{"id":3296,"date":"2020-02-07T05:57:37","date_gmt":"2020-02-07T05:57:37","guid":{"rendered":"https:\/\/commerceiets.com\/?p=3296"},"modified":"2020-02-07T05:57:37","modified_gmt":"2020-02-07T05:57:37","slug":"system-of-wage-payment-in-cost-accounting","status":"publish","type":"post","link":"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/","title":{"rendered":"SYSTEM OF WAGE PAYMENT IN COST ACCOUNTING"},"content":{"rendered":"\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_63 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#SYSTEM_OF_WAGE_PAYMENT_IN_COST_ACCOUNTING\" title=\"SYSTEM OF WAGE PAYMENT IN COST ACCOUNTING\">SYSTEM OF WAGE PAYMENT IN COST ACCOUNTING<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#WAGES\" title=\"WAGES\">WAGES<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#SYSTEM_OF_WAGE_PAYMENT_IN_COST_ACCOUNTING-2\" title=\"SYSTEM OF WAGE PAYMENT IN COST ACCOUNTING\">SYSTEM OF WAGE PAYMENT IN COST ACCOUNTING<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#TIME_RATE_SYSTEM\" title=\"TIME RATE SYSTEM\">TIME RATE SYSTEM<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#1_Simple_formulation\" title=\"1. Simple\nformulation:\">1. Simple\nformulation:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#2_Easy_access\" title=\"2. Easy access:\">2. Easy access:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#3_Production_quality\" title=\"3. Production\nquality:\">3. Production\nquality:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#4_Fixed_wage\" title=\"4. Fixed wage:\">4. Fixed wage:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#5_Improves_equality_among_employees\" title=\"5. Improves\nequality among employees:\">5. Improves\nequality among employees:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#1_It_ignores_efficiency\" title=\"1. It ignores\nefficiency:\">1. It ignores\nefficiency:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#2_Loss_of_skilled_workers\" title=\"2. Loss of\nskilled workers:\">2. Loss of\nskilled workers:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#3_Inefficiency\" title=\"3. Inefficiency:\">3. Inefficiency:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#4_Conflicts_of_thinking\" title=\"4. Conflicts of\nthinking:\">4. Conflicts of\nthinking:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#5_Cost_of_production\" title=\"5. Cost of\nproduction:\">5. Cost of\nproduction:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#6_Increased_supervision_cost\" title=\"6. Increased\nsupervision cost:\">6. Increased\nsupervision cost:<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#PIECE_RATE_SYSTEM\" title=\"PIECE RATE SYSTEM\">PIECE RATE SYSTEM<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#Straight_piece_rate_system\" title=\"Straight piece rate system:\">Straight piece rate system:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#Differential_piece_rate_system\" title=\"Differential piece rate\nsystem:\">Differential piece rate\nsystem:<\/a><ul class='ez-toc-list-level-5' ><li class='ez-toc-heading-level-5'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#1_Increases_the_efficiency_of_all_the_employees\" title=\"1. Increases the efficiency\nof all the employees:\">1. Increases the efficiency\nof all the employees:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-5'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#2_They_do_not_constantly_require_any_kind_of_micromanagement\" title=\"2. They do not constantly\nrequire any kind of micromanagement:\">2. They do not constantly\nrequire any kind of micromanagement:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-5'><a class=\"ez-toc-link ez-toc-heading-21\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#3_It_is_very_easy_to_calculate_the_dues_of_the_worker\" title=\"3. It is very easy to\ncalculate the dues of the worker:\">3. It is very easy to\ncalculate the dues of the worker:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-5'><a class=\"ez-toc-link ez-toc-heading-22\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#4_Workers_do_not_end_up_wasting_any_time\" title=\"4. Workers do not end up\nwasting any time:\">4. Workers do not end up\nwasting any time:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-5'><a class=\"ez-toc-link ez-toc-heading-23\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#5_They_are_encouraged_to_think_of_better_working_methods\" title=\"5. They are encouraged to\nthink of better working methods:\">5. They are encouraged to\nthink of better working methods:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-5'><a class=\"ez-toc-link ez-toc-heading-24\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#6_The_number_of_products_produced_is_much_higher\" title=\"6. The number of products\nproduced is much higher:\">6. The number of products\nproduced is much higher:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-5'><a class=\"ez-toc-link ez-toc-heading-25\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#7_The_workers_set_deadlines_for_themselves\" title=\"7. The workers set deadlines\nfor themselves:\">7. The workers set deadlines\nfor themselves:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-5'><a class=\"ez-toc-link ez-toc-heading-26\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#1_Workers_pay_much_more_attention_to_quantity_and_not_quality\" title=\"1. Workers pay much more\nattention to quantity and not quality:\">1. Workers pay much more\nattention to quantity and not quality:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-5'><a class=\"ez-toc-link ez-toc-heading-27\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#2_Planning_for_the_future_becomes_rather_tough\" title=\"2. Planning for the future\nbecomes rather tough:\">2. Planning for the future\nbecomes rather tough:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-5'><a class=\"ez-toc-link ez-toc-heading-28\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#3_Finding_and_fixing_on_a_reasonable_piece_cost_is_a_rather_tough_task\" title=\"3. Finding and fixing on a\nreasonable piece cost is a rather tough task:\">3. Finding and fixing on a\nreasonable piece cost is a rather tough task:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-5'><a class=\"ez-toc-link ez-toc-heading-29\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#4_It_puts_immense_pressure_on_all_the_employees\" title=\"4. It puts immense pressure\non all the employees:\">4. It puts immense pressure\non all the employees:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-5'><a class=\"ez-toc-link ez-toc-heading-30\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#5_Sometimes_even_more_supervision_is_required\" title=\"5. Sometimes even more\nsupervision is required:\">5. Sometimes even more\nsupervision is required:<\/a><\/li><\/ul><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-31\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#TAYLOR_DIFFERENTIAL_PIECE_RATE_SYSTEM\" title=\"TAYLOR DIFFERENTIAL PIECE RATE SYSTEM\">TAYLOR DIFFERENTIAL PIECE RATE SYSTEM<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-32\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#MERRICK_DIFFERENTIAL_PIECE_RATE_SYSTEM\" title=\"MERRICK DIFFERENTIAL PIECE\nRATE