DIFFERENCE BETWEEN TIME RATE SYSTEM AND PIECE RATE SYSTEM

Table of Contents

DIFFERENCE BETWEEN TIME RATE SYSTEM AND PIECE RATE SYSTEM

BASIS OF DIFFERENCE TIME RATE SYSTEM PIECE RATE SYSTEM
MEANING Time rate system is a method of wage payment to workers based on time spent by them for the production of output. Piece rate system is a method of wage payment to workers based on the quantity of output they have produced. 
NATURE OF PAYMENT Time rate system pays the workers according to the time spent in the factory.   Piece rate system pays the workers according to the units of output produced.
EMPHASIS Time rate system emphasis on better quality of output.   Piece rate system gives emphasis on larger quantity of output.
DISCRIMINATION Time rate system does not discriminate the workers and pays the same wages to efficient and inefficient workers. Piece rate system discriminates the workers and pays more wages to efficient and skilled workers.
SUPERVISION Time rate system requires strict supervision to get required quantity of output. Piece rate system requires strict supervision to get the required quality output.
DETERMINATION OF LABOR COST Time rate system does not help to fix labor cost per unit in advance.   Piece rate system helps to fix per unit labor cost in advance.
FLOW OF PRODUCTION Time rate system helps maintain a uniform flow of production and ensures an efficient use of materials, tools and equipments. Piece rate system does not bring uniformity in the flow of production and causes an excessive wastage of inputs.
IDLE TIME There is possibility of excessive idle time. There is a less chance of idle time in this system.
INCENTIVE There is lack of incentive for efficient workers. It motivates the workers to produce more and earn more.
CONTROL AND SUPERVISION Control and Supervision is needed as the workers may not work properly. Control and supervision are comparatively less required.
STABILITY OF JOB Under this system, gen­erally the employment is stable. Under this system, gen­erally the employment is unstable.
SUITABILITY This method is suitable for the workers who are slow. This method is suitable for the workers who are fast.
CERTAINTY OF AMOUNT OF WAGES Under this system, the amount of wages is certain. Under this system, the amount of wages is not certain.
LEAVE Under this system, the workers want to take more and more leave. Under this system, the workers want to take less leave.
LABOR UNION’S SUPPORT The labor union supports this system. The labor union does not support this system.
ENCOURAGEMENT TO WORK This system does not encourages workers to work more and more. This system encourages the workers to work more and more.
SUITABILITY FOR ARTISTIC WORK This system of wage payment is suitable for artistic work.   This system of wage payment is not suitable for artistic work.  
SLACKNESS IN WORK Under this system, the workers want to pass their time, thus speed of work suffers.   Under this system, the workers do not want to waste even a single minu­te of their time. They want to work as fast as possible.
NATURE OF WORK This system is suitable for the works that are not standardised and measu­rable.   This system is suitable for the works that are standardised and measu­rable.  
AVERAGE COST OF PRODUCTION Under this system, the av­erage cost of production is generally high.   Under this system, the av­erage cost of production is generally low.  

TIME RATE SYSTEM

Time Rate System is otherwise called as Time Work, Day Work, Day Wages and Day Rate. It is the oldest method of remuneration. The time rate system is that system of wage payment in which the workers are paid on the basis of time spent by them in the factory.

Under this system, the workers and employees are paid wages on the basis of the time they have worked rather than the volume of output they have produced. 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.

Time Rate System Formula                                                            

This time rate system calculation is based on the working hours of the employee, that is the amount of time spent on the work along with the amount of work delivered within the specific period of time.

And the actual formula that helps to calculate the total amount by using this formula:

Formula: Wages= Total hours worked X Wages rate per hour.

PIECE-RATE SYSTEM

This is that system of wage payment in which the workers are paid on the basis of the units of output produced. This system does not consider the time spent by the workers. Piece rate system is the method of remunerating the workers according to the number of unit produced or job completed. It is also known as payment by result or output. Piece rate system pays wages at a fixed piece rate for each unit of output produced. The total wages earned by a worker is calculated by using the following formula.


Total Wages Earned= Total units of outputs produced x Wage rate per unit of output.

OR
Total Wages Earned= Output x Piece Rate

Piece-rate pay is also sometimes referred to as Payment by Results System.

Also StudyAlso StudyAlso StudyAlso Study
Cost AccountingScope of cost accountingElements of costTypes of cost
Material controlPerpetual inventory systemPricing of materialsBin Card
Stores LedgerIncentive plansOverheadsIdle time
System of wage payment in cost accountingTime rate vs piece rate wage systemCost CenterLabour Turnover
Difference between management accounting and cost accountingAllocation and apportionment of overheadsAllocation vs Apportionment of overheadsAbsorption of overheads
Over absorption and under absorption of overheadsActivity based costingTraditional costing vs ABC systemReconciliation of accounts
Unit costingCost sheet formatCost sheet vs production sheetJob costing
Batch Costingjob costing vs batch costingContract costingJob Costing vs Contract costing
Process CostingProcess costing vs job costingJoint productsBy Product 
Equivalent productionMarginal costingApplication of marginal costingCost volume profit analysis
Tools and techniques of marginal costingBudgetBreak even pointProcess of budgetary control
Advantages and limitations of budgetary controlBudgetary ControlZero base budgetingStandard Costing
Variance AnalysisStandard costing vs budgetary controlManagement accounting vs cost accountingCost accounting vs financial accounting
Difference between TIME RATE SYSTEM AND PIECE RATE SYSTEM
DIFFERENCE BETWEEN TIME RATE SYSTEM AND PIECE RATE SYSTEM

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