This document discusses Merrick's differential piece rate system. It establishes rates for workers based on their level of efficiency. Workers receiving 83-100% efficiency receive the normal rate. Those over 100% receive an increased rate, while those under 83% receive the normal rate. It provides an example calculating earnings for workers A, B, C and D based on their individual efficiencies. The advantages include direct incentives and rewards that increase competition. Disadvantages include difficulties setting standards and potential impacts to quality from a focus only on quantity.
9. Merrick Differential piece rate system
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This system made by Mr. Merrick, is a modification
of Taylor’s differential piece rate system. Under
Taylor’s differential piece rate system, workers by
whom 100% efficiency cannot be attained are
penalized, whereas under Merrick system, there is
no imposition of such punitive lower rate upon
them; whereas, those by whom certain percentage
or more, of efficiency can be achieved, are
rewarded by higher differential rates.
12. Up to 83% efficiency Normal rate is
applicable
Between 83% & 100%
of efficiency of normal rate is
allowed
Above 100% efficiency of normal rate is
allowed
Rates applied are as follows :
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14. 14
A produced….B produced….C produced…..D produced…..
The piece rate and
Standard output are
Level of performance can
Be calculated by
So level of performance
of A, B, C, D are…..
For example….
15. Rates applied are as follows
A’s level isWhich is less than 1oo%
But more than 83%
So here rate applied will be…
That is….
And so A’s earning is….
Now B’s level is…
Which is more than 100%
So rate applied will be…
Which is…
And thus B’s earning is…
C’s level is only…
Which is even less than 83%
Therefore normal piece rate
Will be applied here…
D’s level is more than 100%
So same rate of B will be
applied here…
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So C will earn …
And thus D will earn…
17. Advantages of merrick’s piece rate system:
1. There is a direct connection between effort and reward.
Efficient workers are paid according to their performance
and hence a sense of competition is created among workers.
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18. 2. There is a direct incentive to work .
3. decreased cost of production specially
overhead cost per unit.
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Advantages of merrick’s piece rate system:
19. 4. Since the cost per unit is fixed computation of labour costs of
production in advance is possible.
5. Worker assumes the responsibility of
his time and output so there is considerable scope of
reduction in managerial cost.
6. Since the payment is linked with results the idle time costs
are reduced to minimum.
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Advantages of merrick’s piece rate system:
22. 1. Setting of piece rates or standard hours involves lot of difficulties It
is difficult to establish fair standard-
If high standard or rates are established, it
Is very difficult to reduce them
subsequently.
2. Quality of work is another casualty of this system. Since the payment
is made on the basis of output, every worker
tempts to produce more and more irrespective of quality of
product.
3. For the maintenance of quality of standards a rigid system of
supervision and inspection is necessary.
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There are certain disadvantages of piece rate system:
23. 4. The workers tend to work for longer hours in temptation to earn more
This leads to excessive fatigue, ill-health and risk of accident.
5. There is always danger to the flow of production and regularity of
minimum wage to the workers.
6. uniform rate is paid regardless of quality and quantity of work.
There is no special incentive for exceptionally
good workmanship and expertise.
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There are certain disadvantages of piece rate system:
