Question

Answer the following question:
State and explain any two advantages and two disadvantages of the time rate system of wage payment.

Answer 1

Wages are calculated in the method as follows:
Earnings = T × R where T stands for time spent and R is the rate of pay.

Advantages:

1. Simplicity: The method of wage payments is very simple. The workers will not find any difficulty in calculating the wages. The time spent by a person multiplied by the rate will determine his wages.
2. Security: Workers are guaranteed minimum wages for the time spent by them. There is no link between wages and output, wages are paid irrespective of output. They are not supposed, to complete a particular task for getting their wages. They are sure to set certain wages at the end of a specified period of time spent in working.
3. Limitations:
   Wastage of time: Workers may waste their time because they will not be following a target of production. Efficient workers may also follow slow workers because there is no distinction between them. This may lead to wastage of time.
4. Low production: Since wages are not related to output, production rate shall below. The responsibility for increasing production may mostly lie on supervisors. Because of low production, overhead expenses per unit will go up, leading to higher production costs.