Suggestion Schemes
Prepared by: Bhakti Joshi
Date: January 30, 2013
Meaning
• Focus on employees
Who do the
real work?
• Ideas for improvement and innovation
• Target creative minds and talent
What kind of
processes are
required?
How are
innovative
products
created?
Why Suggestion Schemes?...To
avoid:
• Lack of consistency of purpose to plan product and service that
will have a market and to sustain in market and create jobs
• Emphasis on short-term profits
• Personal review systems, or evaluation of performance, merit
rating, annual review, etc. for people in management, the
effects of which are devastating.
• Job hopping
• Use of visible figures and considering information that are
unknown or unknowable
• Excessive medical costs
• Excessive costs of liability
The aforementioned are also known as Deming’s Seven Deadly
Disasters
Wage Incentive Plans
A system which provides additional pay (or bonus) for
qualitative and quantitative performance which
exceeds standard or normal levels
•
•
•
•
•
•
•
•
•
Relationship building
Increasing productivity
Employee morale
Employee motivation
Employee regularity
Cost control
Improvement in quality of life
Optimum resource utilisation
Flexibility in changing business conditions
Types of Wage Incentive Plan
• Most common
method
• Time-based
wages
• Mostly for
general roles
(administration,
maintenance,
etc)
• Tendency to
creep upwards
(inflation,
promotion, etc)
• Easier from an
employee’s
perspective
Time-Rate System
Piece-Rate System
Halsey Plan
Straight Piece
Rate
Rowan Plan
Straight-Piece with
minimum
guarantee
Emerson Plan
Differential
Piece Rate
Bedeax Plan
• Payment by
results system
• Output-related
payment
• Encourages effort
at the cost of
quality
• Home-based
workers, subcontractors
• Working hours
are
unaccountable
• Earnings mostly
below average
Straight Piece Rate
Example:
If a worker produces 325 pieces per day and he
is paid at the rate of Rs.0.20 per piece, the daily
wage is 325 × 0.20 = Rs.65
?
Straight Piece with minimum
guarantee
If output > expected or standard production then:
Wages = Base wage + (Current Output – Standard
Production) X Wage Rate
Example
The standard output in a hypothetical welding shop is
110 pieces per day. For a production less than or up to
the standard output, the minimum guaranteed or daily
base wage is Rs.70. Over the standard output an
incentive at the rate of Rs.0.50 per piece is given. If the
output is 150. What is the total wage?
Rs 90
Halsey Premium Plan
•
•
•
•
•
Time Taken (T)
Standard time (S)
Current Wage (R)
Incentive for time saved (Bonus percentage)
Conditions:
– Time Taken < or = Actual Time
– Time taken > Actual Time (No incentive)
Halsey Premium Plan (Contd…)
• When T < or = S
• Total Wages (W) = S*R + S*R*Bonus rate
Example
If the standard time taken to produce 10 units is
240 hours and the actual time taken is 220
hours, with average wages of Rs 4 per hour and
50 % bonus. What is the wage rate under Halsey
Premium Plan? 1440
Halsey Premium Plan (Contd…)
• When T > S
• Total Wages (W) = S*R + R *(S-T)/100 (No
bonus)
Example
If the standard time taken to produce 10 units is
240 hours and the actual time taken is 260
hours, with average wages of Rs 4 per hour and
50 % bonus. What is the wage rate under Halsey
Premium Plan? 959.20
Rowan Plan
•
•
•
•
Time Taken (T)
Standard time (S)
Current Wage (R)
Incentive for time saved (No bonus
percentage)
• Conditions:
– Time Taken < or = Actual Time
– Time taken > Actual Time (No incentive)
Rowan Plan (Contd…)
• When T < or = S
• Total Wages (W) = S*R (No bonus)
Example
If the standard time taken to produce 10 units is
240 hours and the actual time taken is 220
hours, with average wages of Rs 4 per hour and
50 % bonus. What is the wage rate under Rowan
plan? 960
Rowan Plan (Contd…)
• When T > S
• Total Wages (W) = S*R + R *[(S-T)/S]
(Never a bonus but an incentive to improve)
Example
If the standard time taken to produce 10 units is
240 hours and the actual time taken is 250
hours, with average wages of Rs 4 per hour and
50 % bonus. What is the wage rate under Rowan
plan? 959.83
Differences & Comparisons
Advantages
Straight Piece Rate
Straight Piece Rate
with minimum
guarantee
Disadvantages
• Simple and easy to
understand
• Focus of Productivity
• Satisfaction to efficient and
fast workers
• No quality focus
• No job security
• No compensation for breakdown or
sickness
• No guarantee of minimum wage
• Discourage group effort
• Encouragement for higher
production
• Efficient methods can be
adopted to increase
production
• Easy to prepare quotation
estimates and budgets
• No pay for idle time
• Less supervision cost
• No standardised basis for minimum
guarantee
• Beginners and average workers
cannot earn enough due to inability
to work faster
• Quantity will be overemphasised
than quality (unless there is close
supervision
• Overwork and health concerns
• Not suitable for intermittent work
• Not suitable when jobs are
unstandardised
Differences & Comparisons
Advantages
Hasley premium
Plan
Rowlan Plan
Disadvantages
• Simple
• Workers get a small percentage of
• Beneficial for efficient
return over their achievement
