Methods of wage payment

Wage payment meaning:

Wage payment concept is not only important for the employees but also for the employers as they are interesting in paying fewer wages. But paying low wages are not economical as they can prove to be costly for the employer. Employer is morally responsible to pay fair wages to his employees.

There are generally two methods of wage payment

i)                    time wage system

ii)                   piece wage system

Time wage system: in this method worker is paid for the amount of time he has spent on the job. The period of time may be an hour, a day, a week, a month and the wages depend upon the period of time. Here wages are paid for the amount of time spent not on the basis of output. Thus, it is a non variable method of wage payment.

Wages= number of hours worked* rate per hour

Suppose the worker is paid rs 10 per hour and he worked for 15 hours so his wages will be 15* 10 = rs 150

Applicability of time wage system:

i) This method is used when it is difficult to fix standard time for the job.

ii) When production process is complicated and requires high degree of skill.

iii) When machines used are costly.

iv) When quality of work is important.

v) When mental work is involved.

Advantages of time wage system:

i) Simple method: this method is very simple as it is easy to calculate the time spent on the job.

ii) Better quality: when the quality of the product is more important in that case it is better to use this method rather than piece wage system because in that worker are in hurry of making more and more pieces.

iii) Less wastage: under this method workers are not in hurry so there is less wastage of material as well as of machinery.

iv) Equal wages: all the workers are paid as per the time spent by them not on the basis of production. So there is the equality of wages between them.

v) Secure feeling: this method gives the feeling of security to the workers as they will be paid irrespective of what ever is the production.

 Disadvantages of time wage system:

i) Slow work: under this method the workers slows down their work as there is no pressure of making required amount of pieces.

ii) Supervision: this method requires a lot of supervision to ensure better productivity.

iii) Fixed wages: if the workers make more production in that case also they are paid fixed wages as per the time spent by them in the job.

This is the meaning of wage system and its types. Next time we will discuss the piece wage system.

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3 Responses to Methods of wage payment

  1. collins baya says:

    very brief, concise and well explanations…KEEP IT UP!

  2. TITUXONIC says:

    thnks and its so helpful too

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