Time Wage System: Advantages and Disadvantages

In this article we will discuss about the Time Wage System:- 1. Advantages of Time Wage System 2. Disadvantages of Time Wage System.

Advantages of Time Wage System:

Time-wage system offers the following advantages:

(i) Stable wages and security:

It provides the worker with job security and stability of wages. The inefficient workers are assured of stable earnings.

(ii) Better industrial relationship:

This wage system is readily acceptable to unions as it serves the workers on equity basis. This helps to promote better industrial relationship.

(iii) Simplicity:

Wage calculation is simple.

(iv) Economy:

The system is economical in the sense that it involves less clerical expenditure resulting in saving of overheads.

(v) Quality Output:

Time wages result in better quality of output since workers are not in hurry to complete the jobs.

Disadvantages of Time Wage System:

The following are the disadvantages of time wage system:

(i) The efficient workers are economically penalized for their efficiency since they are not paid for it. In course of time they lose initiative and become inefficient.

(ii) With the decrease of productivity labour cost increases resulting in reduction in profit.

(iii) It contributes to creation of bottlenecks in production by upsetting production schedules and, thus, increases the cost per unit.

(iv) To make this system cost effective strict supervision is required. Thus, the additional cost of supervision will increase the labour cost per unit.

(v) Lack of strict supervision encourages the workers to idle away time since they know that they will be paid for the time, not for the work. This will increase cost of labour.

(vi) This system encourages the payment of overtime. The workers are reluctant to complete the assigned job within the working hours. The employer, however, is forced to pay overtime to get the work done in time. This becomes very costly.

(vii) It becomes very difficult to set the standards for labour under this system.

Under this system the employer bears all the loss arising from his employee’s inefficiency, and all the gains arising from employees’ extra efficiency. From the employees’ point of view, inefficient workers gain while efficient workers stand to loose.

The straight-time wage is still the most effective plan for workers such as clerks, stenographers, accountants, factory helpers, members of the supervisory staff and officers whose work cannot be standardised and measured satisfactorily. Here, the quality of work is more important than volume.