We take a look at the pros and cons of paying piecemeal, and how Croptracker can make your payroll decisions faster and easier!

Introduction

A popular tendency in fruit and vegetable farming, particularly in the USA, Canada, and New Zealand, is to pay workers piece-rate, which while complying with minimum wage laws, can be used to pay workers in lieu of the traditional $/hour wage system. This method aims to counter mounting labor expenses, which can be as high as 60% of crop production costs.

Let’s learn more about piece-rate and what its advantages and disadvantages are, as well as some of the most recent developments in piece-rate standards and practices, and how Croptracker can help you better track and calculate piece-rates, and hourly payouts.

What is piece-rate?

Piece-rate essentially means that employees are paid to complete a particular task, that they are paid for every ‘unit’ created or harvested. In this case, a worker is compensated by individual output and not by an hourly rate. They would, for instance, be paid per amount of fruit picked. Compensation, therefore, is not by the hour, as in time spent on the field, but for the actual amount of collection. In Croptracker, you can easily track pieces picked in a harvest or field pack event, and then let Croptracker calculate the piecemeal payouts for your employees using the harvest and punch-clock modules.

There is one caveat to piecemeal payout though; workers must not be paid less than minimum wage after computation of the per-hour price. Employers must also comply with overtime compensation and make sure they keep accurate records to abide by the law.

cucumber harvest

Complying with Minimum Wage

To comply with the minimum wage requirement, an employer would have to make a specific calculation (in the U.S, for example). First, the employer must track the total number of hours worked. Then, the employer must divide the worker’s piece-rate compensation by the total number of hours worked. This will give a theoretical per-hour wage, which will have to be compared to the minimum wage. A piece-rate compensation must not be any less than the legal minimum wage in the area.

Let’s consider this, by way of example: a worker makes $480 over the course of a 40 hour work-week. The operation just described yields that it is a $12 per hour wage. This per-hour rate is evidently more than the minimum wage of most areas. Say, however, that this particular job took place in Seattle, Washington, where the minimum wage stands at $15. What then? As can be seen, the rule of a piece-rate wage which does not go below minimum wage would not be satisfied (consider that a $15 wage X 40 hours = $600). In this case, the employer must pay the $120 difference, on top of the piece-rate compensation. A calculation such as this one must be used in each project a worker completes, to make sure that the particular project and the ensuing piece-rate compensation is not, in the final analysis, below minimum wage. In Croptracker, minimum wage compensations are automatically calculated for you.

Daily Piecework Report2

Complying with Overtime

In the case of overtime, things get a bit trickier. First off, an employer must always track the number of hours their employees work. Once an employee works over 40 hours in a single week, they must be awarded overtime pay.

Such a calculation goes as follows: first, the employer must calculate the worker’s average hourly wage throughout the week, including overtime. Afterwards, the rate of overtime pay comes from multiplying overtime hours by 1.5 times the base compensation.

For instance: imagine an employee works for 50 hours in a week, for a total of $750 in piece-rate compensation. The hourly wage (following the calculation we previously showed) would be $750/50 hours = $15 per hour. Because a work-week maximum would be 40 hours, there would be 10 hours of overtime in this scenario.

In this case, the overtime pay would have to be calculated like this:

$15 (base pay) x 1 .5 (overtime rate) X 10 hours of overtime in the week = $225 overtime pay that must be awarded. Using Croptracker’s Daily Timesheet Report, weekly hours are summarized by employee and totalled for a one click solution to tracking overtime hours.

Croptracker's Daily Timesheet Report

The California Exception

California, in the United States, is a particular case, and a sort of exception. In that state, employees must be compensated for downtime too. It is not enough to comply with the aforementioned scenarios and pay piece-rate. In the state, employers must account for (a) rest and recovery hours and (b) other non-productive hours. Each must be compensated in addition to the lawfully calculated piece-rate.

As pertains to rest, employers must provide 10 minutes rest time for every four hours of work. Recovery time is a period to prevent heat afflictions. To compensate for rest and recovery times, the compensation must be the highest of either (a) the average hourly rate calculated by the division of the total compensation of the work week (without rest or recovery compensation) by the total hours worked during the week (without breaks) or (b) the minimum wage applicable in the area.

In cases such as California, where there is compensation of non-productive time, as well as compensation for rest and recovery breaks, this may prompt the need to pay a lower piece rate wage altogether. Clearly the possibility of discontinuing the piece-rate system in this scenario must be analyzed. Perhaps, in a case such as California, using a flat hourly wage may well be most prudent.

