Time Wage and Piece Wage Systems / merits and demerits
Meaning of Time Wage System
It is the oldest system of remunerating labour. Under the day-work system of wages, the employer buys the time of the worker, i.e., the worker is guaranteed a definite sum of money for a specified period of his working time. The unit of time brought may vary from one hour to one year. The higher the grades of the employees, the longer as a rule is the time unit. For example, managers and high officials are usually engaged for the year, though most usually paid by monthly installments. Foreman and engineers may be hired by the month, other classes by the day or hour. When an employee is hired on the ordinary time-rate basis, the contract between the two parties is definite only in the rate pay of per period of time. The amount of work to be rendered must depend upon the net effect of employee willingness and employer supervision. Within these limits the time rate pays exclusively for the workman’s time taking no account of the quantity of work done. According to section (4) of the payment of Wages Act, 1936, the payment of wages may be made at the end of the day, the week, the fortnight, or the month, as it is mutually agreed.
Advantages of Time Wage System
Some of the illuminating advantages of this system are:
(1) Time wage method is the simplest system of enumerating labour, because time which a man spends on a job can very easily be ascertained.
(2) It is very satisfactory if the raters reflect the value of the time on the work.
(3) It possesses an element of security from the standpoint of the workers because they are sure to receive their fixed wages irrespective of temporary reductions in personal efficiency, which may result from unavoidable accident or sickness or fatigue from outside activities. Thus, a worker who is assured of a fixed remuneration can very conveniently adjust his expenditure to his income and maintain certain standard.
(4) Due to its simplicity and easy understandability, it is very much appreciated and liked by trade unions. Moreover, it creates solidarity of interest within each wage group as the standard wage is always paid and it will be made the basis of easily understood negotiations.
(5) It requires less administrative attention than others because the very basis of the time wage contract is in good faith and mutual confidence between the parties.
(6) Under the time wage system there is no hurry to complete the task immediately or at the earliest, hence the workman get ample opportunity to show his crafts-manship and enjoy the pleasures of a perfect product without any loss to himself.
(7) Due to the careful attention of the worker, the quality of work is also not degraded and all the big three-producers, workers and consumers-gain thereby.
(8) Due to ‘slow and steady pace’ of the worker there is no rough handling of machinery, which is a distinct advantage to the employer.
(9) The worker, under this system is paid what he is worth to the company from a long time standpoint, rather than the estimated worth of the work he does at one time.
(10) Time rate type is the only system of payment that can be used where the output of individual employees or groups of employees cannot be readily measured. In short, time wage system is the best systems provided it is used only after proper job evaluation and merit rating.
Disadvantages of Time Wage System
As the influence of aggregation and specialization began to make themselves felt and the personal relations between labour and capital vanished, the, day work method became less and less applicable. The employer ceased to hire men as men and began to buy labour like any other commodity. The inevitable result was that the better men, unable to obtain higher pay than their more inefficient fellows, organized their class and endeavoured to raise the wage level of the entire class as the only means of obtaining compensation, Some of the glaring defects of the time system which encouraged the piece rate method may be enumerated as follows.
(1) The principal objection of this system is that it represses the superior man as there is no incentive to hard work, and both good and bad workers are paid alike. As long as the wage is assured and there is no stimulus to work harder, the system definitely tends to place a premium on inefficiency.
(2) It leads to the reduced quantum of work; unless a strict supervision is arranged. This method relies upon the driving power of foreman in the plant for the purpose of obtaining a satisfactory output.
(3) It destroys the morale of workers, and efficient workers are either driven out or pulled down to the level of inefficient workers. Competition.
(4) The result of all these factors is that latent talent finds vent in antagonistic forms of activity rather than productivity, for it produces a sense of personal injury in exceptional men.
Piece Wage System
Since time wage tends to encourage lethargy, piece rate system, the second oldest method of remunerating labour, is introduced. As distinct from time, payment is made on the basis of production under this method. ‘Under this plan workmen, working in given conditions and with given machinery are paid exactly in proportion to their physical output’ Under this system the worker makes all the gains or loss of his own time. If he shortens the used time ie, works with greater speed, he receives no less for the job finished and he gains time in which to make extra earnings at the same time. If he takes a longer period, his remuneration may fall below time wages. Another note worthy characteristic of this system is that while the employee makes all the gain or loss of his own time, the employer gains by rapid performance from the fact that the factory burden to be changed to each piece or job is decreased Piece rate wages are applicable to repetitive work and task which can be readily measured, inspected and counted. It is particularly suitable for the standardized process. It appeals to skilled and efficient workers who can increase their earnings by their greater ability. It establishes individual identity fosters initiative and creates self-interest in the workers.
IfN-number of pieces produced, r=rate per piece, then the worker’s carnings or E-Nr. For example, a worker is paid at the rate of Rs. 10 per unit and produces 5 units during the day, he will get Rs. 50 for the work performed.
Advantages of Piece Wage System
The principal advantages of this system may be enumerated as below 1. Under appropriate conditions, it excels other forms of payment respect of economy as well as justice. Remuneration being dependent upon the volume of production, there is a direct stimulus to increase production
2. In encourages voluntary effort as against a ‘drive’ under time rate creating an atmosphere of willingness and zeal for work.
3. The cost of supervision becomes comparatively less, as the workers tend to drive themselves in their own interest.
4. As the direct labour cost per unit of production remains fixed and constant, calculations of costs or making of tenders and estimates become easier.
5. The total unit cost of production comes down, with larger output because the fixed overhead burden can be distributed over a greater number of units.
6. The working arrangements may be improved by the workers themselves to speed up work.
7. Not only are output and wages increased, but method of production are improved as the worker demands material free from defects and machinery in perfect condition.
Disadvantages of Piece Wage System
The piece rate system is not without objections; some of the principal defect of the system may be summarized as follows:
1. When a piece rate has been introduced in place of time rate, under it influence, the workers increase their output and income. The employers thinking that some men were now earnings too much money, have offen ‘cur, the rate or nibbed’ it at frequent intervals, which the workers resent for the consider ‘cuts’ as violations of agreement. This induces antagonism and donates a gap between men and management.
2. Piece rate results is fluctuations in the earning of the workers. The fluctuations in earning are a source of constant worry and annoyance to the worker.
3. In their eagerness for increased productivity, productivity, workers may exert themselves to the point of exhaustion as to undermine their health and efficiency.
4. Too much emphasis on the quantity of production may lower the quality of products.
5. The keeping of individual production records and the making of pay alls involve time and cost.
6. Forced stoppages in work may go to reduce the earnings of workers unless there is the provision of a guaranteed minimum wage.
7. Trade unions are often antagonistic to piece rates, as this form of wage payment encourages rivalry between workers and endanger solidarity of labour unions.
8. Excessive speeding up of work often result in careless handling of machines and equipments that require frequent replacements.
