Methods of remuneration

Cost And Works Accounting

1. C.D. Jain College of Commerce Department of Commerce and Research Centre Class – S.Y . B. Com Sub – Cost And Work Accounting - I Presented by- Prof. Mahale S.A.

2. Methods of remuneration Remuneration has been defined as the reward for labor and services . In industries labor cost represents major portion of total cost. High remuneration attracts efficient labor force. For this purpose valuation of labor remuneration is important. Following three methods are used.

3. Methods of Remuneration Time Wages System 2) Piece Rate System 3) Incentive Plan Flat Time Rate i) Straight Piece Rate i) Halsey Premium Plan High Day rate ii) Taylors Differential Piece Rate ii) Rowan Premium Plan Measured Day Rate iii) Merricks Multiple Piece Rate iii) Halsey-Weir System Graduated Time Rate iv) Group Piece Rate iv) Barth Premium Differential Time Rate v) Gantt Task and Bonus Plan vi) Emersons Effiiency Bonus Plan

4. 1) Time Wages System This Methods based on time. i.e. Per hour, per day, per week etc. Application- a) where quality of work is more important b) where output can not be measured in quantitative terms. c) Strict supervision can possible d) Different processes are involved e) Indirect labor is employed. f) work flow regulated by the speed of machine Advantages- Simplicity Stability in wages Security for wages Quality production is possible Unity in labor

5. Disadvantages No distinction between efficient worker and inefficient worker. No inducement for hard work. Prompt workers to lengthen the work period. Methods of Time Wages System Flat Time Rate Rate of wages per day, per week or per month are fixed in advance. The flat rate is usually fixed keeping in view the rate related in similar trades in the same locality for the same grade and skills. Formulae- Earnings = Hours worked × Rate per Hour.

6. 2)High Wage Rate or High day rate- In this system, the rate of wages is fixed which is higher than the average rate of the Industry. 3) Measured day rate- The workers employed in this method are given specified work and the level of wages is fixed by the employer. 4) Graduated time method- The rate of wages are linked up with the cost of living index. 5) Differential time rate- in this system different rates of wages are fixed for different workers in the same group according to the differences in their personal abilities and skills.

7. 2) Piece Rate System- Wages under this system are paid according to the quantity of work done. Earnings- Number of units produced × Rate per unit. Advantages- Incentives to efficient worker. Increase in production. Lower cost Equitable Decrease in supervision Simple and easy.

8. Disadvantages- Poor quality o work No security of wages Unsuitable to certain works Difficulties in fixing piece rate Misuse of material and equipment Injurious to health of workers. Opposed by trade union.

9. Method of piece work wages- Straight piece rate- The workers receives a flat rate of pay per unit of output. Formula- a) Where rate per unit is known Earnings = No. of units × Rate per unit b) Where standard hour rent is known Earnings = Standards hour of work produced × rate per standard hour Differential Piece Rate- Under these schemes the rate per piece or the rate per standard hour of production is increased as the output level rises.

10. 2) Taylor’s Differential Piece Rate- F.W. Taylor is the father of scientific management- He emphasized that low production causes total cost of production to fall. Therefor Taylor supported quick production. Formulae- Low price Rate, i.e. 80 % of normal piece rate when below standard. High Piece rate- i.e. 120 % of normal piece rate when at or above standard.

11. Advantages- It is simple to understand and work It attract only the best workers 3) It provides good incentive to expert workers Disadvantages- It penalises the slow workers It is not good for quality production It penalise the inefficient workers It does not guarantee for minimum wage

12. 3) Incentive plans- The primary purpose of an incentive plan is to induce a worker to produce more to earn a higher wage. Objectives- To induce the workers to increase the production and productivity. To provide them additional wages for their skill and efforts To raise the morale of the labor To reduce the cost of production To retain the services of good workers To establish better labor- management

13. Features- They are a combination of time and piece rate system Benefits is shared by both employer and employee. They relate payment to output directly or indirectly They regulate speed of workers Wages cost per unit reduces as efficiency increases Time rent guaranteed in some cases. Types of Incentive Plans-

14. Halsey Premium Plan- Under this plan, standard time is fixed for doing a job by time and motion study and the worker is assured about his time rate. If a worker completes the job within less than standard time, he gets a bonus 50 % of the time saved. It is also known as the split bonus plan or the 50:50 plan. Formula- Earnings = HW × RH + 50 % (TA - TT) × RH. HW- Hours worked RH- Rate per hour TA- Time Allowed TT- Time Taken

15. Advantages - - Easy to understand It guarantees minimum time wage to all the workers Saving the time. Employee as well as employer Bonus separately calculated It is simple and easy to operate Efficient worker can get more benefit Fixed overhead cost is reduced Disadvantages- Workers do not like the employer to share the benefit of the time saved by them.

16. It does not provide the employer with full protection against high rate setting. Extra efficiency of workers is not fully rewarded Rowan Premium Plan- This plan is also similar to the halsey plan in respect, of time saved. In Rowan system, bonus hours are calculated as the proportion of the time taken which the time saved bears to the time allowed. Formula =

17. Earnings =Hours worked × Rate per hour+ Time Saved × Hours worked × Rate per hour Time Allowed OR E = HW × RH + TT × TS × RH TA OR E = HW × RH + TA – TT × HW × RH TA

18. Advantages- It provide guaranteed minimum wages to the workers It protects employees against loose rate setting It provides highest bonus than that under halsey plan It provides good incentives for comparatively slow workers and beginners It provide best equipment and methods to the employees. Disadvantages- Calculations of bonus is complicated. Bonus is less than under halsey plan. It provides too easy excuse for loose rate fixing Wage per hour never doubled After certain level earning getting decreased.

19. Thank you……….