1. Prepared by: Bhakti Joshi Date: January 30, 2013
Suggestion Schemes
Prepared by: Bhakti Joshi
Date: January 30, 2013

2. Meaning Focus on employees Ideas for improvement and innovation
Who do the real work?
Focus on employees
Ideas for improvement and innovation
Target creative minds and talent
What kind of processes are required?
How are innovative products created?

3. Why Suggestion Schemes?...To avoid:
Lack of consistency of purpose to plan product and service that will have a market and to sustain in market and create jobs
Emphasis on short-term profits
Personal review systems, or evaluation of performance, merit rating, annual review, etc. for people in management, the effects of which are devastating. 
Job hopping
Use of visible figures and considering information that are unknown or unknowable
Excessive medical costs
Excessive costs of liability
The aforementioned are also known as Deming’s Seven Deadly Disasters

4. Wage Incentive Plans
A system which provides additional pay (or bonus) for qualitative and quantitative performance which exceeds standard or normal levels
Relationship building
Increasing productivity
Employee morale
Employee motivation
Employee regularity
Cost control
Improvement in quality of life
Optimum resource utilisation
Flexibility in changing business conditions

5. Types of Wage Incentive Plan
Time-Rate System
Piece-Rate System
Halsey Plan
Rowan Plan
Emerson Plan
Bedeax Plan
Straight Piece Rate
Straight-Piece with minimum guarantee
Differential Piece Rate
Most common method
Time-based wages
Mostly for general roles (administration, maintenance, etc)
Tendency to creep upwards (inflation, promotion, etc)
Easier from an employee’s perspective
Payment by results system
Output-related payment
Encourages effort at the cost of quality
Home-based workers, sub-contractors
Working hours are unaccountable
Earnings mostly below average

6. Straight Piece Rate
Example: If a worker produces 325 pieces per day and he is paid at the rate of Rs.0.20 per piece, the daily wage is 325 × 0.20 = Rs.65 ?

7. Straight Piece with minimum guarantee
If output > expected or standard production then: Wages = Base wage + (Current Output – Standard Production) X Wage Rate Example The standard output in a hypothetical welding shop is 110 pieces per day. For a production less than or up to the standard output, the minimum guaranteed or daily base wage is Rs.70. Over the standard output an incentive at the rate of Rs.0.50 per piece is given. If the output is 150. What is the total wage?
Rs 90

8. Halsey Premium Plan Time Taken (T) Standard time (S) Current Wage (R)
Incentive for time saved (Bonus percentage)
Conditions:
Time Taken < or = Actual Time
Time taken > Actual Time (No incentive)

9. Halsey Premium Plan (Contd…)
When T < or = S
Total Wages (W) = S*R + S*R*Bonus rate
Example
If the standard time taken to produce 10 units is 240 hours and the actual time taken is 220 hours, with average wages of Rs 4 per hour and 50 % bonus. What is the wage rate under Halsey Premium Plan?
1440

10. Halsey Premium Plan (Contd…)
When T > S
Total Wages (W) = S*R + R *(S-T)/100 (No bonus)
Example
If the standard time taken to produce 10 units is 240 hours and the actual time taken is 260 hours, with average wages of Rs 4 per hour and 50 % bonus. What is the wage rate under Halsey Premium Plan?
959.20

11. Rowan Plan Time Taken (T) Standard time (S) Current Wage (R)
Incentive for time saved (No bonus percentage)
Conditions:
Time Taken < or = Actual Time
Time taken > Actual Time (No incentive)

12. Rowan Plan (Contd…) 960 When T < or = S
Total Wages (W) = S*R (No bonus)
Example
If the standard time taken to produce 10 units is 240 hours and the actual time taken is 220 hours, with average wages of Rs 4 per hour and 50 % bonus. What is the wage rate under Rowan plan?
960

13. Rowan Plan (Contd…) 959.83 When T > S
Total Wages (W) = S*R + R *[(S-T)/S]
(Never a bonus but an incentive to improve)
Example
If the standard time taken to produce 10 units is 240 hours and the actual time taken is 250 hours, with average wages of Rs 4 per hour and 50 % bonus. What is the wage rate under Rowan plan?
959.83

14. Differences & Comparisons
Advantages
Disadvantages
Simple and easy to understand
Focus of Productivity
Satisfaction to efficient and fast workers
No quality focus
No job security
No compensation for breakdown or sickness
No guarantee of minimum wage
Discourage group effort
Straight Piece Rate
Encouragement for higher production
Efficient methods can be adopted to increase production
Easy to prepare quotation estimates and budgets
No pay for idle time
Less supervision cost
No standardised basis for minimum guarantee
Beginners and average workers cannot earn enough due to inability to work faster
Quantity will be overemphasised than quality (unless there is close supervision
Overwork and health concerns
Not suitable for intermittent work
Not suitable when jobs are unstandardised
Straight Piece Rate with minimum guarantee

