Time Rate and Piece Rate Systems of Wage Payment (ISC Class 12)
Updated 17 October 2026 · Fact-checked
Under the time rate system, wages depend on the time worked (hour, day, week or month) whatever the output; wage = time worked x rate per unit of time. Under the piece rate system, wages depend on the units produced; wage = units produced x rate per piece. Time rate gives security and quality; piece rate rewards efficiency.
Understand Time Rate and Piece Rate Wage Systems
Remuneration is the compensation paid to employees for their services. The ISC syllabus asks for two methods of wage payment: the time rate and piece rate systems, with their merits, demerits, suitability and differences.
1. Time rate system
*Meaning*: wages are paid according to the time worked, at a fixed rate per hour, day, week or month, without regard to how much is produced.
*Formula*: Wages = Time worked x Rate per unit of time.
*Worked illustration (imaginary)*: rate ₹95 per hour; 8 hours a day; 24 working days. Daily wage = 95 x 8 = ₹760; monthly wage = 760 x 24 = ₹18,240.
*Merits*: assured and steady income, so workers feel secure; simple to calculate and understand; quality of work does not suffer because workers need not hurry; suits all workers, including beginners and slow but careful workers; helps industrial peace and is liked by trade unions.
*Demerits*: no reward for extra effort, as efficient and inefficient workers are paid alike; close supervision is needed; there is a risk of idle time and slow output; labour cost per unit is not fixed and rises if output falls; may discourage good workers.
*Suitability*: where quality matters more than quantity (jewellery, art, precision tools); where output cannot be measured easily (clerical, supervisory, maintenance work, teaching); where the work is irregular, or the workers are learners.
2. Piece rate system
*Meaning*: wages are paid according to the number of units produced at a fixed rate per piece.
*Formula*: Wages = Number of units produced x Rate per unit.
*Worked illustration (imaginary)*: rate ₹6.50 per unit; output in the month 2,800 units. Wages = 2,800 x 6.5 = ₹18,200.
*Merits*: direct reward for efficiency, so workers try to produce more; less supervision of output is needed; labour cost per unit is fixed, which helps pricing and costing; encourages better methods and better use of machines; efficient workers earn more.
*Demerits*: no guaranteed minimum income, so the worker feels insecure (some firms give a minimum guarantee); the quality may fall because workers hurry; over-strain and risk to health; machines and materials may be misused; fixing a fair rate is difficult; trade unions often oppose it; slow or new workers suffer.
*Suitability*: where work is repetitive, standardised and measurable, and where quality can be checked: stitching, packing, assembling, rolling.
3. Comparison
| Basis | Time rate | Piece rate |
|---|---|---|
| Basis of payment | Time worked | Units produced |
| Reward for efficiency | No | Yes |
| Income | Steady and secure | Varies with output; no guaranteed minimum |
| Quality | Generally good | May suffer |
| Supervision | Close supervision of work | Less supervision of speed, but quality checking is needed |
| Labour cost per unit | Varies with output | Fixed |
| Suitable for | Quality work; work that is hard to measure | Standardised, measurable work |
4. Which pays more? A quick break-even. Break-even output = time wage for the day / rate per piece. If time wage is ₹640 a day and the piece rate is ₹16, the break-even output is 640 / 16 = 40 pieces. Above 40 pieces the piece rate pays more; below 40 the time rate pays more.
5. Choosing the system (case skill). Ask: Can output be measured? Does quality matter more than speed? Is the work repetitive? Is the worker a learner? If output is measurable and repetitive, use piece rate; if quality matters or output cannot be measured, use time rate.
Time Rate and Piece Rate Wage Systems: key facts
- Time rate wage
- Time worked x rate per unit of time | Independent of output
- Rate per hour, day, week or month.
- Piece rate wage
- Units produced x rate per unit | No guaranteed minimum
- Rewards efficiency.
- Break-even output
- Time wage for the period / piece rate per unit
- Above this piece rate pays more
- Below it time rate pays more
- Compare the two systems.
How to answer Time Rate and Piece Rate Wage Systems questions
Expect a wage calculation, a distinction, merits and demerits, and a choice of system for a given job.
- 1For time rate, multiply the hours (or days) by the rate; keep units: hours x rupees per hour = rupees.
- 2For piece rate, multiply the pieces by the rate per piece; check that the pieces are accepted units if the question mentions rejects.
- 3For comparison, find the wage under each system and the labour cost per unit (wage divided by output).
- 4For suitability, state the job feature (measurable output, quality) that decides.
