Investigating the Effect of Piece-Rate and Time-Rate Payment Systems on Promoting Wage and Production: The Case of the Garment Sector in Bole-Lemi Industrial Park

Abstract

The study's goal was to find out how piece-rate and time-rate payment systems affected salary and production growth in the garment industries in the Bole Lemi industrial park. It was decided to use the piece rate at Lyu plant and the time rate at Evertop factory. Over a sample size of 300, the Relative Importance Index, Multiple Regression, and Mediation Analysis were used. Both primary and secondary sources were used to compile the data. When sampling the population, the study employed random sampling procedures. The relative relevance index indicates that the following factors have a substantial impact on Lyu factory production: Product Type, Input Material Quantity, Style Change Time, and Absenteeism. When paid on a time basis, the production is less affected by the type of product, the quantity of input materials, and the length of style changes. Nevertheless, absenteeism, machine downtime, and management style all have a significant impact on production. The main conclusion of the mediation analysis for the Lyu factory is that the mediator (production) has a positive and significant effect on wage, whereas for the Evertop factory, the effect of production on pay is negligible. The results also indicate that Lyu employees' wages and output were higher than those of Evertop employees. The study strongly suggests that Evertop Factory implement the piece rate payment system since it clearly demonstrates that it can inspire workers because production is a mediator of wage, thus as production increases, wages also do.