Incentive Wage System | Halsey | Rowan | Taylor | Gantt Task

 

 

Accounting for Premium Plan of Wages

The premium plan is also called the incentive wage system and bonus plan system.

Time and piece wages system have their own advantage and disadvantage.

Due to the disadvantages of the time and piece wage system, this incentive wage system has been developed.

It is developed to provide financial benefits to skilled workers.

Workers are separated as skilled and unskilled. Some common features of this system are:

Time wages are guaranteed

As production increase, labour remuneration also increases; but not in proportion to output.

As for efficiency increase, wage cost per unit reduces.

 

Keep in Mind (KIM)

Halsey premium plan, Rowan premium plan, Taylor system and Gantt task system are not in syllabus of 10+2 level.

These plans are given only understanding for incentive plan.

These plans are studied at the Bachelor level.

 

 

Halsey Premium Plan

This plan has been introduced by F.H. Halsey an American engineer in 1891.

This scheme provides workers hourly wage for the time taken to do work plus 50% (0.5 or ½) bonus time saved at an hourly rate.

The remaining 50% of the bonus is left for other workers.

Standard time is prefixed for every job or work.

 

Basic wages	=		Time taken x Wage rate
Bonus	=		50% (Standard time – Time taken) x Wage rate
Or	=		½(Time saved) x Wage rate
Wages  with premium plan	=	Basic wages		+	Bonus
Or	=	Time taken x Wage rate		+	50 % (Standard time – Time taken) x Wage rate
	=	(TT x WR)		+	0.5 (ST – TT) x WR

 

 

Keep in Mind (KIM)

The bonus calculation limit is 30% to 70%. In other words, 40% or 60% is also possible if given in the question.

 

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

PROBLEM: 3A

The extracted data are given related to labour:

Standard time fixed for production	50 hours
Time spend by worker	40 hours
Wage rate per hour	Rs 40

Required:  (1) Bonus under Halsey plan; (2) Total wages under Halsey plan

[Answer: Bonus = Rs 200; Total wage = Rs 1,800]

Solution:

Bonus under Halsey plan

Bonus	= 50% (Standard time – Time taken) x Wage rate
	= 0.5 (50 – 40) 40
	= 0.5 x 10 x 40
	= Rs 200

 

Total wages under Halsey plan

Total wage/earning	=	Basic wages + Bonus
	=	(Time taken x Wage rate) + Bonus
	=	(40 hours x Rs 40) + Rs 200
	=	1,600 + 200
	=	Rs 1,800

 

Alternative,

Wages under premium plan	= Time taken x Wage rate + 50 % (Standard time – Time taken) x Wage rate
Or	= (TT x WR) + 0.5 (ST – TT) x WR
	= (40 hours x Rs 40) + 0.5 (50 – 40 hours) Rs 40
	= 1,600 + 0.5 x 10 x 40
	= 1,600 + 200
	= Rs 1,800

 

 

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Rowan System

This plan is introduced by David Rowan in 1901 A.D.

Under this system, a basic wage is guaranteed for the actual time attended by the workers.

Standard time is preset for the task or work.

Bonus is allowed to the worker if he/she completes work before standard time.

 

Basic wages	= Time taken x Wage rate
Bonus	= (Standard time – Time taken) ÷ Standard time x Time taken x Wage rate
Or	= (Time saved ÷ Standard time) x Time taken x Wage rate

 

Wages with premium plan

Wages	= Basic wages	+	Bonus
Or	= Time taken x Wage rate	+	(Time saved ÷ Standard time) x Time taken x Wage rate
	= (TT x WR)	+	(TS ÷ ST) x TT x WR

 

 

Keep in Mind (KIM)

Actual remuneration = Basic wage = Time taken x Wage rate per hour

 

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

PROBLEM: 3B

The extracted data are given below:

Standard working hours in a week	48 hours
Worker took time to complete work	40 hours
Wage rate per hour	Rs 36

Required:   (1) Basic wage under Rowan system; (2) Bonus under Rowan system;

(3) Total wages earned under Rowan plan

[Answer: (1) Rs 1,440; (2) Rs 240; (3) Rs 1,680]

Solution:

Basic wages under Rowan system

Basic wages	= Time taken x Wage rate
	= 40 hours x Rs 36
	= Rs 1,440

 

 

Bonus under Rowan system

Bonus	= [(Standard time – Time taken) ÷ Standard time]	x Time taken x Wage rate
	= [(48 – 40) ÷ 48]	x 40 hours x Rs 36
	= 8 ÷ 48	x 1440
	= Rs 240

 

 

Total wages earned under Rowan plan

Total wage earned	= Basic wage + Bonus
	= Rs 1,440 + Rs 240
	= Rs 1,680

 

                  

Taylor System

Fredrick W. Taylor is known as the father of scientific management. He recommended wages for a lower rate of 83% and a higher rate of 125% for standard time.

This system was designed to differentiate between skilled and unskilled workers.

The skilled worker receives a higher rate.

Unskilled woeker receives lower rate.

