Time Rate System Of Wage Payment, Its Advantages And Disadvantages

Concept And Meaning Of Time Rate System Of Wage Payment

The time rate system is that system of wage payment in which the workers are paid on the basis of time spent by them in the factory. Under this system, the workers and employees are paid wages on the basis of the time they have worked rather than the volume of output they have produced. Hence, according to this system, wages are paid on hourly, weekly or monthly basis. Under time rate system, the wages earned by a worker is determined by using the following formula.

Wages Earned = Time spent(Attended) x Wage rate per hour/day/week/month

Advantages Of Time Rate System

The following are some of the important advantages of time rate system of wage payment:

* Time rate system is simple to understand and easy to calculate.

* Time rate system is quite useful for organizations that use costly inputs for quality outputs.

* Time rate system is beneficial for average and below workers.

* Time rate system assures regular income and creates the feeling of economic security among the workers.

* Time rate system does not discriminate the workers and is preferred by trade unions.

Disadvantages Of Time Rate System

The following are some notable disadvantages of time rate system of wage payment.

* Time rate system does not help in increasing output and improving efficiency as there is no correlation between effort and reward.

* Time rate system is not justifiable between efficient and inefficient workers and skilled and unskilled workers.

* Time rate system pays for idle time, which increases the cost of production.
Time rate system encourages a go-slow tendency among workers during working hours and encourages them to work overtime.

* It is difficult to estimate exact labor cost in advance.

* It requires strict supervision to get the required quantity of output.