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Labour Remuneration-Introduction

Worker's Remuneration:

The remuneration for labour is wages. The workers put effort & get wages in exchange of that. On the basis of pay scale & other allowances which are prescribed in the terms of employment, calculation of wages paid to direct or indirect workers is done. By terms of agreement between the employees & the employer, this may be modified from time to time. On the basis of job evaluation, merit rating, incentive plans, profit sharing & labour contract, the wages for the workers are determined.

Under two heads, methods of remuneration can be grouped though there are many in number: -

  • remuneration on time basis

  • remuneration on result basis. Various incentive schemes are also there which provides monetary or non monetary benefits to the workers.
Factors considered before selecting a method of remuneration:-

  • Easy Understandability:

    An average worker must easily understand the remuneration method; otherwise there arise labour unrest due to misunderstanding & suspicion. In simple remuneration method, less clerical cost is involved for the preparation of wage bills & cost records.

  • Choice between quality & quantity:

    A method of remuneration by result must be selected by organizations where quantity is considered more important than quality, because under this method, there is a direct relationship between worker's earnings & output. On the other hand, a method of remuneration by time should be selected by organizations which consider quality much more important than quantity.

  • Effect on overhead:

    Over the units produced, the fixed overhead is spread. Thus, if the output is higher, the incidence of fixed overhead per unit will be lower. Fixed overhead per unit will obviously be reduced by the method of remuneration on the basis of result while the incidence of fixed overhead per unit will be higher in case of method of remuneration on the basis of time.

  • Workers satisfaction:

    The workers must be satisfied by the method of remuneration otherwise labour turnover will be high & resulting in preventive & replacement cost of labour turnover. Efficient workers from outside the organization will get attracted by the method which creates satisfaction.

  • Conformity:

    The remuneration method selected by the organization must confirm with the methods used by similar organizations in similar sphere.
Features essential for a successful wage plan:

A successful wage plan should have the under mentioned essential features:

  • Fairness:

    A wage plan which is based on scientific time & motion study becomes fair to both employer & employee.

  • Minimum Wage guarantee:

    Minimum wage guarantee must be given to the workers, whether under legal compulsion or not. This minimum wage must be fairly above subsistence level of income.

  • Link between effort & remuneration:

    Unless there is a link between the value of work done & the remuneration payable, there will be unfair to either the employer or the worker.

  • Satisfaction for the workers:

    The worker must be satisfied by the wage plan which will result in high morale & low labour turnover.

  • Work guarantee:

    If there is payment by result, worker's earnings will not be satisfactory, even if the rate is too high, unless continuous work is there, which is available to them. Also, if there is payment on the basis of time, there will be too much payment made for the idle time, thereby resulting in heavy loss to the employer, unless continuous work is available to the worker's.

  • Conformity with legal provisions & trade agreements:

    The wage plan should always be in accordance with any of the provisions of law relating to the payment of wage & also there should not be any violation of trade agreement.

  • Restrictive provisions:

    If under a wage plan, payment is made to the worker on the basis of output, he will try to produce as much as he can, so that he can maximize his earning. So there will be undesirably over-production, unless some provision restricting his output is there; also there will be greater chances of breakdown & scraps & defectives etc. The worker's output will be restricted, if the piece rates are on diminishing scale, as rate per unit will decrease after certain quantity of output; as a result the worker will be discouraged after a certain quantity of output.

  • Cost of implementation:

    The wage plan cost of implementation must be as low as possible

  • Flexibility:

    The wage plan must be flexible & not rigid. In case of change in situations, incorporation of some change may have to be there in the wage plan also. Unlike rigid plan, modification can be made in the flexible plan without much disturbance.

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