Labour Problem

The existing incentive system of a certain factory is:

Normal working week:: 5 days of 9 hours each plus resorting to overtime of 3 hours for 3 days.

Rate of payment : For day work - Rs 20 per hour.For overtime - Rs 30 per hour.

Additional bonus payable : Rs 25 if worker is not resorting to overtime,Rs 40 is the worker resorts to overtime.

Average output per operative for 54 hour week i.e normal working hours plus 3 hours late sitting for 3 days- 120 articles

In order to increase output and eliminate overtime it was decided to switch on to a system of payment by results.The factory is considering the introduction of some incentive scheme or to make payment on piece work basis. Assuming that 135 articles are produced in a 45 hour week and the additional bonus under the existing system is discontinued in the proposed scheme,calculate :

Weekly earnings in a) existing time rate scheme b) Rowan plan c) Halsey plan

The following information is obtained:

Time rate Rs 20

Basis time allowed for 15 articles is 5 hours

Premium bonus - Add 50% to time

Please help

If a company wants to incentivise, piece rate wages is the best method. From the above, Rowan plan is generous because it is paying for standard time and standard rate. If an employee’s performance is low, even then he gets additional wages for additional hours later. Coming to Halsey plan, it looks conservative because it is measuring standard time first and fixing the labor rate per hour. This way, a company will understand how many units can be produced in a standard time and if desired output needs additional hours, it will reduce the labor rate accordingly to 9 hour wages. Some people can call it extortion and this is because all labor rates are predetermined. So, piece rate wages solely depend upon an individual and his output.

I guess you can do the math and budgeted labor variance analysis to experiment with