ECONOMIC
1 9 t h N o v e m b e r 1949
WEEKLY
Wage Incentive Plans In Other Countries
T h i s is the T h i r d a r t i c l e in a series on Wage Incentives and P r o d u c t i v i t y of w h i c h the first t w o
appeared in the issues of October 15th and N o v e m b e r 12th,
T
treatment may refer to
H E C O N T E M P O R A R Y pat- haustic
t e r n a n d t h e g e n e r a l t r e n d o f J . K . L i n d e n ' s Wage lncentives,
B u t the important
wage incentive plans
a r e essen- ( p p , 3 7 - 4 5 ) .
t i a l l y the outcome of the move- point to note about t h e m is that
of
the
ment
for scientific management, f r o m the point of v i e w
of a s o u n d
the f o u n d a t i o n for w h i c h w a s l a i d basic r e q u i r e m e n t s
a t t h e close o f t h e 1 9 t h C e n t u r y i n c e n t i v e p l a n l a i d d o w n i n S h r i b y Frederick W . Taylor. D u r i n g mati U r m i l a Devi's article on
to Raise P r o t h e l a s t f e w decades, t h e c a p t a i n s " W a g e I n c e n t i v e s
Economic
Weekly,
o f i n d u s t r y i n A m e r i c a h a v e m a d e d u c t i o n " , The
v a l u a b l e c o n t r i b u t i o n t o t h e m . 1 5 t h O c t o b e r , 1949, t h e H o u r - f a r T h e y h a v e r e f i n e d t h e t e c h n i q u e s H o u r o r 100 p e r c e n t B o n u s P l a n
It
and e x p a n d e d the p r i n c i p l e s a n d is the most satisfactory one.
also s e r v e d as i n t e r p r e t e r s of t h e i s t h i s p l a n t h a t i s g a i n i n g p o p u theory. The Works of Gantt, larity.
In H u n g a r y , the basic c o l l e c t i v e
Gilbreth, Cook
and
Emerson
indeed constitute i m p o r t a n t m i l e - agreement c o n c l u d e d on the 15th
s t o n e s i n t h e e v o l u t i o n o f s c i e n - J a n u a r y , 1949 f o r i n d u s t r y a n d
tific i n d u s t r i a l m a n a g e m e n t . T h e m i n i n g establishes a s y s t e m of
techniques of T a y l o r and G i l b r e t h remuneration w h i c h is intended
p r o v i d e d the m o d e l , n o t o n l y f o r 10 b r i n g t h e i n d i v i d u a l interests
the B r i t i s h System of p r o d u c t i o n of the w o r k e r s into line w i t h the
p r o d u c t i o n to its
or for the capitalist organizations need to raise
i n o t h e r c o u n t r i e s , b u t also f o r m a x i m u m l e v e l . T h e s y s t e m i s
S o v i e t Russia. A s t u d y of these based u p o n the o u t p u t w h i c h a n
plans w o r k e d out in other parts of average w o r k e r , w i t h good t r a i n t h e w o r l d is, t h e r e f o r e , n o t o n l y i n g , c a n m a i n t a i n c o n t i n u o u s l y ,
to his health
i n t e r e s t i n g b u t also i n s t r u c t i v e i n w i t h o u t p r e j u d i c e
the context of the present indus- by p u t t i n g f o r t h an appropriate
effort, by a reasonable w o r k i n g
trial situation in India.
in conformity with
A study of wage i n c e n t i v e plans m e t h o d and
in A m e r i c a w h e r e a n u m b e r of the regulations g o v e r n i n g the
these h a v e b e e n t r i e d o u t , n a t u r - q u a l i t y o f p r o d u c t i o n a n d i t s ecoa l l y c o m e s f i r s t . A c o m p l e t e des- n o m y . T h i s 100 p e r c e n t o u t p u t
c r i p t i o n of all or even of a majo- is k n o w n as the n o r m a l or standr i t y of the incentive plens n o w ard output. It is well-defined and
by
means of an
i n use i n t h a t c o u n t r y i s b e v e n d is established
t h e scope o f t h e p r e s e n t a r t i c l e . e x h a u s t i v e a n a l y s i s o f t h e w o r k ,
M o r e o v e r , some of the plans, by means of accurate t i m i n g and
w h i c h h a d o n c e b e e n p o p u l a r a r e o f s t u d i e s o f t h e processes u t i l i z e d ,
n o w being abandoned.
