Rates of pay

Generally payment plans based on individual output provide the strongest incentive for individual effort and most closely tie pay to performance, while these features would seem to be attractive to both workers and firms, the use of traditional piecework pay plans has decreased significantly over time until today they cover no more than 21% of the work force. 

Some reasons can be highlighted, one is that a piecework system is only practical for jobs where the amount of output is both directly measurable and subject to worker control. Those types of jobs are becoming increasingly rare however as a greater number of workers produce hard to measure services such as teaching or management or work at jobs requiring considerable teamwork such as on assembly lines. Here it is becoming obvious is that piece work plans often fail to deliver the anticipated increases in production because workers collectively restrict output fearing that increased production will only cause management to raise the output quota further or lower the compensation per unit produced. A third problem is that a piecework payment plan encourages workers to emphasize quantity produced rather than the product quality.

Piece rates have declined in significance time rates have grown more popular. Usually blue collar and lower level service workers have been paid on an hourly basis, while white collar workers have often received monthly or annual salaries. Time rates are easy for the company to administer, but they reward workers for the time spent on the job rather than for the actual amount of work accomplished however this is from the management point of view. Lack of work effort on part of the employees is potential problem with time rates this is also from the management view, thus they have resorted to spur work effort of workers on time rates through carrot and stick mentality. The stick translates to a close supervision of workers with the threat that a worker can be fired for less than adequate effort.