Group Bonus Plans: The premium bonus plans aims at creating
the basis by which wage & bonus payable to individual worker is calculated. Thus,
where the performance of an individual worker can be measured, the premium bonus scheme
is applicable. However, there are situations where instead of an individual worker,
the performance of a group of workers, is desired to be measured by, or only measurable.
The situations are as below:
(a) When the measurement of the performance of the group as a whole can be done although
the measurement of the performance of individual worker is not possible.
(b)When, for the purpose of creating collective spirit of work amongst the workers,
the performance of a group as a whole, instead of individual performances, is desired
to be measured.
(c) A group of persons of different skills is required for the execution of the work
due to its nature.
The group bonus schemes are to be introduced in the above situations.
Advantages of the group bonus scheme are that it is capable of achieving:
(1) team spirit development, (2) increase of output, (3) Wastage minimization etc,
(4) better quality of work, (5) automatic training (i.e. a helper may learn the work
continuously so that ultimately he can become the master in the work) etc.
The disadvantages of group bonus schemes are:
(a) The bonus which is earned by the group only due to more efficient workers is shared
by all, irrespective of the comparative efficiency of the workers in a group.
(b) Unless, there is a clear definition of the sphere of activities of each in the
group, too many cooks may spoil the broth.
(c) Amongst the members of the group, responsibility evasion often becomes a chronic
disease.
(d) The amount of bonus fixation & ascertainment of the basis of its distribution
amongst the members is difficult.
To the entire factory, the group bonus scheme may be extended.
The important group bonus schemes are:
(a) Priestman’s Production Bonus Scheme: A
standard performance in terms of output or point is fixed by this scheme. The workers
as a whole, becomes entitled to bonus, if by producing output above the standard output
, or by securing points more than the standard points, they can be account for better
performance. On the basis of the ratio of excess performance to standard performance,
bonus is paid according to this scheme. Obviously, time wage is guaranteed under this
scheme. Thus, where there is mass production of standard articles with continuous flow
of work, this scheme can be extended to the entire factory.
(b) Rucker Plan: Under this plan, added value is defined as the change in market value due to the alteration in the form, location & availability of product or service, excluding the cost of bought in materials or services. The ascertainment of the ratio of earnings & added value is done. Wage is proportionately increased due to any reduction in this ratio. For successful implementation, constant negotiation between employers & employees is required by the scheme. Rucker plan is known as share of production plan.
(c )Scanion Plan: This is similar to Rucker plan, instead of the ratio between earnings & added value as considered in case of Rucker plan, the ratio between earnings & selling price of production is taken as the basis in case of Scanlon plan.
(d) Towne Gain Sharing Plan: Standard cost of labour is set under this plan. In addition to the wages earned, the workers become qualified to receive bonus for any reduction in the labour cost as compared to the standard labour cost. Bonus is equal to 50% of the savings in labour cost. On pro rata basis, the workers are paid bonus. Under this scheme, the supervisory staff may also be entitled to bonus.
Problem: In a unit, 10 men work as group. Each man is paid an
incentive, when the group production exceeds the standard output of 100 pieces per
hour. Incentive which is ½ the percentage, the excess production over the standard
bears to the standard production, is paid in addition to the worker’s wages at
hourly rate. Incentive is paid to each man at the rate of this percentage of a wage
rate of $1 per hour. Between the individual workman’s hourly rate & the bonus
rate, there is no relation.
In a week, 250 hours are worked & the total production is 60,000 pieces.
(a) Compute the total amount of bonus for the week.
(b) Calculate the total earnings of 2 worker’s X& Y of the group:
X worked 22 hours & $ 1.10 is his basic rate per hour, B worked 24 hours & $
0.95 is his basic rate per hour.
Solution: (a) Total amount of bonus for the week:
Actual production 60000
pieces
Standard production in 250 hours @ 100 pieces per hour 25000
pieces
Excess production over standard 30000
pieces
Incentive % = ½ * (35000/60000)*100 = 29%
Hourly rate of incentive payment = $1*29% = $ 0.29
Total amount of bonus for the week for 250 hours @ $ 0.29 = $ 72.50
(b) Total Earnings: - Worker X: $
Basis Earnings for 22 hours @ $ 1.10 24.20
Incentive for 22 hours @ $ 0.29 6.38
Total 30.58
Worker Y:
Basic Earnings for 24 hours @ $ 0.95 22.80
Incentive for 24 hours @ $ 0.29 6.96
Total 29.76
Problem: A company having 60 employees, who are paid under a
group bonus scheme, produces 3 products X, Y & Z. The company has 3 grades of employees
who are paid bonus which is excess of time allowed over time taken. The bonus is shared
amongst the direct workers in proportion to the time spent to the work & is paid
on the employees basis rate less $ 0.75. The production details are as below:
Product
X Y Z
Units produced 160 320 600
Time allowed per unit in minutes 31.5 60 50
Grade
of Employee
A B C
Number of direct employees 20 8 32
Basis rate ($) 2.00 1.80 1.85
Hours worked by each employee 7.50 16 12.50
From the above information calculate: (a) % of hours saved to hours taken, (b) the
total bonus payable to the group of direct employees, & (c) the total wages payable
to the group of direct employees.
Solution: Time allowed:
Product Units Produced Time allowed per unit (minutes) Total
Time Allowed (hours)
X 160 31.50 84
Y 320 60.00 320
Z 600 50.00 500
904
Hours worked:
Grade of employee No of employees Hours worked per employee Total
hours worked
A 20 7.50 150
B 8 16.00 128
C 32 12.50 400
678
(a) % of hours saved to hours taken:
Hours Allowed 904
Hours worked 678
Hours saved 226
% = (Hours saved/Hours worked)*100 = (226/678)*100 = 331/3 %
(b) Bonus payable:
Grade of employee Hours worked Bonus 331/3% Rate
(= Basic Bonus
(Hours) rate-$0.75)
A 150 50 1.25 62.50
B 128 422/3 1.05 44.80
C 400 1331/3 1.10 146.67
678 253.97
(c)Total wages payable:
Grade of employee Hours
worked Base
Rate Wages Bonus Total
A 150 2.00 300.00 62.50 362.50
B 128 1.80 230.40 44.80 275.20
C 400 1.85 740.00 146.67 886.67
678 1270.40 253.97 1524.37
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- Accounting for Wages
- Bonus for Indirect workers
- Comparison of Halsey & Rowan Scheme
- Causes, Cost of Labour Turnover
- Emersion efficiency system
- Halsey scheme, Rowan Scheme
- Job Evaluation, Merit Rating
- Labour - Introduction
- Labour Remuneration-Introduction
- Labors Remuneration on Result basis
- Labor's Remuneration on Time Basis
- Labour- Time Keeping
- Labour Turnover
- Merit Rating, Work Study
- Other incentive Schemes
- Pay-Roll or Wages Sheet
- Types of Idle Time
- Working Time & Idle time
