When employees are paid on the basis of time (hour, day, weak or month) they spent in the workstation, it is called time rate wage system, On the other hand, if the employees are paid on the basis of quantity of output they produced, it is known as piece rate system of wage payment. Time rate system is useful if the quality is important than the quantity. Similarly, piece rate system is suitable if large quantity of production is important than the quality.
In this post we are going to describe the suitability of these two wage systems briefly.
Suitability Of Time Rate Wage System
Time rate system of wage is suitable for the following circumstances:
1. Priority On Quality
When quality is essential than the volume of production, this system is suitable.
2. Uncontrollable Output
If the volume of output cannot be controlled by workers such as water purification plant, this system of wage payment is applicable.
3. Easy To Supervise
If proper supervision is possible at the workplace, then time rate system is suitable.
4. Measurement
It is useful if it is difficult to measure accurate output and employees efficiency.
Suitability Of Piece Wage System
Piece rate system of wage payment is suitable for the following conditions:
1. Priority On Quantity
This system of wage payment is suitable where large volume of production is important than quality.
2. Direct Relation
If the volume of production is directly related to the effort of individual worker, then piece rate system is useful to determine the wage.
3. Repetitive Work
If the work is repetitive in nature, this system is applicable.
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4. Per Unit Cost
It is suitable if per unit cost of the product can be easily determined.
5. Difficult To Supervise
It proper supervision is difficult, then piece rate system is useful.
6. Regular Flow
If there is no disturbance and regular flow of work, this system is very suitable to determine the wage of employees.