We asked one of our clients to give us their impressions at a China factory visit during procurement recently. Read below to get an idea of how they felt during this trip, regarding the payment scheme of workers. This is one of a series of blogs that we will title: Buyer Diary.
Different factories adopt different payment schemes. These payment schemes are often catered to the different types of job scope, positions and qualifications. Today, we will be discussing about how these payment schemes are allocated to the workers and how they will affect the company in the long run.
There are 3 different types of payment methods and we will evaluate them as follows:
- Payment by per hour basis
- Payment by the amount of pieces that the employee has completed
- Payment on a monthly basis
Payment by hour
This form of payment method is usually seen for stand-in workers. During peak periods, there would usually be a shortage of workers due to the large orders coming in. Some workers might have taken leave beforehand and just so coincidentally, their vacation days clash with the peak period. When this happens, the factory would usually hire stand-in workers to make up for the lack of workers.
Usually, workers with no specific skills get paid on an hourly basis. These workers do everything in general and it usually ranges from production to packaging. It would be better to pay workers who produce large quantities of products on an hourly basis as compared to paying them by pieces as the factory would end up making a loss if the workers produce too many at one go.
Advantages of paying workers on a per hour basis would include:
- Certainty of getting a pay, there will be a specific amount of wage that you can bring home at the end of the day
- You can calculate how much you will earn by the number of hours you work. If you want to earn more, you will just have to work longer hours.
- You get paid for what you work for, even if there is a need to work overtime, you will get paid for it
Some of the disadvantages of this payment scheme would be:
- Workers would become inefficient over time. As they get used to their job scopes, they would tend to be more relaxed and work at a slower pace as compared to the initial stages. This would lead to a company’s loss as your output would be more than your input.
- Some of the workers may push the job to the others and this leads to unequal job allocation. For example, one of them might do less work and another more work but both get the same pay as their working hours are the same.
- If you were to work for an extra half an hour and the factory does not pay you part thereof, you would have to work for another half an hour to get the pay for one full hour.
Payment by piece
For this payment scheme, most of the workers would be technical workers who often deal with the operation of the machineries. By paying these workers on a piece by piece basis, it would help to increase productivity amongst the workers. They would be motivated to produce more as that would mean more income for them. However, when there are rushed orders, the workers would only concentrate on producing more within a shorter time. This would lead to a drop in quality as these workers focus not on quality but not quantity.
Also, when there are rushed orders, workers may be pressurized to produce at a faster rate and this would cause them to be careless while producing the goods. When this happens, it would lead to an increase in defective goods which would in turn delay the whole production process as these defective goods would have to be reproduced again.
Some of the advantages of this payment scheme are as follows:
- It serves as an incentive for the factory workers to produce more goods
- Workers would not be too relaxed as they would want to earn more by producing more goods
- Factory would be able to produce goods on time as workers are fast and efficient
Some of the disadvantages of this payment scheme are as follows:
- Workers would rush through the production stage and this would lead to a drop in quality generally. In times like these, quality check (QC) service would come in handy.
- When workers work as a team, they are paid per piece as a team. If one worker is slower than the others, it would cause unhappiness among them and this would slow down the production process.
- When factory does not produce enough, workers would be paid less as they have lesser goods to be completed. This causes them to be unhappy which may lead to a strike, resulting in workers leaving the company or even causing the factory to shut down in the worst case scenario.
Payment on a monthly basis
This payment scheme is generally used for managerial positions. Usually, managers are paid on a monthly basis as their job scope requires them to be always on the go and their workload differs from time to time. With a monthly pay, these managers would feel more settled in and be more committed to the factory. This would in turn encourage them to give their best at work and the factory would be able to see more results under a capable manager.
Advantages of this payment scheme would include the following:
- Workers would not have to worry about not getting paid as they have a stable income.
- Workers would be more devoted to their work as they are official members of the factory. They would put in their best effort in every project that they do and be role models for the other workers in the factory, encouraging them to be more efficient in their work as well.
- It creates a sense of belonging for the managers as they have a position in the factory and this would inspire them to take on responsibilities. The factory workers would also feel more assured if they know that they are in good hands of a reliable leader.
The disadvantages for this payment scheme include the following:
- Usually, workers who are paid on a monthly basis have a higher position in the factory and these jobs would usually be contract based. If these workers are unhappy with their current jobs and yearn to leave, they would have to wait until the contract is up.
- When there are rushed orders to be completed and these workers have no other choice but to work overtime, they might not get paid for the extra hours that they are putting in. This means that they work more than what they are paid for.
- Sometimes, there may be a delay in receiving your paycheck. This can prove to bring inconvenience to those who need the money urgently for emergency purposes.
Every payment scheme has its own advantages and disadvantages. Employers would have to take every factor into consideration before choosing the right payment scheme for a certain category of workers.
Managerial positions usually receive monthly salaries as the flexibility of their schedule and work load changes. This payment scheme would help them to settle in and be more committed to their work.
Technical workers are usually paid by the number of pieces that have been completed. This serves as the best payment scheme for them as them as these technical workers would work faster to produce more goods in order to receive more income. With more goods being produced, the factory would be able to meet its deadlines and clients would be pleased with our service.
General workers like stand-in workers would be paid on an hourly basis. These workers are usually temporary workers and they take on any role that is assigned to them. As they are able to calculate how much they can earn by the number of hours that they work, there is a definite amount of money that they are bringing back at the end of the day. However, some of them might take advantage of this factor and do a sloppy job.
All in all, these payment schemes would affect the factory in the long run. If the wrong payment scheme was chosen, workers would be dissatisfied, strikes would occur and these would have detrimental effects on the company. Remember to choose your payment scheme carefully in order to ensure that your workers are more efficient and devoted to the factory.