Time Rate and Piece Rate Wage Systems in real life
The idea, met in an everyday situation. Answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.
Piece rate
Suppose a tailoring unit pays ₹30 for each shirt stitched. One tailor completes 520 shirts in a month.
Find her wages. What is the main worry for the tailor under this system?
Try it first, then show the solutionSolution
- Wages = units x rate = 520 x 30 = ₹15,600.
- If machines break down or orders fall, her income falls: there is no guaranteed minimum.
Answer: ₹15,600. The worry: insecurity, because income depends on output.
Memory hook: Piece rate: paid for pieces, not for presence.
Time rate
Imagine a jeweller who pays an engraver a fixed ₹700 a day because every ornament must be perfect, whatever the number completed.
Why is time rate suitable here?
Try it first, then show the solutionSolution
- Quality matters more than quantity.
- Time rate removes the pressure to hurry.
Answer: Time rate suits work where quality matters most, as no rush damages the ornaments.
Memory hook: Time rate: care over speed.
Tricks to remember Time Rate and Piece Rate Wage Systems
Short memory aids. Say each one aloud once, then use it on a question the same day.
T for Time, T for Trust
Time rate: Trust in a steady income, but no reward for extra effort.
Use it when: Time rate summary.
P for Piece, P for Pressure
Piece rate: Pay for Production, but Pressure and poor quality.
Use it when: Piece rate summary.
Time Rate and Piece Rate Wage Systems: solved examples
Ordered from board level to HOTS. Try each one before you open the solution.
Example 1: Identify the system · 1 mark · Very short answerBoard level
A garage pays its mechanics ₹900 for every day worked, whatever the number of cars repaired. Name the system of wage payment.
Try it first, then show the solutionSolution
- Wages depend on days worked, not on the number of repairs.
Answer: Time rate system.
Example 2: Piece rate calculation · 1 mark · Short answerBoard level
A packer is paid ₹4.50 per box packed. In a week she packs 1,480 boxes. Find her wages.
Try it first, then show the solutionSolution
- Wages = 1,480 x 4.50 = ₹6,660.
Answer: ₹6,660.
Example 3: Both systems for one worker · 4 marks · Short answerHarder board level
A machine operator works 8 hours a day for 24 days in a month. Under the time rate system he is paid ₹95 per hour; under the piece rate system he is paid ₹6.50 per unit and produces 2,800 units in the month. Find his monthly wages under both systems and state which is higher and by how much.
Try it first, then show the solutionSolution
- Time rate: hours = 8 x 24 = 192; wages = 192 x 95 = ₹18,240.
- Piece rate: wages = 2,800 x 6.50 = ₹18,200.
- Difference = 18,240 - 18,200 = ₹40, in favour of the time rate system.
Answer: Time rate ₹18,240; piece rate ₹18,200; the time rate is higher by ₹40.
Example 4: Break-even output · 4 marks · Short answerHarder board level
A worker earns ₹640 a day on time rate. The alternative piece rate is ₹16 per piece. Find the daily output at which both systems pay the same, and the wage under piece rate if he makes (a) 45 pieces and (b) 36 pieces.
Try it first, then show the solutionSolution
- Break-even output = 640 / 16 = 40 pieces.
- (a) 45 x 16 = ₹720, which is more than ₹640.
- (b) 36 x 16 = ₹576, which is less than ₹640.
Answer: Break-even 40 pieces; ₹720 at 45 pieces and ₹576 at 36 pieces.
Example 5: Choosing a system · 8 marks · Long answerHOTS / competency
Suppose a company has to pay (i) its accounts clerks, (ii) the workers stitching identical school bags, and (iii) the craftspeople making hand-painted ceramic vases. Recommend the system of wage payment for each, giving a reason, and explain one risk of the system recommended for group (ii) and how the company could reduce it.
Try it first, then show the solutionSolution
- (i) Clerks: time rate, as their output cannot be measured easily.
- (ii) Bag stitchers: piece rate, as work is repetitive and measurable, and efficient workers are rewarded.
- (iii) Vase painters: time rate, as quality is more important than quantity.
- Risk under piece rate: income insecurity and a fall in quality as workers hurry.
- Remedy: guarantee a minimum wage, inspect quality and pay only for accepted pieces.
Answer: (i) Time rate; (ii) piece rate; (iii) time rate; guaranteed minimum and quality checks reduce the risk under piece rate.
Where students lose marks in Time Rate and Piece Rate Wage Systems
The slips examiners see most often, and what to write instead.
