§ 8. Premium plans. Various modifications of piece work have been developed of late, all involving the features of a minimum task and of a premium for performance beyond that point. These plans are called "premium plans," "progressive wage systems," and "gain sharing." One of the first of these, Halsey's premium plan, fixes a standard time for a job, and if the worker falls short of, or merely attains to, that standard he gets the regular pay; but if he takes less than the standard time he receives a fixed premium per hour equal to one third of the wage for the time saved. For example, if the standard time is 10 hours for a $3 job the premium for speed is ten cents per hour, and the worker would receive 20 cents premium if he did the work in 8 hours ($2.40 + 20, total $2.60), and 50 cents premium if he did it in 5 hours ($1.50 + 50, total $2.00). His average wage per hour thus rises as his speed increases; it becomes 32.5 cents per hour when the job is done in 8 hours, and 40 cents per hour when the job is done in 5 hours. The reduction of cost per job to the employer evidently would be 40 cents in the first case and $1 in the second. This is Halsey's plan, by which the worker gets one-third and the employer two-thirds of the time saved.

The same plan has been applied (Weir's method) with a premium that equally divides between the workman and the employer the time saved. By Rowan's method the premium is not a fixed sum but a percentage of the standard rate per hour equal to the percentage of reduction in time consumed. If in the foregoing example the time were reduced 20 per cent (to 8 hours) the premium would be 20 per cent of 30 cents, and the workman would receive 36 cents per hour. By this plan the premium is larger for the earlier reductions in time and becomes less for the later reductions than in either of the other plans.

4 See ch. 21, ! 6.

By Halsey's plan the employer gets two thirds of the total saving in time, by Weir's plan one half, and by Rowan's a percentage varying directly in the ratio of the time saved.

A number of other variations have been worked out by the promoters of recent scientific management, notable ones being Taylor's, Gantt's, and Emerson's plans. The authors of all these plans agree as to the importance of fixing the standard rate so that it will leave a possibility of considerable improvement with unusual effort, and of leaving the standard rate and premium unchanged as long as no new process or new machinery is introduced into the business. If this is not done the employees lose faith in the plan and refuse to make the necessary effort to earn the premium. Most of these plans of payment recently have been connected with experiments and studies in scientific management to reduce the time and increase the ease of the operations.

In a variety of ways a bonus or a premium may be paid for quality, or for economy in the use of materials (as to a fireman for using less coal), or for various other results. Every business has its peculiar conditions that make certain results especially desirable and certain methods of reward practicable. In some industries, for example, the various plans of piece work and of premium payment are applied to groups of workers (as in collective piece work), the total payment being then divided among the members of the group in some agreed proportion.

Examples Where Standard Time is 10 Hours, at $3, Standard Pay per Hour 30 Cents

§ 9. Aim of profit-sharing. Profit-sharing is rewarding the laborer with a share of the profits in addition to his usual contract wages. Payments by the piece and premiums for output are solely dependent on the efforts of the particular workman (or collective group), but in the plan of profit-sharing a premium is given in addition to the regular wage if, at the end of the year, the business as a whole has yielded a profit above a certain amount. Profit-sharing is not merely a gift; it is done usually in accordance with a definite promise in advance. The employer adopting the plan does not intend to lose by it. His purpose is to stimulate the industry of the workers, thus reducing waste and cost of labor and supervision, and thereby increasing profits. He offers to divide with the workman the additional profits that are expected to result from their efforts. There is, in every factory, greater or less waste of materials, destruction of tools, and loss of time, that no rules or penalties can prevent. If the worker can be made to take a strong enough personal interest, he will use care when the eye of the foreman is not upon him. The product also can be slightly increased in many ways by the workman's exertions or suggestions. In some cases the quality of the work cannot be insured by the closest inspection as well as it can be by a small degree of the worker's interest. Either responsibility for the fault cannot be fixed, or the defect is one not measurable by any easily applied standard. Strikes may be averted, good feeling promoted, and contentment furthered if the interest of the worker can be made to approach, and in large measure to become in harmony with, that of the employer. The economic result of the plan, if it can be made to work, should be to reduce the costs of these establishments below what they are. The crucial question is whether profit-sharing alone in any particular case will insure that the costs will be less than those of competitors, thus giving a source out of which an increased amount, really a wage, can be paid to the laborer. For the amount of profits is affected not only by the amount of output, but also by a number of other things that are quite outside the control of the workmen.

§ 10. Examples of profit-sharing. The profit-sharing plan seems first to have been successfully tried in Paris, in 1842, by Leclaire, a house-painter. In house-painting there is often a great waste of materials and time by men working singly or in small groups in different parts of the city. By this new method Leclaire enlisted the aid of the workmen, reduced the costs, and increased the profits. It is a remarkable fact that the plan has been continued successfully by the same firm to the present time. It has been tried in many hundreds, possibly thousands, of cases, and is operating in some form or other, in more than a hundred firms in Europe and America, notable examples of profit-sharing in the United States are the Procter and Gamble's soap-factory in Ivory-dale, 0., the Nelson Manufacturing Company in Leclaire, III., and the Ford factory in Detroit; formerly also the Pills-bury mills in Minneapolis. In some cases both manufacturer and workmen value the system highly. It probably has its greatest success when applied in prosperous establishments where profits are regular and large, and where a steady working force is especially desired. The proportion of business done in this way is not large. One hundred firms is a very small fraction of 1 per cent of the total number of firms in Germany, France, England, and America. A still more important fact is that true profit-sharing has spread little since 1890, though various practices have developed under that name. The most noteworthy of these is the selling of stock, usually at a somewhat lower price, to the employees of a corporation, so that, as stockholders, they may have a motive to work for the success of the company (e. g., the United States Steel Corporation). This method as applied to a select few of the employees, who are advanced to official positions in a corporation, is very widely adopted.