Job Evaluation and Merit Ratings

Job Evaluation and Merit Rating by Prof. J. Singh, MED, MMMUT Gorakhpur, Email: jsme@mmmut.ac.
in Mob: 9235500565
JOB EVALUATION & MERIT RATING

(Concept of job evaluation, Job analysis, Job description, job simplification, job evaluation
methods. Definition and methods of merit rating, wage-incentive payment plans)
JOB EVALUATION AND MERIT RATING
1. Rating of Job/Employees:
Job evaluation is related with the rating of the job whereas merit rating is a systematic
process for evaluation of the capacities and abilities of the man doing the job.
2. Purpose:
The purpose of the job evaluation is to fix wages for the jobs by considering certain factors
such as skill, responsibility etc. In case of merit rating, the purpose is to evaluate the
employee for the purpose of promotion, training, pay increase or incentives etc.
3. Job difference/Individual differences:
Job evaluation considers the differences in jobs whereas merit rating recognizes the
individual differences.
4. Objectives/Subjective Qualities:
The type of factors to be considered are objective in case of job evaluation, whereas in case
of merit rating subjective qualities are considered.
5. Test of worth versus merit:
In job evaluation, an attempt is made to know the worth of a job in terms of certain factors
such as responsibility and effort (mental as well as physical). Merit rating identifies the
capacity and capability of an individual for doing specific job.
1. JOB EVALUATION
1.1 Concept of Job Evaluation:
Human resource management aims at optimum utilization of available human potential. For
this purpose, it is essential to make everyone understand their job and expectations from the
job. This enables them to charter their behavior appropriately.
1.2 Job Analysis
Job analysis is a process of determining which characteristics are necessary for satisfactory
job performance and analyzing the environmental conditions in which the job is performed. It
analyzes the work content of job & job content of work. The process of job analysis leads to
development of two documents viz., job description and job specification.
Job description indicates the tasks and responsibilities, job title, duties, machines, tools and
equipment, working conditions and occupational hazards that form part of the job whereas
Job specification comprises of the capabilities required to perform job, education,
experience, training, judgmental skills, communication skills and personal skills required to
perform the job effectively.
1.3 Significance of Job Analysis
Job analysis is a vital tool in taking a variety of human resource decisions. It is used to design
and execute several human resource management activities and programs. They are described
here:
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Job Evaluation and Merit Rating by Prof. J. Singh, MED, MMMUT Gorakhpur, Email: jsme@mmmut.ac.in Mob: 9235500565
 Manpower Planning: job analysis helps in forecasting manpower requirements based

on the knowledge and skills and quality of manpower needed in organization.
 Recruitment: Carefully designed job analysis provides information as to what sources
of recruitment are to be used to hire employees. For example, job analysis in a retail
stores about merchandise sorters tells that village level schools are potential source of
recruitment.
 Selection: Selection of the right candidate to the right job can only be done with the
help of job analysis. In the case of retail stores, a billing assistant can be selected with
the knowledge of accounting, cash, and computer operations. This is possible with the
help of job analysis.
 Training and Career Development: Job analysis provides valuable information to
develop training programs. It provides information about what skills are to be trained.
It also provides information about various techniques to be used in career
development of employees.
 Placement and socialization: After people are selected and trained, they must be
placed in suitable jobs. Job analysis provides information about the suitability of jobs.
A clear job analysis guides the process to socialize the employees to develop sound
relationships with all those persons.
 Compensation: Job analysis provides information as to how much compensation and
other financial and non-financial benefits to be associated with each job.
 Employee Safety and Welfare: Job analysis details information on working
conditions. Thus, management tries to provide safety and welfare measures that are
outlined in job analysis.
 Performance Appraisal: Performance of employees is appraised based on standard
criteria provided in the job analysis.
 Counselling: A good job analysis provides information to the superiors about the
jobs. They use this information to guide and counsel employees about their career
options, performance, training requirements and skill up-gradation.
 Strategic Planning: Job analysis enables human resource manager to develop a long-
range strategic plan in all concerned areas of human resources.
1.4 Components of Job Analysis

