Piece-rate Pay

What is piece-rate pay?
Piece-rate pay is a common form of payment used in labor industries and we often get questions regarding how it works, so we put together a short video to give you more information!

Employers pay their workers per item of work completed, rather than per hour or at a fixed yearly salary. Paying employees piece-rate is acceptable, but you must ensure that you follow minimum wage and overtime guidelines. But don't worry! Integrated manages the process of calculation as part of our payroll services.
Advantages of piece-rate pay:
Increased production and efficiency: The piece-rate system increases efficiency on the employee's part by ensuring they are busy working hard to achieve their set targets. The employees are aware they may get paid more if they perform their work efficiently and swiftly, so they put in more effort.

Minimal supervision: When using the piece-rate system, the employees need minimal or no supervision while doing their work. Piece rate systems ensure employees are self-driven and work as fast as they can to increase their wages.

Higher production rate: When the employees don't waste time and are always working harder to achieve their targets, production costs go down, and the production rate is higher. Workers may prefer to be in control of their earnings by adjusting their productivity levels. Piece rate pay motivates slower workers to put more effort into growing their earnings, as their pay is determined by productivity.

Machines and equipment get used efficiently: The workers focus on using the machines and other working tools to quickly and efficiently achieve their goals. They also use the devices effectively because they know any breakdown can slow their production rate, reducing wages.

Cost control effectiveness: The increased output helps in the reduction of overhead in every unit. When the overheads are fixed, the company reduces the expenses used to produce a unit, reducing the product's price. Reduced products help attract more consumers and also help with the competition.

Easier planning and control: The employer can easily plan for the production by setting targets and they can control how they are achieved. After observing and measuring the employee's capabilities, they can easily set and achieve targets of the quantity they aim at producing either per day week or, month. There is more control because it is easy to review the set targets regularly.
Disadvantages of piece-rate pay:
Quality deterioration: When employees try to complete many units within a short time, they may not achieve the required product quality. This result may result into substandard products. This might bring losses to the organization or the employees having to redo the work, reducing their income.

It's hard to settle on a fixed piece cost: Agreeing on a figure that is favorable for both parties can be time-consuming and it involves a lot of discussions and negotiations. However, after agreeing on the rate per unit, calculating payment is easy. We are here to help negotiate; contact a payroll specialist today!

Fear of losing revenue: Some employees paid per piece rate are in constant fear of losing revenue when they are absent. When an employee is ill or for other reasons fails to work, the employee gets no payment.

Visit Indeed for more resources regarding piece-rate pay.
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