Dear All,
We are a food company employing workers to produce products on a piece-rate basis. The shift is 12 hours long, including a 1-hour lunch break and another 1 hour designated for other activities, resulting in 10 hours of productive work. Each piece-rate worker is required to produce 1550 pieces during one working shift. Please provide clarification on the following:
1. Should overtime be factored into the per-piece wages calculation? How should daily overtime be managed?
2. Should ESIC, PF, Bonus, and Gratuity be included in the piece-rate calculation?
3. In case a worker produces less than the target, resulting in the minimum wage not being met, what actions should be taken?
4. What components should be considered when determining the piece-rate?
5. Is a piece-rate system more advantageous than daily wages?
Please advise, and if further information is needed, kindly let me know.
Regards, Jagjit Singh
[Email Removed For Privacy Reasons]
From India, Vadodara
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We are a food company employing workers to produce products on a piece-rate basis. The shift is 12 hours long, including a 1-hour lunch break and another 1 hour designated for other activities, resulting in 10 hours of productive work. Each piece-rate worker is required to produce 1550 pieces during one working shift. Please provide clarification on the following:
1. Should overtime be factored into the per-piece wages calculation? How should daily overtime be managed?
2. Should ESIC, PF, Bonus, and Gratuity be included in the piece-rate calculation?
3. In case a worker produces less than the target, resulting in the minimum wage not being met, what actions should be taken?
4. What components should be considered when determining the piece-rate?
5. Is a piece-rate system more advantageous than daily wages?
Please advise, and if further information is needed, kindly let me know.
Regards, Jagjit Singh
[Email Removed For Privacy Reasons]
From India, Vadodara
Acknowledge(0)Amend(0)
Piece Wage System
This system is based on the output or productivity of the workers. Piece rates are frequently used in certain industries or occupations where the work is repetitive in nature and where employees have a high level of control over the results.
1. Is overtime considered when giving out per-piece wages? How to deal with everyday OT?
Answer: Under this system, a fixed rate is paid for each unit produced, job completed, or operation performed. Payment is made according to the quantity of work done, and no consideration is given to the time taken by the worker to perform the work. An equitable piecework rate should be determined to give an inducement to the workers to produce more. Workers are paid according to their performance because a distinction is made between efficient and inefficient workers. Efficient workers earn more wages because wages are linked to output. This gives an inducement to the workers to increase their production. Idle time will not be paid for, as is the case under this wage system. As per the Minimum Wages Act, 1948, where an employee's minimum rate of wages is fixed under this Act by the hour, by the day, or by such a longer wage period as may be prescribed, works on any day in excess of the number of hours constituting a normal working day, the employer shall pay him overtime rate. So, overtime should not be considered in the piece wages system because wages are linked to output, and this system motivates workers to produce more to get more wages.
2. Should ESIC, PF, Bonus, and Gratuity be part of the PR rate?
Answer: The production record for piece workers has to be maintained. The price of the article made by each piece worker has to be described, and the wages register must show the number of pieces made by a particular employee in a month, and the earnings have to be calculated accordingly. The important issue here is the coverage of such piece-rated employees under the ESIC, EPF, Bonus, and Gratuity. You can also refer to the said Act to know "Employee" defined under ESIC, EPF, BONUS, AND GRATUITY.
3. What if a person produces less than the target, so MW will not be met? What should be done?
Answer: To be fair and effective, piece rate systems should be transparent, reward employees according to the difficulty and quality of their work, and ensure that motivated workers can earn substantially more than the minimum wage. As per the Minimum Wages Act, 1948:
a) A minimum rate of wages for piece work referred to as "a minimum piece rate."
b) Where an employee is employed on piece work for which a minimum time rate (If an employer sets the working hours and the workers have to "clock" in and out, this counts as time rate work, not as output or piece rate work) and not a minimum piece rate has been fixed under this Act, the employer shall pay to such employee wages at not less than the minimum time rate and vice versa. For example, in the State of Madhya Pradesh, the minimum wage notification for piece rate beedi rollers (hand-rolled cigarettes) indicates a guaranteed minimum wage per week provided they roll 5600 beedis per week. Workers are entitled to this if the raw materials supplied are inadequate to roll this number. However, the guaranteed minimum wage will not be payable where the failure to roll 5600 beedis is attributable to the worker.
4. What components should be taken into account for making PR?
Answer: All remuneration, i.e., fixed and variable components.
5. Is PR viable or daily wages?
Answer: This will be differentiated on the following basis:
- Time or Output: Daily wages are determined on the basis of time spent on the job, while piece rate wages are determined on the basis of output.
- Efficiency: Daily wage rates are not linked with efficiency, while piece rate wages are linked with the efficiency of the worker, i.e., the higher the number of units produced, the higher the wages.
- Quality: In daily wage rates, the quality of work is very high because wages are fixed for normal working hours, while in piece wage rates, the quality of work need not be very high because wages are payable on output.
- Supervision: In daily wage rates, close supervision is required so that employees may not waste their time, while in piece wage rates, close supervision is not required because employees produce more to get more.
- Maintenance: In the daily wage system, employees are more concerned with their quality work, not quantity work, so the maintenance cost is low for machines and tools because they are properly handled, while in piece wage rates, the maintenance cost of machines and tools is high because employees are more concerned with their quantity work to produce more.
- Strained Industrial Relations: In daily wage rates, the relationship between employer and employee is good due to the fair wage system, while in piece wage rates, the relations between employer and employee become sour if their outputs are low.
Regards, Amit
From India, Surat
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144This system is based on the output or productivity of the workers. Piece rates are frequently used in certain industries or occupations where the work is repetitive in nature and where employees have a high level of control over the results.
1. Is overtime considered when giving out per-piece wages? How to deal with everyday OT?
Answer: Under this system, a fixed rate is paid for each unit produced, job completed, or operation performed. Payment is made according to the quantity of work done, and no consideration is given to the time taken by the worker to perform the work. An equitable piecework rate should be determined to give an inducement to the workers to produce more. Workers are paid according to their performance because a distinction is made between efficient and inefficient workers. Efficient workers earn more wages because wages are linked to output. This gives an inducement to the workers to increase their production. Idle time will not be paid for, as is the case under this wage system. As per the Minimum Wages Act, 1948, where an employee's minimum rate of wages is fixed under this Act by the hour, by the day, or by such a longer wage period as may be prescribed, works on any day in excess of the number of hours constituting a normal working day, the employer shall pay him overtime rate. So, overtime should not be considered in the piece wages system because wages are linked to output, and this system motivates workers to produce more to get more wages.
2. Should ESIC, PF, Bonus, and Gratuity be part of the PR rate?
Answer: The production record for piece workers has to be maintained. The price of the article made by each piece worker has to be described, and the wages register must show the number of pieces made by a particular employee in a month, and the earnings have to be calculated accordingly. The important issue here is the coverage of such piece-rated employees under the ESIC, EPF, Bonus, and Gratuity. You can also refer to the said Act to know "Employee" defined under ESIC, EPF, BONUS, AND GRATUITY.
3. What if a person produces less than the target, so MW will not be met? What should be done?
Answer: To be fair and effective, piece rate systems should be transparent, reward employees according to the difficulty and quality of their work, and ensure that motivated workers can earn substantially more than the minimum wage. As per the Minimum Wages Act, 1948:
a) A minimum rate of wages for piece work referred to as "a minimum piece rate."
b) Where an employee is employed on piece work for which a minimum time rate (If an employer sets the working hours and the workers have to "clock" in and out, this counts as time rate work, not as output or piece rate work) and not a minimum piece rate has been fixed under this Act, the employer shall pay to such employee wages at not less than the minimum time rate and vice versa. For example, in the State of Madhya Pradesh, the minimum wage notification for piece rate beedi rollers (hand-rolled cigarettes) indicates a guaranteed minimum wage per week provided they roll 5600 beedis per week. Workers are entitled to this if the raw materials supplied are inadequate to roll this number. However, the guaranteed minimum wage will not be payable where the failure to roll 5600 beedis is attributable to the worker.
4. What components should be taken into account for making PR?
Answer: All remuneration, i.e., fixed and variable components.
5. Is PR viable or daily wages?
Answer: This will be differentiated on the following basis:
- Time or Output: Daily wages are determined on the basis of time spent on the job, while piece rate wages are determined on the basis of output.
- Efficiency: Daily wage rates are not linked with efficiency, while piece rate wages are linked with the efficiency of the worker, i.e., the higher the number of units produced, the higher the wages.
- Quality: In daily wage rates, the quality of work is very high because wages are fixed for normal working hours, while in piece wage rates, the quality of work need not be very high because wages are payable on output.
- Supervision: In daily wage rates, close supervision is required so that employees may not waste their time, while in piece wage rates, close supervision is not required because employees produce more to get more.
- Maintenance: In the daily wage system, employees are more concerned with their quality work, not quantity work, so the maintenance cost is low for machines and tools because they are properly handled, while in piece wage rates, the maintenance cost of machines and tools is high because employees are more concerned with their quantity work to produce more.
- Strained Industrial Relations: In daily wage rates, the relationship between employer and employee is good due to the fair wage system, while in piece wage rates, the relations between employer and employee become sour if their outputs are low.
Regards, Amit
From India, Surat
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