1_Understanding the purpose of piece rates is very much important and it leads

to define its own purpose. Piece rate is to motivate employee performance in

return for a monetary reward. A simple, valid concept which is centuries old.
Incentives are effective employee motivators because most people go to work for
money in the first place. Incentives, piece rate, or piece rate pay systems, offer an
opportunity for employees to increase their pay by their own efforts both physical
and mental.
Advantages of offering Piece rate pay plan are:
1) Increased Employee motivation (hard work): Employee will be motivated to
work harder to increase his or her production in order to partake in
metropolitan fumiture company success. Under specified time rates may
lead any benefits from higher production accrue only to the employers;
under rearranged piece rates benefits are mostly shared by the employer
and the employee.
2) Job Satisfaction: Setting specified targets for output can result to a form of
job satisfaction for employees at Metropolitan Fumiture, particularity
where the task placed on basically repetitive, leads to compensation level
of employee.
3) Work Efficiency: Possibly higher earnings pave the way to attract efficient
works among Employees at Metropolitan Fumiture, this is to the fact that
employees will tend to work more efficiently when their salary is tied to the
number of fumiture produced (piece rate pay plan).
4) Less Supervision: There are less or no supervision needed because
Metropolitan Fumiture employees will keep working even if there are no
supervisors around in order to attain high or satisfactory compensation
rate.
5) Pride In accomplishment: Employees at Metropolitan Fumiture have more
scope for pride in his/her work, having to work by one own self will make
employees at Metropolitan Fumiture feel a sense of pride to his/her work
achievement.
6) Increased productivity and labor relations: In practice, piece rate is often
found that a combination of timework and piecework gives the best results
in terms both of increased productivity and of labor relations. Employees at
Metropolitan fumiture with high motivation and moral with the piece rate
 payment will definitely have increased productivity and smooth labor
relations.

2_Team-based plan is a small group of employees shares a financial reward when

a specific object is meet. Each team member receives a financial reward for the
attainment of a group goal
Advantages of team-based pay are:
1) Consistency in performance quality: The workers at Metropolitan Furniture
will complete pieces of the furniture set to ensure on-time delivery.
Metropolitan Furniture is known for their on-time delivery, which is their
high priority. Quality of the furniture will be consistent, due to
collaboration of team members
2) Motivation: Employees are motivated to work together in a cooperative
manner toward a common goal. Employees encourage one another,
participate in brainstorming sessions and support each other in their efforts
to complete given tasks. There is full utilization of collective staff
knowledge and experience; encourage multi- skilling, which brings a
competitive advantage for an organization. The team members will work
together to achieve their target, that is on time delivery.
3) Collaboration and Cooperation: team-based incentives encourage
Collaborating and cooperation to achieve shared goals. Team based
incentive pay plan make Metropolitan Furniture employees work towards
organization objective of on-time delivery to clients, which is the company's
competitive advantage.
4) Team Building: When employees are faced with the task of working with
one another, relying on each other's contributions for their compensation,
a spirit of teamwork can materialize. Employees feel stronger and more
effective in a team unit than they do on an individual basis. This lead to
greater staff unity in other aspects of the business, which has the potential
to reinforce the workforce and promote company loyalty and longevity. At
Metropolitan Furniture, the workers help each other to complete the
pieces of the furniture sets.
 5) Reduce Employee Turnover: Attractive total rewards packages reduce
employee turnover because employees who feel satisfied with their pay
and conditions are less likely to be enticed by a competitor. Researchers
found that companies with long-term, team-based incentive pay,
experienced lower than average employee turnover, this is because
members of the team are committed to the shared goal and reluctant to
leave their colleagues. Lower employee turnover benefits Metropolitan
Furniture Company by reducing costs of recruiting and training new
employees.

