Wage Systems

Wage Systems

Wage Systems, the methods by which wages are paid. There are two main ones. (a) In time payments the employee is paid according to the length of time for which he works, usually at a standard rate per hour. This type of payment does not depend on output (subject to a satisfactory minimum standard), and is therefore suitable where skill is required and quality is more important than quantity of output. An advantage of this system is that time payments are predictable and the employee can count on a known wage. Salaries are a form of time payment in which the unit of time is usually a month. (b) In payment by results the remuneration depends upon the quantity (and quality) of output. Incentive payment systems of this kind can work only where output is measurable. They are suitable when maximum output is the principal goal, as when standardized goods are being produced by unskilled or semi-skilled labour. To the employee an incentive system can be a mixed blessing: he can reach very high earnings, but as they depend on a high output they may be irregular. The possibility of variation in weekly earnings can lead to uncertainty and insecurity, although there is usually a minimum fall-back' rate as a lower limit to wages . In practice the fixing of piece-rates' and work bonus systems raises complex issues and have been the source of industrial dispute.

ExamplesEconomic - Economic Life


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