Question

. In your small manufacturing company you prefer to pay the employees under Merricks differential piece-
rate system. There are three employees; Rahman, Ali, and Mahmood who produced 85 units, 69 units and,
35 units respectively in one particular day. How much would you pay your employees if you have fixed
0.500 Baisa per unit as piece rate, standard output as 50 units per day? The employees normally work for 8
hours a day.

Answer 1

Meaning of Merricks Differential Piece Rate System -

Merricks differential piece rate system is method of calculating piece rate wherein the piece rate is differentiated based on the efficiency of the employees. There are three rates applicable. The employee is paid the normal rate up to 83% of the standard output, 10 % above the normal rate for producing between 83% – 100% and 20% above the normal rate for producing more than 100% of the standard output.

Following are the working notes required -

Standard output per day = 50 units

Piece rate = 0.50 Baisa per unit

1) Calculation of level of performance of each employee -

Level of performance of each employee = ( Actual Output / Standard Output ) x 100

Rehman's level of performance = ( 85 / 50 ) x 100 = 170%

Ali's level of performance = ( 69 / 50 ) x 100 = 138%

Mahmood's level of performance = ( 35 / 50 ) x 100 = 70%

2) Following are the piece rates applicable based on output -

Piece rate applicable -

Up to 83% = Normal Piece Rate

83% to 100% = 110% of Normal Piece Rate

Above 100% = 120% of Normal Piece Rate

3) Calculation of earning of employees -

Rehman's level of performance is 170%

Earning of Rehman = Units produced x Normal piece rate x 120/100

= 85 x 0.50 x 120/100

= 51 OMR.

Ali's level of performance is 138%

Earning of Ali = Units produced x Normal piece rate x 120/100

= 69 x 0.50 x 120/100

= 41.40 OMR.

Mahmood's level of performance is 70%

Earning of Mahmood = Units produced x Normal piece rate

= 35 x 0.50

= 17.50 OMR.

Therefore, total payments to employees is OMR 109.90.