Where and why is the lump sum system of remuneration used and how to correctly calculate the salaries of employees?

The remuneration system characterizes its unit of account and the method by which the amount of labor remuneration is calculated. Different business circumstances dictate different ways of organizing the payment of wages.

The most common types of wages are piecework and time-based. In some cases, a special type of piecework system is used - piece-rate payment.

• What are its features,
• when is it more profitable to use it,
• how remuneration is calculated based on the criteria of this system,
• and how to introduce it in an enterprise

We'll tell you below.

What are the features of using the lump sum system of remuneration ?

The logic of lump sum remuneration for work

In practice, sometimes labor is organized in such a way that it is impossible to apply either the piecework or time-based wage systems in their full form. For example, a group of people works, completing a set amount of work within a given time frame, and the specialization and qualifications of the employees are different. The result of their work is complex.

It would be logical to use piecework payment, since there is a volume of work to be taken into account, but, unlike the usual use of the piecework system, it cannot be arbitrarily increased, nor can the set time be changed. The time-based payment system is also inapplicable here, since the product produced directly reflects the amount of labor invested, and the hour worked cannot act as an accounting unit.

How to calculate and pay wages in construction using the lump sum form of remuneration ?

For such types of activities, there is a lump sum system of remuneration - a subtype of piecework remuneration, when the money earned is planned to be paid in aggregate for the entire required amount of work completed within the agreed time.

REFERENCE! We can say that piece-rate payment is piecework, established for a heterogeneous group of employees, but can also be established for one employee. It is regulated by the Methodological Recommendations for accounting of labor costs and their payment in agricultural organizations, approved by the Ministry of Agriculture of the Russian Federation on October 22, 2008.

What is piecework payment?

According to Article 150 of the Labor Code of the Russian Federation, piecework payment is considered a certain form of rewarding an employee, in which the employee receives a salary depending on the number of tasks completed. At the same time, the amount of work could be easily calculated, as well as monitored for quality.

The difference between piecework payment and other forms of wages lies in the presence of reliance on a special indicator - piecework cost . To determine the piece rate, the same indicators are used as for other types of labor rewards.

Piece payment is organized subject to the following points:

• There must be reasonable standards for labor costs and correct pricing of work.
• The product and its production are the final indicator of the employee’s efforts, and the quality should depend directly on the worker.
• Workplaces must have all the necessary conditions for comfortable work .
• The result of the work and the time spent must be strictly taken into account.

Not everyone understands how piecework payment differs from time-based payment. The main difference is in the form of accounting for labor costs:

1. If you use time-based payment, you need to take into account the time .
2. If you use piecework wages, then you need to take into account the size and quality of the work performed , or you need to keep records of the operations performed by the worker.

When is it appropriate to use

The chord payment system should be chosen in cases where you need to perform a number of actions within a limited time frame, these could be the following situations:

• rush;
• the need for urgent implementation under threat of sanctions;
• extraordinary circumstances that may cause problems with the further functioning of production;
• one-time amounts of work;
• introduction of new equipment or technological process, etc.

IMPORTANT! The chord system is stimulating in nature, therefore it is mainly used only temporarily and in special situations.

Most often, the chord system is used in enterprises where it is possible to accurately take into account the amount of work performed according to the developed labor cost standards. These could be communications enterprises, industrial organizations, construction companies, work in some branches of agriculture, where manual labor is used, etc.

Procedure for attracting employees

• What is the wage grade system?

If the technique is used for a limited period, then the establishment time should appear in internal local regulations. It is necessary to conclude a fixed-term individual employment contract with each employee. If the lump sum system of remuneration is characterized by the implementation of specific work for a specific period, then the period in the employment contract should not exceed the established time interval.

• How is overtime paid under the Labor Code?

Labor relations are formalized:

• a fixed-term employment contract for internal part-time work or an order to combine positions if the employee is on the staff of the enterprise;
• an additional labor agreement for external part-time work, if the hired citizen is not on the staff of the enterprise as the main employee.

The lump sum wage system provides for the possibility of paying remuneration in an amount not lower than the minimum wage established at the regional level throughout the entire period until the completion of the production cycle or set of works. This information must be specified in internal local documents.

Piecework wages are an analogue of attracting a citizen to perform work of a civil nature. However, unlike a one-time contract, the employee is not removed from activities based on the results of performance, but receives a bonus payment and “extra points” in the eyes of management.

