Page 139 - DCOM202_COST_ACCOUNTING_I

Unit 7: Remuneration and Incentives

cost of living. Sometimes, wage rates are adjusted with changes in the selling price of the Notes
product.

Advantages of Time Rate Method
The following are the main advantages of this method:

(i) Simplicity: It is the simplest method. Wages can be easily calculated by workers as well
as by the management. As the system is very simple to understand, the workers are also
satisfied with it.
(ii) Best Work: As there is no hurry to the worker for completing the work, he handles work
with his all ability and cares the job. Hence, this method is useful for artistic and fine jobs.

(iii) Safety of Wages: The timely prescription of wages is very safe. Sickness, accident or less
work has no effect on the wages.
(iv) Economy in Costs: As labourer and producer are is no hurry for the work, it is done
properly and accurately with care so there is no need of control, hence, there is economy in
administration costs as less supervision is required.
(v) Easy Counting: Workers can calculate their wages easily. Working for a certain period
gives them knowledge as to what they have earned as wages.
(vi) Feeling of Unity: Workers engaged in the same kind of work with equal wages have the
feeling of unity and makes the union strong.
(vii) Appropriate Use of Factors of Production: As there is no rush of work and machines,
instruments and materials are properly handled and wastes are avoided.
(viii) Possibility of Exhibiting Efficiency: Worker performs the job with care and ably hence he
has enough chances to show his job efficiency.

disadvantages of Time Rate Method

This method has the following disadvantages also:
(i) Need of More Inspection: Times wages make the labour costly. They do not care for time
and consume time uselessly. Hence to make it disciplined, they need more control and
inspection.
(ii) Fatal to Efficiency: Efforts and rewards are not correlated in this system. This works as
a disincentive to efficient and skilled workers. They feel frustrated. It leaves a bad moral
influence on them in the long run.
(iii) Dissatisfaction Among Workers: Inefficient and efficient persons get equal wages, hence
efficient workers lose their enthusiasm for work. They are dissatisfied because of less wages
and he finds other outlets for working.
(iv) Employer’s Complaint: Employer is unsatisfied with the work of workers even if he may
do much work. He expects always more work from them.
(v) Higher Cost of Production: As there is no check on the quantity of production by workers,
more supervision is required. Thus, the additional cost of supervision increases the labour
cost per unit.

(vi) Slow Production: Worker has no hurry to work hence, there is slow work and production
slackens.

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