SYSTEM\">MERRICK DIFFERENTIAL PIECE\nRATE SYSTEM<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-33\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#EMERSON_EFFICIENCY_PLAN\" title=\"EMERSON EFFICIENCY PLAN\">EMERSON EFFICIENCY PLAN<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-34\" href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/#GANTT_TASK_AND_BONUS_SYSTEM\" title=\"GANTT TASK AND BONUS SYSTEM\">GANTT TASK AND BONUS SYSTEM<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"has-text-align-center wp-block-heading\" id=\"system-of-wage-payment-in-cost-accounting\"><span class=\"ez-toc-section\" id=\"SYSTEM_OF_WAGE_PAYMENT_IN_COST_ACCOUNTING\"><\/span><strong>SYSTEM OF WAGE PAYMENT IN <a href=\"https:\/\/commerceiets.com\/cost-accounting\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"COST ACCOUNTING (opens in a new tab)\">COST ACCOUNTING<\/a><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"has-text-align-center wp-block-heading\" id=\"wages\"><span class=\"ez-toc-section\" id=\"WAGES\"><\/span>WAGES<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Before understanding system of wage payment in cost accounting, get to know What is Wage? <\/p>\n\n\n\n<p>A&nbsp;wage&nbsp;is monetary compensation paid by an&nbsp;employer&nbsp;to an&nbsp;employee&nbsp;in exchange for work done. Payment may be calculated as a fixed amount for each task completed or at an hourly or daily rate, or based on an easily measured quantity of work done.<\/p>\n\n\n\n<p>Wages are part of the expenses that are\ninvolved in running a business.<\/p>\n\n\n\n<p>Payment by wage contrasts with&nbsp;salaried work, in which the employer pays an arranged amount at steady intervals (such as a week or month) regardless of hours worked, with&nbsp;commission&nbsp;which conditions pay on individual performance, and with compensation based on the performance of the company as a whole. <\/p>\n\n\n\n<p>Waged employees may also receive tips or&nbsp;gratuity&nbsp;paid directly by clients and&nbsp;employee benefits&nbsp;which are non-monetary forms of compensation. Since&nbsp;wage labour&nbsp;is the predominant form of work, the term &#8220;wage&#8221; sometimes refers to all forms (or all monetary forms) of employee compensation.<\/p>\n\n\n\n<p><strong>ESSENTIAL FEATURES OF IDEAL WAGE SYSTEM<\/strong><\/p>\n\n\n\n<p>Wages are the biggest incentive for employees\nto perform their jobs sincerely and error free. Several wage systems have been\ndevised for fulfilling the requirements of both employees and employers.<\/p>\n\n\n\n<p>Thus, the wage system should be planned\ncarefully. A system that reduces the labour cost per unit while increasing the\noutput and giving a fair return to workers will be the most suitable one. The\naim of the wage system should be the introduction of a fair wage. A good wage\nsystem should possess the following characteristics:<\/p>\n\n\n\n<p><strong>(i)\nSimplicity:<\/strong>&nbsp;The wage system should be easy to\nunderstand and simple to operate. A complex system may lead to strikes and\nagitations and may be a hindrance to a harmonious employer-employee\nrelationship.<\/p>\n\n\n\n<p><strong>(ii)\nFair to Employer and Employee:<\/strong>&nbsp;The\nsystem should be satisfactory from the point of view of both employer and\nemployees.<\/p>\n\n\n\n<p><strong>(iii)\nGuaranteed minimum wage:<\/strong>&nbsp;The\nsystem should guarantee a minimum wage to every worker irrespective of the work\ndone by them.<\/p>\n\n\n\n<p><strong>(iv)\nIncentive to work:<\/strong>&nbsp;Adequate\nincentives should be provided to the workers to work hard with great care.\nEfficient workers should be able to earn more wages as compared to the\ninefficient workers.<\/p>\n\n\n\n<p><strong>(v)\nQuality output:<\/strong>&nbsp;The system should encourage the workers\nnot only to increase the quantity of output but also to improve the quality of\noutput.<\/p>\n\n\n\n<p><strong>(vi)\nCertainty:<\/strong>&nbsp;There shouldn&#8217;t be any ambiguity in the\nwage distribution.<\/p>\n\n\n\n<p><strong>(vii)\nConformity with local and national labour laws:<\/strong>&nbsp;The system should to conformity with various labour\nlaws and regulations both local and national.<\/p>\n\n\n\n<p><strong>(viii)\nMinimization of labour turnover:<\/strong>&nbsp;The\nsystem should minimize labor turnover, absenteeism and late attendance.<\/p>\n\n\n\n<p><strong>(ix)\nAdjustment to price changes:<\/strong>&nbsp;The\nsystem should invariably contain provision for automatic rise in wages as cost\nof living index increases.<\/p>\n\n\n\n<p><strong>(x)\nFlexibility<\/strong>: The system should incorporate flexibility\nto adjust with changing circumstances of the business.<\/p>\n\n\n\n<h3 class=\"has-text-align-center wp-block-heading\" id=\"system-of-wage-payment-in-cost-accounting\"><span class=\"ez-toc-section\" id=\"SYSTEM_OF_WAGE_PAYMENT_IN_COST_ACCOUNTING-2\"><\/span>SYSTEM OF WAGE PAYMENT IN COST ACCOUNTING<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The system of wage payment in cost accounting are:<\/p>\n\n\n\n<ul><li>Time Rate System<\/li><li>Piece Rate System<\/li><li>Taylor\u2019s Differential Piece Rate System<\/li><li>Merrick\u2019s Differential Piece Rate System<\/li><li>Emerson\u2019s Plan<\/li><li>Gantt\u2019s Task and Bonus Plan <\/li><\/ul>\n\n\n\n<h4 class=\"has-text-align-center wp-block-heading\" id=\"time-rate-system\"><span class=\"ez-toc-section\" id=\"TIME_RATE_SYSTEM\"><\/span><strong>TIME RATE SYSTEM<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>It is another system of wage payment in cost accounting.<\/p>\n\n\n\n<p>Time Rate System is otherwise called as Time Work, Day Work, Day Wages and Day Rate. It is the oldest method of remuneration.&nbsp;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. <br \/>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. <\/p>\n\n\n\n<p>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.<\/p>\n\n\n\n<p><strong>Time Rate System Formula<\/strong><\/p>\n\n\n\n<p>This time rate system calculation is based on\nthe working hours of the employee, that is the amount of time spent on the work\nalong with the amount of work delivered within the specific period of time.<\/p>\n\n\n\n<p>And the actual formula that helps to calculate the total\namount by using this time rate system formula is<\/p>\n\n\n\n<p><strong>Formula: Wages= Total hours worked X Wages\nrate per hour<\/strong>.<\/p>\n\n\n\n<p><strong>Examples of&nbsp;Time Rate System<\/strong><\/p>\n\n\n\n<p>An employee works for Rs. 20 an hour and he spends a total of around 400 hrs in a month of 30 days at work. What would be his salary?<\/p>\n\n\n\n<p>Calculation under time rate system.<br \/> Total hours worked = 400 hrs, wage per hour = 20<br \/> <strong>Wages= Total hours worked X Wages rate per hour<\/strong>.<br \/> Wages = 400*20 = 8000.Therefore, the employee receives a salary of 8000\/- on a monthly basis.<\/p>\n\n\n\n<p><strong>Chief Features of Time Wage Payment Methods<\/strong><\/p>\n\n\n\n<ul><li>Very popular and\neasy form of payment.<\/li><li>Helpful in the\npayroll function<\/li><li>All the\ncalculations are quite simple<\/li><li>There will be no\nirregularity or uncertainty regarding income or wages<\/li><li>Can concentrate\nmore on the work as the income will be regular<\/li><\/ul>\n\n\n\n<p><strong>Suitability of Time Wage Payment Methods<\/strong><\/p>\n\n\n\n<ul><li>When the output or\nresult cannot be assessed or measured<\/li><li>The work may get\ndelayed depending upon the industry you are working for.