Standard Hour Plans

Standard hour plans are used quite a bit in some types of service work. In a standard hour plan, each task is assigned a “standard” amount of work time for completion. Generally, this time will be shown in a standard-hour manual. The individual doing the job will get paid based on the standard time to complete the job, but good workers can frequently complete the work in less than the standard amount of time. If they do, they can get paid for an hour of work while working less than an hour of time.
Like the piecework plan, standard hour incentives can cause quality problems. So most standard hour plans also require that if there are any quality problems, the job has to be redone; the worker must do the rework for no additional pay. This is one way to make sure that speed doesn’t create poor quality. Standard hour plans, like most individual incentive programs, can be used for groups if the group is responsible for completion of the work.
Standard hour plans are used heavily in automotive and heavy equipment repair and in other areas, like heating and air-conditioning services. The biggest challenge with standard hour plans is creating the manuals showing the allowable time for a job. We have to have a large baseline measuring the amount of time necessary to perform specific tasks in order to figure out the average time needed to do a particular job. We can only do this in jobs where the same task is done many times in a year.
We also need to keep an ongoing record of the actual times to do the jobs so we can adjust the standards accordingly and not over or underpay for each job.