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Let's Talk About Piece Rates

Business owners can pay their employees in a number of different ways.


Wages

Wages are paid based on the amount of time an employee spends working for a business owner. The amount that the employee is paid is agreed upon between the employee and the business owner. The employee however is entitled to the minimum wage that is in place at the time of this agreement.


Salary

Salary is paid at a fixed amount for a one year period and is tied to the number of hours that the employee needs to work. The salary earned must still be equal to or higher than the minimum wage for each hour worked.


Commission

A commission is paid based on sales an employee makes or other targets that they have met. Commissions are sometimes paid on top of an hourly rate and can be capped in some instances. Employees on a commission must still get at least a relevant minimum wage.


Piece rates

A piece rate is a commission where the worker is paid for the number of pieces that they worked on. For example in the aquaculture industry an employee might be paid $0.20 for each oyster they shuck, in horticulture an orchard worker may be paid $2.00 per kilo of apples they pick and in the fashion industry it could be $1.00 for each tee-shirt that they sew.


So let's say for example that our aquaculture worker is able to process 80 oysters on average an hour for a 10 hour day. Their hourly rate would be $16.00 and their daily rate before deductions $160. As of the date this is being written our aquaculture worker is getting less than the minimum wage. This doesn't seem right. Or is it. Does someone on a piece rate just have to work harder and faster to make sure that they earn enough to get the minimum wage?


Well, actually the answer is no. Just like all of the other examples that we talked about where an employer must ensure that their employee gets at least the minimum an employer of piece rate workers must ensure the exact same thing. This means that our aquaculture employee will need to have their hourly pay topped up so that it is equivalent to the relevant minimum wage.


So what if the orchard employee can only pick on average 5 kilograms of apples amounting to a $10.00 hourly rate. The same thing. Their employer must top up to the relevant minimum wage.


"But surely an employee who has agreed to a piece rate is not entitled to more than what they have agreed to with their employer?" Unfortunately it does not work like that. All workers are entitled to at least a relevant minimum wage.


Piece rates are meant to encourage employees to work faster so that they can decide what their average hourly will be. This is good for them and good for the employer who can generate higher productivity. Sadly though we see many news stories of employers who often take advantage of piece rate workers, often seasonal workers, and under pay them.


Paying employees the minimum wage is a basic legal requirement. If an employer uses a piece rate, they need to have a system in place to ensure their workers get paid at least the minimum wage for all hours worked. That means payments may need to be topped up to at least the minimum wage.


The Labour Inspectorate encourages anyone concerned about their employment situation or the situation of someone they know, to phone the Ministry’s service centre on 0800 20 90 20 where concerns are handled in a safe environment.





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