Premium Bonus Plans MBS-10-43

Premium Bonus Plans

The system of wage payment under this plan aim at inducing workers to increased efficiency and greater output.

The main features of most incentive plans are: It combine both time and piece rate systems Time wages are guaranteed to all workers Piece rate system in which employee are paid according to work Check the speed of worker either worker perform work on stranded or below or above slandered

There are two method of remuneration Time rate system Piece rate system

Advantage
This

method is very simple and calculation of wage is easily understood by the worker Worker are assure of a certain amount of wages payable even if there is stoppage of work due to power failure machine break down Quality of product is batter in this method It ensures equality and care

Disadvantages
Low quality : when the worker ate paid on the on time basis they tend to be slow in work this result tend in lower production quantity. Extra supervision : in this method extra supervision is needed so that worker do not waste time

1. Halsey Plan: F. A. Halsey,

The

method recognizes individual efficiency. It advocates a bonus based on time saved. Standard time and standard work are prescribed in advance. If an employee completes the job less than the standard time, he is entitled to receive a bonus for the time saved. A bonus equal to 50% of the wage time saved is paid to the workers as a reward to his good work Workers, who fail to achieve the standard, get the time wage

Method of Computation:
Total

Earnings of the worker = (Time Rate X Time Taken) + (1/2 X Time Saved X Time Rate) Example: The standard time for producing 250 articles is 65 hours. The rate of wages is Rs. 2.50 per hour. The actual time taken for producing 250 articles is 55 hours. What are the earnings of the worker under Halsey plan?

Solution:
1.

Total Earnings of the worker =(Time Rate X Time Taken) + (1/2 X Time Saved X Time Rate)(Rs. 2.50 X 55 hours) + (1/2 X 10 X Rs. 2.50) =Rs.150 2. Effective Wage rate per hour=( 150/55 hours)= Rs.2.72

2. Halsey Weir Plan:

This

method is more or less similar to the Halsey plan except that in Halsey Weir plan the bonus is equal to 30% of the time saved. Example: The standard time for producing 250 articles is 65 hours. The rate of wages is Rs. 2.50 per hour. The actual time taken for producing 250 articles is 55 hours. What are the earnings of the worker under Halsey plan?

Solution:
1.

Total Earnings of the worker =(Time Rate X Time Taken) + (30%X Time Saved X Time Rate) (Rs. 2.50 X 55 hours) + (30% X 10 X Rs. 2.50) =Rs.145 2. Effective Wage rate per hour=( 145/55 hours)= Rs.2.63

(3) Rowan Premium Plan:

Rowan

plan is also similar to Halsey plan, except in the calculation of bonus. The main features of his plan are: Workers receive remuneration based on actual time taken by them in completing the job Workers receive bonus for the time saved i.e., for the difference between the standard time and actual time.

Its formula is:

1.

Bonus = (Time Saved/Time allowed) X Time taken X Time rate 2. Earnings = (Time taken X Time rate) + Bonus

Example:
The

standard time for producing 250 articles is 65 hours. The rate of wages is Rs. 2.50 per hour. The actual time taken for producing 250 articles is 55 hours. Solution: 1. Bonus = (Time Saved/Time allowed) X Time taken X Time rate= (65-55/65) X 55 X Rs. 2.50 = Rs. 21.15 2. Earnings = (Time taken X Time rate) + Bonus= (55 X Rs. 2.50) +21.15385 = Rs. 158.65 3. Effective Wage Rate per hour = Rs. 158.65/55 = Rs. 2.89