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Minimum Wage and Overtime for Piecework.
How Are They Calculated?

 

Although many workers today are paid a salary or an hourly wage, there are still a considerable number of workers who are paid on a piecework basis. Under this arrangement an employee is paid a set rate for each unit that is produced or each task performed.

For instance, a plumber may be paid a set amount for each toilet installed, a telemarketer is paid for each call made, a migrant worker is paid for each basket of fruit picked, etc. In effect, this method is often used as an incentive. The more units produced or tasks performed, the greater the financial rewards.

However, employers who pay for piecework may make one critical mistake. They assume that since the employee is not being paid on an hourly basis, the employer is not obligated to track the amount of time spent by the employee in performing the work. This reasoning is faulty for two primary reasons:

 

• Even pieceworkers must be paid minimum wage, and

• Even pieceworkers must be paid for overtime work.

 

Piecework and Minimum Wage

Under the provisions of the Fair Labor Standards Act (FLSA), every employee who is not exempt from the provisions of the FLSA must be paid a minimum wage. Currently, the federal minimum wage is $7.25 an hour, but each state also has a minimum wage law, and in some states the minimum wage is higher. An employee must be paid the higher minimum wage.

Since pieceworkers are not paid on an hourly basis, a pieceworker is defined as being paid the minimum wage if his regular rate of pay is greater than the current minimum wage. As noted in the article The Basics of Calculating Overtime Pay, the regular rate of pay is calculated by dividing the employee’s total remuneration by the total number of hours worked in a workweek.

Therefore, a pieceworker’s regular rate of pay will vary from week to week, because a pieceworker’s remuneration is based on the total number of units produced or tasks performed. This also highlights one crucial point: An employer must track the total number of hours worked during a workweek, even if the employee is not being paid an hourly rate.

For instance, suppose that a pieceworker in Maryland is paid $3.50 for each widget he produces, and he works 46 hours one week in order to produce 103 widgets. His total compensation for the week would be $360.50 (103 widgets x $3.50/widget). His regular rate of pay would be $7.83/hour ($360.50 / 46 hrs). That is more than the federal minimum wage, but the minimum wage in Maryland is $8.00 per hour, so this pieceworker would have to be paid an additional $7.50 in order to be paid minimum wage for the 46 hours worked (46 hrs x $8.00/hr).

Another point to keep in mind is that this calculation must be done for each workweek. The Code of Federal Regulations [29 CFR 776.4] clearly states that a workweek is the standard for any definitions under the FLSA.

Piecework and Overtime

The Code of Federal Regulations states the following: “When an employee is employed on a piece-rate basis, his regular hourly rate of pay is computed by adding together his total earnings for the workweek from piece rates and all other sources (such as production bonuses) and any sums paid for waiting time or other hours worked (except statutory exclusions): This sum is then divided by the number of hours worked in the week for which such compensation was paid, to yield the pieceworker's ‘regular rate’ for that week. For his overtime work the piece-worker is entitled to be paid, in addition to his total weekly earnings at this regular rate for all hours worked, a sum equivalent to one-half this regular rate of pay multiplied by the number of hours worked in excess of 40 in the week.” [29 CFR 778.111]

Suppose the employee in the above example works 46 hours in one week again, but this time he produces 128 widgets. His paycheck would be calculated as follows:
 

• Regular pay = 128 widgets x $3.50/widget = $448.00

• Regular rate of pay = $448.00 / 46 hours = $9.73/hour

• Overtime hours = 46 hours – 40 hours = 6 hours overtime

• Overtime pay = $6 hr x $9.73/hr x 50% = $29.19

• Total paycheck = $448.00 + $29.19 = $477.19

There is an alternative method of paying overtime to pieceworkers as long as their regular rate of pay is more than the minimum wage. In this method both the employer and the employee must agree that any piecework done during overtime hours will be paid for at one and a half times the regular piece rate. [29 CFR 778.418]

Suppose that such an agreement were in place for the above employee, and that he produced 110 widgets in the first 40 hours and the remaining 18 widgets during the 6 hours of overtime. His paycheck would then be calculated as follows:
 

• Regular time piecework = 110 widgets x $3.50/widget = $385.00

• Overtime piecework = 18 widgets x $3.50/widget x 1.5 = $94.50 (or $5.25/widget)

• Total paycheck = $385.00 + $94.50 = $$479.50

Tracking Hours Worked Is a Key to Pieceworkers’ Compensation

Although an employer may pay its employees based on piecework rather than an hourly rate, employers must still be able to track the amount of time worked by each pieceworker. This is only way that an employer can verify that its employees have been paid minimum wage, and that all overtime due has been paid. In fact, tracking time worked is a key factor in paying any employee that is subject to the Fair Labor Standards Act.