Piece Rate System

Piece rate system is a wage payment system by which the manufacturing concern calculates the remuneration which a worker would be getting after doing the assigned work. Under this worker gets wages according to the work he or she has performed and not according to the time spent on the work. It can be better understood with the help of an example, suppose in a toy factory a worker makes 5 toys daily and rate per unit is fixed at 10 dollars per unit than the worker would be getting 50 dollars for a day. If a worker produces 5 units in 1 hour then also he or she will 50 dollars and if he or she produces it in 10 hours than also the earning would be 50 dollars.

This system is best suited for those tasks which are repetitive in nature and also where it is possible to check and control the quality of products because biggest flaw of this method is that workers try to produce as much quantity as possible so as to earn more money and thereby sacrificing the quality of the product. The advantage of this method is that when this method is followed workers do not waste time which is the case under time rate system and therefore if this method is followed properly it can lead to better efficiency of the workers.


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