Question

Chapter 4 deals with incentives, and in this case we will look at PIECEWORK. This rewards employees based on their individual hourly production against an objective output standard and, of course, also something that may contribute to pay is the efficiency of the machinery. For example, if machinery is running slow or malfunctions, then people cannot produce work and, therefore, will earn less. So it’s a combination of the worker’s efforts and the machinery/capital.

The payment standard:

Hourly rate: $4.50 per hour base pay (employee receives this regardless of whether there is production or not)

Piecework rate: Every worker is expected to produce 15 garments per hour as the base. For EVERY GARMENT PRODUCED MORE THAN 15 garments, the worker will receive 75 cents per garment.   So, if a worker produces 20 garments in the first hour of work, he/she receives an additional payment of 5 garments above target times 75 cents, or 3.75 more for that hour. So the total earnings for that hour would be the base of 4.50 PLUS the 3.75 piecework incentive, for a total of 8.25 for that hour.

Now calculate the shift earnings for this worker:

Hour	Base Hourly Rate	# Pieces above Target	Amount of Piecework incentive ($)	Total Hourly Wage $ (base plus incentive)
1	4.50	15
2	4.50	0
3	4.50	13
4	4.50	3
5	4.50	1

1) Fill in the table above with the dollar amount of the incentive payment in total for each hour. Then add that to the base rate and enter the total hourly wage in the column above.

2) Looking at the hourly data above, how much did this worker earn in TOTAL INCENTIVES ONLY (meaning without base pay) for the 5 hours worked?  

3) If you were the manager, and you saw that this worker was producing wide variations in pieces above the target (o some hours and way more in others), would you be concerned?   As a manager, what would you do to try and improve this worker’s performance?  

Answer 1

Hour	Base Hourly Rate	Pieces above Target	Total Pieces in A Hour	25% of Pieces in case of above 15	Amount of Piecework incentive ($)	Total Hourly Wage $ (base plus incentive)
1	4.5	15	30	7.5	5.63	10.13
2	4.5	0	15	0	0.00	4.50
3	4.5	13	28	7	5.25	9.75
4	4.5	3	18	4.5	3.38	7.88
5	4.5	1	16	4	3.00	7.50
			total		17.25	39.75

(b) This worker earn in TOTAL INCENTIVES ONLY (meaning without base pay) for the 5 hours worked is 17.25

(c)

If I were the manager, and saw that this worker was producing wide variations in pieces above the target (o some hours and way more in others), Yes I would be concerned And as a manager I can make or connect the incentive plan with the quality of work also which i think will help to improve the company performance due to this worker can also try to remain same all the time period