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System of compensating


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System of Compensating (Time Wage Plan, Piece Wage Plan, Balanced Wage Plan, Skill Based Pay, Competency Based Pay, Broad-banding, Variable Pay, Merits of Time Wage, Demerits of Time Wage,Time Wage …

System of Compensating (Time Wage Plan, Piece Wage Plan, Balanced Wage Plan, Skill Based Pay, Competency Based Pay, Broad-banding, Variable Pay, Merits of Time Wage, Demerits of Time Wage,Time Wage Plan Environment, Merits of Piece Wage, Demerits of Piece Wage, Piece Wage Plan Environment, Merits of Balanced Wage, Factors Affecting Wages)

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  • 1. System of Compensating Dr. G C Mohanta, BE, MSc(Engg), MBA, PhD(Mgt) Professor Al-Qurmoshi Institute of Business Management Hyderabad
  • 2. Wage Plans  Time Wage Plan  Piece Wage Plan  Balanced Wage Plan  Skill Based Pay  Competency Based Pay  Broadbanding  Variable Pay
  • 3. Wage Plans (Contd.)  Time Wage Plan – paid based on time worked: hourly, daily, weekly, monthly - Jobs for which output within specified period not measurable  Piece Wage Plan - paid wages based on number of units produced or completion of a job  Balanced Wage Plan – paid based on combination of time wage & piece wage
  • 4. Merits of Time Wage  Easy to understand and calculate wages  Illiterate worker can understand it  Employers and workers know in advance wages payable and adjust budgets  Payment made regularly - specific wages, beneficial from social point of view  Product/service quality high, workers not in hurry to produce more
  • 5. Demerits of Time Wage  Workers not motivated for higher performance - generate inefficiency  Performance and wages not linked, employee take it easy  Efficient and inefficient workers not differentiated; inefficiency percolates  De-motivates efficient workers for putting at par with inefficient ones.  Production labour cost difficult to determine  Productivity not criteria for fixing wages, wrong employees placed on job
  • 6. Time Wage Plan Environment  Output cannot be measured precisely  Individual employees not have direct control on outputs  Quality of work more pronounced, needing creative imagination  Machine, materials – sophisticated, requiring handling with utmost care  Work highly varied, standard outputs cannot be ascertained  Supervision good and fair day's work can be estimated
  • 7. Merits of Piece Wage  Output and wages linked, acts as motivating factor to produce more.  Differentiates efficient and inefficient workers, provides incentives to become more efficient  Fair and equitable for utilization of HR  Requires less supervision for in-built quality control in product.  Cost of production can be estimated in advance.
  • 8. Demerits of Piece Wage  Fixing piece rate difficult, if no standardized procedure  Employer tries to cut piece rate, if workers' earnings very high  Minimum wages not assured, where factors beyond control of worker  Quality & machine conditions suffers, as workers concentrate on quantity  Jealousy and interpersonal conflict among workers for uneven earnings
  • 9. Piece Wage Plan Environment  Output of individual worker - can be measured precisely  Quantity of output - result of skills and efforts  Flow of work - regular and no work interruptions  Production methods – standardized & job repetitive  Workmanship - not required
  • 10. Merits of Balanced Wage  Worker is guaranteed for fixed wage and also provision for piece wage  If worker produces more quantity, earns more than time wage  Given credit for additional output to compensate for short falls in future  Provides a sense of security  Motivate worker to produce more
  • 11. Factors Affecting Wages  Demand for and supply of labour - short supply increases wages, more supply decreases wages  Labour unions - strong trade unions can demand higher rates of wages, un-organised workers get low wages  Cost of living - strong influence on rate of wages
  • 12. Factors Affecting Wages (Contd.)  Prevailing wage rates - Prevailing wages taken into account for deciding wage  Ability to pay - ability of a company to pay  Job requirements – Jobs with specialized knowledge or skill are priced higher  State regulation - State regulates wage rates of labourers  Increment system - wages increase annually at a prescribed rate