Page 130 - CalcBus_Flipbook

14-4 Payrolls, Wages and Commissions CH 14]

Wages on hours worked plus Productivity (piecework)
Working on production lines and in packing sheds, such as when boxing oranges,
apples, and pears, employers may pay an hourly wage plus incentive for production or units
produced; numbers of boxes packed. This incentive payment method increases the output
for harvested crops. It is important to note the fruit is segregated on its size, that is if an
orange is large there will be fewer oranges going into a packing box than if the oranges are
small yielding more oranges in boxes. These size differences influence how many boxes
(units) are packed in an hour. In packing sheds workers will work on size lines, that is a box
being labeled #48 means that there are 48 pieces of fruit in the box compared to a box
labeled #72 with 72 pieces of fruit in the box. It takes more time to load 72 pieces in a box
than 48, thus the worker filling #48’s will produce more boxes than the worker filling #72’s.
Because of these differences supervisors will shift workers during the work week to
different lines for equality in pay and harmony in the packing shed over wages and
incentives to be more productive.
There are three basic incentive wage systems used in industry: (1) differential piecework
− progressive output, (2) bonus for efficient production, and (3) premium for extra
production over target quotas.

Differential Piecework – progressive output. The differential piecework plan is an
incentive plan for workers to produce more pieces by paying more per piece as that
individual’s production increases, and the Piece Rate plan payment structure increases at
an increasing rate which incentivizes the employee with an increase on an increase. For
example, according to the following schedule an employee who produces 46 pieces a day
receives $3.10 per piece; in contrast the worker with a lower production of 42 pieces a day
receives $2.85 per piece.

Example: Use the following schedule to calculate the earnings of each of these
employees for production today: (a) T. Wilson, 46 pieces; (b) K.D. Jones, 42
pieces.

Pieces Produced Daily Piece Rate Differential
Under 25 .................................. $2.35
26 - 30 ..................................... 2.40 -------------- 5¢
31 - 35 ..................................... 2.50 -------------- 10¢
36 - 40 ..................................... 2.65 -------------- 15¢
41 - 44 ..................................... 2.85 -------------- 20¢
45 and more .............................. 3.10 -------------- 25¢

Solution algorithm: (a) 46 x $3.10 = $142.60 (b) 42 x $2.85 = $119.70

Efficient Production Bonus for time. There are businesses that pay a guaranteed
hourly rate with a bonus for productivity. If the employee is 95% efficient (productive) only
the hourly wage is paid. Increases in productivity during time on the job increases total pay
as the bonus, an incentive increases their wages. The bonus is on a stipulated and stated
contracted amount, generally as a percentage that can vary from 10% to 50% or more over
the hourly wage variations depending on the industry and time needed to complete a job
and the productivity over expectations. As with other forms of hourly payment the wage per
hour multiplied by the hours worked determines the productivity baseline ( wage/hour x
hours worked = productivity baseline).

Example: J.P. Jones is paid $21.50 an hour for an 8-hour day during which the
standard production is to produce 41 units. He receives a 20% bonus when
his performance is better than the standard. Calculate his gross pay for each
of three days when he produced (a) 41 units, (b) 42 units, and (c) 43 units.

Solution algorithm: (a) The production standard was met and not exceeded. Therefore:

$21.50 guaranteed hourly wage
x 8 hours worked
$172.00 earnings

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