DISCUSS ADVANTAGES AND DISADVANTAGES OF HAVING PIECE RATE SYSTEM?

DISCUSS ADVANTAGES AND DISADVANTAGES OF HAVING PIECE RATE SYSTEM?
The piece rate pay method compensates employees a set amount for each unit of work completed. For example, in a manufacturing setting, an employee receives a set amount for each item he produces, regardless of how fast or slow he works. This payment method is beneficial for both employees and the company, but the potential drawbacks may make it less feasible for your business.

Motivation

The opportunity to earn more money motivates some employees to increase productivity. If the employee increases her work speed, she can complete more units of work in an hour. She could potentially make more per hour than she would with a standard hourly rate. With an hourly pay rate, employees know they cannot make any more no matter how hard they work so they may be less likely to push themselves.

Cost Effective

In many work settings, the piece rate pay method is cost effective, since the company is only paying for work completed. A slower employee may not complete many work units per hour. If you use a standard hourly wage, he gets paid the same, even if he only completes a fraction of the work completed by another employee. You may end up paying him less per hour with the piece rate method if his production is low.

One-Dimensional

The piece rate pay system looks only at productivity making it a one-dimensional system for evaluating work. You may encounter employees who stop worrying as much about quality, instead only worrying about the quantity of work completed for greater earnings. The piece rate method may also discourage teamwork in the workplace because individual employees simply want to complete more of their own work. This method of pay overlooks other elements that go into work that don't produce immediately visible results, including strong decision-making, customer interaction or problem-solving skills.

More Payroll Work

A standard hourly wage is generally easier to calculate each pay period, since it remains the same with the exception of overtime or bonuses. The piece rate pay method requires more work from the payroll department, as the productivity levels fluctuate frequently. Each employee will likely vary at times on the amount produced. You still need a record of the hours worked by the employees. In most cases, each employee's pay must still work out to at least minimum wage, even if production levels are lower