<\/li><li>When the quality\nof work is given preference<\/li><li>When workers\nhaving an idea regarding the output quantity <\/li><li>When employees are\nfreshers and are in training period for the respected job.<\/li><li>When trying to\nreduce the risk of errors or accidents depending upon the work speed<\/li><\/ul>\n\n\n\n<p><strong>Importance of Time Wage Payment Methods<\/strong><\/p>\n\n\n\n<ul><li>The worth of the\nemployee can be assessed<\/li><li>Quality work is\ngiven more importance when compared to quantity work.<\/li><li>High level of\nmonitoring of work can be achieved<\/li><li>Delays and risks\nof accidents are high and are out of control.<\/li><li>No single employee\nwill have control over the whole output<\/li><\/ul>\n\n\n\n<p><strong>Advantages \/ Disadvantages of Time Rate System <\/strong><\/p>\n\n\n\n<p>There are several advantages and disadvantages of the\ntime rate systems, and these advantages and disadvantages create\ndifferentiation for the purpose of the company benefits.<\/p>\n\n\n\n<p><strong>Advantages of the Time Rate System<\/strong><\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"1-simple-formulation\"><span class=\"ez-toc-section\" id=\"1_Simple_formulation\"><\/span>1. Simple\nformulation:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>The calculation and nature of the time rate system are\nvery easy and simple to understand. It is one of the methods that can be\nunderstood by all the employers of the company.<\/p>\n\n\n\n<p>Its measurement and the calculation of this wage system\nprovide the actual picture about the overall time rate system.<\/p>\n\n\n\n<p>Therefore, as it is mentioned earlier, it is easy and\nsimple to understand and formulate in the company.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"2-easy-access\"><span class=\"ez-toc-section\" id=\"2_Easy_access\"><\/span>2. Easy access:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>This time rate system is very easy to access and that is\nbecause of its brief and clear detailed information. The details collected and\nmaintained through this time rate system are very economical.<\/p>\n\n\n\n<p>In other words, it is one of the simple methods of\nunderstanding the total wages of the employees of the company. It makes records\nmaintenance, affordable and clear. Therefore, it is one of the economic methods\nof calculating wages under time rate systems.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"3-production-quality\"><span class=\"ez-toc-section\" id=\"3_Production_quality\"><\/span>3. Production\nquality:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>As per the information provided by different sources of\nthe production unit, the company performs better with these time rate systems.<\/p>\n\n\n\n<p>Eventually, the production quality will increase and the\nemployer monitors all the production units without any mistakes.<\/p>\n\n\n\n<p>Therefore, because of this time rate system, the quality\nof production gets improved and it favours the overall&nbsp;development of the\ncompany.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"4-fixed-wage\"><span class=\"ez-toc-section\" id=\"4_Fixed_wage\"><\/span>4. Fixed wage:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Even when it comes to a salary expense calculation, the\ncompany earns better profits because of its fixed rate of price.<\/p>\n\n\n\n<p>The time rate systems incorporate fixed-wage systems\nbecause of which the company using it confirms a fixed rate of price per day.<\/p>\n\n\n\n<p>And this fixed rate per price helps to increase the\nprofits of the company as its only a small amount of profit returns.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"5-improves-equality-among-employees\"><span class=\"ez-toc-section\" id=\"5_Improves_equality_among_employees\"><\/span>5. Improves\nequality among employees:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Because of the time rate system, the employees of the\ncompany may feel equal within themselves.<\/p>\n\n\n\n<p>Most of the time several companies face a certain kind of\nunion problems and if the company incorporates these time rate system policy,\nthen the possibility of inequality issue will be considerably less among the\nemployees of the company.<\/p>\n\n\n\n<p>Therefore, all the employees of the company experience\nequality among them.<\/p>\n\n\n\n<p><strong>Disadvantages of Time Rate Systems:<\/strong><\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"1-it-ignores-efficiency\"><span class=\"ez-toc-section\" id=\"1_It_ignores_efficiency\"><\/span>1. It ignores\nefficiency:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>As per the formulation of this time rate system, the\nactual focus of this time rate system is on the part of the production where\nthe employee works according to the specific number of time and production.<\/p>\n\n\n\n<p>Most importantly the work delivered by the employees will\nbe based on their total daily production output. And it is obvious that it\ncompletely ignores the efficiency of its employees, because of which deserving\nemployee feels unappreciated for their work.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"2-loss-of-skilled-workers\"><span class=\"ez-toc-section\" id=\"2_Loss_of_skilled_workers\"><\/span>2. Loss of\nskilled workers:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>As explained above, the company works according to the\nspecific production rate and it totally ignores the efficiency of its employees\nand because of that, the employees of the company decide to leave the company.\nThis is one of the disadvantages of this time rate system.<\/p>\n\n\n\n<p>Therefore, the company suffers a loss of their skilled\nworkers because of the time rate system methods of wage calculations.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"3-inefficiency\"><span class=\"ez-toc-section\" id=\"3_Inefficiency\"><\/span>3. Inefficiency:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>The workers and the employees of the company eventually\nunderstand that the company expects a certain level of production from them not\nthe quality of work from them. This kind of ignorance creates inefficiency\namong the employees of the company.<\/p>\n\n\n\n<p>Therefore, all the employees of the company decide to\nwork as per their specific production expectation and they try to not bring\nefficiency in their work because their efficiency will not reward them for\ntheir excellent work delivery.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"4-conflicts-of-thinking\"><span class=\"ez-toc-section\" id=\"4_Conflicts_of_thinking\"><\/span>4. Conflicts of\nthinking:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Most of the time the company incorporates some kind of\nrules and regulations in the company without consulting their employees of the\ncompany.<\/p>\n\n\n\n<p>And when it comes to the wage system and salary system,\nthen the employees of the company will definitely have some conflicts of\nthinking.