The world has not yet invented a more effective way of personnel management than wages. Being the main source of income for employees, wages have a dominant effect on labor productivity and employee qualifications.
Choosing a pay option is an important step for an organization. It should be simple and clearly demonstrate to workers the relationship between the quality of work and the level of remuneration.
Pay options
There are two main systems of remuneration: piece-rate and time-based. All other forms are varieties of these two systems.
Most often, organizations use a time-based wage system. With this form of payment, salaries are accrued to employees based on the tariff rate established for each type of work and the actual hours worked. In this case, wages are calculated by multiplying the hourly / daily wage rate by the number of hours / days worked.
A type of time-based payment is a time-based premium form of payment. In this case, a bonus for achieving certain results is added to the salary calculated according to tariff rates. Bonuses are paid monthly in the form of a fixed amount or percentage of the basic salary.
The piece-rate pay system is usually applied in manufacturing, where the results of labor can be calculated. To implement this system, the enterprise needs to establish piece rates for each type of work performed.
Piecework is called a wage system in which wages are charged for each unit of work performed or products produced. Piece-rate payment is divided into: direct piece-rate, indirect piece-rate, piece-bonus, piece-rate progressive and lump-sum systems.
In direct piece-rate wages, wages are calculated by multiplying the quantity of products produced by the price of each unit.
An indirect piece-rate system of payment is used to calculate wages for workers engaged in servicing the main production, the quality of whose work depends on the production of products by the main workers. This system is usually used for workers involved in the repair, maintenance and adjustment of equipment in main shops.
Under the piece-rate-bonus system, along with the salary calculated according to piece-rate rates, a bonus part is paid for achieving high performance in work. These indicators include a decrease in the level of manufacturing defects, an increase in product output, and resource savings.
Piece-piece-progressive form of payment provides for increased prices for each unit of products produced in excess of the established base.
With a lump-sum system, wages are set for the entire volume of work or products produced. The establishment of this form of payment encourages employees to quickly and efficiently perform work.
Modern pay systems
In connection with the transition to a market economy and an increase in the number of organizations of various forms of ownership, the use of traditional wage systems has become impractical. These systems are outdated and do not meet the real requirements of the modern labor market, do not take into account the individual contribution of the employee to the final result. All this led to the use of new tariff-free systems.
The tariff-free system has collected all the advantages of time-based and piece-rate wages and provides a direct relationship between the level of wages and the results of the work of an individual employee and the entire enterprise as a whole.
The use of modern payment systems gives employees the opportunity to earn more, contributing to the achievement of high results throughout the organization. The firm gets motivated employees to do more in order to earn more. At the same time, the system carries out natural selection: to replace workers who have not withstood the competition, new, more purposeful ones come.
The choice of the wage option is a very important issue for the company. The efficiency of the firm's work and its competitiveness depend on the correct choice of the remuneration system.
