MODULE 4

EMPLOYEE PRODUCTIVITY
Productivity:

• Output relative to inputs

• Production refers to total output
• So, productivity is defined as the amount of
goods and services produced with the resources
used.
•
Quality of goods and services produced
Productivity = -----------------------------------------------
Amount of resources used
Productivity can be increased in several ways

1.Increase production using the same or a smaller amount

of resources.
2.Reduce the amount of resources used while keeping the
same production or increasing it.

3.Allow the amount of resources used to increase as long

as production increases more.

4.Allow production to decrease as long as the amount of

resources used decreases more.
• Improved production means getting more from given
inputs
• Higher productivity means not adding more
resources but using resources better
• Not working harder but smatter
• Not just doing things rights but during right things
High and Low productive organisation
Production Function-Areas of Productivity

1.Improving volume of production.

2.Reducing rejection rates.
3.Minimizing rework rate.
4.Maintaining delivery schedules.
5.Controlling idle time of machines and men.
6.Establishing / updating / improving / setting industrial
engineering norms.
7.Updating processes and procedures.
8.Maintaining accuracy and timeliness of MIS.
9.Decreasing machine set-up time.
10.Controlling overtime.
11.Good house-keeping.
12.Checking, absenteeism, thefts and misconduct.
13.Eliminating accidents.
14.Effective grievance handling.
15.Efficient training and team building.
16.Minimising inventory and achieving better yields.
17.Enhancing customer satisfaction.
18.Total quality management (TQM).
19.Business process re-engineering (BPRE).
20.Automation.
Measuring Productivity:

1.Major inputs to production process is Capital , Labour,

Materials and Energy
2.Productivity of each resource is measured separately
which gives partial productivity
3.Which is called as multiple factor approach to measure
productivity.
4.
Output in a given period
Partial productivity = -----------------------------------

Labour hours used in a period

Total productivity =

Outputs in a given period

------------------------------------------------------------------------
( Labour+ Capital +Materials +Energy used in the same period)

Labour Productivity:
Output for man-hour,
output
Labour productivity = ------------------
Man-hours used
Labour hours per unit of output,

Total labour hours used

Labour productivity = -----------------------------
Output

Added value per unit of labour cost,

Added value for the products

Labour productivity = -----------------------------------------
Total wages
Factors affecting labour productivity
Improving productivity:

• To improve the productivity , understand the factors that

influence the relationship between output and input.
• Both organization as well as workers are responsible for
improving productivity
• Organization – getting all required machinery
• Workers- Dedication is required
Learning curves:

• organization gains experience in manufacturing product ,

the resources inputs required per unit of output
diminishing over the life of the product
• Because when worker is in the learning stage a lot of
raw materials are wasted so his performance is also less.
• The concepts of learning curve is based on the following:
 I.Where there is life, there can be learning.
II.The more complex the life, the greater the rate of
learning.

III.The rate of learning can be sufficiently regular to be

predictive. Therefore it is easy to estimate

a)the average number of labour-hours required to produce

n- units in a production run,

b)the total number of labour-hours required to produce

n- units in a production run
c)the exact number of labour-hours required to produce the nth
unit of production run.
Arithmetic Analysis:

As the number of units produced is doubled , the labour –

hour per unit decline by a constant factor

Here we calculate for n-units and not for n-th unit for
which we go in for logarithmic analysis.
Logarithmic Analysis:
Time taken to produce the n-th unit is

Tn = T1(nb )
T1 time taken to produce 1 unit
b- slope of the learning curve
b- depends on learning rate.

Learning rate b
70%
75% -0.515
-0.415
80%
85% -0.322
-0.234
90% -0.152
Uses and Limitations of Learning Curve:

Used in
1.Man-power planning
2.Cash flow analysis

In job shop and custom service operations the learning

curve theory is significantly used in
1.Products and services tend to be custom-designs that
require workers to start near the beginning of small
batches.
2.Batches tend to be small, thus labour-hours per unit
improve dramatically from the first to the last unit.
3.Product/service designs tend to be complex; thus labour-
hours per unit improve quickly.
Safety and Healthy:

Industry – accidents are common.

Management suffers 2 losses due to accidents

1.Direct cost – Compensation payable to the workers /

dependents, Medical expenses incurred in treating the
patients
2.Indirect cost – Down time of operations
Slowed up production rate
Materials spoiled
Damage to equipment
Managers undertake prevention actions
 Organization evolve elaborate safety program
which consists of 5 elements

1.Development of policies, procedures and training

systems
2.Creation of an organisation to ensure safety
3.Analysis of the causes and occurrence of accidents
4.Implementation of the safety programme
5.Evaluation of the effectiveness of the programme.
Health:

1.Health is wealth for employees

2.Affected by surroundings
E.g.: Job stress ,noise, alcoholism, drug and AIDS
3.It is legal requirement with sections 11 to 20 of
factories Act 1948 , deal with Health of workers
4.
Incentive Payments:

