Wages are paid to the workers as a reward for their labour and service. Several systems of remuneration have been devised for meeting the requirements of both employees and employers.

The efforts made by workers depend to a great extent upon the quantum of their remuneration.

Thus the wage system should be planned with great care. The system that reduces the labour cost per unit while increasing the output and giving a fair return to workers will be the most suitable one. In other words, the wage system should be such that increases efficiency and provides satisfaction to the workers. The aim of the wage system should be the introduction of a fair wage. The fair wage is a wage equal to that received by employees performing equal work and having equal skill.

An ideal system of wage payment should possess the following characteristics:


(i) Simplicity: The wage system should be easy to understand and simple to operate. A complex system may lead to strikes and agitations and may be a hindrance to a harmonious employer-employee relationship.

(ii) Fair to Employer and Employee: The system should be satisfactory from the point of view of both employer and employees. In other words, the reward to the employee should be fair and must give low cost per unit to the employer.

(iii) Guaranteed minimum wage: The system should guarantee a minimum wage to every worker irrespective of the work done by them.

(iv) Incentive to work: The system should provide adequate incentives to workers to work hard with great care. Efficient workers should be able to earn more wages as compared to the inefficient workers.


(v) Quality output: The system should encourage the workers not only to increase the quantum of output but also to improve the quality of output.

(vi) Certainty: The system should not have any element of uncertainty or ambiguity.

(vii) Distinction between skilled and unskilled worker: The system should distinguish between skilled and unskilled workers. Skilled workers should be compensated for the efforts put in by them to acquire the skill.

(viii) Uniformity: The system should be common in the same local industry.


(ix) Conformity with local and national labour laws: The system should to conformity with various labour laws and regulations both local and national.

(x) Minimisation of labour turnover: The system should minimise la turnover, absenteeism and late attendance.

(xi) Adjustment to price changes: The system should invariably contain provision for automatic rise in wages as cost of living index nu increases.

(xii) Flexibility: The system should incorporate flexibility to adjust with changing circumstances of the business.