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.