Straight Piece Rate System | Suitability | Merits | Demerits

Straight Piece Rate System of wage payment

The earnings of the worker are calculated on the basis of the number of pieces produced by him/her. The volume of time spent by the concerned worker is not taken into account for the purpose of calculation of earnings.

Straight Piece Rate System

Straight Piece Rate System – Meaning, Suitability, Advantages, Disadvantages

Under the straight piece rate system, each operation, job or unit of production is termed as piece. The piece rate is fixed after conducting time study and motion study very carefully. The earnings of the worker is high if the output of the concerned worker is high and vice versa.

In other words, efficiency of worker is recognized in straight piece rate system of wage payment method. Therefore, the earnings of efficient worker are always high. Moreover, this system stimulates the inefficient and slow worker to improve their efficiency and increase their speed in production activities.

The following formula is followed to calculate the earnings of the worker.

Earnings = No. of Units Produced x Rate Per Unit

Suitability of Piece Rate System

The piece rate system is high useful in the following circumstances.

1. Units of output are measurable.

2. There must be a clear-cut relationship between employee effort and level of output.

3. The job may be standardized.

4. There is a regular flow of work.

5. There is no breakdown of machine. If so, it may occur very rare.

6. Quality of output is not getting any importance.

7. There is no need of close supervision.

8. There is no possibility of close supervision.

9. The cost per unit is fixed well in advance.

Advantages of Piece Rate System

The following are the advantages of piece rate system.

1. The employer does not pay anything more than the level of output.

2. Efficient workers are earning more amounts of wages. Hence, all the workers are interested to increase their efficiency.

3. Since the wages are linked with output, the workers interested to increase the output.

4. Since the output is increased, cost per unit of production is very low which leads to increase in profit.

5. The calculation of cost per unit of labour cost is very easy.

6. It provides a sound basis for introduction of standard costing system.

Disadvantages of Piece Rate System

The following are some of the disadvantages of piece rate system.

1. The fixation of piece rate is very difficult task.

2. The introduction of new production method or technology involves the fixation of new piece rate.

3. Quality of the output is not maintained. It leads to decrease in profit and sales.

4. It is impossible to reward employees for seniority.

5. A charge in the piece rate decreases the confidence of the worker over this system.

Leave a Reply

Recent Posts

Related pages

advertising merits and demeritshow to calculate the average collection periodratio analysis interpretation financial statementsadvantages and disadvantages of depreciation in accountinglien hindi meaningadvantages and disadvantages of accounting theoryadvantage of autocratic leadershipwhat is plant layout in production managementdifference between bond and debenturesimilarities between advertising and public relations75000 inr to usddemotion policyroles of managerial economicswhat does autocratic leader meandefinition of bonds and debenturebatches definitionmeaning of mechanisationservice blueprinting processbreach means in hindiexamples of negotiable instrumentsseniority principleautocratic model of obschedule of debtorsskimming strategy marketingadvantages and disadvantages of horizontal communicationvoid and voidable contractsquick ratio formula financedisadvantages of internet shoppingskimming marketing strategydefine payback methodcash budgetsprecis writtingimportance of hire purchaseaccounting tick marks legendcentralization in organizationwhat is sinking fund provisioncapitalistic systemdisadvantages of accounting ratiosadvertisements with propagandadiscuss the limitations of ratio analysisdisqualification of an auditorexpress bailmentsundry creditsrequirement of a valid contractadvantage and disadvantage of sole traderaccounts recievable turnover ratiodecentralization disadvantagesdormant partnerprepare a sales budgetwhat does drawer mean on a chequeadvantage of sole traderadvantages and disadvantages market economywhat is business reengineering processadvantages of periodic inventory systemdisadvantages of tpmdifference between public limited company and public corporationvertical integration advantages and disadvantagessinking fund method of calculating depreciationconsumable goods examplesexemplary damages meaningwto and gattduty of baileesocialism advantages and disadvantagesadvantages and disadvantages of standardisationqualitative measures of credit controlrights of bailoradvantages of deductive methodstock turnover ratio definitionsecuritization definevertical communication advantages and disadvantages