Payroll Manager Tutorial | Time Rate V/S Piece Rate Systems

Time Rate V/S Piece Rate Systems

Time Rate V/S Piece Rate Systems

Let’s learn the difference between Time Rate V/S Piece Rate Systems.

Meaning:

  • Wages are paid as per the time spent by workers.
  • Wages are paid as per the output or production given by workers.

Old/New System:

  • Oldest and simplest method of wage payment
  • Modern and incentive system of wage system

Guarantee of wages:

  • Gives guarantee of certain minimum wage payment to every worker
  • Fails to give guarantee of minimum wage payment to every worker

Support:

  • Employees and trade unions support time rate system.
  • Employers and efficient workers prefer piece rate system.

Understanding of system:

  • Easy to understand and simple to administer
  • Complicated system as various recorded and registers are required to be maintained
  • Distinction between workers:
  • Distinction is not made between efficient and inefficient workers as all are paid at one and same rate.
  • Distinction is made between efficient and inefficient workers. Efficient worker is paid more while an inefficient worker is paid less.

Effect on Production:

  • Encourages workers to follow go-slow policy and naturally production suffers.
  • Encourages workers to take more interest in the work and naturally production increases

Quality of production:

  • Quality, workmanship of production are not affected, raw materials, machinery are utilized properly. The spoiled work is also negligible.
  • Quality, workmanship of production may suffer. Increase in spoiled work and wastage of raw materials.

Supervision:

  • Strict supervision is necessary as workers are paid as per the period spent.
  • Strict supervision is not necessary as workers are paid in proportion to the production given

Suitability:

  • Suitable to manufacturing units, also suitable when individual contribution is not easily measurable.
  • Suitable when contribution of individual worker is measurable and work is standardized and resistive in character.

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