For employers the technicalities of pay for piece work can present a logistical nightmare. Even under a piece rate commission scheme, legally the employer must ensure that they are paying at least the minimum wage for each hour of work. As an example, they will need to work out how many pieces the employee produced and divide it by the number of hours that the employee worked, if the resulting number is less than the minimum wage then the employee has not been paid enough for the work that they have done.
It is worth remembering with production rates varying from one week to another, due to any number of factors including the health of the employee, that the employer will be required to work these figures out on a weekly basis to ensure that no employee is receiving less than the minimum wage. In order to this efficiently an employer must keep accurate records of the hours worked by each employee and the amount that they have produced during this time.
Failing to do so can leave an employer wise open to issues in the event of a complaint being filed or government investigators coming to make a check on the business. The method used for correctly calculating overtime compensation for those employees who are paid on a piece rate basis can be even more complicated.
Piece work is legal in California and there are laws that have been put into effect that protect those employees who are paid on a piece rate basis.
This is to ensure that the financial compensation they receive for the work that they do is fair and in at least in line with the minimum wage. It establishes compensation and wage statement requirements for piece-rate employees and creates a defense for employees to bring claims against an employer if they fail to pay compensation for rest and recovery periods and other non-productive time that an employee should have been paid.
Under California law, piece-rate workers are required to receive compensation for non-productive time that is separate from their piece-rate compensation. The average hourly rate must be determined by dividing the total compensation for the workweek , exclusive of any compensation that was paid for rest and recovery periods and overtime, by the total number of hours worked during the workweek , exclusive of the time that was taken for rest and recovery periods.
Some types of employees are exempt from receiving additional compensation for non-productive periods under AB These employees are employees who are compensated on a commission basis. A compensation plan that is considered to be commission compensation is one that pays based on a percentage of a sale.
Every piece-rate claim is different. If you are trying to determine if you should file a claim against your employer for failing to compensation you, you need to know whether your employer is in violation of the law. While employers can design piece-rate compensation plans, they may not opt out for paying you for non-productive time, unless your pay is considered to be commission-based.
In addition, all piece-rate employees must be compensated according to their average hourly rates and must be paid overtime according to the existing California overtime statutes. If you believe that you have a piece-rate case, you should contact a San Diego attorney right away. Delaying your claim could potentially harm your chances of receiving the compensation that you are owed. If you would like someone to review your case today, send us an email or call Walker Law at to schedule your free consultation.
I think it makes infinitely more sense to pay me based on the amount of work I do, instead of paying me an arbitrary flat hourly rate. Paying a worker by output encourages the worker to manage time so as to increase the output. This also warrants less supervision, as the worker is already incentivized to work harder. When paid per piece, workers tend to develop and adhere to the most efficient means of production.
It's easier to calculate the cost per unit, because it's easier to factor in the cost of labor. Calculate the time spent producing the product, which is the labor, and then add materials and shipping, and you can see that it's easy to arrive at a transparent manufacturing cost. The Illustration shows the degree of this narrowing. There are advantages in employing timeworkers at times of change in product lines and technology.
Employers have some scope in directing timeworkers to new tasks at the same hourly pay rate. In contrast, new tasks involve negotiating and setting new piece rates in a payments-by-results setting.
It is likely, therefore, that there would be an increasing incidence of time rates when production methods change during periods of rapid technological improvements. A US study of 37 manufacturing industries found a declining incidence of incentive pay jobs—involving piecework and production bonuses—relative to straight time jobs [10].
Two major reasons given are: i the increased use of highly automated machines and machine-paced production; and ii the costs of revising performance standards linked to incentive pay during periods of rapid changes in production facilities and techniques.
Piecework is most suited to individuals undertaking a small number of job tasks that result in easily measurable output.
