Pay Schemes: Definition; Time Rate; Piece Rate; Merrick; Gantt; Halsey Premium; Halsey Weir; Rowan And Barth

The following are the EIGHT pay schemes adopted by most of the firms in any country. Each pay scheme is explained in details as per the respective articles for each type of pay scheme. They are;

2.1 Time Rate Method

2.1.1 Definition:

Time Rate Method is an approach for computing labor cost which is based on the time taken at work place whether one has actually utilized the time for productive output or not. The employees are paid based on the time rate set for the amount of time they spend at work. The rates are on either weekly or monthly basis which is termed as the standard working time and can for instance be either 35 or 40 hours per week.

2.2 Piece Rate Payment System

2.2.1 Definition:

Piece Rate Payment system is a method of computing the labor cost for the employees which is pegged on the pieces an individual employee produces within a given period. This formula is categorized in to two broad types, namely:

Straight piece rate system
and

Differential piece rate system

Definition:

Straight Rate Method is a Piece Rate Payment System affiliated approach which entails a piece rate which is set per piece of work or output produced and the total number of the units produced.

When using Straight Rate Method, the time taken does not matter for this is a scheme where payment of the employees is pegged on results/output. In other words, the method advocates for worker’s efficiency. The intention of the developers of this method was to overcome the challenges faced in the case of Time Rate Method which focuses much on time worked which may not really be the exact time worked.

b). Piece Rate Payment System-Differential Piece Rate System (by F.W. Taylor)

Definition:

Differential Piece Rate System is a Piece Rate Payment System affiliated approach is a method of computing labor cost where by an employee is paid at a higher wage rate for completing the job within a shorter time set or expected time. To the contrary, an employee is paid less if he or she takes more time than the set or expected time to complete the same job. The method was developed by F.W. Taylor.

2.3 Merrick Differential Piece-Rate System

Definition:

Merrick Differential Piece-Rate System is methodology where by the employer pays the inefficient employee a minimum amount of income wage even if he or she accomplishes production of the expected output past the set or predetermined period.

Merrick Differential Piece-Rate System is Taylor’s differential piece-rate system modification which was developed by Merrick to solve the harsh and discriminative Taylor’s method of rewarding of employees.

Definition:

Gantt Task Bonus Plan is a wage incentive method of rewarding the employees who outperform the expected set output by the organization. In this case, high task efficiency is maintained by providing a bonus expressed in percentage form as a recompence for producing extra above the set standard output.

2.5 Halsey Premium Plan (Halsey, Doolittle, and Emerson)

Definition:

Halsey Premium Plan is an incentive scheme where by the employer sets a standard time such that when the worker is undertaking the task, he or she adheres to it when doing each job or operation but then the worker is given wages for the actual time, he or she takes to complete the job or operation at the agreed rate per hour plus a bonus equal to (usually) one-half (50% of the time saved) of the wages of the time saved.

2.6 Halsey-Weir Plan (A modified Halsey Premium Plan)

Definition:

Halsey-Weir Plan is a scheme or employee rewarding methodology which is pegged on rewarding of the employees with some bonus for finishing the task before the time limit.  Generally, the bonus set aside is a percentage of the wages gotten by the employee.

2.7 Rowan System

Definition:

Rowan System is a plan for rewarding employees where by the method advocates that an employee be paid according to the time rate set if he or she takes more than the set period to finish the task. But a bonus is tied on one’s salary if the same task is accomplished within a shorter time than stipulated.

2.8 Barth Variable Sharing Plan (by Barth and Co)

Definition:

Barth Variable Sharing Plan is a rewarding scheme where by the employer does not promise to pay anything extra amount to the employee even if the latter has worked overtime. So, this approach does not give a time rate guarantee to the worker. This implies that workers are only paid for the standard hours.

About the Author - Dr Geoffrey Mbuva(PhD-Finance) is a lecturer of Finance and Accountancy at Kenyatta University, Kenya. He is an enthusiast of teaching and making accounting & research tutorials for his readers.