Methods of Remuneration

Methods of remuneration

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  • Created by: Madiha
  • Created on: 24-01-12 17:54

The peice rate system

The peice rate system is when employees are paid by the outcome or the amount they produce. The more products made by an Employee, the higher the pay

Advantages of peice rate

:-) employees who are money motivated will work harder for a higher pay

:-)Encourages employees to work faster for more pay and more productivity


:-( Some employees will be slower and producing than others and this may demotivate them as they think they pay is unfair especially if their quality is better

:-( Employees completley ignore quality and focus on quanitity, leading to wastages and money wasted.

:-( A member of staff will need to be recruited so that they can check quality

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Wages, Salaries and time rates

Wages: Wages are hourly pay that is paid together at the end of each week

Salary: A fixed amount (regardless of how many days worked) earned per year that is paid monthly into a bank account every month

Time rates: Wage is based on the number of hours worked multiplied by hourly pay rate . If employee agrees to work longer hours, they may get premium pay for the number of overtime hours worked,

The advantages of time rate:

:-) Certainty about wage that will be received, employment costs easily calculated, relatively not expensive and easy to administer. Also because there is no rush to complete task, work will be done properly and quality will be better

The disadvantages of time rate:

:-( lack of link between effort and reward and whatever the output,the pay will remain the same. Employees think that is unfair and poor motivation

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Performance related pay

Performance related pay is payment by results and can be peice work, commission or bonus schemes

Peicework or peice rate: already mentioned in previous revision card

commission: basic amount is payed to employees and increases made with the amount of sales- employees with good customer service and selling skills can earn lots of money. However employees can lie about product to make more money

Bonuses: sum of money paid annually as an extra to the salary or wage. Employees will recieve an extra payment when dividends are given to shareholders therefore increases committment and encouraging and motivating staff to work hard. Eventually this incease company profits and values of shares so that the next bonus may be higher. Employees not paid the bonus will get jealous and resent work.

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Performance related pay- Appraisal

An appraisal is an annual meeting or assessment of of an employers performance which can give support for idea on how much to pay staff using the performance related pay methods.

It starts with the employee setting s personal target and at the next years appraisal meeting, employees will fill out a questionnaire on the previously agreed targets and comment on whether they think they have met their targets or not. it will be reviewed by the line manager who deiced how far they have reached i.e if the targets are met. If targets have been met, then an extra payment will be made.

Advantages and disadvantages

:-) Employees encouraged to reach targets and this will benefit business as met targets will lead to better work and motivation where customer service is high and More profit .

:-( Employees may be set targets that are unrealistic or not wanted . Employees objectives should also be smart

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