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Methods of Wage Payment

Labour is one of the main factors of production. The success of a concern depends upon the efficiency of labour to a great extent. Low wages do not necessarily result in low cost of production. Actually there should be optimum wages for remunerating labour and any single method cannot be recommended for all business concerns. However, there are some factors which are to be considered carefully before adoption any particular method of labour remuneration.

Factors to be considered

Mutual benefit

The wage system should be the best combination of interest of both the employer and the employees. From the employer’s point of view, the cost of labour should be the minimum with the maximum of qualitative output. From workers’ angle, the wages should be fair and equitable and should be adequate reward for the efforts put in by them. The workers should also be allowed to share the profits of prosperity periods in the form of increased wages or bonus.

Easily understood

H.J. Wheldon has rightly remarked – “Strikes and agitations have arisen where wages schemes are complex, and not understood by the workers.” Hence, in promoting a special method of payment care must be taken to see that it is not only understood, but also appreciated as a reasonable one by the workers.

It should be such as to avoid strikes as well as lock-outs and thus promoting harmonious relations between the employer and the employees.

Minimum wages

Workers must get a minimum wage under the system. Moreover, the system should provide incentives for an efficient worker for arousing his interest further in the work. Thus, human factor should be given due prominence.

Simple operation

The wage system should be easy to understand and simple to operate. Complex calculations may arouse suspicion in the minds of illiterate labourers.

Flexibility

Flexibility in the system of wage payment is an essential factor to be considered so that the system may be changed whenever required.

Time wage system

The system under which the payment is made to the workers according to the time for which they work is known as Time –wage system. The time-rate is fixed beforehand and workers are remunerated for the hours of work done by them. For example, an employee has to work for 8 hours daily in factory, and the rate per hour fixed by the management is $ 2; the total remuneration per day shall be $ 8 × 2 = $ 16. The payment can be made according to the rate per hour, day, week, fortnight or month. There is a guarantee given to the worker that he will get a fixed minimum for a specified period of time.