Extensive use of piecework in relatively large and complex manufacturing plants involves breaking down production processes into many narrowly defined job titles. Associated costs include evaluating relative piece rates across jobs, monitoring output performances, and dealing with potential labor disputes over rates differentials. Since job tasks will involve differences in execution times, it is usually necessary to undertake significant in-process inventories in order to minimize the incidence of downtime in product operations.
Pieceworkers, directly remunerated for their per-period performance, would be especially concerned about enforced downtimes due to shortages of parts and materials necessary to execute their tasks. An alternative strategy is to identify more widely defined clusters of job tasks, allocate groups of the workforce to each cluster, train group members how to perform some or all of the tasks belonging to their cluster, and pay a unified wage rate common to all members of each cluster.
Labor costs would be likely to rise since, for example, this strategy would necessitate paying relatively high wages as compensation for the requirement to train for and to execute a wider range of tasks.
Group-based merit and bonus incentives may also apply. Cost advantages would include a significant reduction in monitoring costs, reductions of partly finished and final product inventories, and lower costs of setting and negotiating pay scales. Such a move from piecework to group timework is well illustrated in a study of the switch from a progressive bundle system PBS to a modular teamwork system of production in the US garment industry in the s and s [11].
Sewing-room assembly is the principal source of employment and PBS entails workers performing single sewing operations as part of a sequence of small steps toward final garment assembly. Since different operations involve varying assembly times, there is a requirement to create buffers of partly finished products between operations in order to minimize downtime. Virtually all workers under PBS were paid piece rates, with significant monitoring and work-in-process inventory costs.
In contrast, the modular system involved the formation of work groups with each group responsible for the sewing operations of a significantly larger segment, or all, of a given garment. Members of a module could be required to perform several sewing operations, thereby allowing a degree of work flexibility within each module. Group-based incentive pay schemes largely replaced piece rates. The main comparative advantages of modular assembly in the garment industry is that it enabled garment suppliers with close relationships to retailers to meet increasingly stringent delivery requirements and for lower costs of inventories of both in-process and finished products.
There is one especially important return from the adoption of modular systems. A longitudinal study of a US paper mill reports that, in , four job clusters replaced 96 time-rated separate job titles [12]. Individualized piecework is associated with a lack of such motivation. Pieceworkers may well be discouraged from suggestions that lead to enhanced firm-level productive efficiency since this may lead to revised lower performance-related piece rates.
An excellent case study of a large US shoe manufacturer embraces all the foregoing reasons for moving from piece rates to time rates [8].
Its remedies included: a the adoption of a continuous flow mode of operation involving work teams with workers trained in wider sets of job functions; b the introduction of more styles and higher quality products; and c a switch from piece rates to time rates in the early s. While the introduction of time rates modestly reduced productivity, this was more than offset by an increase in so-called quasi rents , defined as total revenues minus labor and material costs.
Profitability improved because cost reductions more than offset productivity reductions. Advances in precision and automated technologies can potentially enhance product quality and enable speedier product-design improvements.
Workers are often required to perform multidimensional tasks; for example, the attainment of high output levels with units of output satisfying prescribed quality standards. If multidimensional tasks are not complementary, then it might be possible to allocate work between pieceworkers concentrating on the observable production dimensions of the job and workers paid under alternative compensation scheme s concerned with the hard-to-observe aspects of the job.
This is likely, however, to add to organizational and administrative costs. The use of just-in-time production methods, with the general aim of minimizing inventory-holding costs, renders even observable production as unsuitable for piecework. Here, the requirement is to produce exact quantities of output per period. This contribution has concentrated on piecework in advanced economies.
Occupational health and safety issues also arise when taxi drivers, for example, need to work excessive hours to make a decent living. If the rate is not fair to the employer, the enterprise might fail. To be fair and effective, piece rate systems should be transparent, reward employees according to the difficulty and quality of their work, and ensure that motivated workers can earn substantially more than the minimum wage.
In these countries, at the very minimum, workers under a piece rate system should earn the minimum wage. When they do not, the difference between what they have earned and the minimum wage needs to be paid by the employer.
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