1.4.1. Job Description: It is an important document. It is descriptive in nature. It is useful to
identify a job for consideration by job analyst. Important questions to be answered through
job description are:
What should be done? - Why it should be done? -Where it should be done?
There is no universal format of writing job description. According to Ghorpade the following
information is common in most of the job descriptions.
Job title: title of the job and other identifying information such as wages, salaries, other
benefits
Summary: summary is written in one or two lines that describes what outputs are expected
from job incumbents.
Equipment: a clear statement of tools, equipment and other information required to perform
job effectively.
Environment: a clear description of the working conditions of the job, the location and other
characteristics of work environment such as hazards, noise, temperature, cleanliness etc.
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Activities: a description about the job duties, responsibilities, and expected behaviour on the
job. A description of social interactions associated with the job such as the size of work
group, interpersonal interaction on the job is made.
Job analyst writes job description in consultations with the workers and supervisors. After
writing draft job description, comments and criticism are invited to improve its content. Final
draft is then prepared. Job description is written either by making personal observation or
using questionnaire to collect relevant information from supervisors and workers. Job
description should be reviewed from time to time.
1.4.2. Job Specifications: It also known as man or employee specifications is prepared on

the basis of job specification. It specifies the qualities required in a job incumbent for the
effective performance of the job.
Basic contents of a job specification are as follows:

 Personal characteristics such as education, job experience, age, sex, and extra co-
curricular activities.
 Physical characteristics such as height, weight, chest, vision, hearing, health, voice
poise, and hand and foot coordination, (for specific positions only).
 Mental characteristics such as general intelligence, memory, judgment, foresight,
ability to concentrate, etc.
 Social and psychological characteristics such as emotional ability, flexibility,
manners, drive, conversational ability, interpersonal ability, attitude, values, creativity
etc.
Various contents of a job specification can be prescribed in three terms:
 essential qualities which a person must possess;
 desirable qualities which a person may possess; and
 contra-indicators which are likely to become a handicap to successful job
performance
1.4.3. Job evaluation: It is a process of determining the relative worth of a job. It is a process
which is helpful even for framing compensation plans by the personnel manager. Job
evaluation as a process is advantageous to a company in many ways:
o Reduction in inequalities in salary structure - It is found that people and

their motivation is dependent upon how well they are being paid. Therefore
the main objective of job evaluation is to have external and internal
consistency in salary structure so that inequalities in salaries are reduced.
o Specialization - Because of division of labour and thereby specialization, a
large number of enterprises have got hundred jobs and many employees to
perform them. Therefore, an attempt should be made to define a job and
thereby fix salaries for it. This is possible only through job evaluation.
o Helps in selection of employees - The job evaluation information can be
helpful at the time of selection of candidates. The factors that are determined
for job evaluation can be taken into account while selecting the employees.
o Harmonious relationship between employees and manager - Through job
evaluation, harmonious and congenial relations can be maintained between
employees and management, so that all kinds of salaries controversies can be
minimized.
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o Standardization - The process of determining the salary differentials for

different jobs become standardized through job evaluation. This helps in
bringing uniformity into salary structure.
o Relevance of new jobs - Through job evaluation, one can understand the
relative value of new jobs in a concern.
 According to Kimball and Kimball, “Job evaluation represents an effort to determine
the relative value of every job in a plant and to determine what the fair basic wage for
such a job should be.” Thus, job evaluation is different from performance appraisal. In
job evaluation, worth of a job is calculated while in performance appraisal, the worth
of employee is rated.
1.5 Methods of Job Evaluation
Job analysis methods can be categorized into three basic types: (1) Observation Methods;
(2) Interview; and (3) Questionnaire
1.5.1. Observation Method: Observation of work activities and worker behaviors is a

method of job analysis which can be used independently or in combination with other
methods of job analysis. Three methods of job analysis based on observation are: (i) Direct
Observation; (ii) Work Methods Analysis; and (iii) Critical Incidents Technique.
(i) Direct Observation: Using direct observation, a person conducting the analysis simply
observes employees in the performance of their duties. The observer either takes general
notes or works from a form which has structured categories for comment. Everything is
observed: what the worker accomplishes, what equipment is used etc. The limitation of this
method is that it cannot capture the mental aspects of jobs, such as decision making or
planning, since mental processes are not observable.
(ii)Work Methods Analysis: This method is used to describe manual and repetitive
production jobs, such as factory or assembly-line jobs. This method is used by industrial
engineers to determine standard rates of
production.
(iii) Critical Incidents Technique: It involves observation and recording of examples of
particularly effective or ineffective behaviors. Behaviours are judged to be “effective” or
“ineffective” in terms of results produced by the behavior. In this method a person using the
critical incidents must describe behaviour in retrospect, or after the fact, rather than as the
activity unfolds. Accurate recording of past observations is more difficult than recording the
behaviours as they occur.
1.5.2. Interview: In this method, the Analyst interviews the employee, his supervisor and
other concerned persons and record answers to relevant questions. The interviewer asks job
related questions and a standard format is used to record the data. The limitation of this
method is that it does not provide accurate information because the employee may not
provide accurate information to protect his own interest. Success of this method depends
upon the rapport between the analyst and the employee.
1.5.3. Questionnaire: In this method properly drafted questionnaires are sent to jobholders.
Structured questionnaires on different aspects of a job are developed. Each task is described
in terms of characteristics such as frequency, significance, difficulty and relationship to
overall performance. The jobholders give their rating of these dimensions. The ratings
obtained are analyzed and a profile of actual job is developed. This method provides
comprehensive information about a job. The limitation of this method is that it is time
consuming and costly.
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1.6 Job Simplification

