Explanation:

Differential Piece Rate System was introduced by Taylor, the father of scientific management. The underlying principle of this system is to penalise a slow worker by paying him a low piece rate for low production and to reward an efficient worker by giving him a higher piece rate for a higher production. Taylor was of the view that an inefficient worker should have no place in the organisation and he should be compelled to leave the organisation by paying him a low piece rate for low production.

Taylor proceeded on the assumption that through time and motion study it is possible to fix a standard time for doing a particular task. To encourage the workers to complete the work within the standard time, Taylor advocated two piece rates, so that if a worker performs the work within or less than the standard time, he is pad a higher piece rate, and if he does not complete the work within the standard time, he is given a lower piece rate.