Disadvantages of paying piece rate?

As can be seen, several disadvantages immediately come to mind when talking about piece-rate.

The first one is the risk of hindered production. Sometimes, in new projects, it may be difficult to determine how much product is expected to be gathered, making it difficult to calculate the correct piece-rate that both benefits the employer and motivates the worker.

Sick or Injured workers: The problem with the incentives that piece-rate creates is that workers may want to work, and do so at maximum efficiency, even when they are perhaps not able to. Also, the desire to work faster may lead to injury.

Reduced Quality: Since the emphasis is on efficiency and quantity, it is quite possible that the quality of processes suffers as a result. The idea, therefore, should be to have workers learn exactly what they are to be doing and then to execute in the most efficient manner possible. It is not, however, to have workers disdain quality and correct processes in the name of speed and efficiency.

Growers may find that keeping track of the fair compensation for each worker is an administrative and paperwork hassle without Croptracker’s harvest and labour tracking modules. 

Advantages of paying piece rate?

So, those are some disadvantages. There are, however, several strong advantages too.

First, it is more time-efficient. Since the employee is being paid for his output, the worker is encouraged to manage time better, be more productive and finish faster. Less supervision is possible this way. When paid per piece a worker develops the most efficient way of working. The most efficiently they achieve, the better it is for their employer but also for them.

Employers pay for what they get and diligent employees will get more, either by completing more ‘units’ of work or by finishing the job fast and moving on to other things. In terms of cost accountability, it is easier to calculate the cost per unit.

Another advantage of piece-rate is that an employee’s performance may be judged better, making for fairer and simpler dismissals. Imagine for instance that a worker is paid per bucket of fruit picked; it will be easy to ascertain whether the employee is performing well or not. The worker may be dismissed based on a verifiable poor performance/rate of performance.

When is it best to use piece-rate?

As can be seen from the advantages and disadvantages, there are specific times and projects when piece-rate simply makes more sense than standard by-the-hour compensations which may mean rising costs.

The first type of scenario would be when there is a large-scale project with a lot of repetitive tasks. Harvesting for instance, may very well benefit from a piece-rate scheme. Fruit picking is a particular instance where paying piece-rate will probably increase employee productivity. Piece-rate makes sense when the worker already knows the craft or duty he will have to perform, or in situations where there are no security hazards which may be perilous to workers working very fast.

Strawberries

The rule of thumb is simply this: consider using piece-rate in relatively easy and predictable tasks; these stand to benefit the most from a piece-rate compensation scheme. In Croptracker, piece rates can easily be associated with your harvest or field pack items such as bins or baskets, or even with production practices such as number of trees pruned or acres mowed.

Conclusion

At the end of the day, a farming employer’s greatest challenge is to efficiently complete a task. In that scenario, piece-rate makes sense. It is always best to agree on the piece-rate beforehand though; workers are seldom willing to give it their all if the piece-rate is not considered to be firmly in place.

Farm employers are well advised to view a piece-rate scenario as one in which they figure out how much they are saving per acre, rather than focusing on how much employees make when their earnings are translated into an hourly wage.

Finally, attention should be given to new legal developments. The Seattle Supreme Court, for example, recently found that tasks related to piece-rate workers, such as unloading equipment at the end of the workday or the travel between each field, picking up fruit, should be tracked and compensated too, this time by the hour. Legal developments such as this one may alter piece-rate compensation altogether in the future.

In the final analysis, it is easy to see how some farming operations would benefit from a piece-rate compensation scheme and how such a scheme could increase productivity. In spite of legal innovations and enmity from certain quarters, piece-rate payment strategies do not seem to be disappearing. In fact, as minimum wages increase, perhaps there will be more sense in using piece-rate with its enhanced productivity and more motivated workers.

Whether you prefer to pay piecemeal or hourly, Croptracker farm management software can provide solutions, and eliminate paperwork in your operation’s payroll department. Croptracker has a solution for your operation, from large to small. Contact us today to see how we can help your organization simplify your payroll process, piece-meal or otherwise.


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And as always, if you're ever stuck, never hesitate to e-mail us at support@croptracker.com or Live Chat with us by clicking the green speech bubble helpiconin your bottom right-hand corner. We're always happy to help you make the most of Croptracker to make your farm more efficient, safer, and more profitable!