<\/p>\n\n\n\n<p>This conflict of thinking creates a communication\ndifference between the employees and the employers of the company which is not\nat all good for the company development.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"5-cost-of-production\"><span class=\"ez-toc-section\" id=\"5_Cost_of_production\"><\/span>5. Cost of\nproduction:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>As the company prefers its employees to provide a\nspecified number of productions and the employees of the company meet their\ndaily production unit, then there is a possibility that the company might\nincrease the production output. This increment in production output leads to\nthe increment of cost of production.<\/p>\n\n\n\n<p>Therefore, this can affect the company effectively\nbecause of this time rate system of the wage calculations.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"6-increased-supervision-cost\"><span class=\"ez-toc-section\" id=\"6_Increased_supervision_cost\"><\/span>6. Increased\nsupervision cost:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>When it comes to the cost of supervision the company may\nend up being in trouble because of these time rate systems. Therefore, the\ncompany needs to cut back its supervision cost so that they can regain the\nposition of the company.<\/p>\n\n\n\n<p>And to make that happen, the company needs to cut back\nfrom the time rate systems so that they can reduce the cost of supervision\neventually.<\/p>\n\n\n\n<p><strong>Variations of the time rate system<\/strong><\/p>\n\n\n\n<p>There are a few variations of the time rate system with a\nview to introducing an element of incentive in the time wages. These methods\nare:<\/p>\n\n\n\n<p><strong>(a)\nHigh Wage Rate:<\/strong><\/p>\n\n\n\n<p>Under\nthis wage system, a time rate of a worker is fixed at a higher level than the\naverage wage rate of the industry. The wage rate is fixed by hour or day.\nHigher rate is given to attract efficient workers. Overtime is not permitted\nunder this system. Stable working conditions are created to enable the workers\nto achieve the standard output within the regular hours of work. Those who are\nnot able to achieve the standard are taken off the scheme.<\/p>\n\n\n\n<p><strong>(b)\nGraduated Time Rate:<\/strong><\/p>\n\n\n\n<p>Under\nthis method, wages we paid at time rates which vary with changes in cost of\nliving index. The wage rate per hour or per day goes on changing with changes\nin the general cost of living index. This system is preferred by the workers\nduring the time of rising prices because their wages go on increasing with\nincrease in the cost of living index. In India, the basic wage rates normally\nremain fixed and the worker is paid dearness allowance which rises with cost of\nliving.<\/p>\n\n\n\n<p><strong>(c)\nDifferential Time Rate:<\/strong><\/p>\n\n\n\n<p>Under\nthis wage plan, different wage rates are fixed for different levels efficiency.\nNormal time rate is paid to the workers up to certain percentage efficiency.\nThe rate gradually increases beyond the standard. Thus higher rates are giving\nto efficient workers in recognisation of their efficient performance.<\/p>\n\n\n\n<h3 class=\"has-text-align-center wp-block-heading\" id=\"piece-rate-system\"><span class=\"ez-toc-section\" id=\"PIECE_RATE_SYSTEM\"><\/span><strong>PIECE RATE SYSTEM<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>It is another system of wage payment in cost accounting.<\/p>\n\n\n\n<p>The piece rate system is that system of wage payment in which the workers are paid on the basis of the units of output produced. Piece rate 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.<\/p>\n\n\n\n<p><strong><br \/>\nTotal Wages Earned= Total units of outputs produced x Wage rate per unit of\noutput.<\/strong><\/p>\n\n\n\n<p><strong>OR<br \/>\nTotal Wages Earned= Output x Piece Rate<\/strong><\/p>\n\n\n\n<p>Piece-rate pay is also sometimes referred to as <strong>Payment by Results System.<\/strong><\/p>\n\n\n\n<p><strong>Suitability of Piece rate pay system Methods<\/strong><\/p>\n\n\n\n<p>Here are a few cases where the piece rate\nsystem methods can be successfully applied.<\/p>\n\n\n\n<ul><li>When the type of\nwork is repetitive in nature<\/li><li>When the quantity\nof output can be assessed<\/li><li>When goods quality\nneeds to be measured<\/li><li>Workers are paid\nreasonable rates.<\/li><li>When a fair and\nacceptable piece rate is fixed<\/li><li>To create\ndiscipline among workers time cards are introduced<\/li><li>Rates need to be\nadjusted depending on the price level changes<\/li><li>Sufficient sources\nare present for production increase<\/li><\/ul>\n\n\n\n<p><strong>Types of Piece Rate Pay System<\/strong><\/p>\n\n\n\n<p>There\nare mainly 2 types of piece-rate system. They are<\/p>\n\n\n\n<p>1.\nStraight piece rate system<br \/>\n2. Differential piece rate system<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"straight-piece-rate-system\"><span class=\"ez-toc-section\" id=\"Straight_piece_rate_system\"><\/span>Straight piece rate system:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>This\nis the type of wage system where the wages are paid to the workers based on the\noutput or result of work done.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"differential-piece-rate-system\"><span class=\"ez-toc-section\" id=\"Differential_piece_rate_system\"><\/span>Differential piece rate\nsystem:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>This\nis a type of wage system where the wages are paid to the workers after the\ncompletion of work. High piece rate is offered to workers who completed the\nwork within the given time and low piece rate for those who exceeded the given\ntime for the task.<\/p>\n\n\n\n<p><strong>Advantages of Piece Rate Pay System<\/strong><\/p>\n\n\n\n<h5 class=\"wp-block-heading\" id=\"1-increases-the-efficiency-of-all-the-employees\"><span class=\"ez-toc-section\" id=\"1_Increases_the_efficiency_of_all_the_employees\"><\/span>1. Increases the efficiency\nof all the employees:<span class=\"ez-toc-section-end\"><\/span><\/h5>\n\n\n\n<p>One\nof the biggest and major advantages of this piece-rate pay system is that it&nbsp;<strong>helps to increase the efficiency\nof the employee<\/strong>s keeping them busy all the time.<\/p>\n\n\n\n<p>They\nare well aware of the fact that them getting paid or not is dependent on their\nown work output. If they fail to&nbsp;work efficiently and quickly&nbsp;then\nthat is going to bring about their own downfall.<\/p>\n\n\n\n<p>Having\nsuch efficient workers in the company not only ensures that the work is done\nquickly but it also ensures that the company rises from strength to strength\nslowly making its way to the top.<\/p>\n\n\n\n<h5 class=\"wp-block-heading\" id=\"2-they-do-not-constantly-require-any-kind-of-micromanagement\"><span class=\"ez-toc-section\" id=\"2_They_do_not_constantly_require_any_kind_of_micromanagement\"><\/span>2. They do not constantly\nrequire any kind of micromanagement:<span class=\"ez-toc-section-end\"><\/span><\/h5>\n\n\n\n<p>In\nthe time rate system, the workers need to have constant supervision, because if\nnot then they will try to drag out the task for as long as possible so that\nthey can get as much money as possible.