M.Sc Notes

Incentive Plans For Wage Payment Workers | Advantages, Disadvantages

Incentive Plans For Wage Payment Workers
Incentive Plans For Wage Payment Workers

Meaning of Taylor’s Differential Piece Rate System

Incentive Plans For Wage Payment Workers system was introduced by F.W. Taylor, the father of scientific management. The main features of this incentive plan are as follows:

1. Day wages are not guaranteed. It does not assure any minimum amount of wages to workers.

2. A standard time for each job is set very carefully after time and motion studies.

The father of scientific management

F.W. Taylor

3. Two piece rates are set for each job. The lower rate and higher rate. The lower piece rate is payable where a worker takes a longer time than the standard time to complete the work.

Higher rate is payable when a worker completes the work within the standard time Usually these rate are 83% of the piece work rate for inefficient workers and 175% of the piece work rate for efficient workers.

ALSO READ- What is Incentive Plans | Objectives, Suitability, Advantages, Disadvantage

Advantages of Taylor’s Differential Piece Rate System

This plan provides strong incentive to efficient workers The calculation of wages is also not difficult and can be understood by the

Disadvantages of Taylor’s Differential Piece Rate System

However, this system suffers from the following workers shortcomings:

1. It severely penalizes the workers who produce slightly less than standard output.

2. It does not guarantee minimum wages.

3. It makes wide discrimination between efficient and inefficient workers and thus creates rivalry. This may weaken their unity.

ALSO READ- What are Incentive Plans for Indirect Workers | Payment of Incentives

Meaning of Merrick’s Differential Piece Rate System

This is a modification of Taylor’s plan. While Taylor prescribed two rates, Merrick’s plan lays down three rates.

The lowest rate is for the beginners, the middle rate is for the developing workers and the highest rate is for the highly efficient workers.

Efficiency of the workers is determined in terms of percentages. Thus the rate of remuneration are:

Level of Efficiency                             Piece Rate

Up to 83%                                           Ordinary Piece Rate

83% to 100%                                     110% of Ordinary Piece Rate

Above 100%                                       120% of Ordinary Piece Rate

Like Taylor’s plan, this method also does not guarantee minimum wages. The general criticism levelled against Taylor’s plan also applies to it except that it lessens or minimizes the punitive character of Taylor’s plan.

ALSO READ- What is Non-monetary incentives | Forms of Non-Monetary Incentives

Measurement of Efficiency = Actual Output / Std. Output x 100

Meaning of Gantt’s Premium Plan

This system was introduced by H.L. Gantt. This plan is the mixed form of Halsey and Taylor’s plan. The main features this plan are:

1. Day wages on time basis are guaranteed to all workers.

2. This plan is a combination of time rate differential piece rate and bonus.

3. A standard is set and remuneration is calculated as follows:

(a) When output is below standard-Payment at time rate.

(b) When output is at standard – Payment at time rate + 20% Bonus.

(c) When output is above standard – Payment at a high piece rate.

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