What is piecework pay?

Piecework is a form of performance-based pay where payment is directly based on the amount of work performed, rather than the number of hours worked. You are paid per unit produced or per task completed. This is also known as working on a piecework basis.

The word "piecework" itself refers to the agreement that underlies the work, where a fixed price per unit is determined in advance. This form of pay is intended to motivate higher productivity, as those who work quickly and efficiently have the opportunity to earn more than with traditional hourly wages.

Piecework vs. Hourly Pay

The fundamental difference between piecework and hourly pay lies in what is measured. Hourly pay compensates for time spent, while piecework compensates for results achieved.

• Hourly wage: Provides a predictable and stable income based on a fixed hourly rate, regardless of production pace.
• Piecework: Provides a variable income that is directly linked to your own efforts. Higher production results in higher wages.

In many cases, a hybrid model is used, often called combined piecework or piecework with guaranteed pay . Here, the employee has a guaranteed minimum wage (hourly wage), with a supplement for production above a certain level. This provides financial security while also incentivizing increased effort.

How are piece rates determined?

A piece rate agreement (or piece rate) is a detailed agreement that sets the price per unit. To arrive at a fair price, it is common to carry out work studies or time studies . Here, work operations are analyzed and measured to find out how long an average skilled worker takes to produce one unit. This standard time forms the basis for the piece rate, which is intended to make it possible to obtain a reasonable wage for normal work effort.

Industries that use piecework pay

Piecework was historically very widespread in industry, but is today most common in industries where it is easy to measure and quantify work results.

• Construction: Payment per installed plasterboard, per painted square meter or per laid meter of pipe.
• Agriculture: Pay for harvest is often based on the number of baskets of berries or kilograms of vegetables picked.
• Industry and manufacturing: For example, in the textile industry, wages may be based on the number of garments sewn. In logistics, it may be paid per packaged order.

Advantages and disadvantages of piecework pay

Benefits	Disadvantages
For the employee: Potential for higher wages.	For the employee: Unpredictable income, can pressure to take shortcuts.
For the employer: Increased productivity.	For the employer: May come at the expense of quality and safety (HSE).
Provides direct rewards for efficient work.	Can create a competitive and stressful work environment.

Piecework in accounting

For a company, correct handling of wages is a central part of the accounting . Piecework wages, like all other wages, must be carefully documented. The basis for the payment of wages (e.g. number of units produced) must be traceable and registered in the employee's employee ledger . The wages must be reported via the unemployment notification , and withholding tax and employer's social security contributions must be calculated in the usual way.

Related words

• Performance pay
• Commission salary
• Hourly wage
• Piecework agreement
• Wages