Piece Rate Pay Plan

Case 1

Question:

1. What are some advantages of offering a piece-rate pay plan to the furniture builders at Metropolitan Furniture?

In this case, Jack has give suggestion to his current employer, Sally about the pay plan issues. He prefers the company to offer him in a piece-rate pay plan. Piece-rate pay plan is a method to compensate employee by setting an amount for each unit of work that they can produce. For instance, in manufacturing employees paid for each unit produced, garment workers paid for completion of a section of the garment, and farm workers paid by the volume of produce harvested.

The main advantages of offering a piece-rate pay plan to the furniture builders at Metropolitan Furniture are as follows:

* Motivate employees to increase productivity.

Piece-rate pay plan is the opportunity for furniture builders to earn more money, therefore it motivates them to increase productivity. In other words, the more they can produce in workplace, the more they can earn, because their salary is depend on units they produced. Piece-rate pay plan motivate employees to increase their work speed, therefore they able to complete more units of work in an hour. They could potentially make more per hour than they could earn with a standard of hourly rate. With an hourly pay rate, they may be less likely to put more effort in producing work, because they know no matter how hard they contribute their pay rate is fixed.

* Better utilization of equipments

When Metropolitan Furniture offering piece-rate pay plan, the machines and equipments will fully utilized by furniture builders. They may not want to keep the machine idle due to the more time they waste, the less amount they can earn. Besides this, the use of machines will also be systematic because any breakdown that may happen in workplace may affect the furniture builders’ productivity. Therefore, they will take a very good care on the machine and equipment. Thus, better machine utilization...