<\/p>\n\n\n\n<p>Why\nwould they try to finish the task off faster when they can get more money for\ndoing nothing at all?<\/p>\n\n\n\n<p>Tactics\nlike this are often employed by the workers, where they take the employers for\na ride. In this piece-rate plan system, very often the workers take it upon\nthemselves to do the&nbsp;task as fast as they can&nbsp;and they have their own\nsense of responsibility.<\/p>\n\n\n\n<h5 class=\"wp-block-heading\" id=\"3-it-is-very-easy-to-calculate-the-dues-of-the-worker\"><span class=\"ez-toc-section\" id=\"3_It_is_very_easy_to_calculate_the_dues_of_the_worker\"><\/span>3. It is very easy to\ncalculate the dues of the worker:<span class=\"ez-toc-section-end\"><\/span><\/h5>\n\n\n\n<p>As\nmentioned above, the simple formula which is applied to calculate the earnings\nof the workers makes things rather simple for everyone concerned.<\/p>\n\n\n\n<p>In\nthe time rate system, keeping a track for the number of hours of work done by\neach employee becomes a very difficult task indeed and most often there is no\nproof or accountability.<\/p>\n\n\n\n<p>In\nthis system, everything is very clear and transparent, since if the task is\ndone, then the finished product will serve as proof. The few&nbsp;<strong>calculations<\/strong>&nbsp;involved\nmeans that there is&nbsp;<strong>less scope for error as well as mistakes<\/strong>.<\/p>\n\n\n\n<h5 class=\"wp-block-heading\" id=\"4-workers-do-not-end-up-wasting-any-time\"><span class=\"ez-toc-section\" id=\"4_Workers_do_not_end_up_wasting_any_time\"><\/span>4. Workers do not end up\nwasting any time:<span class=\"ez-toc-section-end\"><\/span><\/h5>\n\n\n\n<p>In\nthis day and age, time is of the essence and time means money. If the workers\ntake their own sweet time completing the task at hand then the only one who is\ngoing to suffer is the company.<\/p>\n\n\n\n<p>The\ncompany will suffer on two fronts, firstly they will have to keep paying the\nemployees more and more money because they are taking so much time with the\nwork and secondly, because they will not have any products to sell since the\nemployees are working so slow.<\/p>\n\n\n\n<p>A\nmajor advantage of a system like this is that the employees are seldom idle and\nthey are&nbsp;<strong>always\nbusy and working as hard as they can to get good results<\/strong>.<\/p>\n\n\n\n<h5 class=\"wp-block-heading\" id=\"5-they-are-encouraged-to-think-of-better-working-methods\"><span class=\"ez-toc-section\" id=\"5_They_are_encouraged_to_think_of_better_working_methods\"><\/span>5. They are encouraged to\nthink of better working methods:<span class=\"ez-toc-section-end\"><\/span><\/h5>\n\n\n\n<p>Owing\nto the fact that the workers know that the more output they produce, the better\nthings will be for them and it is for this reason that the employees always\nhave their head in the game and are trying to think of new and innovative ways\nof increasing their output.<\/p>\n\n\n\n<p>Doing\nthings in this way has a dual benefit firstly it increases the amount of money\nwhich the employees are able to make and secondly, it increases the profits\nwhich the company is able to make.<\/p>\n\n\n\n<p>If\neveryone thinks of&nbsp;innovative ways to get jobs done&nbsp;then the company\nis bound to make a huge mark for itself.<\/p>\n\n\n\n<h5 class=\"wp-block-heading\" id=\"6-the-number-of-products-produced-is-much-higher\"><span class=\"ez-toc-section\" id=\"6_The_number_of_products_produced_is_much_higher\"><\/span>6. The number of products\nproduced is much higher:<span class=\"ez-toc-section-end\"><\/span><\/h5>\n\n\n\n<p>Another\nmajor advantage of this kind of system is that the number of products produced\nis very high and since the number of products produced is so high, the&nbsp;<strong>cost of production becomes lower\nfor the company.<\/strong><\/p>\n\n\n\n<p>In\nthe other systems, chances are the cost becomes so high because the workers\ntake so much of time to complete even one product. So even if the demand is a\nlot, the supply is very limit.<\/p>\n\n\n\n<p>Here\nthe demand and supply are both high allowing the company to reap maximum\nbenefits and keep all the customers happy and satisfied.<\/p>\n\n\n\n<h5 class=\"wp-block-heading\" id=\"7-the-workers-set-deadlines-for-themselves\"><span class=\"ez-toc-section\" id=\"7_The_workers_set_deadlines_for_themselves\"><\/span>7. The workers set deadlines\nfor themselves:<span class=\"ez-toc-section-end\"><\/span><\/h5>\n\n\n\n<p>Finally,\nrather than the bosses setting deadlines for the workers, the&nbsp;<strong>workers set their own deadlines<\/strong>&nbsp;and\nsometimes even finish the task before the stipulated time.<\/p>\n\n\n\n<p>Everything\nis dependent on them, including the money which they make so that is why they\ntake their job very seriously and even work from home when they think that they\nare running short of time.<\/p>\n\n\n\n<p><strong>Disadvantages of Piece Rate Pay System<\/strong><\/p>\n\n\n\n<h5 class=\"wp-block-heading\" id=\"1-workers-pay-much-more-attention-to-quantity-and-not-quality\"><span class=\"ez-toc-section\" id=\"1_Workers_pay_much_more_attention_to_quantity_and_not_quality\"><\/span>1. Workers pay much more\nattention to quantity and not quality:<span class=\"ez-toc-section-end\"><\/span><\/h5>\n\n\n\n<p>As\nit is often said, there are two sides to every story, so even if there are a\nnumber of advantages of the system, there are also disadvantages.<\/p>\n\n\n\n<p>The\nmajor disadvantage of this kind of piece-rate pay is that the workers try too\nhard to finish the task at hand, that the quality of work suffers and they give\nup substandard work.<\/p>\n\n\n\n<p>In\nthe attempt of trying to make more money, they often cut corners and even give\nup incomplete work hoping that this will go undetected. Things like this\ngreatly&nbsp;affect the reputation and name of the company&nbsp;concerned.<\/p>\n\n\n\n<h5 class=\"wp-block-heading\" id=\"2-planning-for-the-future-becomes-rather-tough\"><span class=\"ez-toc-section\" id=\"2_Planning_for_the_future_becomes_rather_tough\"><\/span>2. Planning for the future\nbecomes rather tough:<span class=\"ez-toc-section-end\"><\/span><\/h5>\n\n\n\n<p>As\nmentioned above, the workers often decide on their own deadline and they\ncomplete the work when they can, it is for this very reason that there is no\nuniformity in the work output and it becomes quite a challenging task to plan\nfor the future of the company or to even make out a proper schedule of\nproduction.<\/p>\n\n\n\n<h5 class=\"wp-block-heading\" id=\"3-finding-and-fixing-on-a-reasonable-piece-cost-is-a-rather-tough-task\"><span class=\"ez-toc-section\" id=\"3_Finding_and_fixing_on_a_reasonable_piece_cost_is_a_rather_tough_task\"><\/span>3. Finding and fixing on a\nreasonable piece cost is a rather tough task:<span class=\"ez-toc-section-end\"><\/span><\/h5>\n\n\n\n<p>Another\nbig disadvantage of this system is that the workers and employers find it very\ntough to fix a reasonable cost for the finished product.<\/p>\n\n\n\n<p>Narrowing\ndown on one figure which both parties will be happy with is quite a challenging\nand even time-consuming task which requires hours of talking, convincing and\nnegotiations.