Piece Rate

What Is Piece Rate Pay?

Piece rate (or piecework) compensation is a pay structure where employees are paid based on the number of units they produce, tasks they complete, or items they process—rather than the number of hours they work. Common examples include:

• Agricultural workers paid per bin of produce harvested
• Garment workers paid per item sewn
• Auto mechanics paid per repair job (flat rate)
• Truck drivers paid per mile driven or load delivered
• Home healthcare workers paid per patient visit

While piece rate pay can incentivize productivity, California has strict requirements to ensure piece-rate workers receive fair compensation for all their time.

California Piece Rate Requirements

California law provides unique protections for piece-rate employees that go beyond federal requirements.

Minimum Wage Guarantee

Even when paid by the piece, employees must earn at least minimum wage for all hours worked. If piece-rate earnings divided by total hours falls below minimum wage, the employer must make up the difference.

Example:

• Employee earns $120 in piece-rate pay
• Employee worked 10 hours
• Effective hourly rate: $120 ÷ 10 = $12/hour
• California minimum wage: $16/hour
• Employer must pay additional $40 to meet minimum wage

Separate Compensation for Nonproductive Time

Under AB 1513 (codified in Labor Code Section 226.2), California employers must separately compensate piece-rate employees for:

Time Type	Required Compensation
Rest and recovery periods	Average hourly rate for the workweek (piece-rate earnings ÷ productive hours)
Other nonproductive time	Minimum wage OR higher agreed-upon rate

Nonproductive time includes:

• Time between tasks waiting for work
• Time spent on duties not directly tied to piece-rate production
• Administrative tasks, meetings, or training
• Time spent cleaning or setting up

Wage Statement Requirements

Pay stubs for piece-rate employees must show:

• Total piece-rate earnings
• Number of units and applicable rate(s)
• Compensation for rest and recovery periods
• Compensation for other nonproductive time
• Hours worked and how compensation was calculated

Calculating Overtime for Piece-Rate Workers

Piece-rate employees are entitled to overtime pay, but the calculation differs from hourly workers.

California Method

1. Calculate the regular rate:

   • Add all piece-rate earnings + rest period pay + nonproductive time pay
   • Divide by total hours worked

2. Calculate overtime premium:

   • For hours over 8/day or 40/week: Pay an additional 0.5× the regular rate
   • For hours over 12/day or 7th consecutive day hours: Pay an additional 1.0× the regular rate

Example:

• Piece-rate earnings: $600
• Rest period pay: $40
• Nonproductive time: $20
• Total compensation: $660
• Total hours worked: 50
• Regular rate: $660 ÷ 50 = $13.20/hour
• Overtime premium (10 hours): 10 × $6.60 = $66
• Total weekly pay: $726

Note: The $660 already compensates for all 50 hours at the base rate—you only add the overtime premium (0.5×).

Rest and Recovery Period Calculations

California piece-rate workers must receive:

Rest Breaks

• One 10-minute paid rest break per 4 hours worked
• Paid at the average hourly rate for that workweek
• Must be separately itemized on the wage statement

Calculating Average Hourly Rate

Average Hourly Rate = Total Piece-Rate Earnings ÷ Hours Spent on Piece-Rate Work

Example:

• Employee earned $480 in piece-rate pay during productive work
• Spent 30 hours on piece-rate work
• Average hourly rate: $480 ÷ 30 = $16/hour
• Worked 40 total hours (including breaks and nonproductive time)
• Rest break compensation: 4 rest breaks × 10 minutes = 40 minutes = 0.67 hours
• Rest break pay: 0.67 × $16 = $10.72

Common Industries Using Piece Rate

Agriculture

• Harvesting crews paid per bin, box, or pound
• Strict heat illness prevention and rest break requirements apply
• Contractors must register with the Labor Commissioner

Manufacturing and Garment

• Assembly line workers paid per completed unit
• Sewing operators paid per garment
• Extra scrutiny for wage theft in this industry

Automotive

• Mechanics paid "flat rate" per repair job
• Book time may differ from actual time spent
• Must still track hours for overtime purposes

Healthcare

• Home health aides paid per patient visit
• Travel time between patients may be compensable
• Rest breaks must be scheduled and compensated

Trucking and Delivery

• Per-mile or per-load compensation
• California's AB 5 has impacted independent contractor classifications
• Detailed time records required

Compliance Challenges

Piece-rate pay presents unique compliance challenges:

Tracking Time Accurately

Even though pay is based on output, employers must:

• Track all hours worked (not just productive time)
• Record start and end times for shifts
• Document meal and rest breaks
• Separate productive from nonproductive time

Preventing Off-the-Clock Work

The incentive to produce more can lead to:

• Employees skipping breaks to earn more
• Working before/after shift without clocking in
• Pressure to report fewer hours than actually worked

Managing Minimum Wage Compliance

• Weekly reconciliation of piece-rate earnings vs. hours worked
• Automatic minimum wage top-ups when needed
• Clear documentation of all adjustments

Best Practices for Employers

1. Use time-tracking technology: Capture exact hours, break times, and productive vs. nonproductive time
2. Automate calculations: Let payroll software handle complex piece-rate overtime and break pay
3. Train supervisors: Ensure managers understand break requirements and don't pressure employees to skip breaks
4. Audit regularly: Review pay calculations to catch errors before they become systemic
5. Document piece rates: Keep signed agreements showing agreed-upon rates for each task type
6. Itemize everything: Provide detailed wage statements showing all components of pay

Piece-rate pay can be efficient and motivating when implemented correctly, but California's detailed requirements demand careful attention to compliance.