Job Simplification means breaking the job into relatively easier sub-parts with the intention to
enhance the individual’s productivity by minimizing the physical and mental efforts required
to perform a complex job.
Once the complex task is divided into the relatively easier tasks, each task is assigned to the
individuals who perform these over and over again. By doing the same thing again and again,
the employees gain proficiencies in the jobs assigned to them and as a result, the profitability
of the organization increases.
Under the job simplification method, the organization saves its training cost, as a very low
level of skills is required to perform the simplified jobs. Also, the job speed increases, as the
individual is required to perform a small portion of the previously larger and complex job.
But however, by performing the same task again and again, the employees may feel boredom
and may resist the monotony. This may lead to an increase in the employee absenteeism,
mistakes and accidents, etc. Due to these negative consequences, the overall productivity may
get adversely affected, and the organization may suffer losses as a whole.
Thus, an organization cannot resort to the job simplification every time to reap the economic
benefits. It must look at the organizational conditions prevailing at the time of designing the
job.
1.7. METHODS OF JOB EVALUATION
The various commonly used methods or systems of job evaluation are: 1. Ranking Method 2.
Classification or Grading Method 3. Factor Comparison Method 4. Point Method.
1.7.1. Ranking Method:
The different jobs, depending upon their requirements, responsibilities involved and their
importance to the organisation, are ranked, graded or placed from top to bottom.
Advantages:
(a) The method is simple and fast.
(b) It can be easily mastered and administered.
(c) The method is suitable for small organisations involving lesser number of jobs.
(d) The method does not involve expenses.
Disadvantages:
(a) There is no commonly accepted base for deciding the ranks.
(b) The method is not very accurate.
(c) It is not useful for large organisations.
It is the least used method.
1.7.2. Classification or Grading Method:
Jobs are classified or graded in groups or levels of equal skill, difficulty, responsibility,
importance and other requirements. It may be a production job, a sales job or an office job;
each job family can be broken into a number of grades.
For example, office jobs may be classified into six grades, namely graded A to grade F.
Grade A involves simple tasks like sorting whereas grade F deals with those tasks which
require high responsibility and judgment. Each grade carries an appropriate monetary scale.
Advantages:
(1) The method resembles Ranking method, is simple and can be easily mastered.
(2) It is more accurate as compared to Ranking method.
Disadvantages:
(1) It is not useful for large organisations.
(2) Job classification process is cumbersome and time consuming.
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(3) The method does not involve detailed Job Analysis.

(4) Sometimes it is difficult to correlate the (classified) grade of the job with the present
salary of the worker; he may be getting a wage higher than the one specified in the recently
determined grade for him.
1.7.3. Factor Comparison Method:
The method employs a five-factor scale for analysis, comparing and evaluating different jobs.
The five factors are Skill, Mental Effort, Physical Effort, Responsibility and Working
Conditions.
The various steps involved in the factor comparison method are as follows:
(1) Identify a few Key Jobs in the organisation and record their wages. Key jobs are those
representative jobs which are assumed to be correctly paid.
(2) Analyse the key jobs for each of the five factors mentioned above.
(3) Allocate the salary (paid for each key job) amongst the five factors in proportion to their
requirements, necessity or importance in the job, (Table-1).
Table-1
(4) This formulates a money rating scale for each of the five factors.
Table 1 shows that key job-3 requires mote skill on the part of the worker as compared to key
job-2, whereas key job-2 needs more mental effort as compared to key job-1 and so on.
(5) From Table 1 construct a Job Comparison scale (i.e., Table -2).
(6) Analyse the job to be evaluated into the five factors,
(7) As per the job requirements, determine the importance of each factor in the job, fit the
same in the job comparison scale and total the monetary values attached to each. This value
for jobs (to be evaluated) Je comes out to be 100 + 60 + 60 + 220 + 120 = Rs. 560.
Advantages:
1. Factor comparison method finds the wages for a job from existing wage rates.
2. It finds wages by direct comparison.
3. For fixing wages for a new job, this method uses a ready-made Job Comparison
(monetary) scale and thus the wages can be calculated speedily.
Disadvantages:
1. It is a complicated method; is not easily understood and hence it is less popular as
compared to Point method.
2. Selection of unfairly paid jobs as key jobs can introduce considerable error in the wages
calculated by this method.
3. It is difficult to divide each factor into a large number of sub-factors and unless done so,
accurate results may not be achieved.
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4. The method depends upon subjective judgment; different persons may attach different
monetary values with each factor for the same importance.
Table-2
1.7.4. Point Method:

The point method bases itself on dividing the jobs into several factors which in turn are
further subdivided into grades or degrees. Each degree is awarded certain points and when
such points for all the degrees are totalled, they indicate the importance of the job in the
organisation; consequently, a suitable wage rate proportional to the total points is determined.
The steps involved in point method are given below:
(a) Select a few key jobs which can be taken as representatives of the jobs to be evaluated in
the organisation. Key jobs are those which can be clearly defined and are fairly paid.
(b) Establish and define job factors whose number may vary between five to ten. Both, key
jobs and the jobs to be evaluated should have common job factors.
A few job factors are listed below:
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For the range of jobs to be evaluated, establish the importance of each factor and decide its
weighting (i.e. points).
Table -3 Weighting for different factors for an arbitrary job:
(c) Select and define grades or degrees for each factor mentioned under (b) above.
For example, the factor Education and Training may have the following degrees or
grades:
(i) Degree in science with no training.
(ii) Degree in science with 2 years of training in the material testing lab.
(iii) Diploma in engineering with no training.
(iv) Diploma in engineering with 2 years of training in the material testing lab.
(v) Fresh graduate in engineering.
(vi) Degree in engineering with one year’s experience in the material testing lab.
Each grade is allotted certain points. The first and the last grades possess minimum and
maximum points respectively. The total number of grades may vary from four to eight. An
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even number of grades is preferred as it avoids the natural tendency to select the middle
grade.
(d) Allocate points to each grade. Table 29.3 shows the weighting given to each factor and
the points allocated to each grade. Four grades have been assumed for each factor.
(e) Break the (already selected) key jobs into factors and the factors into grades. Total up all
the grade points for each key job.
Since the wage rate for each key job is fair and is known, plot the figure 1:
Figure-1
(f) Establish the factors and grades for the job to be evaluated. Add all the grade points (as
taken from Table -3). Suppose the job gets total grade point ‘P; then as per Fig. -1, the daily
wage rate for this job is Rs. ‘R’.
Advantages:
(1) Since the method involves points (i.e., numerical figures), it is considered to be more
accurate and reliable.
(2) It is more precise than any other method of job evaluations.
(3) Once Grade-Table has been constructed, the chances of subjective discretion decrease.
(4) The method can be understood without much difficulty.
(5) It is the most widely (about 80%) used method of job evaluation.
Limitations:
(1) Analysis of factors and grades involves a large amount of work and experience.
(2) Points allocated to each factor base on more or less arbitrary grounds.
2. MERIT RATING
After reading this article you will learn about:- 1. Definition of Merit Rating 2. Objectives of
Merit Rating 3. Methods 4. Advantages 5. Disadvantages.
2.1 Definition of Merit Rating:
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Merit Rating assesses the merit of the person doing the job. Merit rating determines the extent
to which an employee meets job requirements. Job evaluation and Merit Rating are two
complementary aspects of a sound personnel policy.
The first, determines a suitable wage structure for the job and the second (i.e., merit rating),
decides the rewards an employee should get in addition to his wages, depending upon his
merits.
Merit Rating is a systematic and orderly approach to assess the relative worth of an employee
working in an organisation in terms of his job performance, integrity, leadership, intelligence,
behaviour, etc.
Merit rating is commonly referred to as Employee Rating, Employee Appraisal or Staff
Reporting.
2.2 Objectives of Merit Rating:

(1) Merit rating provides a record of the worth of employees; they, therefore, can be put on
the most appropriate jobs depending upon their capabilities.
(2) Merit rating unfolds the limitations of an employee and thus helps in employee
improvement.
(3) Merit rating records form a basis for:
(a) Wage-increase,
(b) Promotion,
(c) Special assignments,
(d) Training,
(e) Transfer, and
(f) Discharge.
2.3 Methods of Merit Rating:
The different methods of merit rating, merit rating plans or merit rating systems are discussed
below:
2.3.1. Rating Scale Method:
The steps involved in Rating Scale method are:
(a) Define the merit factors (i.e., standards) to rate the employees.
The different factors, according to the nature of job may be as follows:
i. Standard of output,
ii. Quantity of output,
iii. Intelligence,
iv. Job knowledge,
v. Leadership,
vi. Integrity,
vii. Dependability,
viii. Education and experience,
ix. Efforts and initiative,
x. Adaptability,
xi. Co-operation,
xii. Judgment,
xiii. Character,
xiv. Loyalty, and
xv. Health and appearance.
The number of factors employed for rating an employee may vary from six to ten.
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(b) Divide each factor into three to five different grades or degrees like Excellent, Very good,
Good, Fair and Unsatisfactory.
(c) Impart certain points (marks) to each grade.
(d) The worth of an employee can be determined from the total points he gets for all his merit
factors. On the basis of these points different workers can also be compared.
2.3.2. Check List Method:
The method employs a list of questions and several statements which are concerned with the
employee performance on various aspects of the job and which are considered important for
evaluating the merit of an employee for that job. The questions are of Yes or No type. Each
question or statement possesses certain points which when totaled together for all the relevant
questions indicate the rating of an employee.
Advantages:
(i) It is a good method of merit rating.
(ii) It reduces Halo-Effect.
Disadvantages:
It is time consuming and very difficult to construct statements and prepare appropriate
questions.
2.3.3. Employee Comparison Method:
The method compares a worker on a job with all other workers on the same job, in pairs.
Suppose there are four workers namely W, X, Y and Z.
Then,
W is compared with X and suppose
W is better W is compared with Y and suppose Y is better
W is compared with Z and suppose W is better Next,
X is compared with Y and suppose Y is better
X is compared with Z and suppose Z is better
Y is compared with Z and suppose Y is better
The summary of the results shows that
W turned out to be better – 2 times
X turned out to be better – Nil.
Y turned out to be better – 3 times (maximum) and
Z turned out to be better – 1 time.
Therefore, the worker Y is taken to be the best worker.
This method consumes much time especially when the number of employees to be compared
is large.
Advantages of Merit Rating:
Besides a few mentioned under objectives, other advantages of Merit Rating are as
listed below:
(1) Merit rating develops the ability of a rater,
(2) Meritorious employees are encouraged,
(3) Employee-employer relations improve.
(4) It is easy to deal with the unions as merit rating is a systematic method to rate the
employees.
(5) It involves lesser calculations as compared to other incentive schemes.
Disadvantages of Merit Rating:
(i) It entails Halo Effect. Halo effect means the tendency of the rater to rate an employee
consistently low, average or high in all jobs, simply basing upon the general impression
formed by him about the employee.
(ii) Correct results will not be obtained, if merit factors relevant to a particular job are,
somehow or other omitted or points allocated to them are not fair.
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(iii) A rater may play safe and tend to impart average grade to an employee who otherwise
deserves unsatisfactory rating.
(iv) A rater, if he does not make enough personal contacts with each employee cannot rate
them correctly.
(v) A rater (i.e., supervisor) may not like to degrade his subordinates who maybe excellent
otherwise but not good at work.
(vi) Merit rating does not reward employees immediately for their performance.
3. WAGE INCENTIVE PLANS:

