What is Piecework Pay?

Piecework is a compensation arrangement under which employees or third parties are paid based on the number of units produced. Under this arrangement, a standard amount is paid for each unit produced. Where there are minimum wage laws in effect, the minimum wage must still be paid to employees, irrespective of the number of units produced. This approach to compensation will only work if product quality can still be assured; otherwise, employees tend to focus on increasing their production volume, irrespective of quality considerations.

Advantages of Piecework Pay

Having a piecework pay system in place presents a strong incentive for workers to produce in volume, and as efficiently as possible. From the perspective of the employer, this can result in more units produced for a given pay level. This can also be beneficial for workers, if the arrangement is for them to reach a certain amount of output, after which they can leave work. This can be beneficial for those working second jobs, or who can only work for a certain number of hours per day.