Composition of lump sum payment

Wages intended for a group (team) of workers for a given volume of labor operations within a specified period consist of the following components:

• salary, tariff or established rate for labor;
• certain additional payments;
• premium.

Earnings depend to a greater extent on the first component, that is, on the prices for certain types of work.

Accord-premium system

Payment of bonuses under such a system is carried out for the fulfillment of pre-agreed bonus conditions. What these conditions will be is determined individually. Naturally, there must be mandatory accounting of established indicators. If the group failed to achieve these indicators or meet the conditions (for example, meet the allotted deadline), then the money will be paid without a bonus component.

How to calculate employee salaries

If an urgent job consisting of n separate components is assigned to one employee, then his remuneration is calculated using the formula:

C = S1 * A1 + S2 * A2 + … + S(n) * A(n),

where C is the total payment amount, A(n) is the quantity of the nth work, and S(n) is the cost of the nth component of the work.

Example 1.

The worker is tasked with turning 100 parts in 10 days (job A1) and assembling 5 structures from them (job A2). The cost of manufacturing one part is 100 rubles (S1), and the cost of one assembly is 1000 rubles (S2). The salary will be:

C = (100 * 100) + (5 * 1000) = 15,000 rubles.

Piece system

If the work is entrusted to a team, and the result of the work directly depends on the time it takes to complete it (for example, guarding a warehouse or performing similar actions), then the piecework type of the chord system is used, and the contribution of each employee is proportional to the duration of his work.

Formula for calculating payment to the nth team member:

C(n) = S * T(n) / T,

where S is the total payment for the entire facility, T(n) is the time spent by the nth employee on work, and T is the time spent by all employees, with T1 + T2 + ... T(n) = T.

Example 2.

A team of 5 workers was assigned to guard the warehouse for 10 days in turn. The declared total cost of the work is 40,000 rubles. During the entire period, two workers guarded the warehouse for 72 hours each, the other three – for 32 hours each. The total operating time is 240 hours.

The payment to each of the first two workers is 40,000 * 72 / 240 = 12,000 rubles, and the payment to each of the remaining three is 40,000 * 32 / 240 = 5,333.33 rubles.

Premium and mixed systems

If the work consists of several components, each of which is valued in a different way, then the final payment for each employee of the team consists of the price of work of each type, multiplied by the contribution of this employee to this component (in hours or another unit of measurement) and, if necessary, multiplied by the KTU. The formula in this case will be individual for each case.

Example 3.

A team of 6 workers was tasked with renovating the premises in 10 days. The total cost of the work is 100,000 rubles. The list of works included:

• dismantling the old floor - 30,000 rubles;
• installation of a new floor – 60,000 rubles;
• security of the premises at night (ten nights for 12 hours) – 10,000 rubles.

The dismantling fee depends on the labor contribution, therefore it is calculated using the formula:

C = 30000 * (A(n) / A),

where A(n) is the area of ​​the floor broken by the nth member of the team, A is the total area of ​​the floor.

Installation is more complex, therefore, in addition to the volume completed, KTU is taken into account for quality. 0.9 – low quality, 1.1 – high.

The fee for installing the floor of the nth employee is 60000 * (A(n) / A) * KTU .

The security fee depends on time and is calculated for the nth employee as:

10000 * T(n) / T,

where T(n) is the number of hours worked by the nth employee, and T is the total number of hours (120).

In total, the salary of the nth employee will be:

C(n) = 30000 * (A(n) / A) + 60000 * (A(n) / A) * KTU + 10000 * T(n) / T.

When calculating, it is important to take into account that the total KTU of all employees should be equal to 6 (the number of team workers).

How to distribute lump sum earnings within a team

The amount paid upon completion of the work is intended for all participants in the process. It can be distributed depending on different criteria:

• by the time during which each participant was employed (distribution of wages);
• according to the labor participation coefficient (LCR), which takes into account various labor characteristics (this is how bonuses and additional payments are usually distributed).

Calculation formula

To calculate possible time and labor costs when the lump-sum method of remuneration is used, projects, drawings, time standards, waybills, and work orders on a piece-rate basis are used. The money to be paid is issued to the entire team, after which a calculation is made for each employee based on individual contribution in proportion to the time spent or the volume of the task.

To calculate the individual contribution, the formula is used:

Piece rate = prices for the type of work (RVR) No. 1 × quantity of work (KR) No. 1 + RVR No. 2 × KR No. 2 + … + RVR No. n × KR No. n.

If the form of labor is collective, the resulting calculation result is divided by the total amount of work for the final result.