3_The following factors should be taken into consideration in determining wage

and salary structure of workers:
1) _ Personal perception of wage:
Whether the wage is adequate and equitable depends not only upon the
amount that is paid but also upon the perceptions and the views of the
recipients of the wage. Even though the wage is above the going wage rate in
the community if it is lower than that of fellow worker deemed inferior, it will
be regarded as inequitable in the eyes of the recipients of the wage. A man’s
perception of the equity of his wage will undoubtedly affect his behavior in
joining and continuing in the organization.
2) Cost of living:
Another important factor affecting the wage is the cost of living adjustments of
wages. This approach tends to vary money wage depending upon the variations in
the cost of living index following rise or fall in the general price level and
consumer price index. It is an essential ingredient of long-term labor contracts
unless provision is made to reopen the wage clause periodically.
There are measurement problems in both ascertaining productivity and cost of
living increases. This problem may lead to lack of understanding and unanimity on
the part of the management and the workers.
3) Government legislation:
 The laws passed and the labor policies formed by the Government have an
important influence on wages and salaries paid by the employees. Wages and
salaries cannot be fixed below the level prescribed by the government. The
laws on minimum wages, hours of work, equal pay for equal work, payment of
dearness and other allowances, payment of bonus, etc. have been enacted
and enforced to bring about a measure of fairness in compensating the
working class.
4) Ability to pay:
Labor unions have often demanded an increase in wages on the basis that the
firm is prosperous and able to pay. However, the fundamental determinants of
the wage rate for the individual firm emanate for supply and demand. If the
firm is marginal and cannot afford to pay competitive rates, its employees will
generally leave it for better paying jobs. However, this adjustment is neither
immediate nor perfect because of problems of labor immobility and lack of
perfect knowledge of alternatives. If the firm is highly successful, there is little
need to pay for more than the competitive rates to obtain personnel.
5) Supply and demand:
As stated earlier, the wage is a price for the services rendered by a worker or
employee. The firm desires these services, and it must pay a price that will
bring forth the supply, which is controlled by the individual worker or by a
group of workers acting together through their unions. The practical result of
the operation of this law of supply and demand is the creation of “going- wage
rate”.
It is not practicable to draw demand and supply curves for each job in an
organization even though, theoretically, a separate curve exists for each job.
However, in general, if anything works to decrease the supply of labor such as
restriction by a particular labor union, there will be a tendency to increase the
wage. The reverse of each situation is likely to result in a decrease in employee
wage, provided other factors, such as those discussed below, do not intervene.
6) Productivity:
Increasingly there is a trend towards gearing wage increases to productivity
increases. Productivity is the key factor in the operations of a company. High
 wages and low costs are possible only when productivity increases
appreciably. The above factors exercise a kind of general influence on wage
rates. In addition, several factors affect the individual differences in wage
rates.
All these factors together help Sally to design the intensive pay plan for their
employee in way to be, she and their employees, satisfied and maintain the
differentiation of her company and the motivation and effectives of their
employee

4_ Sally should considered with his ideas to offering a team-based incentive pay
plan because it is a better approach compared to piece rate pay plan. In offering a
team-based incentive pay plan, the Metropolitan Company can provide a bonus
payment when each set of furniture is completed in time for scheduled delivery.
At the same time, great understanding and goal relationship between employees
will be created when helping each other. Paying group performances provides
more like bonuses. Example, when each set of furniture is completed in the time
for scheduled delivery. This is because Metropolitan Furniture has a competitive
advantage in on time delivery. Reputations for on-time delivery differentiate
Metropolitan from its competitor. General companies that compete against
Metropolitan have a reputation of late deliveries, it is give Metropolitan a
competitive edge. This is because their promise of on - time delivery is such a high
priority, which is the company`s strategic objective. Besides that, when Sally
considered for a team-based incentive pay plan, the workers will help each
other's to achieve the goals and to complete certain pieces of the set furniture to
ensure on-time delivery. Then, the Metropolitan will maintain their good
reputation and performance for on-time delivery compared to their competitors.
Piece rate pay plan would negatively affect the employees need to work together
as a team. Team based plan pay encourage group or team members to cooperate
so that they can achieve their goal. So, Sally should proceed with teams based pay
to have a sustainable competitive advantage over its competitors
Application of intensive pay in a company lead to:
 High productivity
 High capacity utilization
 Use of bargaining power to negotiate the lowest prices for production
inputs
 Lean production methods
 Effective production process
 Effective distribution channels
 Reach goal on its time
 Increase the employees attention rate to avoid error
 Collaboration team to reach goal faster
These factors help in decreasing the labor cost by decrease the loose of materials
and maintaining the differentiation of the company represented by delivery order
at time, which helps it to maintain its customers satisfied, and attract new clients
to order form it.