What Are the Benefits of Piece Rate?

For many decades, workers in large factories and even small ones have been working on what is called piece rate. A piece rate system is how employers pay per unit or part they create or produce. With this type of system in place, it can motivate employees to produce more parts, thus increasing productivity throughout the factory. Piece work pay does have many advantages as well as disadvantages. Read on for more information about piece rate with Fladger Associates!

What is Piece-Rate Pay?

Piece rate, also called piece work, is a type of employment system in which employers pay each employee per item of work they complete. This is in place of a fixed annual salary or a per-hour pay rate. Normally, there is a base hourly pay rate, but employees can make way more money when they reach their goal of piece rate each day. This is because employers base the rate and the employees' pay on the work done each day. This boils down to the fact that employees' earnings are directly related to how much output they can achieve regarding services and products. The base rate of pay that employers shell out is to comply with minimum wage laws. This ensures that the employees get paid at least a minimum amount even if they don't make their piece rate.

For example, if an employee gets paid $10 an hour on base pay but makes a dollar per part that they produce and can produce ten parts per hour, they would be making $20 per hour. A downside to this is when and if an employee's machine breaks down and needs to be repaired. They are only making the base rate of $10 per hour while their machine is down, and they are waiting for the maintenance workers to repair it and get it back up and running.

When is a Piece-Rate System Most Effective?

A piece rate system can be used in various employment opportunities depending on the company's production methods. Some of the best conditions are when the tasks that the employees have to complete are repetitive or when the company keeps track of output quantities. It also is effective when a company is measuring its output of quality.

For an employer to utilize this type of piece rate payment method properly, they must adhere to the minimum wage laws and any overtime requirements under employment laws. There are two things that employers must consider when they are trying to apply a piece rate pay for their employees:

Employees Dictate Terms by Their Results

The piece rate system is designed to pay employees per unit of work that they do. Normally, employees will not receive payment until they complete their tasks or deliver within their daily quotas. An employer offering a piece work payment option wants employees to strive to complete their tasks quickly. By doing this, employees will make more money per hour, and the company will produce more products per hour.

Employees Are Paid After Work is Completed

Employees will receive payments within the piece rate system after completing the task. Piece work pay will depend on how many units or parts the employee produces. If an employee does not complete the number of units, the employer may not pay them over their minimum rate of pay per hour. This also means that if an employee completes ten and a half units before the end of their shift, they will only get paid for ten units since half of a unit was not completed.

Advantages of Piece-Rate Pay

There are several advantages of piece rate pay, but first, an employee must compare the advantages of the terms of piece rate over other payment options. Employers must consider the benefits of the payment system to determine if it is best to adapt their business or company to piece work pay.

Once piece rate pay is implemented, it can increase production and efficiency. This is because employees will work harder to achieve their goals daily to make top pay. The company can provide less supervision for employees since they will need little or no supervision while doing their work. This is because employees making piece rate are very self-driven and motivated to work as fast as they can, so they make the most money possible.

Employers find it easier to calculate wages when the pay is based on the number of units completed and added to their base pay rate. There is also less idle time and way more active time during the employees' workdays. This is better than a time-based system in which people are paid per hour since there can be times when they are not producing very much product. With piece rate, they are motivated to produce as many products as possible daily. This results in much higher production rates since employees are no longer wasting time accomplishing their jobs. This also means that there's much more self-evaluation by employees. This is because many employees working at piece rate will set their own goals and work hard each day to achieve them. They can then self-evaluate to decide whether they should keep their target goals the same or increase them.

Piece rate can also lead to better equipment efficiency. This means the employees will strive to work very carefully and efficiently on their machines, so they don't go down and lose piece rate money. This helps the company save on repair costs since employees put much more effort into maintaining their machines at top capacity.

Contact Us

If you are looking for a job in which you can make piece rate and be paid directly proportionate to how much effort you apply, contact us and speak to the the employment specialists at Fladger Associates today!