3.1 The various aspects of job-performance are:
(i) Product Quantity;
(ii) Product quality;
(iii) Utilisation of materials, plant, tools and services; and
(iv) Efficiency.
Almost all commonly employed Wage Incentive Schemes guarantee a minimum (base) wage
plus incentive based upon operator’s performance, if it exceeds a plant-wide standard.
Normally the wage incentive plans should depend on the standards set by Work
Measurement, The Wage Rate may be the result of mutual agreement between employer and
employee or formal/informal evaluation of the employee.
Until now, about 30 major Wage Incentive Plans have been analyzed. A few of them which
are considered to be the basic and representative.
Requirements of Wage Incentive Plans:
3.2 The requirements of a sound wage incentive plan are:
(a) It should be simple, easy to understand and to operate. It should involve least clerical
work.
(b) It would be well planned and guarantee a minimum wage.
c) A worker should be rewarded in proportion to his efforts and achievements. Reward
should be promptly paid.
(d) A worker should get enough and adequate incentive for his contributions.
(e) The scheme should preferably be based on Time-study data.
(f) It should give incentive both for quantity and quality of production.
(g) Standards should be fairly set.
(h) The scheme should be Just for workers as well as for the management.
(i) Standards and hence the allowed time (to the worker) should be altered only when there is
a change in the work method.
(j) Standardization should preferably be the basis for all incentive scheme. Work methods,
materials, work place, working conditions, etc., all should be standardized.
(k) Worker should not suffer in his incentive (i.e., earnings) for reasons (like faulty material,
improper tools, etc.) beyond his control.
(l) No limit should be put on a worker’s incentive earnings.
(m) The plan should be installed with the consent of the employees.
(n) Once installed, the incentive scheme should be rigidly maintained.
3.3 Objectives of Wage Incentive Plans:
(1) The incentive scheme should be profitable to both workers and management.
(2) It should help increasing production and thereby lower the related costs.
(3) It should reward workers in proportion to their output, and thus high up their morale.
(4) The characteristics of an incentive scheme should be such that an able worker is in a
position to earn sufficient amount of money to raise his standard of living.
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(5) An incentive scheme should provide recognition to a worker for his good contribution.
(6) An incentive scheme should aid improvement in the utilization of equipment, materials
and services.
(7) An incentive scheme should furnish a basis for cost control and labour control.
(8) An incentive scheme should help in reducing labour turnover and absentee rate.
(9) An incentive scheme should aim at improving relations between workers and
management.
Types of Wage Incentive Plans:
3.4 The following different Wage Incentive Plans for Direct Workers will be discussed
here:
1. Straight piece rate,
2. Straight piece rate with a guaranteed minimum wage,
3. Differential piece rate system,
4. Halsey Plan,
5. Rowan Plan,
6. Gantt Plan,
7. Bedaux Plan,
8. Emerson’s efficiency Plan, and
9. Group Plan.
3.4.1. Straight Piece Rate System:
In the straight piece rate system, a worker is paid straight for the number of pieces which he
produces per day.
Earning of a worker = No. of pieces (i.e., units) produced x Rate per piece.
In other words, if a worker brazes 16 heat exchangers per day and for each heat exchanger the
wage rate is Rs. 5 then he earns at the rate of Rs. 80 per day. (8 hours).
The wage rate per piece to be paid to worker is decided as follows:
(i) Through any appropriate work measurement technique determine the standard time
required to braze one heat exchanger. Suppose it comes out to be 30 minutes. It means in a
working day (i.e., 8 hours) a worker should be able to braze 16 heat exchangers.
(ii) Find from the local or national market the wages for such type of job. Suppose it is Rs.
2000 p.m.; which means 2000/25 x 16 = Rs. 5 per piece (for a 25 days month).
Advantages:
(i) The method is very simple, easy to understand and to operate.
(ii) A worker’s earnings are solely based upon his contribution towards production and it
appears to be a good incentive for him.
(iii) This method of payment helps boosting production fast.
(iv) It is easy to estimate labour cost.
Disadvantages:
(i) With a motive to produce more (and thus to earn more) the workers may not pay proper
attention towards:
(a) Maintaining the required product quality,
(b) Effective utilization of materials, equipment and tools, etc.
(ii) The method does not assure job security.
(iii) A worker may suffer badly as regards his earnings owing to the enforced idleness if any,
(e.g., lack of material, instructions, power or proper tools, etc.)
(iv) A worker is not guaranteed minimum wage.
(v) With a desire to earn more and excel others, a worker may spoil his relations with his co-
workers.
Because of these disadvantages the method is not much used in industries today.
Applications:
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This type of wage incentive scheme is very suitable where:

