the î$%standard time for the job is
fixed.
 Each minute of the standard time is called a point or î
 Each job has standard number of Bs.
 The worker receives bonus which is equal to 75 per cent
of the number of points earned, in excess of 60 per hour,
multiplied by one sixtieth of the worker͛s hourly rate.
 An example to illustrate the Bedaux system is as follows:
 Standard time=10 hrs
 Rate per hour = Re 1
! !!
 !
Case(i):
Time taken = 12 hrs
Earnings = 12 x 1 = Rs 12.00
Case(ii):
Time taken = 8 hrs
Earnings: Time wages= 8 x 1= Rs 8.00
Bonus:
Standard Bs = 10 x 60 = 600
Actual Bs = 8 x 60 = 480
Bs saved =120
Bonus = 75 x 120x1 = Rs 1.50
100 60
Total earnings = Rs 9.50
!
!!
 !
    
  
 
 This scheme includes two methods:
 High piece rate :
¦ It is similar to straight piece work method differing only
in high rate of incentives paid.
¦ For each one per cent increase in output above the
standard, there may be 4/3 times increase in earnings as
compared to one per cent increase in earnings .
¦ The higher the rates start applying after the standards
have been reached.

! !!
 !
  High standard hour system :
 It is similar to standard hour system but the only
difference is the higher rate of bonus paid as otherwise
in simple standard hour system.

! !!
 !
   &'' &'' !( 
'
 This group includes several schemes:

 Taylor͛s Differential Piece-Rate system;

 Merrick Differential Piece-Rate system;
 Gantt Task system;
 Emerson͛s Efficiency system;

! !!
 !
  )&''  
á
 It was developed by F.W. Taylor in 1880.
 In this system, an efficient worker (whose output
exceeds standard output) is paid 120 percent of the
piece rate.
 An inefficient worker (worker output falls short of
standard ) is paid only 80 per cent of the piece rate.
 To illustrate the Taylor͛s piece rate system, we take
following:
Standard output = 100 units
Rate per unit = 10 paise
! !!
 !
 Differentials to be applied:
120 percent of piece-rate at or above the standard
80 percent of piece-rate when below the standard
Case(i):
Output = 120 units
Earnings = 120 x 120 x 0.10 = Rs 14.40
100
Case(ii):
Output = 90 units
Earnings = 90 x 80 x 0.10 = Rs 7.20
100

 !!
 !
&''  
á
 nder this system, straight piece rate is paid to the
worker up to 83 per cent of the standard output.
For efficiency more than 83 % but below 100 %,rate
payable is 110% of base piece rate and above 100 % is
120 % of base piece rate.

 The Merrick system can be illustrated as follows:

 Standard output = 100 units

 Piece-rate = 10 paise
! !!
 !
 Case(i):
Output = 80 units
Efficiency = 80 x 100 = 80%
100
Earnings : As the efficiency is less than 83 per cent, only the base
piece-rate applies:
80 x 0.10 = Rs 8.00
 Case (ii):
Output = 90 units
Efficiency= 90 x 100 = 90%
100
Earnings: As the efficiency is more than 83 per cent but less than
100 per cent,110 per cent of the base piece-rate applies:
90 x 110 x 0.10 = Rs 9.90
 !!
 !
100
 Case(iii):
Output = 110 units
Efficiency = 110 x 100 = 110%
100

As the efficiency exceeds 100 per cent, 120 per cent of the
base piece-rate applies:
110 x 120 x 0.10 = Rs 13.20
100

 !!
 !
 2 
 nder this system, the worker is guaranteed his or her
time-rate for output below the standard.
 On reaching the standard output or task, which is set at
a high level , the worker is entitled to a bonus of 20 per
cent of the time wages.
 The Gantt Task system operates as follows:
Rate per hour = Re 0.50
High piece-rate = Re 0.10
Standard output = 80 units
Time taken = 8 hrs

 !!
 !
Case(i):
Output = 70 units
As the output is less than the standard only time wages are
paid to the worker.
Earnings = 8 x 0.50 = Rs 4.00
Case(ii):
Output = 80 units
Earnings: As the output is equal to the standard , the worker is
entitled to time wages plus 20 per cent of time wages as
bonus.
Time wages = 8 x 0.50 = Rs 4.00
Bonus = 20 x 4 = Re 0.80
100
Total earnings = Rs 4.80

!!
 !
 Case(iii):
Output = 110 units
Earnings: As the output is more than the worker is
entitled to a high piece-rate.
110 x 0.10 = Rs 11.00

 !!
 !
  )

 nder the Emerson͛s Plan, up to 67 per cent of
efficiency , only time rate is paid to the worker.
 A guaranteed bonus of 20 per cent at 100 per cent
efficiency is paid.
 An additional bonus of 1 per cent , for each additional 1
per cent efficiency is added.
 The following example illustrates the method:
Standard output in 10 hrs = 100 units
Rate per hour = Re 1

 !!
 !
  Case(i):
Output in 10 hrs = 50 units
Earnings:
Efficiency = 50 per cent
As the efficiency is below 67 per cent the worker is
entitled to time wages only.
10 x 1 = Rs 10.00
Case(ii):
Output in 10 hrs = 100 units
Efficiency = 100 per cent

 !!
 !
  The worker is entitled to time wages plus 20 per cent of
time wages as bonus.
Time wages = 10 x 1 =Rs 10.00
Bonus = 20 x 10 = Rs 2.00
100
= Rs 12.00
Case(iii):
Output in 10 hrs = 130 units
Efficiency = 130 per cent
As the rate of 20 per cent efficiency and one per cent
increase for every one per cent increase in efficiency ,
the worker is eligible for 50 per cent of the time wage as
bonus.
 !!
 !
 Time wages = 10 x 1 = Rs 10.00
Bonus = 50 x 10 = Rs 5.00
100
= Rs 15.00

 !!
 !
! !!
 !