What are Methods of Labour Remuneration

Contents

There are two basic methods of labour remuneration, time rate and piece rate system of wage payment. In modern days a number of incentive plans to induce workers to work hard so as to produce more and earn more are being used.

What is Time Rate System

Under this system of wage payment, workers are paid according to the time for which they work. Payment may be on hourly

basis, daily basis, weekly basis, or monthly basis. In this system, no consideration is given to the quantity and quality of work done. When payment is made on hourly basis, total wages payable are calculated as follows:

Wages No. of hours worked Rate per hour For example, if a worker is paid at the rate of Rs. 7.50 per hour, his wages for a day of 8 hours will be 7.5 x 8 = Rs. 60.

Though this is the oldest system of wage payment, yet it is commonly used these days.

Suitability- This method of wage payment is suitable under the following type of situations.

1. What quality of work is more more important than quantity of work high class tailoring.

2. Where output cannot be measured in quantitative terms, e.g. in the case of indirect workers like watch man, cleaners and sweepers, etc.

3. Where output is beyond the control of the worker, e.g. in process industries, where the work of a worker is dependent on the work of other workers.

4. Where work is being done on a small scale so that close supervision is possible.

5. Where the worker is a learner or an apprentice.

Advantage of Labour Remuneration

Following are the main advantages of this method:

1. Simplicity – The system is simple and calculation of wages is easily understood by the workers.

2. Security to Workers – Under this method, workers are assured of a certain amount of wages payable even if there is stoppage of work due to power failure, machine break-down etc. This gives a sense of security to workers.

3. Quality of Work – As this method does not give weight to the quantity of work done, workers can concentrate on the quality of good produced. Thus, the quality of work under this method is better.

4. Economical – Under this method, no detailed records are required to be maintained regarding the work done by workers. This results in saving of clerical costs. Moreover, workers avoid over-speeding and causeless damage to Plant and Machinery and also materials. This also results in economy.

5. Accepted by Trade Unions – This method is favored by trade unions because it treats all workers alike and no distinction is made between efficient and inefficient workers.

6. Unity in Labour – No hard line of distinction is drawn between an efficient and inefficient worker on the basis of production. This promotes a feeling of unity among the workers.

Also Read- What is Meaning of Obsolete Material |Causes, Treatment and Losses

Disadvantage of Labour Remuneration

The main disadvantages of this method are:

1. Lack of Incentive – This method of wage payment offers no positive inducement to workers to improve performance as it does not distinguish between an efficient and inefficient workers.

2. Lower Production – As workers are paid on time basis, they tend to be slow in work. This results in lower production quantity.

3. More Supervision – Under this method, more supervision is required, so that workers may not waste time. Appointment of additional supervisors increase of supervision cost.

4. Idle Time – Under this method of wage payment, workers waste a la of time resulting in increasing in idle time.

5. Costing Difficulties – From costing point of view, it creates difficulties in the calculation of labour cost per unit because the output is quite fluctuating.

6. It makes workers lazy and dull – Due to the adoption of this method workers become lazy and dull and try to avoid work, and thus production suffers.

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