Navigating Piece-Rate Employment: Minimum Wages, Engagement Letters, and Leave Policies?

Hi, I am Sreeram. The company I am working for is planning a new garments factory. The employees will be on a piece-rate. I need your advice on:

1) Is there anything called minimum wages pertaining to piece-rate employees?

2) Is an engagement letter mandatory? If so, can I have a draft of it?

3) Leave applicability and overtime (OT) applicability.

Regards,
Sreeram

You are in the garment industry, and as far as I know, the MW Act is applicable throughout India in this industry. Regarding your question on piece rate, you should set the piece rate in such a way that for an average 8-hour production, the wages should not be less than the MW rate. You need to convince the authority that your piece rate works out to be above the MW rate.

Items such as an engagement letter, appointment letter, leave, and overtime are mandatory.

If an appointment letter is not issued to you, and no leave or overtime is provided, would you still accept the employment?

Thank you.

Minimum Wage in Garment Factories

The minimum wage applies to garment factories. The rule for the piece rate is that after the end of the month (or if you are paying every day, then at the end of the day), the employee should receive the minimum wages. So, if one of your workers is not able to work fast enough to earn the minimum wages (say ₹256 per day), then you have to pay him that amount irrespective of the fact that he didn't earn it.

The rule for rice rate is that after the end of the month (or if you are paying every day, then at the end of the day), the employee should get minimum wages. I have not understood the above quote. Can you please explain it?

So, if one of your workers is not able to work fast enough to make minimum wages (say ₹256 per day), then you have to pay him that amount irrespective of the fact that he didn't earn it. Do you mean to say the under-performer should be rewarded with?

Thank you.

Let's say you are paying ₹20 per garment as a piece rate. If the minimum wage is ₹250 per day, a worker has to produce 13 garments in a shift of 8 hours (7 hours excluding breaks) to achieve the minimum wage.

Suppose a worker is inefficient and can only produce 10 garments in a day. In that case, he would earn only ₹200. However, since the minimum wage is ₹250, he must be paid ₹250 even though he has not earned it.

This applies if you are paying daily (not just a daily rate, but actually paying each day's wages each day). If you are paying wages monthly, you similarly need to pay the minimum wages for the month, irrespective of whether he has completed 325 garments (12.5 per day x 26 working days).

Hope I am clear on this. If you have a different idea, please let me know.

Yes, I have a different idea. According to you, an under-performer should be rewarded with more than their performance. I do not agree with this, with due regards to you, sir.

Piece Rate Determination

Generally, the piece rate is decided based on how much an average person produces in eight hours and what the minimum wage rate is for those eight hours. Once this is determined, one can produce as much as their performance capacity or skill allows. If a person produces less, their minimum wage for eight hours is not protected, and they are paid based on the piece rate only.

Incentives for Performers

If an under-performer is rewarded in such a way that their eight-hour wages are protected without meeting expected performance levels, then what is the incentive for the performers?

Experts are requested to comment on this to bring clarity.

Minimum Time Rate Wages for Piece Work

Please refer to Sec 17 of the Minimum Wages Act, which states as below:

17. Minimum Time Rate Wages for Piece Work - Where an employee is employed on piece work for which a minimum time rate and not a minimum piece rate has been fixed under this Act, the employer shall pay to such an employee wages at not less than the minimum time rate.

Applicability of Section 17 for Piece-Rate Employees

Section 17 is applicable in cases where the minimum piece rate is not fixed by the appropriate government. If a minimum piece rate or a guaranteed time rate (as per Section 3(2)) is fixed by your appropriate government for the garment industry, you need to pay only that rate. I recommend contacting the Minimum Wage inspector in your area for more detailed guidance.

Regards,
Varghese Mathew

Please refer to section 3(2)(b) and 17 of the Minimum Wages Act, 1948 to confirm that piece rate is a valid term.

Regards,
Varghese Mathew
[Phone Number Removed For Privacy Reasons]

Hello All, I want a draft for a piecework (piece rate) agreement. Please share.

Regards, Sachin Mhaske