worker
• Quality may suffer due to over• Causes no harm to trainee, achievement
new or slow worker
• Management gets a wrong picture of
• Benefits sharing
worker’s ability
• Minimum base-wage
guaranteed
• Checks over-speeding
overstrain by workers
• Assured minimum basewage
• Efficiency is rewarded
• Discourages workers to over-achieve
• Difficulty in ascertaining wages as it
requires large data processing
• Sharing of profit for overachievement may not be liked by
workers
Wages in India
• Three types of wages: Minimum wages, Living wages, Fair wages
• Minimum wages (Revision every 5 years):
– 3 consumption units for 1 earner
– Minimum food requirements of 2700 calories per average Indian
adult
– Clothing requirement of 72 yards per annum per family
– Rent corresponding to minimum area provided for under
Government’s Industrial Housing Scheme
– Fuel, lighting, etc expenditures that constitute to 20% of the total
minimum wages
– Children education, medical requirement, minimum recreation,
etc that constitutes to 25% of the total minimum wage
– Local conditions and other factors affecting wages
Wages in India (Contd…)
• Minimum wages (Revision every 5 years):
– Maharashtra state has devised minimum wages in agriculture as follows
Scheduled
Employment*
Agriculture
Category of
Workers
Total
Minimum
Wage
(Rs/Day)
Zone
Basic Minimum
Wages
I
120.00
120.00
II
110.00
110.00
III
105.00
IV
100.00
*Scheduled employment means an employment
specified in the Schedule or any process or branch of
work forming part of such employment
V.D.A
No
105.00
100.00
Variable Dearness Allowance:
To protect minimum wages
from inflation (CPI)
Wages in India (Contd…)
Scheduled
Employment
Automobile
Repairing
Workshops
and Garages
Category of
Workers
Zone
Basic Minimum
Wages
V.D.A
Total
Minimum
Wage
(Rs/Day)
Unskilled
I
73.08
53.31
126.38
Semi-skilled
I
76.92
53.31
130.23
Skilled
I
80.77
53.31
134.08
Unskilled
II
69.73
53.31
122.54
Semi-skilled
II
73.08
53.31
126.38
Skilled
II
76.92
53.31
130.23
Unskilled
III
65.38
53.31
118.69
Semi-skilled
III
69.23
53.31
122.54
Skilled
III
73.08
53.31
126.38
Wages in India (Contd…)
• Living Wage
– More than the minimum wage
– Considers national income
– Paying capacity of industrial sector
• Fair wage
– Above minimum wage (lower-limit) and below
living wage (upper-limit)
– Factors: labour productivity prevailing wage rate,
level of national income and its distribution and
capacity of industry to pay
Components of Employee Remuneration
Financial
Basic Wages
• Fringe
Benefits
• Provident
fund
• Medical care
• Accident
relief
• Health and
group
insurance
Non-Financial
Incentives
• Car and its
maintenance
• Club
membership
• Paid
membership
• Furnished
house
• Stock option
scheme
•
•
•
•
•
•
Job context
Challenging job
Responsibilities
Growth prospects
Supervision
Working
conditions
• Job sharing etc.
Process of managing compensation
•
•
•
•
•
Organisational Strategy
Compensation policy
Job analysis and evaluation
Analysis of contingent factors
Design and implementation of compensation
plan
• Evaluation and review
Job Evaluation
…is a process of determining the relative worth
of a job.
Aims at…
• Reduction in inequalities in salary structure
• Specialisation
• Selection in employees
• Harmony between employees and manager
• Standardisation
• Creating relevance for new jobs
Job Evaluation: Pre-requisites
•
•
•
•
•
Job content – job description and specification
Top management support
Cooperation of union and individual workers
Comparison of Jobs
Involvement of expert in job-evaluation
techniques
Job Evaluation Methods
Non-Analytical Methods
Ranking Method
Classification
Method
Methods designed on the
basis of the jobs as a
whole
Analytical Methods
Factor
Comparison
Point Method
Methods designed on the
basis of the requirements
and elements of the jobs
Ranking Method
• Worth of a job based on:
–
–
–
–
–
Judgement of skill
Effort (physical and mental)
Responsibility (supervisory and fiscal)
Working conditions
Ranked in descending order from best to worst
• Processes:
– Identify and place in order a number of clearly differentiated and welldefined benchmark jobs at various levels. (benchmark jobs as in
producers, maintainers, administrators, etc)
– Jobs are perceived to be the ones with the highest and lowest value;
selecting a job mid-way and finally choosing others at lower or higher
intermediate points. The remainder of the jobs are grouped as key
jobs and ranking is complete
– Divide the ranked jobs into grades and an initial estimate (based on
common features among groups to bring about distinction between
groups)
Ranking Method (Contd…)
– Presentations and continuous iterations
• Simple, quick and inexpensive only if agreement of the jobs
and ranks are reached easily
LIMITATION:
• Highly subjective.
• Not diagnostic to point the specific areas of weakness and
strength of a worker.
• Existing jobs must be re-ranked to accommodate new
position
• Requires detailed knowledge of every job for evaluation
and ranking and difficult when a large number of jobs are
under consideration
Email: bhaktij@gmail.com
Website: www.headscratchingnotes.net