With a per-piece pay rate, payment is based on the number of pieces of work that a worker completes. The worker receives a specified amount of money for each piece completed; that is their rate of pay. What constitutes a “piece” worthy of the set rate is defined in advance.
Learn more about what kinds of jobs use per-piece pay rates and what factors are important to consider with this payment structure.
What Is a Per-Piece Pay Rate?
A per-piece pay rate is a payment structure that compensates a worker for each piece or unit they complete. Therefore, their pay is not based on how many hours they work, but rather on the number of pieces they create.
- Alternate names: Piece rate, piecework
How a Per-Piece Pay Rate Works
Per-piece pay rates can apply to a number of jobs. A mechanic might be paid for each car they repair, while a writer could be paid by the word, or a carpenter by linear foot of carpentry completed. Per-piece pay also can be applied to online jobs. At places such as Amazon's Mechanical Turk, which offers a marketplace for micro jobs such as clicking links or transcribing audio, workers are paid on a per-piece basis. A worker also might do piecework in such fields as data entry, translation, writing, editing, and call centers.
In each line of work, the “pieces” are clearly defined and incorporated in the rate. For example, a worker could be paid per minute of talk time, per call, per completion, per word, per keystroke, per page, or per project. Some jobs may have hourly or daily quotas.
Piecework, particularly when working from home, may have no set time frame for completion, making it a very flexible work option.
The hourly wage of a worker operating on a per-piece pay rate will vary based on how skilled they are in completing the work, how time-consuming each piece of work is, and how much they are paid per piece.
Requirements of Per-Piece Pay Rates
In the United States, this type of pay rate must account for minimum wage laws for employees.
For instance, an employee who works at a rate of ten cents per piece and who completes 60 pieces in an hour would not receive $6, but instead would receive the state’s minimum wage, which would be equal to (or in some cases more than) the federal rate of $7.25 an hour. But if the worker is able to work fast enough to complete 80 pieces in an hour, they can earn $8 an hour, even if minimum wage in their state is less. In that way, a per-piece rate pay can act as an incentive for employees.
To find the overtime rate for an employe paid by the piece, divide their total pay for the week by the number of hours worked, then multiply by 1.5 to calculate time-and-a-half. That is the rate they must be paid for every hour worked over 40.
Freelancers and Independent Contractors
Note that only employees are protected by minimum wage laws. Per-piece pay structures are often used as pay rates for freelancers or independent contractors. For example, writers who are full-time employees might receive an hourly wage and are owed overtime pay for hours worked over 40, whereas writers who are freelancers might charge by the word. If the freelancer can write quickly, it's possible they can make much more with a per-piece rate than they could by being on staff. But if it takes them longer than 40 hours in a week to complete their work, they aren't owed overtime pay.
Pros and Cons of Per-Piece Pay Rates
Opportunity for increased pay
Flexibility in work hours
Incentive to be efficient
Work could be rejected for quality issues
Lower wages at the beginning
No pay when there's no work available
- Opportunity for increased pay: As a worker becomes skilled in a particular type of piecework, their speed will increase.
- Flexibility in work hours: This isn’t true of all piecework, but for independent contractors, work can often be done when the worker chooses, many times in very short shifts.
- Incentive to be efficient: When paid by the piece, it pays to find the most efficient way to produce an item of quality.
- Work could be rejected for quality issues: For example, work-at-home scams in assembly work and stuffing envelopes use poor quality as an excuse to refuse to pay. Acceptable quality must be clearly spelled out in any kind of per-piece pay arrangement.
- Lower wages at the beginning: Even those with experience in a field may need a little time to ramp up in order to work at a speed that earns a good rate.
- No pay when work is not available: No pieces, no pay. This is particularly a problem for call center workers who may be paid per call or per talk time minute but who must wait for calls to come in. They cannot do anything else while they wait for calls, so there can be significant amounts of unpaid time.
- A per-piece pay rate is a payment structure that is based on how many pieces a worker completes.
- Both the rate of pay and what constitutes a "piece" of work must be clearly defined in advance.
- Employees being paid a per-piece pay rate are still entitled to overtime pay and minimum wage, per the Fair Labor Standards Act.