How is Piece Rate Pay Calculated?

Piece Rate Pay

Share This...

Piece Rate Pay

Piece rate pay, also known as piecework, is a payment system where employees are paid based on the number of items they produce or tasks they complete, rather than the amount of time they work. This system is often used in manufacturing, farming, and other industries where work output can be easily quantified.

To calculate piece rate pay, you need to know two things:

  • The piece rate: This is the amount of money an employee earns for each item produced or task completed. This rate should be determined in advance and communicated clearly to the employee.
  • The number of items produced or tasks completed: This is the employee’s output during the pay period.

To calculate the total pay, you simply multiply the piece rate by the number of pieces produced or tasks completed.

Here’s an example:

Let’s say a fruit picker is paid a piece rate of $2 per box of apples picked. If they pick 100 boxes of apples during the workweek, their pay would be calculated as follows:

Piece Rate ($2 per box) x Number of Boxes Picked (100 boxes) = Total Pay ($200)

So, the fruit picker would earn $200 for their work.

Please note that piece rate pay must still comply with minimum wage laws. If the piece rate pay does not meet minimum wage requirements for the total hours worked, the employer is generally required to make up the difference. This can vary depending on local labor laws and regulations.

Example of Piece Rate Pay

Let’s consider an example with a furniture manufacturing company that pays its assembly workers on a piece rate basis.

  • Setting the Piece Rate: The company determines that for each chair assembled, a worker will receive $10. This is the piece rate. This rate is communicated clearly to all assembly workers.
  • Tracking Production: Over the course of a week, an assembly worker named Sarah assembles 45 chairs.
  • Calculating Pay: At the end of the week, Sarah’s pay is calculated based on the piece rate and her output. She assembled 45 chairs, and the piece rate is $10 per chair, so her pay is 45 chairs x $10/chair = $450.

Therefore, for that week, Sarah has earned $450 based on the piece rate pay system.

It’s important to remember that if Sarah’s earnings do not meet the minimum wage for the total hours she worked, the company would need to make up the difference to ensure they are complying with labor laws. For example, if Sarah worked 50 hours that week, and the minimum wage is $10 per hour, she should earn at least $500. In this case, the company would need to compensate her an additional $50 to meet the minimum wage requirement. This can vary depending on the specific labor laws and regulations in a given region or country.

Other Posts You'll Like...

Want to Pass as Fast as Possible?

(and avoid failing sections?)

Watch one of our free "Study Hacks" trainings for a free walkthrough of the SuperfastCPA study methods that have helped so many candidates pass their sections faster and avoid failing scores...