Given for outstanding performance

Advantages:

• Inducement and motivation of workers for higher

efficiency and greater output
• Reduced supervision
• Better utilisation of equipment
• Reduced scrap
• Reduced lost time
• Reduced absenteeism and turn over
• Increased output
Disadvantage

• Product quality is deteriorated

•
• Added expensive to maintain the quality
•
• One of the greatest difficulty with this is setting of
bonus rates (i.e.) problem in judgment , always risk of
error.
 Scope:
a) Industries in which measurement of individual or group
output is rendered difficult or impossible either by
technical consideration or by psychological circumstances
which might be prejudicial to output
b) Industries in which the control of quality is necessary
and is particularly difficult, or in the case of certain classes
of workers, where high quality and precision of work is of
prime importance
c) Industries in which the work is especially dangerous and
is particularly difficult to ensure the observance of
adequate safety precautions.
 Type:
1.Incentives schemes where the workers earnings vary in
the same proportion as output.
2.Schemes where earnings vary proportionately less than
output.

3.Schemes where earnings vary proportionately more

than output.

4.Schemes where earnings differ at different levels of

output.
1. Incomes Varying in proportion to output:
In this method the labour is paid for the standard
hour although the time taken is less than the standard hour.

Standard Time = 10 hrs

Rate / Hour = Re 1
Case 1: Time taken = 8 Hrs
Earnings = 10 X 1 = Rs 10
Case 2: Time taken = 12 Hrs
Earnings = 12 X 1 = Rs 12
2. Earnings varying proportionately less than the
output:
• This scheme is called as Gain Sharing Scheme.
• The common term is time.
There are four different systems
a. Halsey system b. Rowan system
c. Barth Variable sharing system d. Bedaux scheme
Under Halsey system
Standard time is fixed, If products are produced early then there is a
guarantee for the payment in the standard time
Bonus is given for the saved time as 50% of it.
Standard Time = 10 hrs
Rate / Hour = Re 1
Case 1: Time taken = 10 Hrs
Earnings = 10 X 1 = Rs 10
Case 2: Time taken = 12 Hrs
Earnings = 12 X 1 = Rs 12

Case 3: Time taken = 8 Hrs

Earnings = 8 X 1 = Rs 8
Bonus ½ X 2 X 1 = Re 1
Total = 9 Rs
Under Rowan system
Standard time and rate is fixed, if time is less ,% of bonus is
given this percentage is equal to the proportion which the
time saves forms of the standard time
Standard Time = 10 hrs
Rate / Hour = Re 1
Case 1: Time taken = 10 Hrs
Earnings = 10 X 1 = Rs 10
Case 2: Time taken = 12 Hrs
Earnings = 12 X 1 = Rs 12

Case 3: Time taken = 8 Hrs

Earnings = 8 X 1 = Rs 8
Bonus (2/10) X 8 X 1 = Rs 1.60
Total = 9.60 Rs
In Barth variable sharing system
The pay is ascertained by multiplying the standard hour by
number of hours actually taken to do the job, taking square
root of the product and multiplying by the workers hourly rate
Standard Time = 10 hrs
Rate / Hour = Re 1
Case 1: Time taken = 12 Hrs
Earnings = 10 X 12 = Rs 10.95
√
Case 2: Time taken = 10 Hrs
Earnings = 10 X 10 = Rs 10
√
Case 3: Time taken = 8 Hrs
Earnings = 8 X 10 = Rs 8.94
√
In Bedaux system
Standard time of the job is fixed
Each time is taken as B so in 1 hour = 60B
If the standard time is not met he, gets the actual + bonus of
the difference in time by 60th of workers hour rate and 75%
along with it.

Standard Time = 10 hrs

Rate / Hour = Re 1

Case 1: Time taken = 12 Hrs

Earnings = 12 X 1 = Rs 12
Case 2: Time taken = 8 Hrs
Time wages = 8 X 1 = Rs 8
Bonus: Standard Bs = 60 X 10 = 600
Actual B = 8 X 60 = 480
Difference or Saved Time = 120
Bonus = (75/100) X(120 / 60) X 1 = Rs 1.50
Total earnings = Rs 8 + Rs 1.50
= 9.50Rs
3. Earning varying proportionately more than the
output:

There are two methods.

a. High piece rate
b. High standard hour
4. Earnings Differing at Different levels:
a. Taylor’s Differential piece rate system
b. Merrick Differential piece rate system
c. Gantt Task system
d. Emerson Plan
a.Taylor’s Differential piece rate system:
•Developed by Taylor -1880
•Low rate of output below the standard
•High rate of output above the standard.
Standard Outputs = 100 units
Rate / Hour = 10 paise
Differentials to be applied
120% of piece rate above standard
80% of piece rate when below standard
Case 1: Output = 200 units

Earnings = 200 x(120/100)x0.10= Rs 14.40

Case 2: Output = 90 units

Earnings = 90 x(80/100)x0.10= Rs 7.20

b. Merrick Differential piece rate system

• Straight piece rates are paid upto 83% of standard output

• Bonus of 10% of time rate payable
• 10% bonus on reaching the standard output

Standard output = 100 Units

Piece rate = 10 Paise

Case 1 : Output = 80 Units

Efficiency = (80/100) X 100 = 80%

Since 80% less then 83% only the base piece rate is given.

