The term “piece rate” refers to a system of paying employees per unit of work completed rather than by the hour. For example, harvest workers might be paid a specified amount per bushel of apples picked. A good piece work plan can benefit employers by increasing productivity. It can also benefit workers by providing real rewards for extra effort. Any piece rate system in the United States must conform to the Fair Labor Standards Act. The provisions of the FLSA determine how the piece rate is calculated.
Add up the total hours worked. Although piece work is not paid by the hour, a record of time worked must be kept to verify the worker is paid at least minimum wage.
Multiply the piece rate by the number of units of work completed to determine the total regular earnings. For example, if a worker is paid $1.50 per unit and has completed 320 units of work during the work week, the regular earnings equal $480.
Divide the regular earnings by the number of hours worked to determine the regular (hourly) rate. If a worker earned $480 for 40 hours of work, the regular pay rate is $12 per hour. If the regular rate equals or exceeds the current minimum wage, the piece rate complies with the FLSA. If the piece rate falls short of the minimum wage, the employer must make up the difference.
Calculate overtime pay if a worker paid piece rate works over 40 hours in one week. Divide the regular rate of pay by 2. Multiply this amount by the number of overtime hours, then add the result to the regular pay. For example, suppose a worker earned $360 for 45 hours of work. The regular rate is $360/45, or $8 per hour. Divide $8 by 2, which equals $4. Multiply $4 times the 5 overtime hours to determine the overtime pay ($20) and add it to the regular pay for total earnings of $380.
Based in Atlanta, Georgia, William Adkins has been writing professionally since 2008. He writes about small business, finance and economics issues for publishers like Chron Small Business and Bizfluent.com. Adkins holds master's degrees in history of business and labor and in sociology from Georgia State University. He became a member of the Society of Professional Journalists in 2009.