by This is the oldest method of wage payment. “Time” is made a basis for determining wages of worker. Under this system, the wages are paid according to the time spent by workers irrespective of his output of work done. The wage rates are fixed for an hour, a day, week, a month or even a year (seldom used).
For example, a wage rate of Rs. 70 per day is fixed in an industrial unit. Two workers A and B attend work for 28 and 16 days respectively. The wages as per time wage system will be Rs. 1960 and 1120 for A and B respectively. This method of wage payment does not give weight age to the quantity of goods produced by the workers.
The supervisor may ensure that workers do not waste their time and the quality of goods is also maintained. There are no hard and fast rules for fixing rates of wages. These may be decided according to the level of the past higher positions may be paid higher rates and vice- versa.
Wages are calculated in the method as follows:
Earnings = T x R
where T stands for time spent and R is rate of pay.
Suitability of Time Wage System
Time wage system is suitable under following situations:
- When productivity of an employee cannot be measured precisely.
- Where quality of products is more important than the quantity produced.
- Where individual employees do not have any control over production.
- Where close supervision of work is possible.
- Where work delays are frequent and beyond the control of workers.
Advantage of Time Wage System
- Simplicity
The method of wage payments is very simple. The workers will not find any difficulty in calculating the wages. The time spent by a person multiplied by the rate will determine his wages.
- Security
Workers are guaranteed minimum wages for the time spent by them. There is no link between wages and output, wages are paid irrespective of output. They are not supposed to complete particular task for getting their wages. They are sure to set certain wages at the end of a specified period of time spent in working.
- Batter Quality of Products
When workers are assured of wages on time basis, they will improve the quality of products. If wages are related to output, then workers may think of increasing production without bothering about quality of goods.
In this method, workers will concentrate on producing better quality of goods. In certain situations, only time wage system will be suitable. If some artistic nature products are produced, then this method will be most suitable.
- Support of Unions
This method is acceptable to trade unions because it does not distinguish between workers on the basis of their performance. Any method which gives different wage rates or wages based on output is generally opposed by trade unions.
- Beneficial for Beginners
Wage rate system is good for the beginners because they may not be able to reach particular level of production on entering employment.
- Less, Wastages
The workers will not be in a hurry to push through production. The materials and equipment’s will be properly handled leading to less wastage.
Limitations pf Time Wage System
Time wage system suffers from the following drawbacks:
- No Incentive for efficiency
This method does not distinguish between efficient and inefficient workers. The payment of wages is related to time and not output. Thus, the method gives no incentive for more production.
Efficient workers may start to follow inefficient persons because rates of pay are same. Rates of wages fixed in this method are also low because these are fixed by taken into account the output of dullest workers. Thus, this method does not provide incentive for efficiency.
- Wastage of time
Workers may waste their time because they will not be following a target of production. Efficient workers may also follow slow workers because there is no distinction between them. This may lead to wastage of time.
- Low production
Since wages are not related to output, production rate shall be low. The responsibility for increasing production may mostly lie on supervisors. Because of low production, overhead expenses per unit will go up, leading to higher production cost.
- Difficulty to determine labour cost
Because wages are not related to output, employees find it difficult to calculate labour cost per unit. The output will go on varying from time to time while wages will remain almost same. Production planning and control will be difficult in the absence of a relationship between wages and output wages and output.
- Difficult supervision work
Under this system, workers are not offered incentives for production. To get more worker from them, there will be need for greater supervision. More supervision may be required to maintain proper quality of goods also. In wage system supervision cost goes up to a great extent.
- Employer-employee trouble
When all employees, irrespective of their merit are treated equally, there is likely to be a trouble between management and workers. Those employees, who are not satisfied with this method, may start disobeying order from their superiors.