The payment is calculated according to the labor participation rate (LCR):

Wages = cost of work / KTU of workers × KTU of an individual worker.

How to introduce the chord system

Since the application of this system is temporary (one-time or emergency) in nature, the accounting documents must reflect that for a group of employees, wages will be calculated according to this scheme for a specified time.

This kind of work can be performed under fixed-term employment contracts (Article 95 of the Labor Code of the Russian Federation), which will stipulate:

• types of actions;
• deadline (there must be a work schedule, even if it does not affect the amount of remuneration);
• prices for work.

IMPORTANT INFORMATION! If an employee who wants to be involved in working under such a system has already concluded an agreement with the company, that is, is part of the staff, an internal transfer will be needed. You cannot do without it: since the remuneration system is an indispensable element of the employment agreement, it must be reflected in the employment contract.

Distinctive features

The lump sum wage system is characterized by an increase in the quantity of manufactured products while simultaneously improving quality and saving time resources.

The benefits include:

1. Increased productivity and efficiency. The scheme is optimal for one-time work on an urgent basis, because:
   stimulates the employee according to deadlines;
2. minimizes equipment operating costs.

1. Elimination of claims from employees, since with a lump-sum remuneration system, wages are set before the start of work, the minimum final figure is known to each employee involved, and receiving a bonus introduces an additional positive element.
2. Degree of motivation. A specific volume and an additional bonus for early completion are a powerful incentive for the team, which influences each participant.

The disadvantages include the fact that the lump sum wage system provides for a comprehensive assessment of an entire stage of work with the formation of remuneration for a specific volume. Behind the scenes there may be an assessment of the labor costs of each employee when establishing an individual coefficient.

Documenting

One of the internal documents of the organization must specify the procedure for remuneration according to the lump-sum system if it is planned to be used. When a fixed-term employment contract is concluded with a worker or group of employees, it must contain a reference to this act.

To calculate wages using the lump-sum system, there must be the following documentary grounds - paper reflecting the essence of the lump-sum task and the progress of work on its implementation. Such a document must contain:

• a list of all types of work performed;
• their quantitative and qualitative indicators;
• prices for each type of activity;
• total amount to be paid.

In most cases, such documents are work orders and reports of completed tasks.

ATTENTION! An organization may adopt its own design standards, but in some industries, unified forms of documentation have been developed for this purpose, for example, a waybill for the transport sector, a work order for piecework in agriculture, a report on the operation of mechanisms in construction, etc.

Advantages and disadvantages

The advantages of the chord system include:

• increasing the team’s motivation for quality work>;
• time saving>;
• reduction of labor standardization costs>;
• independent distribution of work volumes and working hours within the team;
• reducing business risk.

If, when concluding ordinary employment contracts, the employer is forced to continuously monitor the speed and quality of work, then with the chord system, the team itself is interested in the quick and high-quality completion of the work.

For private customers, this system is convenient because there is no need to delve into the essence of each component of the scope of work in detail - it is enough to agree on the final price for the entire volume and set deadlines.

The disadvantages include the likelihood of an incorrect (inflated) initial estimate of the cost of the total scope of work , especially for an inexperienced customer, since after signing the contract, the cost of the work cannot be changed if there are no violations. For the brigade, the disadvantage is the difficulty of assessing the contribution of each individual employee under the piecework-bonus system.

Advantages of the lump sum payment system

Since the original meaning of any labor remuneration is payment for achieving a certain result, lump sum payment is the best way to promote the effective application of this principle.

If the organization has a well-established record of labor results, rationing is well planned, and quality control is constant, then the chord system guarantees:

• reducing the workload of standardizers;
• simplifying the distribution of work volumes;
• facilitating the process of accepting work results;
• saving working time, material and energy costs;
• reduction in production costs;
• a more cohesive workforce;
• a significant reduction in business risk, since personnel costs are always proportional to the volume of labor.

Example

Under certain working conditions, a chord system is necessary and does not cause practical problems. This option is widely used for one-time actions performed by a work team. Let's consider an example of calculation using KTU.

A team consisting of two employees completed the reconstruction of the building in 5 days (40 hours of working time). Cost - 10,000 rubles. The first worker worked 26 hours, the second - 14.

Calculation:

If workers worked the same amount of time, the total amount is divided in half. If one worked more, he will receive more - this is the answer to the question of what is chord work in a team. The described system helps to rationally distribute funds among team members thanks to clearly defined standards for the time spent on the process, eliminating conflicts and misunderstandings.