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Piece Rates Example
Standard output of average operator is 15 units per hour. For a standard week of 39 hours the guaranteed basic wage is £70.20. This factory operates a so-called 'time allowed' rate system of bonuses. This means that it pays piece rates calculated at the time allowed for the standard output for any excess of output produced by an operator.
A given operator produces 825 units in a particular week. What will be his gross pay?
Answer 15 units per hour for 39 hours = 585 units, which is therefore the
standard weekly output per man.
Standard weekly wage is £70.20.
Therefore 'time allowed' rate is 12p.
Gross pay is 825 x 12p = £99.
Advantages of Piece Rates
Source of the main advantages of piece rates are as follows.
1. The employee has a major incentive to increase his production. Under pure time rates any benefits from higher production accrue only to the employer; under modified piece rates benefits are shared by employer and employee.
2. Setting targets for output provides a form of job satisfaction, especially where the task, being essentially repetitive, does not itself provide any sense of achievement.
3. The potentially high earnings attract efficient workers.
4. There is less need for supervision, although... see: Advantages of Piece Rates