Major drawbacks or disadvantages of time rate system of wage payment are as follows:
1. Ignores Efficiency Of Workers
Time rate system of wage payment treats equally to both efficient and inefficient workers. Wages are paid on the basis of time not on the basis of efficiency. So, efficient workers may feel unappreciated.
2. Low Productivity
Time rate system does not focus on increasing output and efficiency because there is no correlation between input and output and effort and reward. So, there is high chance of decreasing output.
3. High Production Cost
Time rate system suffers from lower level of output, idle time payment and high supervision costs. So, there is a high cost of production in this system.
4. Less Profit
Because of low output and high cost of production, there is reduction in profit in time rate system of wage payment.
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5. Difficult To Set Labor Cost
Time rate system ignores output while determining wage rate. So, it is difficult to determine labor cost per unit.
6. Loss Of Efficient Employees
Time rate system is not based on efficiency. So, it lacks reward system for efficient and skilled employees. Therefore, skilled and efficient workers may leave the company because of frustration.