Mistake: Wrong formula
Hours and pieces are interchanged.
Wrong working
Wage under piece rate = hours worked x rate.
Right working
Wage under piece rate = units produced x rate per unit.
Do this: Piece = pieces.
Usually costs: 2-3 marks.
Mistake: Arithmetic and unit slips
Decimal rates multiplied carelessly.
Wrong working
2,800 x 6.50 = 1,820
Right working
2,800 x 6.50 = 18,200
Do this: Check by estimation: 2,800 x 6 = 16,800; add 2,800 x 0.5 = 1,400; total 18,200.
Usually costs: 1-2 marks.
Mistake: Saying piece rate always pays more
Efficient workers do earn more, but only above the break-even output.
Wrong working
Piece rate is always better for the worker.
Right working
Piece rate pays more only above the break-even output and gives no guaranteed minimum.
Do this: Compare with numbers.
Usually costs: 1 mark.
Mistake: Suitability without a reason
Only the job is named.
Wrong working
Piece rate suits stitching.
Right working
Piece rate suits stitching because the work is repetitive, standardised and output can be measured.
Do this: Always add 'because'.
Usually costs: 1 mark.
Exam tips
- The syllabus asks for both systems with merits, demerits, suitability and the differences between them.
- Write the formula first in every numerical, then substitute with units.
- In a choice question, name the job feature (measurable, repetitive, quality-critical) that decides.
- If asked about demerits of piece rate, mention insecurity, poor quality and difficulty of fixing the rate.
Practice questions on Time Rate and Piece Rate Wage Systems
Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.
Q1 · 1 mark · Very short answerBoard level
State one merit of the time rate system.
Hint
Think about income.
Answer
It gives a steady, guaranteed income to the worker (or: quality does not suffer).
Q2 · 1 mark · Very short answerBoard level
Under which system does labour cost per unit remain fixed, time rate or piece rate?
Hint
Cost per piece.
Answer
Piece rate.
Q3 · 4 marks · Short answerHarder board level
A worker is paid ₹70 per hour on a time rate for an 8-hour day. If instead she were paid ₹10 per piece and produced 60 pieces in the day, find her daily wage under each system, the labour cost per piece for the employer under each (to two decimal places), and say which is better for her.
Hint
Wage divided by output for cost per piece.
Answer
Time rate: 70 x 8 = ₹560, cost per piece = 560 / 60 = ₹9.33. Piece rate: 60 x 10 = ₹600, cost per piece = ₹10.00. At 60 pieces the piece rate gives her ₹40 more per day. (Break-even output is 560 / 10 = 56 pieces.)
Q4 · 4 marks · Short answerHarder board level
Distinguish between the time rate and piece rate systems on four bases and state one job suited to each.
Hint
Basis, reward, income, quality.
Answer
Basis: time rate pays for time worked, piece rate pays for units produced. Reward for efficiency: none under time rate, direct under piece rate. Income: steady under time rate, variable and unsecured under piece rate. Quality: usually good under time rate, may suffer under piece rate. Time rate suits clerical or precision work; piece rate suits repetitive stitching or packing.
Q5 · 4 marks · Short answerHOTS / competency
A factory using piece rate finds that its workers are rushing, many pieces are rejected and some skilled workers are leaving. Suppose the owner wants to switch entirely to time rate to fix this. Evaluate the proposal and suggest an alternative.
Hint
Each system has a weakness.
Answer
A switch to time rate would raise quality and security but would remove the reward for efficiency, so output may fall and supervision cost would rise. An alternative is to keep piece rate with a guaranteed minimum wage, pay only for pieces that pass inspection, and add a quality bonus. This keeps the incentive while reducing insecurity and poor quality.
Test your recall
Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.
1.What decides pay under the time rate system?Show answer
The time worked.
2.What decides pay under the piece rate system?Show answer
The number of units produced.
3.Which system suits quality-sensitive work?Show answer
Time rate.
4.Which system has no guaranteed minimum wage?Show answer
Piece rate.
5.How is break-even output found?Show answer
Time wage for the period divided by the piece rate.
Time Rate and Piece Rate Wage Systems: frequently asked questions
Which is better for the employer?
It depends: piece rate fixes labour cost per unit and rewards efficiency, while time rate protects quality and suits work that cannot be measured.
Do the numbers in the pay slip matter here?
Pay slip and payroll are a separate topic; here only the earning of wages by time or output is considered.
Can a firm use both systems?
Yes, different groups can be paid on different systems, or a minimum time wage can be combined with piece-rate incentive.