(i) Industries involve repetitive nature of jobs;
(ii) A job can be distinctly identified and the output can be measured; and
(iii) Management desires to increase total production.
3.4.2. Straight Piece Rate with a Guaranteed Base Wage:
This method is an improvement over the straight piece rate system as it guarantees a
minimum (hourly or daily) base wage. Suppose the standard of output set by the management
is 16 pieces per day. If a worker produces less than this amount he still gets the minimum
guaranteed wage and if another worker exceeds this standard, he is given a wage in direct
proportion to the number of pieces produced by him at the straight piece rate.
The following illustration will explain this method:
Assume:
i. An output standard of 16 pieces per day.
ii. A wage rate of Rs. 10 per hour.
iii. 8 working hours in a day.
Therefore per piece wage is 10 x 8/16 = Rs. 5
The guaranteed wage rate will be 8 x 10 = Rs. 80 per day.
(a) If a worker produces less than the output standard set (i.e., 16 pieces per day) he still gets
Rs. 80 per day.
(b) On the other hand if a worker excels the output standard and makes 20 pieces per day, his
earnings will be 20 x 5 = Rs. 100 per day.
Advantages:
(i) The system provides a guaranteed minimum wage.
(ii) By guaranteeing a minimum wage, this system automatically takes some care of the
enforced idleness beyond the control of the workers.
Disadvantages:
A worker who produces say 14 pieces per day, still gets Rs. 80 for that day-that means he
earns @ Rs. 80/14, i.e., Rs. 5.71 per piece whereas a worker producing 20 pieces per day,
gets Rs. 100 only, Le., he earns @ Rs.5 per piece. This shows that the system does not offer
sufficient incentive for a worker who exceeds the set output standard.
Like the straight piece rate system, this system is also becoming obsolete.
3.4.3. Differential Piece Rate System:
A differential piece rate system tends to overcome the disadvantages of the piece rate system
by providing a guaranteed base. It bases itself on differential wage rates; a worker who
exceeds the output standard is paid a higher wage rate per piece and another who fails to do
so gets his earnings at a low piece rate [refer to curve (c) of Fig.-2].
This system as suggested by F. W. Taylor had the disadvantage that the inferior or fresh
workers, who were unable to reach output standard, could earn very little and hardly survive.
14
Figure-2
Merrick modified the Taylor’s plan and introduced Merrick Differential piece Rate System.
This plan assured a minimum wage to the workers and suggested separate differential piece
rates (in an increasing order) for workers reaching up to 70%, 100%, 120% of the output
standards and above (refer Fig. 3).
Figure-3
This system, though improved Taylor’s plan could not become popular because of its
complex nature of wage calculations.
3.4.4. Halsey Plan:
In this plan
15
(i) A minimum base wage is guaranteed.

(ii) An additional bonus is given to a worker who exceeds output standard (in a given time).
He normally gets a percentage of the total bonus for the saved time. A very common
percentage is 50-50, i.e., 50% of the bonus (on the saved time) is given to the worker and the
rest (50%) is enjoyed by management.
(iii) Output standards are based upon previous production records available.
Wage of a worker is given by
W = R.T + (P/100) (S-T)R.
for 50-50 Halsey plan
W = RT + (50/100) (S – T) R = R.T. + (S-T)R/2
Assume R – the hourly wage rate = Rs. 10.
T – Actual time taken to complete the job = 4 hours
S – Standard time or allowed time = 6 hours.
Then
W = (10 x 4) + (6 – 4)/2 10 = 40 + 10 = Rs. 50.
Therefore wage rate per hour = 50/4 = 12.5.
Whereas a worker who finishes the job in 6 hours gets only
R T., i.e., 10 x 6 = Rs. 60. In this case wage rate per hour is only Rs. 10.
Advantages:
(i) It guarantees minimum wage.
(ii) It is simple to understand and to operate.
(iii) It does not consume time on expensive time studies.
(iv) Management also shares a percentage of bonus.
Disadvantages:
(i) Workers do not like that management should share the bonus on the time saved solely
because of their efforts.
(ii) Output standards being based upon past production records (and not on time study) may
not be accurate and fair or just to all workers.
3.4.5. Rowan Plan:
Rowan Plan.
(i) Like Halsey plan provides a minimum guaranteed base wage;
(ii) Like Halsey plan relies upon output standards based upon past production records; and
(iii) Unlike Halsey plan gives a bonus on
(S – T/S) rather on (S – T) i.e., time saved.
In Rowan plan
W = RT+(S – T/S) RT
Assumed R-Hourly wage rate = Rs. 10
T- Actual time taken to complete the job = 4 hours
S-Standard time or allowed time = 6 hours.
Then
W= 10 x 4 + (6 – 4/6) x 10 x 4 = 40 + 13.3 = Rs. 53.3
Advantages:
(a) Since Rowan plan gives a bonus on (S – T)/S value, it can be employed even if the output
standard (as based upon the past production records) is not very accurate.
(b) It provides a guarantee of minimum wage.
(c) Inferior and fresh workers are not penalised.
(d) Management shares a percentage of bonus.
Disadvantages:
(a) It is not easy to understand and to operate.
(b) Workers do not like management to share their bonus.
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(c) Incentive for high productive workers is insufficient.

