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Calculation of premium wage

Calculation of premium wage[1]

          Actually, haven’t introduced rational methods on stimulation for hourly-paid employees, but however for piece-workers used various combined system of most stimulation on number of manufactured products & worked hours according to work done as bonus plan at 100%, collective stimulation of employees’ know how, allocation plan of income & seniority pay etc. Some wage system showings rise in instant dependence, but however on the contrary others drop in inverse relation to growing indicators. Various directions on ratio changes of wage efficiency indicators cause difficulties to find sound decision on wage stimulation of labor efficiency, which requires mathematical approaches distinguishable from traditional direct calculation methods. Many renowned managers as Frederick W. Tailor, Halsey, Henry Gantt, Lilian Gilbreth & Harrington Emerson & other managers-analysts of efficiency plan & wage system have created plan of wage stimulation but however most of them weren’t used so far. Takes place of leaving out that, weren’t include following indicator ratios into allocation showings of wage bonus between team employees: as declining of production defects, every body’s high professional skill, saving of raw materials, complying labor discipline (loss of working hours) etc. We are as initiators of Mongolian association of Chartered financial analysts have considered the computation methodology[2] on premium wage in dependence with below cited multiple alternative indicators: as earned by employees fulfillment rate of targeted productivity norm, saving in direct material expending, contribution putted into sales revenue with every worker respectively referring to inverse factor ratio index, application of probability notion, & saving concept of material costing.        Table1                                                                                                          

Here have denoted index of saving in direct material spending via 1.20* =1000,0:900,0, & over expending of direct material spending through 0.91**= 550,0:500,0,  pay for everybody expressed in columns 1,2,5,8,9. Assume wage of worker A demonstrates as: 99360=40ּ2000ּ0.90ּ1.20ּ1.15.

       Rise necessary in comparable dynamic analysis by means of 3-5 empiric matched data as of output as well as wage expenditures to estimate naturally determinate business tendency & efficiency for long range period over the whole company & also in the context of its structural components as operation & service departments.  Assume, below given corresponding retrospective data belongs to growth rates of labor productivity & average wage for company ABC.

Table2

Let’s determine average growth rate of above selected both showings by computing geometric mean of chain growth rate: lgy1=0.144064:5=0.0288128. Hence antilogarithm is y1=100.0288128=1.0686 or 106.86%, like this lgy2=0.0213157:5=0.0042631. Thus antilogarithm is too y2=100.0042631=1.0098 or 100.98%.  Obtained   results led to make conclusion that achieved proper ratio shows productivity rate exceeded average wage rate approximately at ∆=106.86-100.98=5.88%. Sometimes generate the thoughts to calculate appropriate indicators of employees’ productivity & their average wage from the point of view of man-hour or man-day productivity, length of working hours etc respectively & make a decision by taking these circumstances into analytical consideration. Assume that planned needs in 2012 for company ABC expressed below.                        Table3

       Remarkable, scope & contents of financial statements are seriously restricted & tightened with information capacity at present. Indeed contents of 4 forms of financial statements & their showings couldn’t cope with which main goal as analytical function. Obviously, haven’t included necessary schedules, clusters, items & showings related cost & managerial accounting into financial statements, which  tells on reputation as of accountants-analysts as well as of accounting qualification properly. Began facing with necessity to express physical indicators as possible in association with pecuniary valuation for preparing financial statements as just monetary showings couldn’t accord with the modern, changeable but then uncertainty of economic behavior, thus foresee contingency economics recession, reduction & avoid its negative consequences, & also modify which into superiority. Data contained in financial statements has belated property of time lagged & follows on the past events & uses only for rectifying suffered misleads, but no to predict expected troubles. Recommendable to include some physical indicators which would be rendered feasible & measurable opportunities to conduct financial analysis associated with physical volume method, & consider physical index in dependence with value index taking into account inflation waves. Measurable of any physical & costing indicators newly suggested would be expressed on their controllable property. Many available itemized showings belong to measurable labor, production, factory overhead, output & operation (marketing & administrative) activities on disposal of accounting department haven’t demonstrated in financial analytical statements, thus which  no used in analyzing, planning, forecasting, & controlling etc so far. In this connection we have cited above wage efficiency & labor system analysis, which could be launched by using labor activity levels as machine-hours, labor-hours, & standard-hours etc. Indeed analysts are recognizing probable economical risk & its consequence within collected data basis, also restricted sphere of financial statement information capacity, which complies with accountancy thus far. Inexhaustible & unregistered  evidence, uncertain event & seemed operation, which left outside of financial statement contents causes to follow  chaos in management, increases unmeasured random, & misleads analysts thinking. Recall that learning, Socrates’ wisdom was limited to an awareness of his own ignorance. Socrates believed wrongdoing was a consequence of ignorance & those who did wrong knew no better[3].

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[2] T. Yondon., Gombo. Dariimaa” Analysis of human resources management”, 2011

[3] Wikipedia

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