T h e f o l - clue n o t e b o n g t a k e n o f t h e c o l o w i n g , h o w e v e r , represent the efficients of u n a v o i d a b l e loss a n d
basic p a t t e r n o f t h e i n c e n t i v e f a t i g u e . I n s e t t i n g u p s u c h s t a n d plans n o w in force,
a t least i n ards, the factors of q u a l i t y a n d
e c o n o m y i n p r o d u c t i o n a r e also
the
fundamentals:
taken into consideration, and any
(1) S t r a i g h t piece w o r k ;
( 2 ) T h e H o u r - f o r H o u r o r 100 v a r i a t i o n o f t h e s e e l e m e n t s b r i n g s
in its t r a i n a rise or f a l l in the
per cent B o n u s Plans
( 3 ) T h e 50-50 P r e m i u m B o n u s r e c o g n i z e d o u t p u t r a t e .
Piece-rate w o r k e r s receive their
Plan (Halsey);
(4) P o i n t plans t y p e f i e d b y t h e basic salary f o r t h e i r category,
b e c a u s e w a g e scales
are
presB e d a u x system;
cribed according to the occuna(5) Measured Dav W o r k .
It is not necessary to go i n t o tional classification of w o r k e r s ) ,
the details of the
above
p l a n s W h e n t h e i r o u t p u t e q u a l s 100 p e r
here, t h o u g h some of t h e m have cent of the standard output.
b e e n discussed b e l o w i n specific W h e n t h e i r o u t p u t i s b e l o w t h i s
eases r e l a t i n g t o c e r t a i n i n d u s - f i g u r e , t h e i r w a g e i s r e d u c e d i n
to the d screnancy
tries. Not all of t h e m are relevant direct ratio
When
their output
to us. Those w h o w a n t
an ex- observed,
11
e x c e e d s 100 p e r c e n t o f t h i s s t a n d ard, w o r k e r s are e n t i t l e d to supplementary pay for each a d d i tional percentage unit, and such
p a y m a y r e a c h u p t o 125 p e r c e n t
of the basic wage.
The various
collective agreements
for lower
grades p r o v i d e for v a r i a b l e rates
in this manner.
T h e earnings of
each w o r k e r
m u s t a l w a y s keep pace w i t h his
effective o u t p u t . H o w e v e r , w h e n
the w o r k e r ' s o u t p u t in the course
o f 4 c o n s e c u t i v e w e e k s does n o t
reach 80 per cent of the standard,
his earnings are thereafter m a d e
up in such a w a y that t h e y come
up to 81 p e r cent of his basic w a g e
w h i c h is the guaranteed m i n i m u m
wage. In the event of v e r y considerable fluctuations
in output,
the standards a n d the conditions
under w h i c h the w o r k is done are
checked in order to ascertain the
responsibilities of the w o r k e r s and
of the w o r k s management. H u n g a r y is t h u s stepping up p r o d u c tion consistent b o t h w i t h q u a l i t y
and economy.
In almost a l l the industries in
B r i t a i n , i n c e n t i v e schemes are i n
operation w h i c h have brought
a b o u t a n increase i n p r o d u c t i o n .
O f the t w o schemes w h i c h a r e
i m p o r t a n t , e f f e c t i v e a n d easy, a n d
are therefore f o l l o w e d w i d e l y ,
the first is the W o r k s P r o d u c t i o n
Ballot. T h e A u s t i n Company
mokes special ballot awards e v e r y
week on production
of a l l cars
and t r u c k s p r o v i d e d the total
l o a c h e s 1,700 o r o v e r . A w a r d s
are shared a m o n g five employees
whose names are d r a w n o u t of a
ballot d r u m , the f i r s t w i n n e r geting 50 per c e n t of t h e prize the
s e c o n d 25 p e r cent t h e t h i r d 12½
p e r cent. a n d the o t h e r t w o 6½ per
cent each.
The company makes
three qualifying conditions for
employees. T h e d r a w is open to
all employers
w h o have had at
least 3 m o n t h s ' c o n t i n u o u s s e r v i c e
w i t h the company; w h o regularly
earn the Good T i m e - K e e p i n g
B o n u s ; and w h o satisfy the superv i s o r y staff that t h e y are pulling
their w e i g h t in the general effort
to raise production.
A n d be it
noted that production at Austin's
ECONOMIC
WEEKLY
has been c o n s i s t e n t l y h i g h e r since
the i n t r o d u c t i o n of t h i s scheme.
