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Briefly describe Emerson's Efficiency Bonus Plan with its advantages and disadvantages.
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This plan has been named after Harrington Emerson; the innovator of this plan. Under this plan every worker is guaranteed his day wages irrespective of his performance.
A standard output is fixed, and is represents 100% efficiency. According to the plan upto 66 2/3 the guaranteed time wages are paid to the workers, after this they are paid bonus at stated ratio of the time wages.
Emerson used 32 empirical bonus percentages for efficiency beyond 66 2/,3% under this plan, the bonus starts from 0.01% above 66 2/3% efficiency and increases to 20% at maximum efficiency. After this point the bonus is 20% above the basic wages plus 1% for each 1% increase in efficiency.
Advantages (Merits) of Emerson's Efficiency Plan
1. Beginners are encouraged to work hard under this plan.
2. Proper attention is paid to different kinds of workers.
3. It is easy to understand the Emerson's Plan.
4. It possesses rational determination of efficiency.
5. The calculation of efficiency is logical.
6. This plan can be applied to individual tasks as well as group tasks.
Disadvantages (Demerits) of Emerson's Efficiency Plan
1. Labour cost is increased due to payment of bonus on low level of production.
2. There is low rate of bonus in the beginning.
3. It is a complicated plan as far as calculation is concerned.
4. It requires a lot of clerical work.
5. Under this plan, management may be tempted to fix a very high level of standard output.
