In last article we have discussed the wage system and one of its type that is time wage system Today we will discuss another wage system that is piece wage system.

Piece wage system meaning

Under the piece wage method the wages are paid on the basis of the output. They are paid on the basis of the number of units produced by them irrespective of time spent on the job. So the earning of the worker depends upon the speed of the worker so an efficient worker earns higher wages than the inefficient worker.

Wages= number of units produce* rate per unit

This method is also called straight piece rate system

Suppose the worker is paid rs 50 for per unit produced and he made 5 units then he will be paid wages= 5* 50= rs 250.

Applicability of piece wage system:

i) This method is used when job is of repetitive nature.

ii) When production process is simple and does not require personal skill.

iii) When machines used are not costly.

iv) When quantity is important.

v) When physical work is involved.

Advantages of piece wage system:

i) Less supervision; this method does not require more supervision as they are aware that they will be paid more if they work hard.

ii) More quantity: in this case organization gets more of the quantity from the work method.

iii) Economy: here the workers production in per day is more than the other method so the overall production is more which proves to be economical for the organization.

iv) Fair wages: the workers are paid as per the pieces made by them so it penalizes the inefficient workers automatically.

v) Incentive for more production: here the workers get the incentives for more the output they give.

 Disadvantages of piece wage system:

i).wastage: as the workers are more concerned with production this results into wastage of the material as well as of the machinery.

ii) Low quality: the workers are concerned about producing more and more rather than the quality of the product.

iii) Health hazard: some workers are in habit of making more pieces irrespective of the effect of this on their health.

iv) Inefficient workers: they are not paid properly because the payment is as per the pieces made by them.

v) Difficulty in rate fixation: it is very difficult to fix the per piece rate for paying the workers.

This is the meaning of piece wage system, its applications, advantages and disadvantages.