 

Efficiency below standard 100%	= 83% of standard piece rate
Efficiency equal standard 100%	= 125% of standard piece rate
Efficiency above standard 100%	= 125% of standard piece rate or given rate

 

 

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

PROBLEM: 3C

Extracted data are taken given below:

Standard time		4 units per hour
Standard rate		Rs 32 per hour
Working hours during a day		8 hours
Units produced by the worker during 7 days are:
Ms Rajani	220 units
Ms Beenu	235 units

Required: (a) Wage payable to workers under Taylor’s differential piece rate; (b) Effective hourly wage rate

[Answer: Rajani = Rs 1,460.80; Rs 26.09;

Beenu = Rs 2,350; Rs 41.96]

Solution:

Given and working note:

Wage rate per unit	=   Rs 32 ÷ 4 units	= Rs 8
Standard output in 7 days	= 8 hours x 4 units x 7 days	= 224 units
Working hours in 7 days	= 7 days x 8 hours	= 56 hours

 

Ms. Rajani = 220 units

It is less than standard output; she will receive 83% of the piece rate.

Wage payable	= Output x Wage rate per unit @ 83%
	= 220 units x Rs 8@83%
	= 220 units x Rs 6.64
	= Rs 1,460.80

 

Effective hourly wage rate

= Rs 1,460.80 ÷ 56 hours

= Rs 26.09

 

Ms Beenu = 235 units

It is more than the standard output; she will receive 125% of the piece rate.

Wage payable	= Output x Wage rate per unit @ 125%
	= 235 units x Rs 8@125%
	= 235 units x Rs 10
	= Rs 2,350

 

Effective hourly wage rate

= Rs 2,350 ÷ 56 hours

= Rs 41.96  

 

 

Gantt Task Systems

This is the combination of the Halsey and Rowan premium system.

Under this system, the minimum wage is guaranteed.

It protects average workers by providing time rate wages.

Efficient worker gets 20% bonus for standard work.

This system is also known as the progressive rate system.

 

Output below standard	= Standard production x Piece rate
Output equal standard	= Production units x Time rate @ 120%
Output above standard	= Production units x Piece rate@120% [or given in the question]

 

Keep in Mind (KIM)

If any worker produces less than standard output, he/she will receive minimum guarantee wages

Total wage = Standard production x Piece rate

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

PROBLEM: 3D

The extracted data is given below related to the Gantt task system:

Standard production per day			80 units
Standard working time per day			8 hours
Wage rate per hour			Rs 28
Above standard output wage rate			Rs 3.50 per unit
Units produced by workers:
Anjana	75 units
Binita	80 units
Chanda	90 units

 

Required: Earning per day under Gantt task bonus scheme

 [Answer: Anjana = Rs 224; Binita = Rs 269; Chanda = Rs 315]

Solution:

Given and working note: 

Standard output per hour = 80 units ÷ 8 hours        = 10 units

Standard piece rate per unit = Rs 28 ÷ 10 units       = Rs 2.80

 

Anjana = 75 units        

It is less than standard production. Bonus is not allowed. She will receive minimum guarantee wages.

Total earning	= 80 units x Rs 2.80
	= Rs 224

 

Binita = 80 units

It is equal to standard production. She will receive 20% bonus on piece rate.

Total earning	= 80 units x Rs 2.80 @ 120%
	= 80 units x Rs 3.36
	= Rs 268.8 or 269

 

Chanda = 90 units

It is more than standard production. She will receive Rs 3.50 per unit 

Total earning	= 90 units x Rs 3.50
	= Rs 315

 

 

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PROBLEMS  AND  ANSWERS OF  INCENTIVE  WAGE  PLAN

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

PROBLEM: 3A

The following data is given below related to one working day:

The standard time for production           10 hours

Guaranteed time rate (wage rate) Rs 34 per hour

Total earning under Halsey plan             Rs 323

Required: (under Halsey plan) (1) Time taken; (2) Time saved; (3) Bonus

[Answer: Time taken = 9 hours;

Time saved = 1 hour; Bonus = Rs 17]

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

PROBLEM: 3B

The extracted data related to Rowan plan are given below:

Standard time prefixed by company      10 hours

Actual time taken to complete work by worker       8 hours

Wage rate per hour     Rs 30

Required: (1) Basic wages; (2) Bonus; (3) Total wages

[Answer: (1) Rs 240; (2) Rs 40; (3) Rs 280]

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

PROBLEM: 3C

The extracted data related to Taylor’s differential plan are given below:

Standard production per hour       10 units

Normal time rate per hour  Rs 40

Below standard 83% of piece rate

Above standard 125% of piece rate

In 8 hours working day units produced by:

Worker A   70 units

Worker B   85 units

Required:  (1) Piece rate; (2) Total earning of each worker under Taylor’s differential plan

[Answer: (1) Rs 4; (2) Rs 232.40 and Rs 425;

* Piece rate = Rs 40 ÷ 10 units = Rs 4]

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

PROBLEM: 3D

The extracted data is given below related to the Gantt task system:

Standard production per day 80 units

Standard working time per day 8 hours

Wage rate per hour Rs 32

Above standard output wage rate per unit Rs 3.80

Units produced by workers:

A       75 units

B       80 units

C       100 units

Required: Earning per day under Gantt task bonus scheme

 [Answer: A = Rs 240; B = Rs 307.20; C = Rs 380;

* Standard piece rate = Rs 32 ÷ 10 units = Rs 3.20]

 

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