Allowances in performance standards

Allowances are commonly added to the computed normal time for delay, fatigue, and personal time. Allowances for delay and fatigue depend on the nature of the operation. They may not exist for some activities. The usual approach is to express allowances in percentage of the total available time. Thus, a 10 percent allowance over an 8-hour (480 minute) day is the equivalent of 48 minutes.

Delay Allowances:

Delay allowance must be based on actual measurement of the magnitude of the delays. Although a stopwatch study can be used, work sampling provides a much more efficient means of obtaining accurate data because delays often occur randomly. Work sampling expresses its measurement of delays directly in terms of a percentage of the total available time.

Fatigue and Personal Allowances:

For some very heavy industrial jobs, an employee might work 20 minutes and rest 20 minutes. This type of very heavy work is not common today, but it occurs often enough for a continuing interest to be maintained in the subject of physical fatigue and rest allowances.

Unfortunately, we still lack an accepted framework for the establishment of rest allowances based on any rational or scientific measurements. In most instances, schedules of fatigue allowances for various types of work based on general acceptability are used, and they are often the subject of agreements between labor and management.

Allowances for personal time provide at least a minimum amount of time that the worker can be away from the job. This personal time allows a break from both the physical and the psychological stresses that a job may contain and is, in a sense, a minimum fatigue allowance. The minimum allowance is normally 5 percent of the total available time.

Application of Allowances in Performances Standards:

The usual interpretation of the meaning of percentage allowances is that they allow a percentage of the total available time. A personal time allowance of 5 percent translates into 0.05 x 480 = 24 minutes of personal time in a normal 8 hour day. If the normal time has been measured as 1.20 minutes per piece, then the personal time must be prorated to the normal time in computing the standard time per piece:

Standard time = Normal time x 100/100 – Percentage allowance.

= 1.20 x 100/95 = 1.263 minutes per piece.

If all the allowances for delay, fatigue, and personal time are expressed as percentages of the total available time, they can be added together to obtain a single total percentage allowance figure. Then, standard time can be computed from normal time by a single calculation using the preceding formula.

Wage Incentives:

In spite of the emphasis on job satisfaction and other non-monetary incentives for workers, monetary incentives remain an extremely strong motivation, and wage incentives are one of the most important uses of work measurement data. A survey by Rice (1977) showed that in a sample of 1500 firms, including government and non-manufacturing. The survey shows that the time study is the dominant method for getting production standards and that simplest wage incentive plans, piece rates and standard hour plans, are the most used. Wage incentives are also being applied in service operations. For example, a 1986 survey of 1900 banks showed that 28 percent of those responding have wage incentives in place compared to 17 percent in a similar survey in 1982. But wage incentives are much more prevalent in large banks: 68 percent of banks with over a billion dollars in assets use incentive compensation.

Piece rate plans are the simplest wage incentives. If the piece rate is $0.50 per unit and a worker produces 75 units per day, earnings are $75.50 for the day. Piece rates could be based on work measurement and a standard hourly pay rate, but ordinarily they are not, negotiation or management fiat being the basis for setting rate.

Standard hour plans are the most widely used of the wage incentive plans, and they are based on time standards and hourly pay rate standards called base rates. Suppose that work measurement produces a time standard of 1 minute per unit, and the base rate is $10 per hour. If a worker averages 1 minute per unit, then he or she earns standard hours at the normal rate, and the hourly pay rate will be $10 per hour. In an 8 hour day, that worker would earn 8 standard hours or $80. But if the worker averages only 0.80 minutes per unit, producing 1 / 0.8 = 1.25 times the standard hours allowed, then the earned standard hours would be 1.25 x 8 = 12.5 or $125 for the day. Normally, there is a guarantee of the base pay rate in standard hour plans, and the worker receives all the direct labor benefits from his or her own productivity gains. The company gains from fuller utilization of facilities and in the long term from the smaller capital investment per worker.

Application of work measurement and wage incentives

Percent using time standards 89
Time study 90
Elemental data for job families 61
Universal standard data 32
Work sampling 21
Historical estimates 44
Others 3

Percent using wage incentives 44
Piece work 40
Standard hour 61
Sharing plan 19
Plant wide bonuses 5
Profit sharing 8
Others 9