piece rate

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A payment scheme in which an employee is paid a specific price for each unit made. The rate is therefore directly related to output and not to time (compare time rate). This method is often combined with a basic salary and takes the form of a productivity bonus, in which individual effort is rewarded. In modern factories, many tasks have been mechanized, making this method of payment less common, although it is simple to operate and popular with employees. Piece rate, to be attractive to workers, depends on speed of production, therefore the standard of quality and safety may suffer if adequate precautions are not taken. See also payment by results; premium bonus.

Subjects: Business and Management.

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