Earnings = 80 X 0.10 = Rs 8
Case 2 : Output = 90 units
Efficiency = (90 / 100 ) X 100 = 90 %

Since the efficiency is more then 83% and less then 100%
So 100% of the base piece rate applies there fore

Earnings = 90 X (110 / 100) X 0.10 = Rs 9.90

Case 3 : Output = 110 units

Efficiency = (110 / 100 ) X 100 = 110 %

Since the efficiency is more then 100% We get 120% of

base piece rate applies there fore

Earnings = 110 X (120 / 100) X 0.10 = Rs 13.20

c. Gantt Task system
Time rate is paid if it below the standard, if it standard
output we get time wage + 20% of time wages bonus

Standard Outputs = 80 units

Time Taken = 8 Hrs
Rate / Hour = 50 paise
High Piece rate = 10 paise

Case 1: Output = 70 units

Earnings = 8 x 0.50= Rs 4.00

Case 2: Output = 80 units

Earnings = 8 x 0.50= Rs 4.00
Bonus = (20/100) X 4= Rs 0.80
Total = Rs 4.80
Case 3: Output = 110 units
Since the output is greater the worker is paid with high piece
rate
Earnings = 110 x 0.10 = Rs 11.00

d. Emerson Plan
• Standard time is set for each job
• Efficiency is determined by dividing the time taken by
standard time
• Upto 67% worker is paid at time rate after which a
granted bonus which amounts to 20% of 100% efficiency.
• Additional 1% is added for 1% of efficiency
Standard output in 10 Hours = 100 Units
Rate per hours = Re 1

Case 1 : Output in 10 hours = 50 Units

Efficiency= 50%
As efficiency is less then 67% the worker is given with time
wages only.
Earnings = 10 X 1 = Rs 10

Case 2 : Output in 10 hours = 100 Units

Efficiency = 100%
As efficiency is 100% the worker is given with time wages
and 20% of time wages bonus.
Time wage = 10 X 1 = Rs 10
Bonus = (20/100)X10 = Rs 2
Total = Rs12
Case 3 : Output in 10 hours = 130 Units
Efficiency = 130%

As efficiency is more then 100% the worker is given with

time wage + 1% increase in 1% of increase in efficiency and
20% of time wages bonus.

Time wage = 10 X 1 = Rs 10
Bonus = (20/100)X10 = Rs 2
Bonus = (30/100)X10 = Rs 3
Total = Rs15
Group Incentive Plans:
• All of now we saw was for individual direct workers.
• In some works we have groups involved for particular
operations where individuals cannot be measured so
group
incentive scheme is followed.
• First total earning of the groups is calculated and then
divided for individual
• If individual contribution is different then the bonus is
divided proportionately according to their work they do.
Advantages:

1.Better co-operation among workers

2. Less supervision
3. Reduced incidence of absenteeism
4. Reduced clerical work
5. Shorter training time

Disadvantages:

1.Efficient worker may be penalized for the efficiency of other

members in the group.
2. Incentive may not be strong enough to serve its purpose.
3.Ravilry among the members of the group defects the very
purpose of the team work and co operation.
Group Incentive Plans:
1.The Rucker Plan
2. The Scanlon Plan
3. The Profit Sharing Plan
The Rucker Plan:
• Encourage employees to involve in cost reduction plans
implemented by the management .
• The production value sharing plan attempts to establish a
relationship between earnings of hourly rated employees
and the net production values created.
•Production value = Sales revenue – { Cost of

materials , supplier , outside service used in production

and delivery of output }
•Labour Cost is represented as the percentage of production
value.
•If the ratio decreases to 15% the worker would get a bonus in
proportion to their earnings
The Scanlon Plan:
•Bonus to the worker for tangible savings in labour cost.
•Wages are determine as the ratio of sales revenue
• Different between wages due and wages paid is shared by
workers and management on mutually agreed basis.
• The purpose of the plan is to develop a sense of
improvement among workers and to generate a feeling
that everyone has take in productivity improvement .
The Profit Sharing Plan: The employer pays to all the
employees a share of profit earned in accordance with an
agreement .Three types of profit sharing plan are available.
a. Cash Plan – in which money is paid periodically
b. Deferred Plan – Monetary investments are made in PF of
employees and the benefits are got while their retirement
or when they are leaving the job
c. Combined Plan – Under which the above two are joined
i.e., the payment are partially made and others are invested
in employees PF.