Remuneration Systems for Workers (1 of 2)

published in: Educational articles

28 Sep

Remuneration should reflect the contribution of the respective officer or worker to company outcome!  Person with greater contribution must receive greater remuneration than those with lower contribution.

 remuneration system, manager,workers
It is easier to measure workers’ outcome than officers’ (management and administration).
We will discuss the four most popular workers’ remuneration systems:
1. Payment per quality manufactured product.
From the very first day the worker enjoys all company benefits.  If, however, s/he produces low-quality product, s/he gets no payment for it.  The worker becomes a self quality supervisor.  S/he is repairing the low quality products at her/his expense.  The remuneration is proportional to the number of quality-made products only.
The worker may also get additional bonuses through the following system:  each direct supervisor has a number of points to distribute among his/her subordinates based on predefined criteria (quantity, product quality, initiative, created problems, discipline, etc.);  each point provides financial bonuses for its bearer;  company best workers may receive one more premium, this time from the Production Director.  Experience and loyalty are irrelevant in this system.
The disadvantage of this system is the opposition between workers in their quest to get bigger bonuses.
2. Flexible payment system.
Approximate structure of such a system is:
  • 85% of the income of the worker is flat salary;
  • 10% - periodic premiums based on official criteria (which should not change frequently);
  • 5% - directly depends on the success of the entire department.
The disadvantage of this system is that it depends "85%" on workers’ labor discipline and diligence, and direct manager’s timely reaction towards low-performing workers.
3. Payment against target volume.
For every worker’s class there is a target, for example: miller sixth class - 80 details, miller fourth class - 70 pieces.  The base salary is adjusted depending on the percentage of reached target.  Most often the implementation is divided into three groups:
  • below 95%,
  • 95-105%
  • over 105% of target.
Depending on worker’s results he gets different wages as per predefined scale.
It is recommended to apply this system only to activities where the worker can measure her/his own performance and productivity.
4. Multi-factor remuneration system for workers.
The increasing complexity of workers’ duties and the manufacturing process has increased the need of additional factors for assessing workers performance such as teamwork, initiative, accuracy, versatility, reliability, experience relations, health etc . etc.  The multi-factor remuneration system divides workers’ income into 3 parts:
  • 70% - base salary
  • 20% - allowances
  • 10% - bonuses, twice a year.
Each of the three parts is subject to different criteria.
The disadvantage of this system is:  determining the weight of each factor, and the complexity of the system from the perspective of the employee.
remuneration system, workers, managersThere is no and there cannot be an universal remuneration system that suits all companies or workers.  However, it is possible to build a system that fairly reflects the contributions of current workers, system in which workers with higher contribution receive higher income.
In the next article we will examine remuneration systems for officers (administration and managers).



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