Suggestion Schemes

Prepared by: Bhakti Joshi

Date: January 30, 2013

Meaning
Focus on employees

Who do
the real
work?

Ideas for improvement and

innovation

What kind
of
processes
are
Target creative minds and talent
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 Demings

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
(administratio
n,
maintenance,
etc)
Tendency to
creep
upwards
(inflation,
promotion,
etc)
Easier from an

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
Outputrelated
payment
Encourages
effort at the
cost of quality
Home-based
workers, subcontractors
Working hours
are
unaccountabl
e
Earnings
mostly below

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?
144
0

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 the96
wage rate under Rowan plan?

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?

959.8
3

Differences & Comparisons

Advantages

Disadvantages

Straight Piece
Rate

Simple and easy to

understand
Focus of Productivity
Satisfaction to efficient
and fast workers

Straight Piece
Rate with
minimum
guarantee

Encouragement for
No standardised basis for
higher production
minimum guarantee
Efficient methods can Beginners and average
be adopted to increase workers cannot earn enough
production
due to inability to work faster
Easy to prepare
Quantity will be
quotation estimates and overemphasised than quality
budgets
(unless there is close
No pay for idle time
supervision
Less supervision cost Overwork and health
concerns
Not suitable for intermittent

No quality focus
No job security
No compensation for
breakdown or sickness
No guarantee of minimum
wage
Discourage group effort

Differences & Comparisons

Advantages
Simple
Beneficial for efficient
Hasley premium worker
Plan
Causes no harm to
trainee, new or slow
worker
Benefits sharing
Minimum base-wage
guaranteed
Checks over-speeding
overstrain by workers
Assured minimum
Rowlan Plan
base-wage
Efficiency is rewarded

Disadvantages
Workers get a small
percentage of return over
their achievement
Quality may suffer due to
over-achievement
Management gets a wrong
picture of workers ability
Discourages workers to overachieve
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
Governments 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

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

V.D.A

No

105.00
100.00

Variable Dearness
Allowance: To protect
minimum wages from

Wages in India (Contd)

Scheduled
Employment

Automobile
Repairing
Workshops
and
Garages

Zone

Basic
Minimum
Wages

V.D.A

Total
Minimum
Wage
(Rs/Day)

Unskilled

73.08

53.31

126.38

Semiskilled

76.92

Skilled

80.77

53.31

134.08

Unskilled

II

69.73

53.31

122.54

Semiskilled

II

73.08

Skilled

II

76.92

53.31

130.23

Unskilled

III

65.38

53.31

118.69

Semiskilled

III

69.23

Skilled

III

73.08

Category
of
Workers

53.31

53.31

53.31
53.31

130.23

126.38

122.54
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

NonFinancial

Incentives

Car and its

maintenan
ce
Club
membersh
ip
Paid
membersh
ip
Furnished

Job context
Challenging
job
Responsibilitie
s
Growth
prospects
Supervision
Working
conditions
Job sharing

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: Prerequisites

Job content job description and
specification
Top management support
Cooperation of union and individual
workers
Comparison of Jobs
Involvement of expert in jobevaluation 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 well-defined 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.ne
t