Our company is a automotive recycling center and is considering going to a Piecework base for pay.  We have currently transitioned on department over to this type of wage benefit and plan to transition others over as well.  With the one department we have found that it increases their productivity more with the piecework rather than a hourly wage and the employees seem to like it better as they are able to make more per week in wages.  Here's the issue that I have been tasked with by top management.  With the piecework rate of pay in regards to the overtime factor it can become very expensive to the company when you factor in the OT rate times their overall piecework wages for the week, more so than a hourly rate.  So, here's my question, is there a better way to figure the OT factor based on the piecework rather than just taking the total of the employee's amount for the week times the OT factor?  If there is someone out there that uses a simular system that has a proven idea I would greatly appreciate it.     


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  • I don't have an answer to your question, but just want to warn you about letting employees eat while working during lunchbreaks to up their piecework and/or have OT.  I worked for a company that got into trouble with the state DOL over this.
  • http://www.dol.gov/dol/allcfr/ESA/Title_29/Part_778/29CFR778.418.htm

    This is the section of the FLSA you need to be concerned with.

    "(a) Under section 7(g)(1), an employee who is paid on the basis of a piece rate for the work performed during nonovertime hours may agree with his employer in advance of the performance of the work that he shall be paid at a rate not less than one and one-half times this piece rate for each piece produced during the overtime hours. No additional overtime pay will be due under the Act provided that the general conditions discussed in Sec. 778.417 are met and:

      (1) The piece rate is a bona fide rate;

      (2) The overtime hours for which the overtime rate is paid qualify as overtime hours under section 7(e) (5), (6), or (7);

      (3) The number of overtime hours for which such overtime piece rate is paid equals or exceeds the number of hours worked in excess of the applicable maximum hours standard for the particular workweek; and

      (4) The compensation paid for the overtime hours is at least equal to pay at one and one-half times the applicable minimum rate for the total number of hours worked in excess of the applicable maximum hours standard.

    (b) The piece rate will be regarded as bona fide if it is the rate actually paid for work performed during the nonovertime hours and if it is sufficient to yield at least the minimum wage per hour.

    (c) If a pieceworker works at two or more kinds of work for which different straight time piece rates have been established, and if by agreement he is paid at a rate not less than one and one-half whichever straight time piece rate is applicable to the work performed during the overtime hours, such piece rate or rates must meet all the tests set forth in this section and the general tests set forth in Sec. 778.417 in order to satisfy the overtime requirements of the Act under section 7(g) (2)."

    However this does mean keeping track of pieces during overtime hours SEPARATE from those during regular hours AND I am not sure what happens if an employee is in the middle of a "piece" on the split between overtime and regular.  I also imagine there are some tests that you would have to do to prove that the employee is making at least minimum for regular hours and 1 1/2 minimum for overtime hours.  So you would still need to track total hours worked and compare the piece rate wages to hourly wages on a consistent basis.  I am assuming you have already done some analysis on this part to pick the piecerate payment method in the first place

    I know a really really good FLSA Wage/Hour consultant who retired after quite a few years with the DOL Wage and Hour division.  He just helped me out with a sticky wage/compensation situation.   If you want his information, email me at resumeHR2007@gmail.com.


  • I worked for an employer that guaranteed an hourly wage rate and used that as the basis of pay and considered the piece rate as a sort of bonus in a "whichever is greater" context but specified that the straight rate at time and one half would be the comparison rate for OT.  It was a way to avoid being on a complete piecework plan but turning the piecework concept into a bonus opportunity.  Ironically, the piece work rate goes down in OT because the hourly rate is harder to beat, so there's something to keep in mind.

    That was quite awhile ago and I was not in management at the time.  By my own standards today, I would say that is a sufficiently aggressive approach to merit consultation with counsel for each state in which you have employees.

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