Piecework and Piece-Rate
Understand piecework compensation to ensure minimum wage compliance and proper overtime calculations.
Piecework compensation: Minimum wage, overtime, and compliance considerations
Goals and takeaways
- Understand how piecework pay functions and how to calculate average hourly and overtime pay
- Identify when additional pay is required to meet minimum wage standards
- Recognize compliance risks with rest and recovery or non-productive time
What is piecework?
Piecework compensation refers to paying employees a set rate per unit produced, mile driven, call completed, or similar metric—rather than by hours worked. This model is common in agriculture, installation, trucking, call centers, manufacturing, and crafts.
While piece-rate pay can incentivize productivity, employees are still non-exempt under federal and state law and must receive at least minimum wage and overtime compensation as required.
Minimum wage requirements
Piece-rate pay per unit does not need to equal the minimum wage. However, total compensation divided by hours worked must meet or exceed applicable minimum wage standards at the federal, state, local, or collectively bargained level—whichever is most favorable to the employee.
You must calculate an employee’s average hourly rate of pay (also known as the regular rate of pay) for each workweek or workday.
Regular rate of pay =
(Total compensation for the workweek, excluding rest/recovery and premium pay) ÷ (Total hours worked)
Note: This is based on the workweek or workday, not the pay period. Employers must recalculate every period to confirm minimum wage compliance and overtime eligibility.
Piecework examples: Minimum wage calculations
Piecework only
- $0.40 per unit × 1,000 units = $400
- 40 total hours worked
- $400 ÷ 40 = $10/hour average rate
Meets federal minimum wage ($7.25).
Meets Iowa minimum wage ($7.25).
Fails New Jersey minimum wage ($13.00) → must add $120:
- $13.00 − $10.00 = $3.00 difference
- $3.00 × 40 hours = $120
- $400 + $120 = $520 total pay
Piecework with hourly administrative time
- $0.40 × 500 units = $200
- 25 piece hours + 15 admin hours @ $7.25/hour = $108.75
- Total: $308.75 ÷ 40 hours = $7.72/hour
Meets federal and Georgia minimum wage ($7.25). If working in a state with a higher minimum wage, additional pay is required.
Piecework plus flat-rate bonus
- $0.40 × 1,000 units = $400
- Bonus for 800+ units = $150
- Total: $550 ÷ 40 = $13.75/hour
If the state minimum wage is higher, the employer must top up and recalculate the rate.
Overtime and weighted overtime pay
Piece-rate employees must be paid 1.5× the regular rate for any overtime hours. However, instead of multiplying all overtime hours by 1.5, the standard approach is to pay:
- 1.0× rate for all hours (already included in piece rate)
- 0.5× premium for overtime hours
This is known as weighted (or blended) overtime. You must use the calculated regular rate of pay, even when employees have multiple earning types.
Weighted overtime formula
Average hourly rate × 0.5 × Overtime hours
Examples
Overtime with piecework only
- $0.60 × 2,500 units = $1,500
- 50 total hours worked → 10 overtime hours
- $1,500 ÷ 50 = $30/hour
- $30 × 0.5 × 10 = $150
- Total pay = $1,500 + $150 = $1,650
Overtime with piecework + hourly
- $0.60 × 2,500 units = $1,500
- 10 hours as foreman @ $7.25 = $72.50
- Total hours: 51
- Total pay: $1,572.50 ÷ 51 = $30.83/hour
- $30.83 × 0.5 × 11 overtime hours = $169.62
- Total pay = $1,742.12
If using an alternative overtime method, it must:
- Yield greater pay than weighted overtime
- Apply uniformly to all employees in the job classification
- Be clearly communicated and contractually agreed upon
Rest and recovery time
These are paid, non-working breaks (e.g., lunch or rest breaks). They must:
- Be compensated at no less than the applicable minimum wage
- Be shown as a separate line on the pay statement
- Not be included in piece-rate earnings
- Not be included in overtime or regular rate calculations
If rest time is not provided, employers may owe 1 hour of pay at the regular rate per missed break.
Non-productive time
Time where the employee is under employer control but not working (e.g., waiting on equipment repair, attending training, or meetings). This time must be:
- Paid separately from piecework
- Calculated based on hours worked
- Paid at or above applicable minimum wage
Summary
While piecework pay can drive productivity, it requires careful attention to:
- Minimum wage compliance
- Overtime calculations using average hourly rate
- Separate treatment of rest and non-productive time
- Transparent pay statements
These rules are in place to ensure that employees in high-output roles receive fair pay for all time worked. For nuanced scenarios, such as blended pay or rest rules in states like California or Washington, employers should consult with the state labor agency or a qualified advisor.
Last updated on June 7, 2025