PAYMENT SYSTEMS AND WORKING HOURS

CHAPTER 5

INTRODUCTION• In order to attract workers and to retain the

best performers, employers need to have a compensation system that will achieve their objectives.

• Furthermore, employers need to comply with the relevant laws which relate to payment systems and hours of work.

WAGE AND PAYMENT SYSTEMS

GOALS OF A WAGE SYSTEM

• Attract employees to work in the organization• Retain efficient employees• Motivate employees to perform effectively• Establish a simple system that is easy to

administer

WAGE SYSTEMS• There are 2 major systems of

payment:1) Time-related systems2) Piece-rated systems

1) Time-related systems• Wages are paid for a set period of

work on an hourly, weekly or monthly basis.

• The pay varies with the number of hours worked and not with the output.

ADVANTAGES• They are easy to understand and

administer• The worker is assured of a steady

income

DISADVANTAGES• No relationship between effort

and reward

Examples:• Plantations and manufacturing

workers are being paid based on a daily rate.

• Office workers receive monthly-rated pay.

2) Piece-rated/ Piece-work systems or payment by result

• Workers are paid according to the number of units produced in given time.

• To encourage workers to produce at maximum levels, progressively higher rates may be paid for higher levels of output.

ADVANTAGES• Workers will be self-motivated• Workers put in their best effort in

order to increase their pay packet

DISADVANTAGES• Workers do not necessarily

attempt to maximize their earnings

• The quality of output may be affected

FACTORS AFFECTING LEVELS OF PAY

• Legislation and government policy

• Unions• Selection policy• Employment conditions• Company profitability

FACTORS AFFECTING INDIVIDUAL LEVEL OF PAY

• Seniority• Increase in the cost of living• Performance• Degree of skill

LEGISLATION RELATING TO PAYMENT OF WAGES

• The Employment Act• The Sabah Labor Ordinance• The Sarawak Labour

Ordinance • The Wages Councils Act

CHOOSING A WORKING HOURS SYSTEMFactors:

– The legal constraint– The effect on the efficiency of the workers of a particular

system– The effect on the motivation of the workers– The type of system being used by a majority of

employers in comparable organizations and in the same locality

CHOOSING A WORKING HOURS SYSTEM• Non-traditional working hours can provide

benefits to both employers and employees.• In a tight labor market, work sharing, flexitime

systems, part-time shifts and the compressed work week are examples of systems which can help to recruit employees

OVERTIME WORKING• The Employment Act stipulates that no worker

can be required by his employer to work more tan 8 hours per day or 48 hour per week.

• Except for:– Accident, actual or threatened, in or with respect to the employee’s

place of work– Work, the performance of which is essential to the life of the

community– Work essential for the defense or security of Malaysia– Urgent work to be done to machinery or plant– An interruption of work which it was impossible to foresee– Work to be performed by emplyees in an industrial undertaking

essential to the economy

OVERTIME WORKING

OVERTIME RATES• Overtime worked on an Ordinary Working Day

= 1 ½ times the normal hourly rate• Overtime worked on a Rest Day = 2 times the

normal hourly rates• Overtime worked on a Public Holiday = 3

times the normal hourly rate

REASONS FOR OVERTIME• A temporary shortage of manpower• A temporary increase in workload• Low productivity of the workers• Difficulty in recruiting additional workers

PROBLEMS CAUSED BY EXCESSIVE OVERTIME

• Increased cost• Effect on morale effect on productivity• Effect on productivity

STEPS TO REDUCE OVERTIME WORK

• Keeps records• Recruiting new staff• Improving supervision and training• Investment in new technology• Changing the mode of payment

SHIFT WORK SYSTEMS• Shift work involves:– Hours of work, which include hours outside the

‘normal’ or traditional 8 to 4, or 9 to 5 pattern– 2 or more groups of workers who take turns to

man the workstations

SHIFT WORK PATTERNS• Double-day shifts:– Shift I – 7.00am – 3.00pm– Shift II – 3.00pm – 11.00pm

SHIFT WORK PATTERNS• Three-shifts day:– Shift I – 7.00am – 3.00pm– Shift II – 3.00pm – 11.00pm– Shift III – 11.00pm-7.00pm

SHIFT WORK PATTERNS• The split shift:– Involves working several hours early in the

morning, having time off and then continuing the same shift later in the day

SHIFT WORK PATTERNS• Rotating and permanent shift:– System whereby an individual worker, if he is on a

double-day system, alternates between the first and second shift on regular basis.

JUSTIFICATION FOR SHIFT WORK• 4 common situations in which shift work is found:– Service-oriented industries– Production technologies is that the machinery needs

to be run continuously without a break.– Maximize the productive use of plant and machinery– Consumer service

THE PROBLEMS CAUSED BY SHIFT WORK

• Women and night work• Increase in cost• Workers’ health • Stress and psychological problems