There are more chances of fraud and manipulation in wage payment than any other transaction.
So, strict control must be exercised at the time of wage payment.
For avoiding frauds and manipulation, the proper and systematic procedure should be adopted.
The procedure should be designed in such a way that it should be difficult to do fraud.
The following types of frauds are commonly seen:
Inclusion of dummy or ghost workers in the payroll.
Manipulating the hours worked in job cards.
Recording bogus overtime.
Using the wrong rate of pay in the payroll.
Manipulating wages calculations.
Making a payment to the wrong person.
Making a worker present who was actually absent.
Making a payment to worker twice etc.
a. |
The wages of workers should be paid in the presence of a supervisor or departments head so that the worker can be identified. |
b. |
Each worker should be provided with an identity card with a photograph and necessary information to identify the worker. |
c. |
To avoid bogus entries in the payroll, it should be verified with timekeeping and bookkeeping. |
d. |
The payroll should be certified by the person who prepared it and gets it signed by the manager. |
e. |
To avoid fraud, the cashier should not be associated with the payroll section. |
f. |
Pay pocket must be prepared for each worker with his name and card number but the amount is not written there. |
g. |
The term of remuneration and bonus scheme should be clearly defined. |
h. |
A suitable internal check system must be applied in the payroll section. |
I. |
If any worker is sick or unable to present himself, the wage is to be given only to an authorized person. |
j. |
Undistributed wage is to be entered in the unpaid wage account book. |
k. |
Outstation workers are to be paid by the head office etc. |
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The wage system should be planned with great care.
The most suitable wage system helps to increase the efficiency of the workers.
It also brings satisfaction to the workers.
An ideal wage payment system should have the following characteristic:
It should be easily understood by workers.
It should ensure satisfaction to both the employees and employer.
The system should provide sufficient incentives to workers to work hard.
It should guarantee a minimum wage at a satisfactory level.
It must be accepted by the trade union.
It should have flexibility.
It should reduce labour turnover.
It should be economical to operate.
It should reduce absence and late attendance.
It should be consistent with government policy.
It should encourage productivity.
There are different systems of wage rate; out of them, some important or frequently used wage rate systems are given in the box.
Time rate system: |
Time rate |
High wage plan measured day work |
Difference time rate |
|
Piece wage system: |
Straight piece work |
Difference piece work (time or output-based, Taylor system) |
|
Incentive wage system: (premium bonus system) |
Halsey system |
Rowan system |
Labour cost can be defined into two ways; direct labour or wage cost and indirect labour or wage cost.
The labour who is directly engaged with production is known as direct or productive labour.
The payment paid to direct labour is called direct wages.
Such wages are expressed in term of the unit of output (production or service)
Examples:
Wages paid to stitches in a garment factory
Wages paid to a carpenter in a furniture industry
Wages paid to weavers in cloth mill etc.
Wages paid to workers engaged other than manufacturing are called indirect labour.
Such workers do not engage in production activities directly.
They support to direct workers.
Indirect wages cannot be expressed as per unit of output (production or service)
Example:
Remuneration paid to factory managers
Salary paid to factory foremen, inspectors, helpers, cleaners, guards etc.
Generally, there are three systems for wage payment; they are:
Time wage system
Piece wage system
Incentive wage system
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