Give a detailed discussion on methods used in determining wages

a) Time rate method
Under this method payment is made on the basis of time which may be hour, day, week,
month, ie the workers are paid according to the number of hours worked during a
particular period. Hourly rate is determined in advance at the time a worker is employed.
This hourly rate is multiplied by the number of hours worked in a particular period.
Advantages
- It is a convenient method and the wages can be determined easily.
- Employees can forecast their income and they are ensured to receive it.
- This method eliminates the need to measure the performance of the workers.
- It is more suitable for jobs where work cannot be divided into smaller units eg work for
drivers, secretaries, accountants, etc.
Disadvantages
- It discourages efficient workers because they receive the same amount which is received
by the insufficient and lazy workers.
- This method requires close supervision of the employees.

b) Piece rate method
Here an employee is paid per unit of product, article or per job completed. This method is
only used if the job can be divided into uniform pieces as is often possible for factory
jobs eg textile, house of manji, etc.
A worker at house of manji can be paid kshs. 100 for every 400 pieces of biscuits he
produces, this is called piece rate.
Advantages
- It produces an incentive to the more efficient workers. They are paid according to the
work done, so they get more income.
- Does not require more supervision of employees.
- Provides the employer with an easy way of determining labour cost per output of a
product.
- It minimizes pilferage as workers take care of their products.
Disadvantages
- Workers can produce poor quality products in order to produce greater quantities in a
short time.
- This method cannot be applied to those jobs that are not easy to divide into smaller
pieces.
- This method does not ensure a stable monthly income for workers.

c) High time rate for overtime
Under this method normal working hours are paid at the normal time rate, but for
overtime worked during weekdays and weekends, a high rate is paid in order to make the
workers to work for more hours. Usually the normal working days and hours are Monday
to Friday and eight hours a day respectively. While on Saturday it is five hours.
Therefore, in a week normal working hours are 45.

d) Piece rate with guarantee
Under this method a specific amount is paid to the workers on monthly or daily basis
irrespective of units produced by him or her during that period, but if his/ her output
exceeds a minute’s unit, he/she is paid according to piece rate method. This method
ensures a specific daily or monthly income of workers. Lower output in a specific period
may result due to reasons not related to the efficiency of workers such as;
- Shortage of materials
- Power failure
- Shortage of water
- Machinery breakdown
In such cases, then the guaranteed wage is paid to the workers.

f) Group incentive scheme
Although individually based incentive schemes are common and frequently successful,
on occasions they are inappropriate and some form of group scheme is used. These
schemes are likely to be more appropriate;
- Where production is based on a group/ gang basis eg road surfacing, coal mining
- Where production is integrated and all efforts are directed towards the same ends, eg all
forms of production line manufacture, cars, and domestic appliances.
- Where production methods or products makes it impossible to measure individual
performance.

Advantages
1) May engender closer cooperation in the group and a team spirit
2) It is administratively simpler with far less recording of labour time, production rates etc.
3) It support ; workers not directly associated with production can easily be included in the
scheme
4) May encourage more flexible arrangements within the group
Disadvantages
1) Less direct than individual schemes so may not provide the same incentive
2) Less hardworking members of the group receive the same bonus and this may cause
friction
3) Not always easy to obtain agreement on proportion of the bonus which group members
will receive

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NatalieR answered the question on May 16, 2022 at 13:04