MEANING OF WAGES AND ITS TYPES-ALL YOU NEED TO KNOW

Wages are the financial benefits given by the employer to the workers for their labour. ‘Labour’ in fact means all types of physical and mental efforts being done by the workers to complete the task of their master. Besides remuneration in cash, certain non-financial benefits can also be provided to the labourers such as free accommodation, free travel etc. No normal person will even think of doing work for “no compensation.” At religion places like, temples and Gurudwaras people offer work for no incentives , but still some sort of thought for spiritual compensation do exist in their minds.

“Wages may be defined as the payment made by the employer to the workers for utilizing their skill and energy”

The wages are paid through a contract between the employers i.e contractors and the employees i.e labourers, where the latter sell their skill and energy for money and the former purchase and utilize this skill and energy as per their discretion. The amount may be paid to the workers as per the work done per unit of time (i.e hourly, daily or weekly basis) or as per the work done per piece or operation.

5.3.1. Types of wages

There are two types of ‘wages’ paid to workers:

• Nominal wages
• Real wages

• Nominal Wages: The payment made by the employers to the workers in the form of money only are termed as nominal wages.

The Nominal wages do not include any other additional benefits provided to the workers, such as free accommodation free food, free clothing etc.

• Real wages: The total remuneration paid to the workers for the work done including additional facilities or benefits are termed as real wages. These include the nominal wages plus the additional facilities being offered to the workers in the form of an attractive package. Public sector and multinational companies generally provide real wages to their employees.

It may be understood that sometimes nominal wages show handsome salary in the form of cash, but higher real wages are always important to improve the working condition and standard of living of Indian workers.

Take the case of two skilled  workers A and B . worker A gets ‘nominal wages’ of Rs. 12000 per month from an industry. Worker B gets a cash amount of Rs. 8000 per month from a building concern. In addition, he lives in a medium furnished house provided by the company. The rental cost of such House in that locality is Rs. 2000 per month. He is also provided free food and free clothing by the company and is liable free travelling to his home town once in a year. The company also provides him free medical and life insurance cover for the safety of his life and his family.

Thus, on comparison of the actual wages being earned by workers A and B , we find that the standard of living of worker B is better that A. The real wages being offered to worker B is much more than the nominal wages paid to worker A.

Forms of wages payment

The two main forms of wages payment to the workers are

1. Time rate system ( Payment by Time)
2. Piece rate system (payment by piece)

Although the above two system are in general use, but in certain case the remuneration is based on a combination of these systems.

1. TIME RATE SYSTEM: The type of system in which a fixed amount of wage payment is paid to the worker per unit of time regarding of his output is termed as time rate system.The unit of time can be hours days, weeks, or months. It is the most commonly employed method of wage payment in India in the Field of Construction Industry.

Advantages of the rate system: The system has follows advantages:-

• It is the simplest and convenient method for wage calculation and can be easily understood by illiterate lobourers.
• Quality of work improved, since the worker is in no hurry to complete the work.
• Labourers are not overstrained, physically or mentally, In attempts to increase output of work.
• It is specially suited for works, where output is difficult to the measured.
• Workers will not suffer due to stoppage of work for unavoidable reason, such as break down of power, intensive rain, thunder etc.
• There is no dispute regarding the work or payment. Even, if the owner asks ti dismantle a particular job and rebuild it, the workers has no objection to it.

Disadvantages of the rate system: The system has following disadvantages:

• Both experienced and non experienced workers get payment at the same rate, which is already fixed , So, there is no reward for good workers showing higher output.
• The output of work is usually low, as the workers are assured of payment on the basis of work per unit time.
• Constant supervision is essential to watch the progress of work in the system. So, additional finances are required to pay the supervisory staff.
• Effective cost control i.e economy is not achieved, because of varying efficiency standards of different workers.

2. PIECE RATE SYSTEM: The type of system in which payment is made to the workers on the basis of their output or work done . The work done by each worker is measured in standard units and payment is given at the agreed rate, which is fixed at the start of work. For example

• Work done in cubic foot for breaking bricks into small aggregates.
• Work done for excavating a trench in cubic foot.
• Work done for painting a wall in square metres.

Similarly, the payment can be made to the workers on the basis of completion of item or piece . for example:

• Plastering a stair case
• For painting a complete house

In this case, lumpsum contract done for completing the piece and no measurement of work is required.

Advantages of piece rate system: The system has following advantages:

• Experienced, good and efficient workers will earn more.
• No strict and constant supervision is required . So overhead charges are reduced.
• Output of work is increased
• Effective cost control can be achieved.
• Workers do not receive any payment for idle time. Thus, inefficient and lethargic workers can be automatically punished.
• This system is equally fair to the workers and their employers an the chances of dispute are minimum.
• The work is completed in a scheduled time. So, it is preferred where urgent work is required.

Disadvantages of piece rate system: The system has following disadvantages:

• The quality of work is poor.
• The tendency to increase the output of work will overstrain the workers physically and mentally.
• There is no guaranteed payment for the labourers . The payment can be given only on the completion.
• Workers suffer due to power failure or some other cause.
• The wastage of material is generally more as compared to time rate system.
• The system is not preferred for work which cannot be measured.
• This system is a bit complicated and a separate output record of different workers has to be kept.