National Commission on Labour (1967)||
17.7 The wage boards set up for different industries are required by their terms of reference to bear in mind the desirability of extending the system of payment by results in evolving a wage structure, subject to safeguards against over-work and undue speed. In dealing with this aspect, the first Wage Board for the Cotton Textile industry observed that both the employers and the employees disfavoured any system of progressive rates of incentives. They were satisfied by the system of piece-rates that covered over 50 per cent of the workers. The Sugar Wage Board found little scope for incentive wage system in that industry. A similar finding was recorded by the Cement Wage Board, since it found that individual or even group performance in cement factories was not measurable. No extension of the piece-rate system was recommended by the Coal Wage Board because of "certain inhibiting factors in the very nature of production in the industry". On the other hand, incentives through extension of piece-rates were recommended by the Wage Boards for Jute, Rubber, Coffee and Tea.
17.8 The Study Group1 on Productivity and Incentives, appointed by us, has pointed out that under our conditions, wage incentive is concerned with effective utilisation of manpower, which is the cheapest, quickest and surest means of increasing productivity. The only practicable and self-sustaining means of improving man-power utilisation is to introduce incentive schemes and stimulate human exertion to provide a positive motivation to greater output. The evidence before us supports the basic approach of the Study Group, though there is an understandable variation in the emphasis put by employers' and workers' representatives on its different aspects. There is a general agreement that incentive schemes should be applied to all sectors of economic activity. The following guide-lines for introduction of incentive schemes, on which we had sought views through our questionnaire, have found general acceptance. We recommend their adoption:
(a) Employers and workers should formulate a simple incentive system at the unit level and implement it on some agreed basis through collective bargaining. In every case, introduction of incentive schemes should be preceded by an agreement with trade unions.
(b) In evolving wage incentive schemes, it should be ensured that these do not lead to rate-cutting. The worker's normal wages should be protected where it is not possible for him for circumstances beyond his control to earn an incentive.
(c) Individual or group incentives can be framed to cover both direct and indirect groups of workers.
(d) An incentive scheme cannot be evolved without a work-study undertaken with the cooperation of workers. Nevertheless, it should always be open to employers and workers to evolve a scheme by agreement or on any other acceptable basis.
(e) Efforts should be made to reduce time-rated categories to the minimum. This will ensure that all employees have an equal chance to increase their earnings with increase in productivity.
(f) Wage incentives should generally provide extra earnings only after a mutually agreed level of efficiency has been achieved.
(g) To ensure quality of production, incentive payments should be generally allowed only if the output has been approved on inspection by the management. Relevant norms in this connection should be laid down and made known to workers.
(h) Incentive earnings should not fluctuate very much. This requires a certain degree of planning so that material delays, machine-breakdowns, etc., are controlled.
(i) The scheme should itself safeguard adequately the interests of the worker if he is forced to remain idle due to circumstances entirely beyond his control such as non-supply of raw-materials, and machine breakdown.
(j) Apart from financial incentives, non-financial incentives like better security of employment, job satisfaction, and job status, have also a place in increasing productivity.
1 Report of the Study Group on Productivity and Incentives p. 38.
17.9 Apparently, incentive schemes cannot be introduced to cover all occupations in all industries. The application of such schemes has generally to be selective and limited to industries and occupations in which it is possible to measure, on an agreed basis, the output of workers or groups of workers concerned and in which it is possible to maintain a fair degree of control over the quality of production. Two of our Study Groups on individual industries1 have specifically brought out this issue. It has been suggested to us that industrial units which have been recently set up in the country have taken advantage of modern technology; the scope for introducing incentive schemes in them would be more limited than in older ones. Heavy chemicals, oil refining, fertilizers etc., may not have much scope for production incentives. Due to the highly capital-intensive techniques of several of these industries, proper maintenance of plant and equipment representing heavy investment is equally necessary and this offers extensive scope for introduction of incentive schemes.
17.10 The question of a guaranteed minimum or a fall-back wage assumes considerable importance if workers are expected to speed up production. Production should not be organised in a manner which will give incentive wage on one day and unemployment on the next. A 'fall-back wage' can be a safeguard against it. This principle seems to have found general acceptance everywhere. Workers' organisations have represented to us that workers should not be made to suffer if employers fail to provide good material and machinery. Compensation for such default or shortcoming on the part of employers should be on the basis, not of a fall-back wage, but of what the worker would normally have earned. To us, this seems to be a matter of detail. When the principle of close consultation with workers' representatives is accepted, we feel that given goodwill on both sides, an essential pre-requisite of the successful operation of any incentive scheme, or for that matter, of any other scheme is fulfilled. The fixation of the quantum of fall-back wage is therefore not a matter that cannot be mutually settled.
17.11 Determination of the "Base" for introduction of incentives is another area of debate. If after scientific productivity studies on the shop floor carried out on an agreed basis, it is established that the present level of performance is only 'X' per cent of the standard level of performance taken as 100, should this 'X' per cent become the 'base' for calculations of gains in productivity? Or should some other 'level' be taken as the 'base'? We reproduce below two guiding principles which have found favour in the Report of a tripartite Committee on Sharing the Gains of Productivity:
(i) The norms should be fixed in an objective manner so as to be accepted by both management and labour; for this purpose, independent organisations like trusted management consultants should be increasingly employed.
(ii) The productivity norms should bear some "optimum" relationship with payments; if incentives involve very large payments, management may not be interested in sustaining productivity increases, but if they result in very small payments, labour may not likewise be interested.2
The reaction of either side to an incentive scheme will depend upon what the scheme would bring by way of benefit, which is a function both of the rate of incentive and the 'norm' against which the incentive has to be worked out. This also can be a matter where dialogue between the parties with a determination to settle can provide an answer.
17.12 We are of the view that a careful selection of occupations should be made with the assistance of work study teams, the personnel of which commands the confidence of both sides. Schemes should be evolved after detailed scientific studies and application of agreed industrial engineering techniques. They should cover as many employees of an undertaking as possible and need not be confined only to operatives or direct workers. The inclusion of supervisory personnel as beneficiaries of incentives can have a vital role in improving efficiency; together with maintenance personnel they can make or mar the scheme. The scheme should be simple so that workers are able to understand its full implications; it should ensure their enthusiastic cooperation in its successful implementation. Management should take steps to guard against the impact on incentive schemes of certain unfavourable external factors such as non-availability of raw materials, components, transport difficulties, and accumulation of stocks. Workers' attitude towards accepting incentives is indeed conditioned by these factors much more than by the
1 Study group on Oil Refining and Distribution and Study group on Cotton Textile. 2 Report of the Committee on Sharing the Gains of Productivity, March 67, National Productivity Council, pp. 8-9.
rest. Adequate machinery should also be made available for settling workers grievances relating to the adverse effect of environmental arrangements on their work and earnings. Rate modifications consequent upon a change is job content, methods, organisation, etc., should be made, as far as possible, in agreement with the workers. Also, workers' representatives may be associated with various stages of work measurement, job evaluation and work studies. According to the NPC study team which visited West Germany, U.S.A. and Japan, this system is prevalent in West Germany where incentive rates are freely negotiated with labour unions.