Time Rate System of Wage Payment | Suitability | Merits | Demerits

What Time Rate Wage System?

Time Rate System is otherwise called as Time Work, Day Work, Day Wages and Day Rate. It is the oldest method of remuneration. A worker is paid wages on the basis of number of hours engaged in theĀ  production activities. The output of the worker is not considered for payment of wages.

Time Rate Wage System

Time Rate Wage System – Meaning, Suitability, Advantages, Disadvantages

The wage rate is fixed on hourly, daily weekly, fortnightly or monthly on the basis of the nature of work. The time is the prevalent rate of the industry or area. The rate may either be a fixed one or there may be a progressive scale of pay that starts at minimum and rises up to a maximum, in various stages by way of increments.

The following formula is followed to calculate the earnings of the worker.

Earnings = No. of Hours Worked x Rate Per Hour.

Suitability of Time Rate System of Wage Payment

The time rate system is highly suitable in the case of High skilled workers.

1. High-skilled workers.

2. Unskilled workers.

3. Trainees.

4. Newly recruited workers.

5. Work is being beyond the control of the worker.

6. Work is being dependent on the output of the previous worker.

7. Work is being not measurable in terms of homogeneous units.

8. Work requires close supervision.

9. The output should be a quality.

10. Apprentices.

11. There is not possibility of fixing of standard time.

12. Work does not require speed in completion.

13. Productivity is not commensurate with the incentive paid.

Advantages of Time Rate System of Wage Payment

The following are the advantages of time rate wage system.

1. The calculation of earnings is very easy and requires less clerical work.

2. The calculation of earnings does not create any suspicion in the minds of the worker.

3. A worker is assured of wages as per the specified time spent by him/her in the production area.

4. The quality of output is maintained.

Disadvantages of Time Rate System of Wage Payment

The following are the disadvantages of time rate wage system.

1. This system does not encourage efficient workers.

2. There is no recognition of the efficiency of workers.

3. Both, efficient and inefficient workers are treating equally by the management.

4. It develops idleness on the part of workers.

5. Wages are paid for idle time unnecessarily.

6. There is a possibility of decreasing output.

7. The supervision cost is increased gradually.

8. Work schedule cannot be maintained.