<\/p>\n\n\n\n<h5 class=\"wp-block-heading\" id=\"4-it-puts-immense-pressure-on-all-the-employees\"><span class=\"ez-toc-section\" id=\"4_It_puts_immense_pressure_on_all_the_employees\"><\/span>4. It puts immense pressure\non all the employees:<span class=\"ez-toc-section-end\"><\/span><\/h5>\n\n\n\n<p>In\nsuch a system the workers try their best to make as many products as possible.\nIn the attempt of trying to make more and more money, they often end up\noverworking themselves.<\/p>\n\n\n\n<p>Doing\ntoo much work without taking any breaks is bound to take a toll on the health\nof these workers. As a result, they might come in for serious problems like&nbsp;<strong>stress, heart trouble or even\nhigh blood pressure.<\/strong><\/p>\n\n\n\n<h5 class=\"wp-block-heading\" id=\"5-sometimes-even-more-supervision-is-required\"><span class=\"ez-toc-section\" id=\"5_Sometimes_even_more_supervision_is_required\"><\/span>5. Sometimes even more\nsupervision is required:<span class=\"ez-toc-section-end\"><\/span><\/h5>\n\n\n\n<p>As\nmentioned above, an advantage of the system is that the workers work\nindependently and don\u2019t need micromanaging.<\/p>\n\n\n\n<p>But\nsometimes in the attempt of trying to work quicker, the workers give up bad\nquality work and even use inferior quality products. By this, the finished\nproducts require even more scrutiny and most often many products get rejected\nbecause they are not fit to be sold to the customers.<\/p>\n\n\n\n<h3 class=\"has-text-align-center wp-block-heading\" id=\"taylor-differential-piece-rate-system\"><span class=\"ez-toc-section\" id=\"TAYLOR_DIFFERENTIAL_PIECE_RATE_SYSTEM\"><\/span><strong>TAYLOR DIFFERENTIAL PIECE RATE SYSTEM<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>It is another system of wage payment in cost accounting.<\/p>\n\n\n\n<p><strong>Taylor\u2019s\nDifferential Piece-Rate System<\/strong>&nbsp;was introduced by&nbsp;<strong>F.W. Taylor<\/strong>, who believed that the workers should be paid on the basis\nof their degree of efficiencies. Under this method, with the help of Time and\nMotion Study, the standard time for the completion of a job is fixed on the\nbasis of which the performance of the workers is evaluated. <\/p>\n\n\n\n<p>Taylor proceeded on the assumption that through time and motion study it\nis possible to fix a standard time for doing a particular task. To encourage\nthe workers to complete the work within the standard time, Taylor advocated two\npiece rates, so that if a worker performs the work within or less than the\nstandard time, he is pad a higher piece rate, and if he does not complete the\nwork within the standard time, he is given a lower piece rate.<\/p>\n\n\n\n<p><strong>EXAMPLE:<\/strong> There\nare&nbsp;<strong>two piece-rates<\/strong>,\none who reach the standard output or exceeds it, is paid&nbsp;<strong>120 percent<\/strong>&nbsp;of the piece rate.\nWhile the one who fails to reach the standard level of output, is paid&nbsp;<strong>80 percent<\/strong>&nbsp;of the piece-rate.\nThe minimum wages of the worker are not guaranteed.<\/p>\n\n\n\n<p>Standard Output = 200 units<br \/>\nRate per unit = Rs 10 paise<\/p>\n\n\n\n<p><strong>Case\n(1):<\/strong>&nbsp;Output = 220 units<br \/>\nEarnings = 220 x (120\/200) x 0.1 =&nbsp;<strong>Rs 13.20<\/strong><\/p>\n\n\n\n<p><strong>Case\n(2):<\/strong>&nbsp;Output = 180 units<\/p>\n\n\n\n<p>Earnings = 180 x (80\/200) x 0.1 =&nbsp;<strong>Rs 7.20<\/strong><\/p>\n\n\n\n<p>It is clear from the above example that the\nworker is paid a higher rate (<strong>Rs<\/strong>&nbsp;<strong>13.20<\/strong>) for high production (<strong>220 units)&nbsp;<\/strong>and low rate<strong>&nbsp;(Rs 7.20)&nbsp;<\/strong>for low\nproduction<strong>&nbsp;(180 units).<\/strong>&nbsp;<\/p>\n\n\n\n<p><strong>Features of taylor\u2019s differential piece rate system<\/strong><\/p>\n\n\n\n<p>(i) The system is based on piece rates.<\/p>\n\n\n\n<p>(ii) The standard output for unit of time is\npre-determined on the basis of time and motion study.<\/p>\n\n\n\n<p>(iii) There are two piece rates, one lower\nand another higher. Those who reach the standard or exceed it, get wages at\nhigher piece rate (e.g. 120% of piece rate) and those who fail to reach it, get\nwages at a lower piece rate (e.g. 80% of piece rate).<\/p>\n\n\n\n<p>(iv) Minimum wages for the workers are not\nguaranteed.<\/p>\n\n\n\n<p><strong>Merits<\/strong><br \/>\n<br \/>\n<\/p>\n\n\n\n<ul><li>It makes a distinction between efficient and\ninefficient workers. Lazy and inefficient workers are penalised, while\nefficient workers are rewarded.<br \/>\n<br \/>\n<\/li><li>The basis of this system is scientific. It is\nbased on proper work study.<br \/>\n<br \/>\n<\/li><li>It helps in spotting and eliminating\ninefficient workers.<br \/>\n<br \/>\n<\/li><\/ul>\n\n\n\n<p><strong>Demerits<br \/>\n<\/strong>(1) A worker missing the standard even by\nnarrow margin is penalised heavily.<br \/>\n(2) It is more mechanical and less humane.<br \/>\n(3) Trade unions oppose this plan.<br \/>\n(4) It may lead to discontentment among workers.<\/p>\n\n\n\n<h3 class=\"has-text-align-center wp-block-heading\" id=\"merrick-differential-piece-rate-system\"><span class=\"ez-toc-section\" id=\"MERRICK_DIFFERENTIAL_PIECE_RATE_SYSTEM\"><\/span><strong>MERRICK DIFFERENTIAL PIECE\nRATE SYSTEM<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>It is another system of wage payment in cost accounting.<\/p>\n\n\n\n<p>The worker is paid the&nbsp;<strong>straight price rate up to 83%<\/strong>&nbsp;of the standard output,&nbsp;<strong>10 % above the normal rate<\/strong>&nbsp;for producing between&nbsp;<strong>83% \u2013 100%<\/strong>&nbsp;and&nbsp;<strong>20% above the normal rate&nbsp;<\/strong>for producing<strong>&nbsp;more than 100%&nbsp;<\/strong>of the standard output. Here also, the minimum wages of the worker are not guaranteed<strong>.<\/strong><\/p>\n\n\n\n<p><strong>EXAMPLE<\/strong><\/p>\n\n\n\n<p>Standard Output = 200 units<br \/>\nPiece-rate = 10 paise<\/p>\n\n\n\n<p><strong>Case\n(1):<\/strong>&nbsp;Output = 160 units<br \/>\nEfficiency = 160\/200 x 100 = 80%<\/p>\n\n\n\n<p>Since the efficiency is less than 83%, the\nworker is paid only the basic rate, i.e. 10 paise. Thus,&nbsp;<strong>earnings will be<\/strong>&nbsp;<strong>Rs 8 (80 x 0.1).<\/strong><\/p>\n\n\n\n<p><strong>Case\n(2):&nbsp;<\/strong>Output= 180 units<br \/>\nEfficiency = 180\/200 x 100 = 90%<\/p>\n\n\n\n<p>As the efficiency is more than 83% but less\nthan 100 percent, 10% above the normal rate is paid to the worker. Thus,<br \/>\n<strong>Earnings = 90 x 110\/100 x 0.1 = Rs 9.9<\/strong><\/p>\n\n\n\n<p><strong>Case\n(3):&nbsp;<\/strong>Output = 220 units<br \/>\nEfficiency = 220\/200 x 100 = 110%<\/p>\n\n\n\n<p>As the efficiency is 110%, 20% above the\nnormal rate is paid to the worker. Thus,<\/p>\n\n\n\n<p><strong>Earnings\n= 110 x 120\/100 x 0.1 = Rs 13.30<\/strong><\/p>\n\n\n\n<p><strong>Merits<\/strong><br \/>\n(1) This plan is liberal for the efficient workers. The\nworkers producing more, get their wages at increasing rates.<br \/>\n(2) There is no sudden rise in the wages at one point.<br \/>\n(3) It has all merits of Taylor&#8217;s Differential plan.<br \/>\n<strong>Demerits<br \/>\n<\/strong>(1) The system does not guarantee minimum wages for the\nworkers.<br \/>\n(2) There is wide gap in slabs. All workers producing 1% to\n83% of the standard output are considered as sub-standard workers and are paid\nat the same piece rate.