Piece work - Not So Simple
With construction piece work, you need to consider many pros and cons between using hourly labor rates and piece work rates in the construction industry. Employers need to look at the benefits and drawbacks while ensuring that the choice they make still falls within the rules of the Fair Labor Standards Act (FLSA).
Employers must understand all aspects of piece work and minimum wage laws to remain in compliance and retain employees. Workers who find that they are not being paid properly are likely to find alternate employment or file suit against the employer.
The Wage and Hour Division of the Department of Labor can assess civil penalties up to $1,100 per violation for willful or repeated violations of minimum wage laws and overtime payment laws. Investigations will normally cover two years worth of payment records. If willful violations are found, the investigation can go back three years.
Pros for employers
- Employers paying for piece work are not paying for an employee’s time when no work is being performed.
- Employers can use piece work rates to motivate the productivity of workers. During busy periods, a company can realize a large increase in jobs completed.
- Labor costs are usually inline with estimated costs.
Cons for employers
- Employers must spend time observing production to determine where wasted time is occurring before beginning to consider what normal job time is.
- Employers must make sure that all work is being completed correctly, without short cuts.
- Employers must also ensure that all safety regulations are being followed. Workers attempting to produce faster results may take short cuts in safety measures.
Pro and cons for workers
Employees can earn higher than average wages by working effectively and producing quality results.
Delays in material deliveries, equipment malfunctions and problems outside the workers control can cost them significantly, as they only earn wages for work completed.
Independent contractors are normally paid per job completed. A general contractor can hire sub-contractors for various portions of a large project. This would be considered piece work; however, under independent contractor guidelines, the general contractor is not responsible for meeting a minimum wage.
While using independent contractors may seem like a way to avoid minimum wage regulations, misclassifying employees as contractors can lead to substantial problems. Employers must understand the laws that define independent contractors and employees.
Unions will rarely allow for piece work rates. Hourly pay rates are set and cannot be reduced below the target. Employers would be required to set a very high piece work rates, which probably would not be beneficial in the end.
Accurate piecework tracking is a critical part of your time and labor tracking, for both the employer’s financial records and meeting legal requirements. You need to maintain two records, one record for the number of pieces completed and one for the number of hours worked. As an employer, you must be able to prove that you have paid at least the minimum wage.
To determine the appropriate rate for piece work, you must make several calculations. You need to track the average number of jobs completed per worker over several days or weeks, depending on the nature of the work. Examples for construction projects may help towards understanding the process.
If your company installs replacement windows, use a time and piece work tracking method for several different employees over the course of several projects. If the average employee can install one window per hour, and the current minimum wage is $8.50 per hour, you should set your piece work rate at no less than $8.50 per window. However, you should also look at the minimum averages paid to skilled laborers, most will earn far over the minimum set by law.
This guideline would help you avoid falling under the minimum wage for less productive workers and motivate workers that are capable of higher production. Your set piece work rates must be both achievable and motivational. Paying too high a rate removes motivation. Paying too low a rate will frustrate workers and possibly create problems with meeting FLSA requirements.
The only way to reach a wage rate that is fair to both you and your workers is by using time and piece working tracking for a long enough period to obtain normal results. You will need to continue piece work tracking, along with time and labor tracking, as separate records in order to prove that you are always within minimum wage laws.
Finally, you must also be able to factor hours and wages for any overtime, unless workers are exempt you have to meet overtime pay requirements in addition to minimum wage. If workers go over 40 hours in a work week, they must be paid 1.5 times per piece produced during those hours.
In order to make piece work pay right for your company and workers, you need access to the right software for your calculations and continual reporting obligations.
What issues do you have tracking piecework and rates?
Pacific Timesheet may be the solution for you.