Payroll Manager Tutorial | Piece Rate System

Piece Rate System

This is another basic system of wage payment. It is just opposite to the time rate. It is also treated as an incentive wage system as it encourages workers to produce more and also to earn more. In the piece rate system, wages are paid as per the output or production given by the worker and not as per the time spent by the worker in the factory. Payment is by results in terms of output given. Wage rate is fixed per piece of work or for certain quantity of production. The production given by a worker at the end of the day is counted and payment is made accordingly.002

Merits/ Advantages Of Piece Rate System

• Linking of wages with production: Here wages are linked with production or productivity. It raises the productivity of labour. Workers work with speed and use their capacity fully as the wage payment is directly related to the quantity of production given by a worker.
• Distinction is made between efficient and inefficient workers: Distinction is made between efficient and inefficient worker and full justice is done to efficient worker as he gets payment in proportion to the production given. Efficient workers support the piece rate system but it is not preferred by unskilled and inefficient workers. They get less payment under this method as their capacity to produce is less.
• Encourages workers to take initiative in the work: Piece rate system encourages workers to take more interest and initiative in the work as every worker gets full reward of his efforts. There is direct efforts-reward relationship in the piece rate system.
• Fair to employer and employees: This system is fair to employers as well as employees. The employees get income in proportion to production given by them and the employer gets production in proportion to the wage paid.
• Incentive system: This system serves as the incentive system. Workers work efficiently and take interest in the work due to corresponding benefit/ reward in the form of higher wage payment.
• Limited supervision adequate: In this system strict supervision on the workers is not necessary as workers work sincerely. This is because their wage payment is directly linked with their sincerity and ability.
• Freedom of work to workers: Workers get more freedom of work and there is effective control on the cost of production in the piece rate system.

Brings cordial relations: Piece rate brings cordial labour management relations and industrial peace.

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