<br \/>\n(3) A worker\nmissing the standard even by narrow margin is penalised heavily.<br \/>\n(4) It is more mechanical and less humane.<br \/>\n(5) Trade unions oppose this plan.<br \/>\n(6) It may lead to discontentment among workers.<\/p>\n\n\n\n<h3 class=\"has-text-align-center wp-block-heading\" id=\"emerson-efficiency-plan\"><span class=\"ez-toc-section\" id=\"EMERSON_EFFICIENCY_PLAN\"><\/span><strong>EMERSON EFFICIENCY PLAN<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>It is another system of wage payment in cost accounting.<\/p>\n\n\n\n<p>This plan has been named after <strong>Harrington Emerson<\/strong>; the innovator of this plan. Under&nbsp;<strong>Emerson Plan<\/strong>, the standard time for the completion of a task is fixed against which the actual performance of the workers is measured. The worker\u2019s efficiency can be determined by dividing the time taken by the standard time.<\/p>\n\n\n\n<p>In Emerson Plan, the worker is paid only\nthe&nbsp;<strong>time rate<\/strong>&nbsp;for\nthe efficiency&nbsp;<strong>up to 67%.<\/strong>&nbsp;At\n100% efficiency, the worker is paid&nbsp;<strong>time wages<\/strong>,&nbsp;<strong>plus a bonus of 20%<\/strong>&nbsp;on the\nwages earned. The worker is paid one&nbsp;<strong>percent\nadditional bonus<\/strong>&nbsp;for each additional&nbsp;<strong>one percent efficiency<\/strong>&nbsp;added\nafter the standard. <strong>EXAMPLE<\/strong><\/p>\n\n\n\n<p>Standard output in 10 hrs = 200 units<br \/>\nRate per unit = Rs 2<\/p>\n\n\n\n<p><strong>Case\n(1):&nbsp;<\/strong>Output in 10 hrs = 100 units<br \/>\nEfficiency = 50% (100\/200 x 100)<\/p>\n\n\n\n<p>As efficiency is below 67% the worker is\nentitled to only time wage, thus,&nbsp;<strong>Earnings = 10 x 2 = 20.<\/strong><\/p>\n\n\n\n<p><strong>Case\n(2):&nbsp;<\/strong>Output in 10 hrs = 200 units<br \/>\nEfficiency = 100% (200\/200 x 100)<\/p>\n\n\n\n<p>As the efficiency is 100%, then the worker is\npaid time wages, plus a bonus of 20% on wages earned. Thus,<br \/>\nEarnings:<br \/>\nTime Wages = 10 x 2 = Rs 20<br \/>\nBonus = 20\/100 x 20 = Rs 4<br \/>\n<strong>Total earnings = Rs 24<\/strong><\/p>\n\n\n\n<p><strong>Case\n(3):&nbsp;<\/strong>Output in 10 hrs = 260 units<br \/>\nEfficiency = 130% (260\/200 x 100)<\/p>\n\n\n\n<p>For 100% efficiency, the worker will get a\nbonus of 20% on wages earned, plus one percent additional bonus for every one\npercent increase in efficiency, i.e. 30%. Thus, the total bonus of 50% of time\nwage is paid to the worker.<\/p>\n\n\n\n<p>Earnings:<br \/>\nTime wages = 10 x 2 = Rs 20<br \/>\nBonus = 50\/100 x 20 = Rs 10<br \/>\n<strong>Total Earnings = Rs 30<\/strong><\/p>\n\n\n\n<p><strong>Advantages (Merits) of Emerson&#8217;s Efficiency Plan<br \/>\n<\/strong>1. Beginners are encouraged to work hard\nunder this plan.<br \/>\n2. Proper attention is paid to different kinds of workers.<br \/>\n3. It is easy to understand the Emerson&#8217;s Plan.<br \/>\n4. It possesses rational determination of efficiency.<br \/>\n5. The calculation of efficiency is logical.<br \/>\n6. This plan can be applied to individual tasks as well as group tasks.<br \/>\n<strong>Disadvantages (Demerits) of Emerson&#8217;s\nEfficiency Plan<br \/>\n<\/strong>1. Labour cost is increased due to payment of bonus on low level of\nproduction.<br \/>\n2. There is low rate of bonus in the beginning.<br \/>\n3. It is a complicated plan as far as calculation is concerned.<br \/>\n4. It requires a lot of clerical work.<br \/>\n5. Under this plan, management may be tempted to fix a very high level of\nstandard output.<\/p>\n\n\n\n<h4 class=\"has-text-align-center wp-block-heading\" id=\"gantt-task-and-bonus-system\"><span class=\"ez-toc-section\" id=\"GANTT_TASK_AND_BONUS_SYSTEM\"><\/span><strong>GANTT TASK AND BONUS SYSTEM<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>It is another system of wage payment in cost accounting.<\/p>\n\n\n\n<p><strong>H.L. Gantt, <\/strong>an associate of Taylor, devised this scheme on the basis of Taylor&#8217;s plan. Under this scheme, fixed time rates are guaranteed. Output standards and time<br \/> Standards are established for the performance of each job. Workers completing the standard job within the standard time or a shorter time receive wages for the standard time plus a bonus! The bonus is a percentage, varying from 20 to 50, of the wage for the standard time. When a worker fails to turn out the required quantity of products, he simply gets his time rate without any bonus.<\/p>\n\n\n\n<p><strong>Example<\/strong><\/p>\n\n\n\n<p>Standard Rate: $ 2 per hour<\/p>\n\n\n\n<p>Standard hours for the job 10 hours.<\/p>\n\n\n\n<p>Bonus is 20% of standard time.<\/p>\n\n\n\n<p>I. Worker had done the work in 12 hours.<\/p>\n\n\n\n<p>II. Worker had done the work in 10 hours.<\/p>\n\n\n\n<p>III. Worker had done the work in 8 hours.<\/p>\n\n\n\n<p>First worker shall obtain at the rate of $ 2\nper hour the wages for the work for 12 hours that is, $ 24. Second worker shall\nacquire the wages for 10 hours at the rate of $ 2 per hours that is $ 20 plus\n20% of 10 hours that is for 2 hours @ 2 or $ 4, so in aggregate 24. We can\nstate that he shall be compensated for 12 hours. The 3<sup>rd<\/sup>&nbsp;worker\nwho does the work in 8 hours shall obtain the wages for 10 hours because it is\nthe standard time set for the job plus 20% of 10 hours. So, his compensation\nshall be 10 \u00d7 $ 2 + 2 \u00d7 $ 2 that is, $ 20 + 4 = $ 24 per hour. So, with the\nreduction of time spent on the job, the salary per hour increases and\ntherefore, the total earnings per day go on rising. So, this system is also\ntermed as Progressive Rate system. So, it is a system of time-rate for\nsub-standard workers and piece-rate for above standard and standard workers.<\/p>\n\n\n\n<p><strong>Merits<br \/> <\/strong>(1) It is simple and easily understood.<br \/> (2) It guarantees day wages and also provides incentive to efficient workmen.<br \/> (3) The employer derives the benefit of decreasing it with higher output.<br \/> <strong>Demerits<br \/> <\/strong>(1) If the minimum wages are kept high due to union pressure, there will not be much incentive for better performance.<br \/> (2) Labour cost is high for low production and also upto standard output because of guaranteed day wages and bonus.<br \/> (3) The scheme is preferred by the totally inefficient workers as well as by the most efficient workers. Reasonably efficient workers cut a sorry figure.