The wage system is an important element in the implementation of the reproductive-motivational function of business management. The evolution of this system formulates an eternal search for a compromise between an employee and an employer, a balance of their interests, and productivity growth. One of the possible ways to do it this a piecework salary. But is it really so? Below you may find information about the main advantages and disadvantages of this payroll system.
At first glance, the piecework salary fully covers the interests of the employee and the employer. The amount of the salary directly depends on the amount of work performed work, manufactured goods, or rendered services. The direct relationship between the result of labor and the amount of remuneration is the main advantage of piecework wages. The interests of the employer are successfully realized primarily because the employees themselves are interested in increasing their productivity.
The manager can free himself from constant quality control of the work of his subordinates. If the work of an employee declines, then the salary will naturally decrease. This transfers the risk of low productivity from the employer to the employee. When each employee tries to earn more as a basis, then piece-rate wages look like a driver of economic development.
This method of remuneration eliminates the problem of redistribution of work within the team. If one of the employees ill or simply does not want to do a certain job, then his duties can easily be delegated to another, since the interest of the latter will be provided with additional income. Any dissatisfaction with the staff regarding the unfair distribution of remuneration within the company will also be nullified as the employee who produces more gets paid more. In this sense, the piecework salary is an indicator of the employee’s talent and ability to work and bring benefits.
Despite the fact that the productivity of workers with piecework salary is on average higher than that of those who receive a fixed salary, this way of calculating salaries around the world has been declining since the middle of the last century. In the USA during the period 1950–70 the number of piecework salaries decreased from 70 to 30%, and in France from 40 to 15%. The reason for this may lie in a number of shortcomings of piecework wages, which promise some problems for both workers and employers.
The first problem. It is worth considering that the result of the work of one person may depend on many factors beyond his control. The general organization of work in the company, interaction with colleagues, effectiveness, and professionalism is also very important.
Attachment of private productivity to overall productivity may discredit the concept itself, which involves personal initiative for the sake of increasing salary. Moving production risk from a manager to an employee can lead to destructive autonomy of the work process. An employer may lose vigilance in an emergency situation.
The second problem. Not all aspects of work can be measured. It is hard to analyze an employee’s level of honesty or devotion to the company. Focusing on material results, the employee will strive to improve only those indicators which affect salary, completely ignoring other important professionalism factors.
The third problem. A serious disadvantage of piecework wages for business owners is the risk of quality loss for the sake of quantity. As a result, the costs of quality control can negate the savings, which piecework wages imply.
The fourth problem. The piecework wage system binds the employees to their individual indicators, ignoring the work of the department or organization as a whole. This undermines collective motivation and group efficiency. The employees have a weakening sense of team ownership so the success of the company interests them less than their own. Such an employee is not aimed at results in the long run. Therefore, one of the consequences of piecework wages is high staff turnover.
The fifth problem. The excessive rush of employees to increase their productivity can lead to violations of safety standards, increased injuries, equipment deterioration, or unjustified use of raw materials. Such situations can completely destroy your cash flow management plan. Therefore, some companies require their employees to use their own equipment or tools in their work.