Queen Elizabeth School Members: Cheng Ming Hay (4D) Cheung Tai Kam (4D) Level: Certificate Level
Definition: • Wages are the payment to workers for providing • labour services.
There are four common methods of wage payment: • Time rate • Piece rate • Basic Salary plus commission • Profit-sharing scheme • Example
Time Rate • The worker’s wage is paid according to the the length of time worked, and it is often expressed as dollars per hour, per day or per month. What are the advantages and disadvantages of time rate? Which jobs are suitable for adopting time rate?
Let’s look at an example: (please click the picture) • For news reporters, • it is very suitable to • use "time rate".
News reporters • It is because their contribution is difficult to measure, so the cost of measuring output can be minimized. • However, they may have a low working incentive since • they get the same payment.
Piece rate • The worker's wage is paid according to the quantity of output produced, and it is often expressed as dollars per piece. What are the advantages and disadvantages of piece rate? Which jobs are suitable for adopting piece rate?
Let’s look at an example: • For factory workers, it is very suitable to use "piece rate".
Factory workers • It is because the productivity of the factory can be increased since they have a high working incentive. They earn more if they make more products. Therefore the cost of monitoring can be minimized. • However, the cost of checking output (quality control) may increase since the workers over-emphasis on quantity rather than quality.
Basic salary plus commission • This method is a combination of time and piece rates. - Basic salary : constant - Commission : based on workers’ performance e.g. salesgirl in a department store
Let’s look at an example: It is more suitable to adopt “basic salary plus commission”to employ a delivery man in a delivery company. (please click the picture)
Delivery company • It is because the efficiency of the delivery can be increased since they have a high working incentive. They earn more as they receive more orders from clients. Therefore the cost of monitoring can be minimized. • However, the income may become fluctuating if the number of orders varies from time to time.
Profit-sharing scheme • Workers are given a basic salary and a certain percentage of profit as year-end bonus earned by the firm. • Workers with better performance will receive more bonus. • This method is often used along with any of the following payment method: (1) time rate (2) piece rate (3) Basic salary plus commission
TVB earned a huge profit at the year end.To motivate the working spirit of TVB staff, the company took part of the profit as bonus to award its staff.Every staff was happy to have an additional monthly salary at the year end.
How to determine which method is suitable? (please click the picture) Let’s look at World Cup as an example
What would happen if the football team adopts piece rate? • Some people think that piece rate is suitable for football players, because they will have higher incentives. (please click the picture) • But the video shows there • are disadvantages for adopting piece rate: Each player will prefer to shoot the ball themselves, instead of passing the ball to their team members. This affects the co-operation of the team.
Other disadvantages: • Difficult to decide who should pay more. Since the game is a team work, it is hard to measure each player’s contribution. For example, A centre forward or a goal keeper should be paid more? • Players will have unstable incomes. For example, if a football player was broken his leg during the match, he would suffer a financial difficulty.
What would happen if the football team adopts time rate? (please click the picture)
Advantage: The cost for adopting the time rate is greater than piece rate.Each player does not only work for oneself, but the whole team. (please click the picture) Brazil win the World Cup
Other advantages: • Time rate saves much cost of measuring the football players’ contribution to the match. • Football players can get a stable income. The most important is that playing football is a team work, time rate is more suitable than piece rate and basic salary plus commission.
Conclusion: • Different jobs adopt different wage payment methods. • To adopt the most suitable payment method, we have to consider(1) the nature of each job and (2) the cost of adopting different payment methods.