Question

State and explain any two disadvantages of the time rate system of wage payment.

State two disadvantages of the time rate system.

Answer 1

The time-rate system suffers from the following disadvantages:

1. Premium on inefficiency: The time-rate system does not differentiate between efficient and inefficient workers. Inefficient workers are treated the same as efficient ones, which can lead to a decline in overall worker productivity. This makes it challenging to make informed promotion decisions.
2. Lack of incentives: This system fails to motivate workers to work harder or produce more. Ambitious employees who work diligently do not earn additional wages, so they may limit their output to just what is necessary to maintain their position. Since there is no direct connection between effort and reward, it diminishes workers' enthusiasm and morale.
3. Increased supervision: To prevent workers from wasting time, more supervision is required. This increases the cost of supervision.
4. Uncertain labour cost: The wage bill remains nearly fixed, while the output fluctuates over different periods. As a result, it is challenging to accurately calculate labor costs per unit, and effective control over these costs is diminished.