It is customary in office work and many other lines of endeavor to pay the worker on a straight-time basis; that is, so much an hour, so much a day, so much a week, so much a month, or so much a year. Such a basis is simple to compute. It involves no intricate bookkeeping; it gives the worker security. However, it does not reward the worker in terms of his actual effort. The worker at his job receives his pay just as regularly as the worker who is ambitious, and the only redress is the vigilance of the management in seeing to it that the loafers are eliminated or not given raises and that the others are rewarded. The discussion of personnel rating plans under \”Promotion\” gives some basis for adjusting the compensation of straight-time workers. Straight piece work as such is not possible any more under the terms of law and many laws which require a guaranteed minimum wage.

Straight piece work pays the worker for what he does. This encourages the worker to produce greater quantities. However, it may give the worker a sense of fear and extreme urgency, to a certain extent, and it requires the vigilance of the management to guard against imperfect work being turned out. The management bears very little expense when no work is done. If the worker cannot work because the management fails to provide work, he has a distinct grievance which leads to difficulties.

Incentive wages cover a multitude of schemes of various types. The prevailing method of payment is a guaranteed hourly wage-usually above the legal minimum and determined by union-management negotiation and contract-plus the equivalent of a piece rate superimposed so that the worker is really earning piece rates. Incentive wages of this type have continued ever since. They are eminently fair to both management and labor because:

(1) They reward labor in direct proportion to the effort put into the work,
(2) Management has the advantage of greater production without greater capital investment, overtime, or in some cases multi-shift operations. There are certain lines of business, however, in which incentive wages receive no acceptance whatsoever, notably the building trades, where bricklayers, carpenters, electricians, and other craftsmen traditionally work on a time basis.

Groundwork for an incentive wage plan – No incentive wage plan can take the place of good top management, of sound labor policies and practices, and of understanding and constructive leadership on the part of the foremen and supervisors. Management needs first to ensure that its house is in order. Then, when work has been simplified, methods improved, and a satisfactory alignment of jobs made, the groundwork has been laid for devising and installing a wage incentive system.

Incentives should not be adopted until proper standards have been developed. Job standards are not permanent, for they are subject to improvement, but they are the one best way at the moment and they should represent the most advanced practical method of job operation. If they do not, the workers are inclined to run away with earnings under a wage incentive plan. If management then cuts the rates, difficulties arise, and the wage incentive plan is in disrepute with the workers.

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Category: Business
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