Piece rate pay, sometimes also affectionately known as “pay for effort” or "pay for performance", is one of the most recognizable incentive schemes in manufacturing environments. Because it is simple to understand, production workers appreciate it, and employers embrace it because it guarantees a certain level of productivity from the workforce.While simple in design and easy to implement, there are certain elements that employers must build into a piece rate pay system for production workers to make it effective.
As is evident from its name, Piece Rate Pay is based on paying workers for the number of pieces (or units) they produce. However, the system needs to have the following characteristics to make it fair for workers and productive for employers:
Using these basic principles, management and workers representatives can work together to develop the system and share responsibility for its implementation. During the early stages however, both partners to the system (workers and management) must be open to tweaking and fine-tuning the system.
While piece rate pay systems may look straightforward to design and implement, there are several other finer points that need to be considered to ensure success.
These are just some additional points to think about when designing and implementing Piece Rate pay systems. At the end of the day, if a purely-piece-rate structure doesn’t fit in your particular environment, you may wish to consider variants of the basic system, like Hourly + Piece Rate, or a graduating and incremental Piece Rate system.
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