Piece work is the principle where the employee is strictly compensated per piece (item or outcome). The question is, “Is piece work still relevant?”
Historically, before 1 March 2006, piecework has traditionally been used to compensate employees in line with a specific task and / or outcome performed by the employee. The remuneration earned by an employee was in direct proportion to the output provided by that employee. In the scenario where an employee receives R1 per bag of apples as compensation, and where the employee only harvested 100 bags per day, the employee will only receive R100 as compensation for that particular day. By following this practice, the employer (producer) could better manage his labor input costs. Regardless of the employee’s productivity level, unit labor costs remain unchanged.
With the introduction of a minimum wage, employees must receive at least that minimum wage regardless of what the employee’s production outputs are. The producer (employer) is now forced to manage production outputs. Labor input costs decrease as the employee’s production increases and visa-versa.
Although the employee is entitled to a minimum hourly wage, as per National Minimum Wage, a producer (employer) can still manage his labor input costs by implementing a production bonus system.
Example: The employee is appointed at R21-69 p / hour which is also the current minimum wage. The required production standard that the employee must comply with is 90 picking bags per 9 hour day (which should preferably be included in the employee’s employment contract). That is, it costs the producer R2-169 per picking bag (90 bags divided by 9 hours = 10 bags p / hour at R21.69 per hour). As a motivator, the following measure is taken:
The employee will, in addition to his normal remuneration, receive R2-17 p / picking bag for each picking bag that exceeds the minimum required production standard of 90 picking bags. Assuming the employee harvests 105 picking bags, the employee’s remuneration will be calculated as follows: 9 hours x R21-69, which amounts to R195-21, plus R32-55 (the difference between total picking bags harvested minus minimum required production standard, 105 – 90 = 15 x R2-17). The total earnings are therefore R195-21 + R32-55 = R227-76.
NOTE: If the employee does not harvest at least the minimum production standard pick-up bags (90), he / she must still be compensated at the minimum wage per hour worked! However, should the employee fail to comply with the agreed standard, the employee’s services may be terminated (processes as prescribed by law must be followed). However, the standard must be fair and in line with industry and area standards. If the production standard is not achievable, it can be considered unfair if the employee’s services were to be terminated for this reason.
Although traditional piecework compensation is now “illegal”, the producer (employer) can still manage his labor input costs, and at the same time also increase productivity by implementing a production bonus system.
© Andre Bloem