 Combined Rates (i) Salary + Piece Rate This is where the employee receives a fixed basic salary, and a set piece rate or commission on top. This helps to minimise the worries about pay security that many employees have with piece rate schemes, whilst also solving the problem of salary workers who feel that their extra effort goes unnoticed. The combined rate also helps you to keep costs down if production or sales are below expectations.
The disadvantage of a joint salary and piece rate pay scheme is that the administration and accounting costs are very high. However, for most businesses, the benefits outweigh this cost.
This pay scheme is most appropriate for jobs that have fixed hours, and require a significant amount of sales or production work.
(ii) Hourly Rate + Piece Rate
This is where the employee receives an hourly rate of pay, as well as a set piece or commission rate on top.
This helps to ensure that employees are properly rewarded for extra work, whilst also removing some of the worries that piece rate employees have about losing money if other people prevent them from reaching targets.
The hourly rate helps to ensure that you only pay for hours that are needed, and the piece rate helps to ensure that costs are lowered if sales or production are lower than expected.
The disadvantage of a joint hourly rate and piece rate pay scheme is that it is the most difficult (and therefore most expensive) to administrate and account for. However, for most businesses, the benefits outweigh this cost.
This pay scheme is most appropriate for jobs with variable hours that involve a significant amount of sales or production work.
Payroll Frequency - When to Pay Staff
(i) Weekly
Paying your staff every week will create higher administration costs, as you have to calculate pay four times a month. However, weekly pay is preferred by most employees as it allows them to plan their finances much more easily.
Weekly pay tends to be more common in smaller businesses, as there are fewer employees to account for.
(ii) Monthly
Paying your staff every month will lower your administration costs, as you have just one payroll a month. However, monthly pay is not as popular with employees, as it makes it harder for them to plan their finances.
Monthly pay is usually more common in larger businesses, where there are many employees that need to be paid and accounted for.
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