Top 2 Methods of Wage Payment for Compensating Workers – Explained!

2. Piece Wage

Methods

1. Time Wage:

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It is based on the amount of time spent. Wage is measured on-the basis of units of time e.g: per day, per month etc. Wages do not depend at all on the performance of the employee.

2. Features of Time Wage:

1. It is more widely used as it is very simple to compute the earnings.

2 It provides guaranteed and secured income, thereby removing the fear of irregularity of income.

3. It facilitates payroll function.

Advantages of Time Wage System:

1. Sense of security of income. The worker knows exactly what amount he is to get.

2 Conducive climates is provided for better labour-management relations as dis­putes are minimised.

3. The worker will give greater care and attention to quality and therefore good workmanship can be assured.

Disadvantages of Time Wage System:

1. Time wage system offers no incentive for employees to put forth their best efforts.

2 There is no encouragement for better performance. Merit is discounted and inefficiency is at a premium as all receive the same salary. It is an unsound, unscientific and arbitrary basis of wage payment.

3. Ambitious workers receive no monetary reward for their talents.

4. It demands intensive and strict supervision.

Piece Wage System:

It is based on the amount of work performed or productivity. The earnings of the employee are directly proportional to his output or performance.

Features of Piece Wage System:

1. It offers direct connection between effort and reward. Hence, it is the best method to ensure higher productivity.

2. Wage cost determination is easy.

Advantages of Piece Wage System:

1. Direct connection between effort and reward.

2. It is simple and easy to understand.

3. The worker is interested in giving higher efficiency.

4. Cost accounting and control by management is made easy.

Disadvantages of Piece Wage System:

1. Danger of overwork. This leads to risk of accident and excessive fatigue.

2. It requires a lot of supervision to maintain the quality and standard of work.

3. It is an ineffective method, if quality is to be given top preference.

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