Main advantages or benefits of piece rate or piece wage system are as follows:
1. Simple And Easy
Piece rate system is very easy and simple method of wage payment. Wages can be calculated easily by using the following formula:
Total Wage = Output Unit x Rate Per Unit
2. Higher Productivity
In piece rate system there is direct correlation between effort and reward or output and wages. It means wage amount is linked with employees' effort. They are paid on the basis of output. So, employees become more productive and try their best to increase output. It leads to higher productivity.
3. Fairness
Piece rate system of wage payment ensures fairness by encouraging the efficient workers and penalizing the inefficient ones.
Piece rate system helps to increase production volume. So, it minimizes cost of production.
5. Less Supervision Cost
This system encourages the workers to do their job effectively and efficiently. Employees are self-motivated towards their job. So, supervision costs may be reduced.
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6. Reduce Idle Time
Piece rate system does not pay for idle time. It also discourages go-slow tendency among employees.
7. Ascertainment Of Labor Cost
In piece rate system of wage payment, it is possible to determine per unit labor cost because it is based on the actual output. It also helps for controlling costs.
