WAGE SYSTEMS

Evening Star, Issue 23335, 3 August 1939, Page 16

WAGE SYSTEMS

INCENTIVE TO WORKERS ADDRESS TO SECRETARIES At the conclusion of the formal business at the annual meeting of the Otago Chapter of the New Zealand Institute of Secretaries, which was held in the Returned Soldiers’ Club rooms last night, members were addressed by Mr M. J. Boardman on the subject of incentive wage systems. The speaker dealt with a number of systems in use in various parts of the world and explained their workings. Mr Boardman introduced his subject by defining wages as the reward for work; the amount the worker was entitled to receive for doing a certain job or for working at a task for a defined period. Any person hiring out his services for reward could. be considered as a wage earner, but in practice it was more usual to include as wage earners only those workers who were paid by a daily or weekly wage as opposed to the salaried class of worker who received a monthly or yearly sum, which might be only indirectly related to the amount of work actually performed during the same period. “ As secretaries we are familiar with the type of work which has a tendency to fluctuate in volume depending on many factors—the seasons, balance dates, Government' returns, all these tend to vary the amount of work from month to month,” he_ said. “ A salaried worker then receives wages for doing a certain amount of work which may . be spread over a. period of 12 months, whereas a wage earner, for the purpose of this talk, can be,considered as a person whose reward or wage is a direct cost, of production, and is: (a) A fixed weekly or daily amount paid in most cases irrespective of the amount of work, but depending on the number of hours worked in the period; or, (b) an amount determined by the output of the worker over a similar period. “ The aim of any manufacturer must be to produce goods at the lowest possible cost consistent with quality. As direct wages form a_ very large part of tho cost of it follows that any economies effected in labour either by increased output for tho same labour or the same output for less labour must be immediately reflected in the cost of the goods produced. “ The problem is to pay a rate of wages high enough to attract labour to the industry and at the same time, by making working conditions, hours, etc., attractive, to facilitate production and provide the basis for increased output without increased strain on the workers. The various wage systems which have been devised are the attempts to get over this problem by providing an incentive to workers to make their best efforts and yet to safeguard the - industry from uneconomic costs. Out of these conditions there emerges a long-run tendency for wages to rise, with a decreased cost of production per unit.’ Mr Boardman said that tho methods of computing wages were numerous, but could be considered under ■ the following headings:—The , day-rate system, the piece-work system, differential piece-rate plan, the premium system, the bonus system, the oontract system, the profit-sharing plan, and the stock distribution plan. DAY-RATE SYSTEM. “ The day-rate system is so well known that it requires little explanation,” said the speaker. “The only variations consist in payment by hourly or daily rates, while in some cases weekly rates are fixed. The rate paid may depend on the skill required, the locality of the plant, the demand for labour, or any special conditions such as the nature of the work, etc. “ The day rate is the original method for paying wages. However, as has been stated, so many other plans have been devised to get away from it that it is obvious that there are grave defects in the system.” The chief disadvantages were enumerated as being lack of incentive to effort and the difficulty of finding labour costs. The lack of incentive was attributed by Mr Boardman to there being nothing to gain, the dead level of performance being reduced to its lowest, the fear of losing, the job, or the small quantity and lack of quality of work through lack of interest. In finding costs it had been discovered that product varied,' but wages remained constant, and were applicable where the work was purely a function of time, such as firemen, watchmen, foremen (but wages may he tied to production), instructors, or in repair work. PIECEWORK. “ Piecework, as tho name implies, is payment on the basis of the amount of work done, and at first glance would appear to be a fair method both from the point of view of the employer and the worker,” said Mr Boardman. “ A rate is established for the various operations of manufacture either as a result of past experience or by means of jecial tests. The second is the usual means of finding the rate as by the first the defects of past practice are merely perpetuated, and this is the very thing the system proposes to abolish. When fixing the rate due allowance must be made for all factors which will interfere with or impede the worker in carrying out the particular operation, such as heat, eye strain, tediousness, danger, fumes, dirt, dust, wet, noise, etc. If the. rate fixed is fair no undue friction should arise, but the whole success of the system depends on the rate, and very great care should be exercised in fixing and particularly in maintaining it when fixed. “ A reason for failure of this system is in fixing a rate which is obviously too high. Obvious, that is, after tho experience of working under it, although when fixed it may have been considered reasonable in view of the work being performed under a daily rate plan. “ Under the stimulus of payment proportionate to effort the rate of production may show enormous gains, and the employer may find that production has increased up to 50 per cent. Even if allowance has been made for a certain increase the workers’ earnings may go up aa much as 25 per cent, to 30 per cent. This will have the effect of making the employer think his workers have been “ slacking ” in the past, and are now getting too great a share of the value of the work done. He then proceeds to cut the rate and trouble with the workmen commences. The natural outcome of this is for production to become limited to what may be considered a safe margin. It is considered that under piecework or any other system of individual incentive there is a tendency for the efficiency of all workers to be lowered to the general average.” DIFFERENTIAL PIECE RATES. Referring to the differential piecerate system of payment, Mr Boardman

said it was an extension of the ordinary piece-rate method, and consisted in fixing not only a, rate per operation or piece, but also applying time rates to tho work. “ The method used is to fix a piece rate in the ordinary way, and this is applied to a certain amount of production in a given time. If the worker can produce more than the fixed amount lie is paid a higher rate, either .on the whole amount produced or on that part of the output which exceeds the sot standard. It will be obvious that the caution necessary in fixing rates on an ordinary piecework basis is applicable to this system, and needs even more to be emphasised, since any error in the original or standard rate will be multiplied by the amount or percentage of increase. PREMIUMS AND BONUSES. “ Tho difference between the premium system and ordinary piece rates lies in basing the wages on a time rate instead of quantity produced, and paying extra wages for time saved. A rate is fixed on a time basis for makii,,r an article or carrying out a process in manufacturing, and any production over the standard in the time allowed is paid for at premium rates. The simplest form of bonus system is the payment of a daily wage plus a piece rate on each article in excess of a specified minimum. The differential bonus system is the same, except that an increasing scale is fixed for increasing performance.” Different forms of px-omium and bonus system were then referred to by Dir Boardman, who explained the various factors governing their use. No matter what method of computing wages was selected, he said, the greatest care must be exercised in introducing the system. The workmen were conservative and suspected any change as being to their detriment, so that the fullest explanations had to be made. Cooperation was essential for success, and if a scheme was sound and workable its success would be reflected in lowered costs and increased production. Mr Boardman was accorded a hearty vote of thanks for his informative address.