There are various methods to compensate employees, including hourly, salary, and commission pay. But, are you familiar with piecework pay? Learn more about what is piecework, piecework laws to follow, and how to calculate piecework pay.
What is a piecework?
Piecework, or piece work pay, is paying an employee a fixed pay rate for each unit they produce. Piece rate pay is most common for a contractor employee. However, employees who are not contractors can be paid piecework pay, too. Piecework rates typically depend on the job and product produced.
Types of businesses that may offer piecework pay include:
- Carpet or house cleaning
- Jewelry making
A piecework system may encourage workers to be more productive and time efficient. Paying per piece can motivate employees to produce more and work harder.
Reduced quality can be a drawback of offering piece rate pay. Workers may focus on quantity over quality. Hire employees who put the quality of your product first.
Decide if piecework pay will increase productivity in your business by evaluating its advantages and disadvantages. Determine what your piece rate will be depending on your type of business and product.
How to calculate piecework pay
Employers offering piece rate pay to employees must know how to calculate piecework. Follow the easy-to-use formula below to calculate piecework pay:
Piecework Pay = piece rate per unit x number of units produced
Examples of calculating piecework
Let’s say an employee makes jewelry. They are paid $10 per necklace and produce 40 necklaces during the week. The employee would earn $400 that week.
Piecework Pay = $10 per unit x 40 units
Piecework Pay = $400
Another employee earns different piece rates for various jobs. They paint rooms and also build cabinets. They are paid $20 per room and $30 per cabinet. During the week they paint 25 rooms and build 15 cabinets.
$20 per room x 25 rooms = $500
$30 per cabinet x 15 cabinets = $450
Add the totals together to get the piecework pay amount.
$500 + $450 = $950
Employees paid on a piece rate basis are typically not exempt from FLSA requirements, including minimum wage, overtime, and record-keeping obligations. Employers must comply with minimum wage and overtime laws when offering piece rate pay. Keep state and federal minimum wage requirements in mind when deciding your piece rate per unit.
Piecework employees can accrue overtime after working more than eight hours per day or 40 hours per week. Track hours to stay compliant with overtime laws.
Some states have additional piecework laws employers need to follow.
For example, California state law requires rest and recovery periods for piecework employees. California employers must allow ten minutes of rest time for every four hours of work. AB 1513 also requires California employers to pay for other non-productive hours. Employers in California must compensate non-productive time at minimum wage or higher.
Before you start a piece rate pay system, check with your state about piecework laws. Consider consulting an accountant to verify piecework pay is legal for your business type.
Create a piecework contract for employees. Include your business name, employee name, the date, terms and conditions, and piece rate pay per unit. Give to employees to sign, and keep a copy for your records.
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This article has been updated from its original publication date of December 3, 2018.
This is not intended as legal advice; for more information, please click here.