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Also Study<\/strong><\/td><td><strong>Also Study<\/strong><\/td><td><strong>Also Study<\/strong><\/td><td><strong>Also Study<\/strong><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/cost-accounting\/\">Cost Accounting<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/scope-of-cost-accounting-pdf\/\">Scope of cost accounting<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/elements-of-cost\/\">Elements of cost<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/types-of-cost\/\">Types of cost<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/material-control-in-cost-accounting-pdf\/\">Material control<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/perpetual-inventory-system\/\">Perpetual inventory system<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/pricing-of-materials\/\">Pricing of materials<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/bin-card\/\">Bin Card<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/store-ledger\/\">Stores Ledger<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/incentive-plans\/\">Incentive plans<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/overhead\/\">Overheads<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/accounting-treatment-of-idle-time\/\">Idle time<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/\">System of wage payment in cost accounting<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-time-rate-system-and-piece-rate-system\/\">Time rate vs piece rate wage system<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/cost-centre\/\">Cost Center<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/labor-turnover\/\">Labour Turnover<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/difference-between-management-accounting-and-cost-accounting\/\">Difference between management accounting and cost accounting<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/allocation-and-apportionment-of-overheads\/\">Allocation and apportionment of overheads<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-allocation-and-apportionment-of-overheads\/\">Allocation vs Apportionment of overheads<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/absorption-of-overheads\/\">Absorption of overheads<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/over-absorption-and-under-absorption-of-overheads\/\">Over absorption and under absorption of overheads<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/activity-based-costing\/\">Activity based costing<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-traditional-costing-and-activity-based-costing\/\">Traditional costing vs ABC system<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/reconciliation-of-accounts\/\">Reconciliation of accounts<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/unit-costing\/\">Unit costing<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/cost-sheet-format\/\">Cost sheet format<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/cost-sheet-vs-production-account\/\">Cost sheet vs production sheet<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/job-costing\/\">Job costing<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/batch-costing\/\">Batch Costing<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-job-costing-and-batch-costing\/\">job costing vs batch costing<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/contract-costing\/\">Contract costing<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-job-costing-and-contract-costing\/\">Job Costing vs Contract costing<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/process-costing\/\">Process Costing<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/process-costing-vs-job-costing\/\">Process costing vs job costing<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/joint-products\/\">Joint products<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/by-products\/\">By Product&nbsp;<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/equivalent-production\/\">Equivalent production<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/marginal-costing\/\">Marginal costing<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/applications-of-marginal-costing\/\">Application of marginal costing<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/cost-volume-profit-analysis\/\">Cost volume profit analysis<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/tools-and-techniques-of-marginal-costing\/\">Tools and techniques of marginal costing<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/budget\/\">Budget<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/break-even-point\/\">Break even point<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/process-of-budgetary-control\/\">Process of budgetary control<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/explain-the-advantages-and-limitations-of-budgetary-control\/\">Advantages and limitations of budgetary control<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/budgetary-control\/\">Budgetary Control<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/zero-base-budgeting\/\">Zero base budgeting<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/standard-costing\/\">Standard Costing<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/variance-analysis\/\">Variance Analysis<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-standard-costing-and-budgetary-control\/\">Standard costing vs budgetary control<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-management-accounting-and-cost-accounting\/\">Management accounting vs cost accounting<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-financial-accounting-management-accounting-and-cost-accounting\/\">Cost accounting vs financial accounting<\/a><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\" href=\"https:\/\/www.linkedin.com\/in\/kajal-mahajan-7549b2197\/\" target=\"_blank\" rel=\"noreferrer noopener\">CONNECT ON LINKEDIN<\/a><\/div>\n<\/div>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"512\" height=\"152\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/04\/cropped-cropped-Presentation-resize-1.jpg\" alt=\"Difference between Financial Accounting Management Accounting and Cost accounting\" class=\"wp-image-4836\" srcset=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/04\/cropped-cropped-Presentation-resize-1.jpg 512w, https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/04\/cropped-cropped-Presentation-resize-1-300x89.jpg 300w\" sizes=\"(max-width: 512px) 100vw, 512px\" \/><figcaption>SYSTEM OF WAGE PAYMENT IN COST ACCOUNTING<\/figcaption><\/figure>\n","protected":false},"excerpt":{"rendered":"<p>SYSTEM OF WAGE PAYMENT IN COST ACCOUNTING WAGES Before understanding system of wage payment in cost accounting, get to know What is Wage? A&nbsp;wage&nbsp;is monetary compensation paid by an&nbsp;employer&nbsp;to an&nbsp;employee&nbsp;in exchange for work done. Payment may be calculated as a fixed amount for each task completed or at an hourly or daily rate, or based&#8230;<\/p>\n<p class=\"more-link-wrap\"><a href=\"https:\/\/commerceiets.com\/system-of-wage-payment-in-cost-accounting\/\" class=\"more-link\">Read More<span class=\"screen-reader-text\"> &ldquo;SYSTEM OF WAGE PAYMENT IN COST ACCOUNTING&rdquo;<\/span> &raquo;<\/a><\/p>\n","protected":false},"author":2,"featured_media":3299,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[187],"tags":[],"_links":{"self":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/3296"}],"collection":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/comments?post=3296"}],"version-history":[{"count":0,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/3296\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media\/3299"}],"wp:attachment":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media?parent=3296"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/categories?post=3296"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/tags?post=3296"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}