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Incentive Wage Plans

When information of increasing wage with incentive plans is given to employee or worker, worker's foot does n't touch the earth due to pleasure. When he shares same information with his family, all family members also feel happy because with these incentive wage plans, family's standard of living will rise and they can also live their life with luxury and prosperity. Children will also burst into laughter if they will get more pocket money from this future incentive.

But other side, to calculate correct amount of incentives from incentive wage plans is the headache of company. It is more difficult, if a new fresher joins for calculating and making payroll of each employee and worker. So, solving company's problem, we are writing the tutorial on incentive wage plans

What is Incentive Wage Plans?

Incentive wage plans are extra wages in the form of monetary and non-monetary ways for increasing the efficiency of employees and workers. It is also known as bonus to workers.

What are things included in Incentive Wage Plans?

In incentive wage plans, free house facility, free education of children of workers, free medical treatment and other excess money gifts.

 how to calculate incentive wages in it?

There are about 10 incentive wage plans and these plans were made by experts of management fields. But we are taking first three plans in this part of tutorial for calculation.

1. Halsey Premium Plan

This incentive plan was made by F.A. Halsey in 1891. It formula is given below

Total Wage = Taken Time X Standard Rate + ( Saved Time X Standard Rate) X 50/100

Calculate the wage with incentive of a worker from following information.

Standard time to produce units 250 hrs.

Time taken to produce the units 220 hrs.

Hour rate of wages Rs. 4 /-

Method of payment Halsey premium plan

solution :

Wage = Taken Time X Standard Rate = 220 X 4 = Rs. 880

Incentive Wage or bonus = Time saved X Standard Rate X 50%

 = 30 X 4 X 50/100 = 60

Total wage = Rs. 880 + Rs. 60 = Rs. 940

2. Rowan Plan

This incentive wage plan was made by James Rowan in 1901. Formula of this plan is below.

Total Wage = Time taken X standard rate  + ( time taken X time saved X standard rate ) / standard time

For Example

A worker takes 12 hrs to complete a job to time wage and 9 hrs on a scheme of payment by result. The rate of payment is Rs. 5/- per hr. Calculate his earning if he is paid on the basis of Rowan plan.

Solution :

By analysis, we get the following facts :

Standard time = 12 hrs.

Time taken = 9 hrs.

hourly rate = Rs. 5/-

Wage = time taken X standard rate = 9 X 5 = Rs. 45

Incentive wage or bonus = ( time taken X time saved X standard rate ) / standard time

= 9 X 3 X 5 / 12 = Rs. 11.25

Total Wage = 45 + 11.25 = 56.25

3. Halsey - Weir Premium Plan

This plan was made by G.T. Weir which is improvement of Halsey plan.

it formula is given below :

Total Wage = Taken Time X Standard Rate + ( Saved Time X Standard Rate) X 30/100

Calculate the wage with incentive of a worker from following information.

Standard time to produce units 250 hrs.

Time taken to produce the units 220 hrs.

Hour rate of wages Rs. 4 /-

Method of payment Halsey - weir premium plan

solution :

Wage = Taken Time X Standard Rate = 220 X 4 = Rs. 880

Incentive Wage or bonus = Time saved X Standard Rate X 30%

= 30 X 4 X 30/100 = 36

Total wage = Rs. 880 + Rs. 36 = Rs. 916


: 3
  1. Thank you for such a nice article. But you could make it better if a single example is used, all plans compared with each other, and also the advantages and disadvantages are discussed.

    Thanks once again.

  2. Good but all incentive method should be discussed

In comment, you can give your feedback, reviews, ideas for improving content or ask question relating to written content.

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Accounting Education: Incentive Wage Plans
Incentive Wage Plans
Accounting Education
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