The formation of an Ideal Wage System depends on certain basic principles or factors / Time Wage and Piece Wage System
Factors affecting formation of an Ideal Wage System The system of wage payment should be such that it is acceptable and beneficial to both management and workers. Such a system must contain the following features :
1. Motivation: A good wage system should be providing an incentive to workers to produce more. This can be done by linking wages with output. Workers should be given a share in the gains of higher productivity. Initiative and sound judgement should be rewarded.
2. Stability: The system of wage payment should be permanent and stable. Fluctuating system may create a doubt in the mind of workers. There should be no fear of rate cutting with increase in output. Changes in the wage plan should not be made unless there is a substantial change in the methods of work.
3. Flexibility: The wage plan must be capable of being adjusted quickly to the requirements of the enterprises. It should permit an early detection and of mistakes.
4. Equity: The wage differentials should be used on some rational and objective criteria. The wage system should ensure equal pay for equal work. The system should be fair i.e., it should not discriminate among individuals. Variations in skill, responsibility job conditions etc. must be taken care of. The wage rate should be based on an equitable evaluation of contributions and performance. The wage system should be just and equitable to all types of employees.
5. Result oriented: The wage plan should establish a direct relationship between effort and reward. It should provide for higher wages to more efficient workers. Incentive payments under the plan should be large enough to attract the workers towards higher productivity.
6. Simplicity: The system of wage payment should be easy to understand and simple to operate. A complicated system, which cannot be readily understood by workers, is of little value.
7. Economy: The cost of designing and administering the system should be reasonable. The wage system should permit maximum efficiency and minimum labour cost of unit. The cost of supervision should not be unreasonably high. Benefits accruing from the wage plan should be more than its costs.
8. Reasonable standards: Standards of work used in a wage plan should be reasonable and attainable. They should be neither too easy nor too difficult to achieve. Too easy standards would increase the costs and thereby defeat the very purpose of the incentive wage plan. Standards beyond the reach of workers will not be acceptable to them..
9. Security: A good payment system should guarantee a minimum wage to the workers. Minimum wages should be sufficient to meet the physiological needs of workers so that they are saved uncertainty and mental worry. Real wages should be protected against inflation.
10. Mutual co-operation : The wage system should promote co operation between employer and workers. The wage plan should be installed with co-operation and understanding of the workers.