3.4.6. Gantt Plan:
In Gantt Plan.
(i) A guaranteed wage is provided;
(ii) Workers reaching output standard get a wage rate increase, and
(iii) Workers exceeding output standard, are paid at a higher wage rate.
Curve abef of Fig4 explains Gantt Plan.
Figure-4
Gantt plan is an improvement over the Taylor’s differential piece rate system.
3.4.7. Bedaux Plan:
In Bedaux plan.
i. Like other incentive wage schemes a minimum base wage is guaranteed.
ii. ‘B’ represents unit of work. 1B stands for 1 standard work minute and it includes working
time as well as time for rest. A worker earning “60B’s” per hour reaches 100% of the
standard output or 100% efficiency.
iii. A bonus is paid to a worker who earns more than 60 B’s in one hour. The bonus as in the
original plan is 75% of the number of B’s above 60, in one hour.
Assume R – the hourly wage rate = Rs. 10
T – actual time taken to complete the job = 4 hours.
NT – number of B’s earned = 60 x 4 = 240
S – Standard or allowed time – 6 hours.
Ns – standard number of points for that job = 6 x 60 = 360
Then,
3.4.8. Emerson’s Efficiency Plan:

In Emerson’s efficiency plan
(i) A base wage is guaranteed,
(ii) A worker having efficiency from 67-100%, earns an incentive from 0 to 20% (refer Fig.
5).
17
Figure-5
(iii) For efficiency above 100%, for every 1% increase in output, the worker gets 1% increase
in incentive.
3.4.9. Group Incentive Plan:

A group incentive plan is preferred to an individual incentive plan where:
(a) The output or effective contribution of each worker cannot be accurately measured. For
example: a number of workers unloading freight cars,
(b) The output of a worker can of course be measured but it is related with the output of
others as in (flow) production of motor-cycles or air-conditioners,
(c) All the workers in a group are equally skilled.
The Principle of a group incentive plan can be:
(i) Evaluate the collective performance of the group,
(ii) Calculate total incentives and earnings,
(iii) Divide the earnings in equal or any other proportion amongst the workers-depending
upon the qualities (output, skill, etc.) possessed by each worker. The group leader may be
given a bigger share because he is responsible for the successful completion of the job. The
division of earnings, if carried out unwisely and without proper thought, may deteriorate team
spirit, spoil the job and create conflicts and resentment amongst the workers.
Advantages:
(i) A team spirit builds up amongst the workers.
(ii) Less skilled workers learn from the skilled ones.
(iii) The amount of supervision required is less.
(iv) Group plans involve less clerical work.
(v) Group plans are simpler and less expensive than the incentive plans employed for
individual workers.
Disadvantages:
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(i) In case the total earnings are equally divided amongst all the workers in a group; a slow
worker gets the same money as a speedy worker and this creates dissatisfaction amongst the
skilled workers and may add to labour turnover.
(ii) Unequal division of earnings amongst the workers may give rise to conflicts amongst
them.
(iii) It may be difficult to achieve rapid increase in production.
(iv) Production rate of slow workers in the line may limit the production capacity of the
speedy workers.
(v) Group incentive plans do not work well if the group size is large.
Applications:
(i) In mass and continuous production industries (chemical, petrol, etc.).
(ii) Riveting of bridges, and
(iii) In the manufacture of electronic equipment.
Drawbacks of Wage Incentive Plans:
(i) An incentive scheme involves extra cost of:
(a) Standardizing methods, allowed time, materials, product design, etc.,
(b) Installing and maintaining (the incentive plan), and
(c) Keeping the records of worker’s performance.
(ii) An improperly structured and planned incentive scheme can be a root of all troubles and
disputes between the labour and management.
(iii) Observations showed that groups of workers may have different opinions on an incentive
plan, and this may give rise to conflicts among workmen, between workers and inspectors
and between workers and personnel’s who developed the incentive scheme.
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Job Evaluation and Merit Ratings

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Job Evaluation and Merit Ratings

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Job Evaluation and Merit Rating by Prof. J. Singh, MED, MMMUT Gorakhpur, Email: jsme@mmmut.ac.

JOB EVALUATION & MERIT RATING

 Manpower Planning: job analysis helps in forecasting manpower requirements based

1.4 Components of Job Analysis

1.4.2. Job Specifications: It also known as man or employee specifications is prepared on

Basic contents of a job specification are as follows:

o Reduction in inequalities in salary structure - It is found that people and

o Standardization - The process of determining the salary differentials for

1.5 Methods of Job Evaluation

1.5.1. Observation Method: Observation of work activities and worker behaviors is a

1.6 Job Simplification

1.7. METHODS OF JOB EVALUATION

(3) The method does not involve detailed Job Analysis.

1.7.4. Point Method:

A few job factors are listed below:

2.2 Objectives of Merit Rating:

2.3 Methods of Merit Rating:

3. WAGE INCENTIVE PLANS:

This type of wage incentive scheme is very suitable where:

(i) A minimum base wage is guaranteed.

(c) Incentive for high productive workers is insufficient.

3.4.8. Emerson’s Efficiency Plan:

3.4.9. Group Incentive Plan:

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