15. Differences & Comparisons
Advantages
Disadvantages
Simple
Beneficial for efficient worker
Causes no harm to trainee, new or slow worker
Benefits sharing
Minimum base-wage guaranteed
Workers get a small percentage of return over their achievement
Quality may suffer due to over-achievement
Management gets a wrong picture of worker’s ability
Hasley premium Plan
Checks over-speeding overstrain by workers
Assured minimum base-wage
Efficiency is rewarded
Discourages workers to over-achieve
Difficulty in ascertaining wages as it requires large data processing
Sharing of profit for over-achievement may not be liked by workers
Rowlan Plan

16. Wages in India
Three types of wages: Minimum wages, Living wages, Fair wages
Minimum wages (Revision every 5 years):
3 consumption units for 1 earner
Minimum food requirements of 2700 calories per average Indian adult
Clothing requirement of 72 yards per annum per family
Rent corresponding to minimum area provided for under Government’s Industrial Housing Scheme
Fuel, lighting, etc expenditures that constitute to 20% of the total minimum wages
Children education, medical requirement, minimum recreation, etc that constitutes to 25% of the total minimum wage
Local conditions and other factors affecting wages

17. Wages in India (Contd…)
Minimum wages (Revision every 5 years):
Maharashtra state has devised minimum wages in agriculture as follows
Scheduled Employment*
Category of Workers
Zone
Basic Minimum Wages
V.D.A
Total Minimum Wage (Rs/Day)
Agriculture I
120.00 No II
110.00
III
105.00 IV
100.00
*Scheduled employment means an employment specified in the Schedule or any process or branch of work forming part of such employment
Variable Dearness Allowance: To protect minimum wages from inflation (CPI)

18. Wages in India (Contd…)
Scheduled Employment
Category of Workers
Zone
Basic Minimum Wages
V.D.A
Total Minimum Wage (Rs/Day)
Automobile Repairing Workshops and Garages
Unskilled I
73.08
53.31
126.38
Semi-skilled
76.92
130.23
Skilled
80.77
134.08 II
69.73
122.54
III
65.38
118.69
69.23

19. Wages in India (Contd…)
Living Wage
More than the minimum wage
Considers national income
Paying capacity of industrial sector
Fair wage
Above minimum wage (lower-limit) and below living wage (upper-limit)
Factors: labour productivity prevailing wage rate, level of national income and its distribution and capacity of industry to pay

20. Components of Employee Remuneration
Financial
Non-Financial
Basic Wages
Incentives
Job context
Challenging job
Responsibilities
Growth prospects
Supervision
Working conditions
Job sharing etc.
Fringe Benefits
Provident fund
Medical care
Accident relief
Health and group insurance
Car and its maintenance
Club membership
Paid membership
Furnished house
Stock option scheme

21. Process of managing compensation
Organisational Strategy
Compensation policy
Job analysis and evaluation
Analysis of contingent factors
Design and implementation of compensation plan
Evaluation and review

22. Job Evaluation
…is a process of determining the relative worth of a job.
Aims at…
Reduction in inequalities in salary structure
Specialisation
Selection in employees
Harmony between employees and manager
Standardisation
Creating relevance for new jobs

23. Job Evaluation: Pre-requisites
Job content – job description and specification
Top management support
Cooperation of union and individual workers
Comparison of Jobs
Involvement of expert in job-evaluation techniques

24. Job Evaluation Methods
Non-Analytical Methods
Analytical Methods
Ranking Method
Classification Method
Factor Comparison
Point Method
Methods designed on the basis of the jobs as a whole
Methods designed on the basis of the requirements and elements of the jobs

25. Ranking Method Worth of a job based on: Processes: Judgement of skill
Effort (physical and mental)
Responsibility (supervisory and fiscal)
Working conditions
Ranked in descending order from best to worst
Processes:
Identify and place in order a number of clearly differentiated and well-defined benchmark jobs at various levels. (benchmark jobs as in producers, maintainers, administrators, etc)
Jobs are perceived to be the ones with the highest and lowest value; selecting a job mid-way and finally choosing others at lower or higher intermediate points. The remainder of the jobs are grouped as key jobs and ranking is complete
Divide the ranked jobs into grades and an initial estimate (based on common features among groups to bring about distinction between groups)

26. Ranking Method (Contd…)
Presentations and continuous iterations
Simple, quick and inexpensive only if agreement of the jobs and ranks are reached easily
LIMITATION:
Highly subjective.
Not diagnostic to point the specific areas of weakness and strength of a worker.
Existing jobs must be re-ranked to accommodate new position
Requires detailed knowledge of every job for evaluation and ranking and difficult when a large number of jobs are under consideration

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