Wage Payment System

Meaning of Wage Payment System

Wage can be defined as the payment made by the employer to the worker in return for his services. This payment can be made daily, weekly or monthly in any form.


According to Prof. Benham,

A wage may be defined as a sum of money paid under contract by an employer to a worker for his services rendered.

According to Marshall,

Wages are the price paid for the service of labour.

We can say that a wage is a payment which is received by the worker for the services rendered to the employer. It also includes bonuses and allowances and they may be paid on a daily, weekly, monthly, hourly or per-unit basis.

Important Methods of Wage Payment

The following are the two important methods of wage payment.

  1. Time Wage System
  2. Piece Wage System

Time Wage System

Wage Payment System

Time-based wage payment system is the oldest method of wage payment. According to this method, wages are paid on the basis of time, or in other words, wage payment is not concerned with the amount of work done but with the completion of a fixed time period. Therefore, it is payable daily, weekly, hourly or monthly basis.

Piece Wage System

This system follows the policy of wage payment on the basis of the work completed by each worker. In other words, each worker earns wages, in the ratio of work done by him. Time has no relevance to wages in this system. The wage rates are previously fixed according to the nature of work which is known to each worker in advance.


After analysing these two methods of the wage payment system, we can say that both methods have their own importance. Before choosing any method the employer should decide whether he can give more importance to the quantity or the quality of the goods produced. If higher output is preferred by the employer, he should adopt the Piece Wage System. On the other hand, if artistic or good quality products are preferred, Time Wage System should be adopted.

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