Labor economics Lector s teacher — Myronova Olga Mykolayivna

Labor economics Lector’s teacher - Myronova Olga Mykolayivna

Topic 7 Remuneration system

Questions: 1. General concepts of pay systems 2. Piecework systems of remuneration 3. Time-form systems of remuneration 4. Payment for work in teams 5. Organization of awarding bonuses to employees 6. Worker participation in profits 7. Salaries of public servants

Wage system is the relationship between the actual results of work and wages of the employee. They established by the enterprises in the collective agreement with the requirements and safeguards provided by law, the general and regional agreements.

l Depending on what the main indicator used to determine the outcome of labor, all systems are divided into two groups, which are called the form of wages. l The most common of them are two basic forms of wages – piece and time.

Each of them corresponds to a certain extent the number of labor: the piece the quantity of output, time - the number of worked hours.

To improve the forms of wage payment, company use their variety - the wage systems. The difference between them lies in the way of calculating the earnings and the level of dependence on quantitative and qualitative results.

Depending on the evaluation of the worker’s results can be simple or bonuses. l Depending on the nature of influence on the result of labor systems are divided into direct and the indirect. l Depending on the evaluation of the results distinguish collective wage system that is based on an assessment of teamwork, and individual, which is based on an assessment of the results of work for each employee. l Among the new systems there are flexible, tariff-free, contract etc. l

l piecework form remuneration systems are: direct piece, piece-plus-bonus, piece -progressive, indirect-piece, collective (brigade) piece, l time-based - direct to time, a time-plusbonus, collective (brigade) time.

Piecework system of remuneration is that its size depends on the number of workers produced goods (works) with appropriate quality based on preestablished norms of the time (production) and costs, given the complexity and working conditions. The basis of piece-rate payments is the standard of output (time) and the tariff rate.

Direct piecework wage system. Individual piecework rate is determined by the nature of the production process by the formulas: l for industries which are used output standards:

where T - hourly or daily wage rate, which corresponds to the category of this work; Nunit - production norms per unit of time;

l for production, where the standards of the time:

where Ntime – time norms, min. Total piecework earnings of direct payment is determined by the formula:

where Q - output with good quality for the billing period.

Direct individual piecework wage system financially motivates each worker to increase output, but it does not interest the employee in improving other indicators - saving raw materials, energy, improving product quality, achieving the best overall quantitative and qualitative indicators.

Piece-plus-bonus system of remuneration. Its essence lies in the fact that the worker is charged, except for earnings on a direct piece-rate system, the bonus is paid for the implementation and overfulfillment of certain quantitative and qualitative indicators. The bonus is established as a percentage of earnings, as defined by piece-rates.

Piece-progressive system. Under this system, worker’s payment are paid according to fixed norms (rates), and excess of production standards - at higher rates, and rates increase progressively with increasing number of products produced in excess of targets. The degree of increase in prices is determined by a special scale.

Indirectly piecework wage system it is used for support worker’s wage servicing the main working-piece workers. These earnings of subsidiary workers depend on the results of the work of piece workers, whom they serve.

By a simple time-based system the amount of earnings is determined depending on the tariff rate and the number of workers spent their time. By way of payroll time payment can be hourly, daily, monthly.

The most effective system is a time-plus-bonus, which paid for the work of both main and auxiliary workers. Under this system earnings accrue not only for the worked time, but also for the achievement of certain quantitative and qualitative indicators. Quantitative measures can be employed basis, performance audits and valuation problems, and quality - submit product on the first submission, raising grade of production, saving of raw materials, tools, etc.

Flexible system a system by which some portion of earnings is conditional on merit and the overall efficiency of labor of the enterprise. During the determination of wages is taken into account not only the experience, qualifications, professional skills, but also the importance of the employee, his ability to reach certain goals regarding the development of the organization.

Tariff-free system is an organization of remuneration, which is based on the principle of a partial distribution of funds earned by a team between workers according to the accepted relations (ratios) in the pay of varying quality (depending on qualifications, position, specialty workers, etc. ). They do not use the guaranteed wage rates and salary, premiums and allowances.

l The level of each employee’s payment depends on the wage fund of the company. l Thus, each worker gets his share, depending on the outcome of the organization and its position at the market of goods.

The contract wage system can be used alongside the existing enterprise system of remuneration. Remuneration under a contract is a part of the contract system of employment and payment, which is quite common in foreign countries.

Teamwork form of remuneration applies when achieve the best outcomes of work as a team interested in the whole and every member in particular. Work in teams can be paid using a piece and time-based forms of wages. Piece-rate form of remuneration applied to such areas and occupations in which workers have a major impact on the quantitative and qualitative results of labor.

Time-based of wages is most often used: - If the workers do not directly affect the increase of output; - Where there are no quantitative efficiency indicators, necessary to establish piece rates; - For the correct application of labor standards.

Bonuses serves have to motivate employees in the outcome of labor. Important elements in the bonus is to determine indicators of conditions and the size of bonuses, the sources of premium payments, frequency of bonuses, the category of staff, the order of their payment. l The enterprises involve basic and additional indicators of bonuses. l

l Basic indicators should reflect important areas of production and to influence the efficiency and quality of work, results of production. The amount of the premium increases in the case of result’s over-fulfillment.

There are individual and team bonuses to workers. Indicators and the conditions of worker’s bonuses are: - Implementation and over-fulfillment of personal plans; - Increase productivity; reduce labor intensity of production; - Improving product quality and competitiveness; - Manufacture of defect-free products, saving energy, raw materials, reduction of the defects, etc.

Share in the profits is distribution of a certain part of the profits of the enterprise, organization among workers. Such distribution may be in the form of cash or in the form of shares distribution among workers.

As demonstrated by international experience, the proportion of employees in profit is determined based on the overall activity of the enterprise or on the basis of property relations.

As a result of the overall activities of the company’s profit-sharing system is transformed into such systems: -Score of merit; - Promotion of specific scope of work, sales, etc. ; - Participation in the profits, depending on productivity; - Premiums, bonuses; - Collective stimulating.

A public servant is a person who performs the procedures according to law, the duties of public service under a state office for payment.

Salaries of civil servants consists of: - Salary; - Surcharges for class rank; - Allowances for special conditions of public service; - Allowances for seniority; - Prizes for the results of public employees.

Salaries of government employees are set depending on the complexity and level of responsibility to perform their functions, role and place positions in the structure of public authority.

Surcharge for the rank. The monthly premiums for qualifying rank set in absolute amounts and constitute 25% of earnings.

Seniority bonus l l l is paid to public servants as a percentage of monthly official salary including extra for the rank and depending on the length of public service in the following amounts: more than 3 years - 10% more than 5 years - 15% more than 10 years - 20% more than 15 years - 25% more than 20 years - 30% more than 25 years - 40%.

l Terms of payment of civil servants, the size of their salaries, allowances, premiums and financial aid are determined by the Cabinet of Ministers of Ukraine. l Source of the wage bill of public servants is the State Budget of Ukraine.