This once understood, the satisfaction that results from a coöperative, profit-sharing type of management will be enjoyed.
The five methods of compensation which are to follow are all based upon the task, as laid down by Dr. Taylor; that is to say, upon time study, and an exact knowledge by the man, and the employers, of how much work can be done.
Differential Rate Piece Work the Ultimate Form of Compensation. — Dr. Taylor's method of compensation, which is acknowledged by all thoroughly grounded in Scientific Management to be the ultimate form of compensation where it can be used, is called Differential Rate Piece Work. It is described in "A Piece Rate System," paragraphs 50 to 52, as follows: —
"This consists, briefly, in paying a higher price per piece, or per unit, or per job, if the work is done in the shortest possible time and without imperfection, than is paid if the work takes a longer time or is imperfectly done. To illustrate — suppose 20 units, or pieces, to be the largest amount of work of a certain kind that can be done in a day. Under the differential rate system, if a workman finishes 20 pieces per day, and all of these pieces are perfect, he receives, say, 15 cents per piece, making his pay for the day 15 times 20 = $3.00. If, however, he works too slowly and turns out only, say 19 pieces, then instead of receiving 15 cents per piece he gets
only 12 cents per piece, making his pay for the day 12×19= $2.28, instead of $3.00 per day. If he succeeds in finishing 20 pieces — some of which are imperfect — then he should receive a still lower rate of pay, say 10¢ or 5¢ per piece, according to circumstances, making his pay for the day $2.00 or only $1.00, instead of $3.00."
Advantages of This System. — This system is founded upon knowledge that for a large reward men will do a large amount of work. The small compensation for a small amount of work — and under this system the minimum compensation is a little below the regular day's work — may lead men to exert themselves to accomplish more work. This system appeals to the justice of the men, in that it is more nearly an exact ratio of pay to endeavor.
Task Work with a Bonus. — The Task work with Bonus system of compensation, which is the invention of Mr. H.L. Gantt, is explained in "A Bonus System of Rewarding Labor," paper 923, read before the American Society of Mechanical Engineers, December, 1901, by Mr. Gantt. This system is there described as follows: —
"If the man follows his instructions and accomplishes all the work laid out for him as constituting his proper task for the day, he is paid a definite bonus in addition to the day rate which he always gets. If, however, at the end of the day he has failed to accomplish all of the work laid out, he does not get his bonus, but simply his day rate." This system of compensation is explained more fully in Chapter VI of Mr. Gantt's book, "Work, Wages and Profits,"
where he explains the modification now used by him in the bonus.
Advantages of Task Work with a Bonus. — The psychological advantage of the task with a Bonus is the fact that the worker has the assurance of a living wage while learning, no matter whether he succeeds in winning his bonus or not. In the last analysis, it is "day rate" for the unskilled, and "piece rate" for the skilled, and it naturally leads to a feeling of security in the worker. Mr. Gantt has so admirably explained the advantages, psychological as well as industrial, of his system, that it is unnecessary to go farther, except to emphasize the fine feeling of brotherhood which underlies the idea, and its expression.