This system was devised by F.W. Taylor, the father of scientific management and was the first systematic attempt in rationalizing incentive.
It is based on the assumption that the degree of efficiency varies from worker to worker and hence the workers must be paid according to their degree of efficiency. The main features of the system are:
(i) The system is based on piece rates.
(ii) The standard output for unit of time is pre-determined on the basis of time and motion study.
(iii) There are two piece rates, one lower and another higher. Those who reach the standard or exceed it, get wages at higher piece rate (e.g. 120% of piece rate) and those who fail to reach it, get wages at a lower piece rate (e.g. 80% of piece rate).
(iv) Minimum wages for the workers are not guaranteed.
(i) It does not guarantee a minimum wage for the workers.
ii) The system is very harsh to the inefficient workers because they gentle wages due to lower rate and lower output.
iii) It penalises a worker who just fails to attain the standard by a narrow margin
It is clear from the above illustration that the workers with lower efficiency less wages and workers with higher efficiency get more wages under Table differential piece rate system as compared to ordinary piece rate system.
2. Gantt Task and Bonus Plan
This plan was originated by Mr. Henry L. Gantt. The plan is a combination of time rate, piece rate and bonus plan. The features of the plan are:
There is a guaranteed time wage for every worker irrespective of the efficiency.
Standards are set for various jobs.
(iii) Wages are paid at the following rates:
Output below standard – Guaranteed Time Rate (Below 100% efficiency)
Output at standard – Wages for standard time and a bonus of (100% efficiency) 20% of Time Rate
Output above standard – Wages for standard time and a bonus of (Above 100% efficiency) 20% of wages of standard time
(i) The plan is simple to understand and operate.
(ii) Minimum wages for the workers are guaranteed under the plan.
(iii) It provides a reward to the efficient workers by way of bonus.
(iv) It does not penalise the inefficient workers. Disadvantages
(i) The plan may result in frustration among the workers if the standards are high and a very few workers earn bonus.
(ii) It may not encourage efficiency since a guarantee is given for minimum wages.
3. Emerson’s Efficiency Scheme
This plan was devised by Emerson. The features of the scheme are:
(i) Day wages are guaranteed but efficiency also is rewarded.
(ii) A standard time is fixed for each job or operation or a volume of output and then the level of efficiency of workers is determined on that basis.
(iii) The guaranteed time rate is given for below 66 efficiency.
(iv) Payments are made on the basis of step bonus rate from 66- % to 100% efficiency. This means bonus becomes payable only when efficiency touches 66- % and it increases progressively with increase in efficiency in such a manner that at 100% efficiency the bonus is 20% of the time wages. The scheme contains about 32 differentiating rates at different levels of efficiency.
(v) Additional bonus of 1% is payable for each 1% increase in efficiency beyond 100%. Thus bonus payable is 40% (20% + 20%) at 120% efficiency.