Correct Answer: Variable pay based on employee performance

Solution : The correct answer is (b) Variable pay based on employee performance.

The differential piece-rate system is a compensation system where employees are paid based on their level of performance or the number of units they produce. Under this system, a higher piece-rate is provided for achieving or exceeding a certain level of output, while a lower piece-rate is set for not meeting the specified level. It is a way to incentivize employees to increase their productivity and output. The differential piece-rate system provides variable pay based on individual performance rather than fixed salaries for all employees.