Advantages of Piece Rates

Source of the main advantages of piece rates are as follows.

1. The employee has a major incentive to increase his production. Under pure time rates any benefits from higher production accrue only to the employer; under modified piece rates benefits are shared by employer and employee.

2. Setting targets for output provides a form of job satisfaction, especially where the task, being essentially repetitive, does not itself provide any sense of achievement.

3. The potentially high earnings attract efficient workers.

4. There is less need for supervision, although quality control becomes more important.

5. The individual has more scope for pride in his work.

Disadvantages of piece rates

There are certain disadvantages of piece rates. They include the following.

1. Complicated systems of calculation are hard for the worker to understand.

2. Earnings, although generally higher, can be less stable, predictable or secure.

3. The guaranteed basic pay is usually lower than it would be under pure time rates.

In practice it is often found that a combination of time work and piece work gives the best results in terms both of increased productivity and of labour relations.


Two main methods adopted for providing motivation for shop-floor time workers are as follows.

1. Allotting a given quantity of work per shift, and allowing the members of the shift to leave when the quota has been completed, payment being made for the standard shift. This is possible only where tasks are readily definable. The system does encourage hasty and slipshod work.

2. Modifying the pure time rate by applying some degree of work measurement. Thus, for example, output targets can be set, with bonuses payable for exceeding the target. Bonuses may take the form of a higher... see: Motivation

Personal And Business Finance 2018

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