PAYMENT SYSTEMS SLIDE 7

PAYMENTS Workers must be paid for their work Most production workers receive a basic weekly wage for a basic number of hours per week Additional incentives are used to encourage staff to work harder SLIDE 7

TIME-RATE PAYMENT SYSTEMS Workforce receives a basic wage or salary Workforce rewarded for amount of time they spend at work In addition, holidays with pay are usually included Common in jobs like teachers, bank workers Simple method of calculating payment irrespective of whether employee is paid hourly, weekly or monthly SLIDE 7

OVERTIME Paid when the employee works longer than their contractual hours Higher rate than basic pay Allows employee to increase wages Some organisations guarantee overtime in their employees contracts of employment Overtime is essential to organisations who require staff to work later than contracted hours – police, fire brigade etc SLIDE 7

PIECEWORK (PIECE-RATE) Used in small-scale manufacturing Worker is paid a certain amount for each good unit they produce Employees may receive no basic wage at all Low levels of supervision as staff will be motivated to work to earn a good living Problems: Workers will not pay attention to the amount they waste Only work hardest when they need extra money (holidays) SLIDE 7

PIECE RATES PLUS A BASIC OR FIXED PAY ELEMENT Pay is calculated by using a system made up of 2 elements A basic or fixed-rate wage is calculated on a time rate bases then added to this is a variable, piece-rate element, calculated on employee’s output SLIDE 7

PERFORMANCE-RELATED PAY Additional payment or bonus to staff who are working better than average or who have met targets It does encourage workers to work harder But does not encourage team work as it creates rivalry between managers SLIDE 7

COMMISSION PAYMENTS Usually used to pay a Sales force Based on a flat-rate wage supplemented by some form of commission based on sales volume or value achieved In some organisations the greater part of the wage is in the form of commission and this can lead to sales workers using pressure tactics to achieve sales SLIDE 7

FRINGE BENEFITS AND NON-FINANCIAL PAYMENTS Payments other than wages or salaries that is offered to staff Still taxed by government as a source of income therefore they are not as popular as they used to be Managers Expense accounts Company cars Cheap loans Private Medical insurance Others Free travel Subsidised canteen Creche facilities Discounts on products SLIDE 7

BONUSES This operates with a flat rate of pay which is supplemented by a bonus directly related to the output of each worker Bonuses might be related to setting targets for:- Volume of output Quality standards achieved Reductions of wastage Improved machine use Reduction in the loss of working days due to accidents in the workplace SLIDE 7

INCENTIVES TO PROFESSIONALS Professional employees (dentists, doctors etc) receive a basic salary from their employing health authority They can enhance their pay by undertaking private patient work for which they receive payment on an individual case basis “No win no fee” for Lawyers – client only pays the lawyer a fee if the outcome of the case is in his favour SLIDE 7

CONTRACT EMPLOYMENT More common for employers to hire staff on a contract basis eg for the completion of a job or project Employer makes substantial savings as they are unlikely to offer paid holidays or a company pension scheme Benefit to the employee is that the rate of pay is often higher than for those on a permanent contract but there is a high degree of uncertainty and risk of loss of income when the contract ends SLIDE 7

PROFIT SHARING SCHEMES Staff are given a share of the annual pre-tax profits of the organisation Allows the staff to see the success of the organisation in terms of profit Encourages staff to work more efficiently for organisation and encourages team work Can be paid in the form of shares giving the employee shareholder status SLIDE 7

SHARE SAVE Creates share ownership in staff Employees save a regular amount each month for a set time period, they are then able to turn these savings into shares. They can either keep them or sell them on at a profit Ensures loyalty of employees Provides incentives to keep up profits SLIDE 7

SHARE OPTIONS Creates share ownership in staff - normally for senior managers Given the option to buy a certain number of shares at a discount at some point in the future Creates loyalty and motivation SLIDE 7

EMPLOYERS OBJECTIVES WHEN DEVISING PAYMENT SYSTEMS Motivation Cost Prestige SLIDE 7

EMPLOYERS OBJECTIVES WHEN DEVISING PAYMENT SYSTEMS Motivation workers tend to be motivated by money and this is reflected in the number of employers who use performance related payments systems SLIDE 7

EMPLOYERS OBJECTIVES WHEN DEVISING PAYMENT SYSTEMS Cost As one objective of employer is to maximise profits, he will wish to keep labour costs as low as possible Procedures for calculating, recording and making payments to employees should also be cost effective SLIDE 7

EMPLOYERS OBJECTIVES WHEN DEVISING PAYMENT SYSTEMS Prestige Employers want a good reputation for being “good payers” rather than “poor payers” This improves their ability to recruit and retain workers which, in the long term is cost effective for the organisation SLIDE 7

EMPLOYEES OBJECTIVES THEY WANT TO MEET FROM THE PAYMENT THEY RECEIVE Purchasing Power Recognition and fairness How payments are made up SLIDE 7

EMPLOYEES OBJECTIVES THEY WANT TO MEET FROM THE PAYMENT THEY RECEIVE Purchasing Power the higher the wage the more the employee can buy and the higher his standard of living SLIDE 7

EMPLOYEES OBJECTIVES THEY WANT TO MEET FROM THE PAYMENT THEY RECEIVE Recognition and fairness Most employees like to have the value of their work recognised Many see their wage/salary as the main indicator of such recognition They also want to see fairness between payments they receive and payments made to other workers doing similar work or with similar qualifications SLIDE 7

EMPLOYEES OBJECTIVES THEY WANT TO MEET FROM THE PAYMENT THEY RECEIVE How payments are made up Employees are interested in the way in which their pay is made up They might be happy to settle for a lower annual salary provided that the employer is contributing into a pension fund for them SLIDE 7