Do I Need To Pay My Staff A Minimum Rate If They Are Being Paid A Piece Rate?

Yes. 

You do have to pay your staff a minimum rate, even if they are being paid a piece rate. Failing to pay your employees the minimum wage can result in serious wage theft. 

Paying your employees a piece rate can be a great option to incentivise and improve productivity in the workplace. 

However, it is vital that any piece rate agreement you enter into is fair to your employee. 

Implementing an unfair piece rate agreement can be detrimental to your business, both financially and reputationally. 

Understanding how to effectively and fairly implement piece rate agreements within your business is vital to the success of your business and the protection of your employees’ human rights. 

What Is A Piece Rate?

A piece rate is when an employee gets paid by the amount of pieces they pick, pack, prune or make. The purpose of a piece rate is to improve productivity in the workplace. 

Piece rates are often utilised for employees who pick fruit on a fruit farm or grapes on a winery. A person who works for a piece rate is often referred to as a ‘pieceworker.’

A piece rate is generally utilised instead of an hourly rate. This means that an employee does not get paid by the hour, but by the amount of pieces they pick, pack, prune or make. 

Let’s consider the following example: 

Example 1  John works on Alex’s fruit farm as a ‘pieceworker.’ Alex and John have a registered agreement that states John will be paid a piece rate.  The agreement states that for every bag of fruit John picks, John will be paid $10. John generally picks around 3 bags of fruit per hour. As such, he is earning approximately $30 an hour. Note: This is above the minimum wage for John’s employment agreement (more on this in a bit).

The above scenario details a simple example of an agreement where an employee is paid a piece rate. 

Who Can Be Paid A Piece Rate?

In New Zealand, an employee can be paid a piece rate when: 

• An employment agreement specifically allows for piece rate payments 
• The employee isn’t covered by a collective agreement and they get paid a rate based on how much work they do. 

What Is An Employment Agreement?

An employment agreement outlines the wages and conditions of an employee’s employment within a particular industry or occupation. 

Employment agreements that allow for piece rate payments require that pieceworkers are still paid the minimum wage. 

What this means is that a piece rate must allow for the average competent employee to earn at least as much as the minimum hourly rate that they would receive under their employment agreement. 

For example, a pieceworker must be paid a minimum of NZ$18.90 an hour (as of the knowledge cutoff in 2023). This means that their piece rate must allow them, as an average competent employee, to earn at least NZ$18.90 an hour. 

What Is A Collective Agreement?

A collective agreement is an agreement between an employer and a union representing the employees. Collective agreements typically set out an employee’s employment conditions. 

Where there is a collective agreement in place, the individual employment agreement does not apply. 

Your piecework agreement must clearly outline the rate you will pay your employee per piece and how this will be measured. Ways in which a piece rate can be measured includes (but is not limited to) per item, kilo, bag or box. Similar to an employment agreement, your agreement must ensure that your employee is paid at least the minimum wage. 

For your piecework agreement to come into effect, it must be signed by both you and your employee. As an employer, you must keep a copy of this agreement and also provide a copy to the employee. 

A piece rate can vary depending on the work available. For example, there may not be as much crop available for picking as there was the day prior. In the instance that your piecework agreement is varied, the variation must be agreed to in writing by both you as the employer and your employee. 

Employees Who Don’t Fall Into An Employment Or Collective Agreement 

Employees who do not fall into an employment or collective agreement are often referred to as ‘agreement-free employees.’ 

If your business encounters agreement-free employees, you can still pay them a piece rate. However, it is vital to understand that they must still receive the minimum wage. 

To calculate the minimum wage relevant to your business’s industry, you can refer to the New Zealand government’s Employment website here. 

How Can I Tell If My Piecework Agreement Is Fair? 

The purpose of a piece rate is to improve productivity in the workplace. It is certainly not a means to exploit your employees. 

Ensuring that your business’s piecework agreement is fair is vital to your business and its livelihood. 

Your business’s piecework agreement will likely be fair if: 

• The piecework rate is in accordance with the relevant employment agreement requirements
• You are paying your employee a piece rate based on their experience in the workforce, the size of the operation they are undertaking and the quality of the crop
• You are regularly reviewing and updating your piecework rates according to any changes to the employment agreement or working conditions. 

What Are The Repercussions Of Not Having A Fair Piecework Agreement In Place?

Failing to have a fair piecework agreement in place can be extremely detrimental to your business. 

Failing to pay your employees the correct wage is wage theft. Wage theft encompasses serious repercussions. If you are found guilty of wage theft you can be both fined and forced to pay back your employees.

Too often it is revealed that piece rates are utilised to exploit society’s most vulnerable employees. For example, foreign immigrants have consistently reported that they have been paid unjustly low wages under a ‘piece rate agreement.’

Not only can wage theft result in hefty fines for your business, it can also result in significant loss of reputation and brand. It is vital to remember that the purpose of a piece rate is to incentivise and increase productivity in the workplace. It is not a means to exploit your employees. 

Need More Help?

Getting your legals right when it comes to piece rate agreements is vital to the success of your business. 

Exploiting your employees through the means of an unfair piece rate agreement is simply not an option. It will likely heavily impact your business, both financially and reputationally. 

Getting your legals right can be a complex task, we’re here to help! Reach out to our team for a free, no-obligations chat at [email protected] or 0800 002 184. 

---