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Labour Payment Systems. Operations Management Intermediate Business Management. Labour Payment Systems. Time Rates. Piece Rates. Bonus Rates. PAYMENT SYSTEMS. Overtime. Flat Rates. Commission. Flat Rate. Employee paid a set salary per annum

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labour payment systems

Labour Payment Systems

Operations Management

Intermediate Business Management

labour payment systems1
Labour Payment Systems

Time Rates

Piece Rates

Bonus Rates



Flat Rates


R Alexander

flat rate
Flat Rate
  • Employee paid a set salary per annum
  • Salary divided into 12 equal monthly payments
  • Managers, supervisors, office staff paid this way


  • Guarantees monthly income for employee


  • Doesn’t reward increased effort

R Alexander

piece rate
Piece Rate
  • Worker is paid per item they produce.
  • Paid a low basic rate with additional earnings.
  • Tends to be used in factories
  • More worker produces, more they get paid


  • Acts as an incentive to work hard


  • Close supervision of output is required
  • Employees may need to be penalised if quality not maintained

R Alexander

time rate
Time Rate
  • Workers are paid by the hour (e.g. £6.50 per hour) eg £6.50 X 20 hours = £130.00
  • Service sector and manual workers often paid this way


  • Simple to calculate for employer
  • Rewards time spent at work for employee


  • Doesn’t provide any incentive to produce quality work

R Alexander

  • Overtime is extra hours worked over and above their set number of hours.
  • Normal hourly time rate usually rises for overtime worked e.g. double-time.

R Alexander

bonus rate
Bonus Rate
  • Additional payments received on top of basic wage.
  • Paid when employee meets targets:
    • Productivity
    • Time-keeping
    • Efficiency
  • Bonus is added to their basic pay

R Alexander

  • Used in many organisations e.g. car showrooms, double-glazing etc.
  • Is calculated as a percentage of the products’ sales value.
  • Eg a car sells for £15,000 and the commission rate is 5%. The salesman would earn £750.
  • May be the only method of paying employees or added on to basic wage/salary


  • Used as an incentive by employers for employees to sell more


  • Supervisors must keep an eye on staff to ensure they aren’t using dodgy selling techniques.

R Alexander

  • You have been asked to come up with a suitable payment system for the following organisations:

Strathclyde Police

-patrol car



KFC (manager and staff)

Audi Car Showroom

R Alexander


What does each person want?

  • The employee wants to be rewarded for the work they do and to feel valued by the organisation.
  • The employerwants to motivate their staff but keep the costs of labour low. However, they also want to be seen as good payers to help them recruit staff!

Prepare a recommendation for each organisation detailing which payment system(s) you would recommend and WHY!

R Alexander