T h e other scheme is the Co-operative A w a r d system
and is in
operation at the factory of the
Henley Tyre and Rubber Company.
I t does n o t p r o v i d e f o r a
b o n u s b u t i t offers,
instead, an
increase i n basic p a y
for better
w o r k . B e t t e r w o r k i s assessed b y
e v a l u a t i n g each
employee's output w i t h marks for:
1. Quality and quantity of
work;
2.
Application;
3.
Effort and initiative;
4.
Co-operation;
5. A t t e n t i o n to safety, care of
tools and materials.
T h e t o p r a t i n g i s 100 m a r k s —
2 0 f o r e a c h o f t h e a b o v e . Assessments are made twice a year, for
each employee,
on the independent reports of the supervisor and
the
assistant
supervisor. These
reports are themselves based on a
questionnaire framed
under the
five headings a n d are h a n d e d to a
panel, w i t h the w o r k s manager i n
t h e c h a i r , f o r assessment.
The
awards are calculated
as a p e r centage
increase on the h o u r l y
rate.
T h e increase
in pay operates o v e r the f o l l o w i n g six
months, after w h i c h the w o r k o f
e v e r y e m p l o y e e i s assessed a g a i n .
I t has b e e n f o u n d t h a t t h e a v e r age w e e k l y p a y o f t h e
m e n has
gone u p b y £ 1 Is. 5d. a n d the
w o m e n ' s b y 13s. 1 d . A n d w h a t i s
more important, the company is
n o w g e t t i n g n e a r l y five for e v e r y
three tyres produced before
the
i n t r o d u c t i o n o f the scheme. A b s e n t e e i s m has b e e n p r o d u c e d b y
81 per cent, u n p u n c t u a l i t y by 41
per cent and scrap a n d waste by
40 per cent. A l l this means considerable i m p r o v e m e n t in indust r i a l efficiency and, therefore, i n creased p r o d u c t i o n .
T h e above are b u t a few illustrations of the
many incentive
plans w h i c h are in existence and
w h i c h are helping industrial recovery abroad. It w i l l be noticed
that the various
plans of wage
incentives described above recognize t w o fundamental principles;
viz., (1) T h e a m o u n t of the wage
is based u p o n the q u a n t i t y and
q u a l i t y of w o r k done and (2) the
w a g e scale i s e s t a b l i s h e d w i t h d u e
regard to the relatively higher
value of skilled w o r k of higher
1 9 t h N o v e m b e r 1949
quality and to the importance of
the w o r k to the general economy.
The system of wages
by output
is thus best s u i t e d to
ensure
a
correct appraisal of the quality
a n d q u a n t i t y of the w o r k done, to
develop p r o d u c t i v i t y and thereby
to increase the w o r k e r s ' earnings.
B e a r i n g these f u n d a m e n t a l p r i n ciples i n m i n d , industries i n I n d i a
m a y adopt one or other of the
above m e n t i o n e d wage incentive
plans w i t h such modification a n d
c h a n g e s a s a r e c o n s i d e r e d necessary according to the nature of
t h e m a n u f a c t u r i n g processes e m p l o y e d and of the conditions of
work.
I had already indicated in my
earlier article (vide "Wage Payments vis-a-vis Wage Incentives",
The Economic Weekly, 12th N o v e m b e r . 1949) n o t o n l y t h e e x i s t i n g
gaps i n t h e w a g e s y s t e m o f I n d i a
b u t also t h e d e s i r a b i l i t y a n d fea-
sibility of introducing wage i n centives to step up p r o d u c t i o n as
has a l r e a d y b e e n done i n B r i t i s h
and A m e r i c a n industries.
With
inflationary
tendencies
still operating in our economy and
production
persistently refusing
to look up, we have been caught
in a vicious circle w h i c h must be
b r o k e n at some p o i n t
or other.
Increased production on a l l fronts
is the c r y i n g need of the h o u r to
f i g h t scarcity, inflation and rising
prices. D e v a l u a t i o n of the rupee
has a d d e d t o t h e u r g e n c y o f
greater p r o d u c t i v e effort. If they
can i n d u c e l a b o u r t o j o i n hands
w i t h the Government. and
the
i n d u s t r y t o press o n w i t h p l a n n e d
p r o d u c t i o n , o u r captains of indust r y w i l l h a v e s o l v e d I n d i a ' s economic problem No. 1
and done
y e o m a n service to the cause of
the nation's peace a n d p r o s p e r i t y .