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The New Zealand Railways Magazine, Volume 1, Issue 6 (October 24, 1926)

Premium Bonus System

page 32

Premium Bonus System

I have asked that all concerned should not be hasty in their judgment of the premium system. I did this purposely, just the same as I am explaining the system in its details, piece by piece, so that it will be discussed and understood. If not understood, I hope every question is being written down so that when the time for discussion comes, not one question will be overlooked.

This opportunity for discussion will come, and it might be mentioned that Workshop Committee business includes this subject.

Progress and modern methods have developed systems of wage payments, just the same as modern machinery has evolved from its ancient counterpart. This is to be seen in every phase of our existence unless we refuse to see.

Therefore, to be fair, you can't say the “Premium System” is “no good” because the Piecework system of 10 or 20 years ago was “no good.” I say myself that that was “no good” and I worked under it myself, in England. So let's carry on.

How a Premium rate is set.

The “Allowed Time” for a job is made up of four factors. First the “actual time” required to do the job (calculated or studied). Secondly the addition to machine running time of 10 per cent. for machine slip. Thirdly the addition of 20 per cent. to all handling operations for the human factor; and Fourthly 40 per cent. is added to the sum of the first three items as bonus allowance.

I want you to notice particularly the last item, and remember that under Premium the “time saved” is divided “fifty-fifty” between the operator and the railway. I want to point out particularly that under Premium double the bonus allowance is added to the time required to do the job, as compared with that added under modern Piecework systems; so that


The earnings of the operator justify his effort.


There is an added incentive to try and make a bonus.


The railways benefit progressively with the operator.

Explaining these items further:—

Item No. 1.

Under Piecework the actual “time required”—that is, the neat time of a good average man—is found, and 20 per cent. is then added for bonus—which under the Piecework system the operator always gets, irrespective of quantity. He gets it all. If the rate is set wrong, by bad judgment, poor guess or otherwise, the earnings of the operators go up at such a quick rate that “rate cutting” develops, and there is the trouble.

Under Premium the time required is found as outlined and 40 per cent. is added, which, when divided fifty-fifty, means that the operator actually gets 20 per cent. as a bonus in money.

This is, therefore, the same as Piecework, it being conceded that a man working on any output system at a proper rate is entitled to earn at least 20 per cent. over his wages. Get this right—Double the percentage, compared with Piecework, is added and the final bonus is halved. There is a sound reason for this, although it does “bust” the idea of many who think the Railway is taking half the profits, which it does not.

Item No. 2.

The incentive to try is the next reason. All men are not gifted alike, and many men take 50 per cent. longer than other men to do the same job. We must base “allowances” on the “average good man”; that is only commonsense. The higher percentage added makes a time that a “slow” man will feel he can reach, and endeavouring invariably means a bonus.

Item No. 3.

The railway benefits directly under the Premium system by reason of the fifty-fifty division of time saved. The cost of each operation decreases as greater proficiency is developed by the operator, and the bonus money earnings of the operator do not go up at such a rapid rate as under Piecework. This permits of more liberal rate setting and it provides for a greater margin of error in rates (for rate-setters too are human).

An example will make the position more clear. Suppose the job is turning tires, the actual working time to turn one pair being 60 minutes.

The “Time allowed” under Premium would be 60 minutes plus 40 per cent. equals 84 minutes.

The “Time allowed” under Piecework (that is, modern Piecework systems where guessing is not done) would be 60 plus 20 per cent. equals 72 minutes.

Consider an eight hour day's production.

page 33

The operator would receive as a bonus the following number of minutes pay at his own rate, in addition to his day rate wages.

Piecework Premium
Mins. Mins.
If he turned 5 pairs
If he turned 6 pairs 0 12
If he turned 7 pairs 24 54
If he turned 8 pairs 96 96
If he turned 9 pairs 168 138
If he turned 10 pairs 240 180

The advantages of Premium are seen in the above. The operator earns more bonus for less output than under piecework. This gives more incentive and makes it possible for a greater range of operators to gain a bonus. Since eight per day represents the basic rate of an average good man, it is seen that at that point the actual bonus under either system is the same, the Railway does not take any half of it as is usually misconstrued. Lastly the earnings of the super speed operator are not so excessive as to necessitate rate cuttings at the expense of the average man.

Note:—Work out for yourself the above example, just to make sure you understand it. I will send copies of the calculation to any that would like them.

On the Continent

A party from the Railway Students’ Association of the London School of Economics which recently visited Germany to inspect the railway systems at Berlin, Dresden and Leipzig, had extended to it a very cordial and hospitable welcome by the Chiefs of the various administrations. Facilities were given for a thorough inspection of the railways mentioned, which proved of great interest to the visitors (says the “Railway Gazette”). At the Brandenburg locomotives works—the most modern in Germany—the visitors were shown a very useful and novel device in the form of a washing machine in which the whole under-carriage frame of a locamotive could be placed and washed in boiling soda water in one operation. This machine is said to be the only one of its kind in existence. At Dresden the party listened to a lecture given in English by Dr. Gläsel, at the Psychotechnical Institute, on the methods by which candidates for railway posts are tested, and also were afforded an opportunity of seeing the cars and apparatus used for the tests and examinations. These proved very interesting. The tests are designed under the latest discoveries of the science of psychology to ascertain speed, accuracy, method, memory, will-power, nervousness, etc., of each candidate. They consist mainly of simple actions, e.g., sorting various shaped dises, carrying out written instructions, placing indicators of trains at stations on blank diagrams after seeing position of filled-in diagram previously for a few minutes. The candidates are observed while performing the tests, and although no special knowledge or skill is required in this section the results vary very considerably. In the case of drivers and firemen, a model cab is available from the windows of which the driver sees the signals he is liable to meet with, and electrical apparatus records the promptness with which he uses the control levers, etc. It is claimed that in eighty to ninety per cent. of the results obtained reports of the men's superior officers confirm the accuracy of the results secured by the tests.

Locomotive Branch Notes

Otahuhu.—Awaiting the acceptance of tenders, the levelling of the site is being pushed ahead.

Hutt Valley.—The preparation of the site for the shops is being proceeded with in readiness for the contractors. The tender of Messrs. Sir William Arrol and Company, London and Glasgow, through Messrs. Cory-Wright and Salmon, Ltd., Wellington, has been accepted for the structural portions of the buildings.

Addington.—The demolition of the welding shop and clearance of sites is well under way. About one half of the timber rack foundations have been laid.

Hillside.—Tenders for building do not close until 1st November, but in the meantime the site is being prepared.

Workshops Electrification.—Tenders for Hillside motors are being considered and tenders for the power house equipment for same shop are now being called.

Workshop Machinery.—Specifications for the second year's allotment of machinery under the workshops improvement scheme, including travelling cranes, traversers, etc., are in the hands of the printer.

Rolling Stock.—One class “Ab” locomotive, one class “Wab” locomotive, two bogie wagons and six four-wheel wagons have been turned out of the shops.

Rail Cars.—The “Sentinel” steam car has been sent to Frankton Junction for service between that station and Thames.

It has been decided to fit up one of the sleeping cars under construction at Petone for the use of His Royal Highness the Duke of York for the North Island Tour. This car will be altered to a sleeping car after the Royal visit. A new Ministerial car is in hand for the South Island. This car will be available for the use of His Royal Highness on the South Island tour.