3. A lower cost per unit to the employer as wages automatically increase.
4. A supplemental earning power, or bonus, to the worker above the day wage, the bonus being based on efficiency.
The premium system is a combination of day wage and piece rate, involving the establishment of standard times for stated tasks. It is based on the theory that if, when a standard time has been fairly established, the worker performs a task in less than standard time, he is entitled to a bonus, or extra pay, for the time saved. The bonus is based on the wage rate paid for standard time.
For what part of the time saved the workman should be paid, depends on circumstances. It might be argued that the workman is entitled to full pay for all of the time saved, but other factors than the dexterity of the workman enter into the time saving. The employer supplies additional power, there is an extra cost for wear and tear on machinery, and an extra quality of material; all have a bearing on time saving. The employer is, therefore, entitled to a part of the saving.
The original premium system is known as the Halsey plan. There are, however, several well-known modifications of the plan, all based on efficiency, but each having certain distinguishing characteristics. No more clear presentation of the essential features of the best known premium systems has been made, than is found in a review by Mr. Carl Bender, published in the Engineering Magazine, from which the following is quoted:
HALSEY PREMIUM PLAN
To mitigate to some extent the evil workings of piece rates, Mr. F. Halsey invented the premium plan shown in Fig. 1.
The slant of the wage line may be at any angle from horizontal, straight piece rate, to coalescence with day rate line. This system possesses at least four valuable points:
1. It pays day rates if a longer time is taken than standard.
2. It is a very flexible system and can be adapted to different conditions.