Typically, you need only take the labor hours for each item on your estimate and mathematically determine how much of that labor or labor burden your company will cover. This can vary from 10–30 percent. You should always discuss these company costs with the pieceworkers to be certain they believe they’re getting a fair deal. Then you simply need to count or measure what they perform each day and keep score.
The rest is basic accounting procedures that can vary from state to state especially when overtime (over 40 per week) is involved. You also need to ensure that worker’s compensation and taxes are being paid. In many instances, you are actually using “labor only” subcontractors, rather than actually company employees. Some contractors are using outside payroll firms or payroll leasing companies to simplify the mathematics and legalities.
Piecework is especially effective with today’s popular flex-time schedules and employees traveling far or staying at out-of-town jobsites. Employees who choose to work long shifts, odd hours and enjoy those three or four-day weekends can easily be measured without having your foreman or supervisor present during all these varying shifts.
Not Always: But as we stated last month, piecework doesn’t automatically fit every situation or every employee. Let’s look at some of these problems and alternatives.
Possibly the biggest problem or objection I’ve encountered with piecework comes from unions. Most union agreements I’ve read disallow any type of incentive pay that would encourage one of their members to work harder. That old union philosophy was to stretch out of the work so that no one would get laid off and their “bench” would stay empty. This is not true in every trade or local, but it was still very common until the unions lost their construction market share. Today’s aggressive locals are loosening up most of those old dinosaurs “right to not work” work rules.
Many union contractors have found creative methods for rewarding their productive, company-minded union employees. Some merely change the piecework units into hours of labor and then pay each employee for that many hours, regardless of how long it took to do the work. Some will reward the employees with a company truck or other perks.
Second on my problem list comes the Davis-Bacon prevailing wage and certified payroll. Even though it is extremely difficult for some contractors to accept, those Davis-Bacon prevailing wages are only the minimum that you must pay. By establishing a fair piecework productivity goal, you can then legally reward your top performers for whatever they can produce. You need to decide and agree with your pieceworker how much work you expect for that eight-hour paycheck and determine how much extra you will pay for each extra unit installed.
You can use that very same formula even when there is no Davis-Bacon prevailing wage. Some contractors call it “incentive pay” or a “piecework bonus” when the employees are paid a fair wage for a fair day’s work and so much per unit for anything above that.
Flat Rate: Next on our problem list comes repairs, replacement and remodeling. Typically, this work has always been done on a “time and material” or “cost plus” basis. By keeping track of exactly what each of these specific tasks cost, however, service contractors have accumulated enough historic data to accurately estimate and give flat rate prices. Many of those service contractors also are giving that flat rate labor budget to their service techs on a piecework basis. The gung-ho service techs are now really making some envious “bragging money” and so are their contractors.
But there will always be jobs that simply cannot be estimated. Thank God, we also have an ample supply of workers who are not interested in piecework. These are solid “8 for 8” craftsmen who will do a good job and please your customers without any incentives. I hope you are already rewarding these good “8 for 8’s” on a true merit basis to ensure they will continue to maintain their profit-producing pace.
Our next problem is dealing with employees who object to being paid on a piecework basis, but are not solid 8 for 8’s. They want their eight hours of pay, but really don’t concern themselves with whether the company gets a full eight hours of productivity. If you had no other reason or desire to initiate piecework in your company, this alone would justify your doing it.
The next project is the hardest for me personally to comprehend. We have foremen, job superintendents and project managers who resist piecework because “it’s too much trouble” and “takes too much time.” Even though I am a craftsmen, most of my working years were spent in supervision. I have always preached and practiced merit reward to be certain the best workers made the most money. As most of you have already discovered, that is quite impossible unless you measure fairly and keep score. There are dozens of workable methods for doing this, but none are even close to being as easy and less time-consuming than piecework. Piecework is literally the merit shortcut!
What makes all of this even more difficult to understand is that the same jobsite supervisors who resist piecework are the ones who need it the most! They typically run over their labor budgets and conveniently blame it on poor estimating. Their jobs lack discipline and are usually getting only six or seven hours work out of their crews. Their crews always manage to get a full 40-hour paycheck even if nothing gets done on that jobsite. But none of that even seems to bother them.
How Much For Each? Our last problem requires the most thought. When you have a crew doing piecework, how do you decide how much to pay each individual employee? Let me share some viable options that work:
- Some companies will pay the full amount to their crew leader and allow him or her to establish and pay each individual’s share. Usually these crew leaders will recruit and hire their own helpers at a beginner’s wage or 20–30 percent of the piecework wages. As that helper improves and increases the amount of work produced, that wage or percentage is adjusted accordingly. This system is self-policing because the crew leader realizes the financial value of that assistant’s effort and efficiency. We also have companies who will pay that entire crew those designated amounts to eliminate the payroll, insurance and tax headaches for their crew leaders.
- Other companies hire all of the employees and maintain a merit rating of pay for each craftsmen, as well as helpers. They then offer each piecework crew leader a helper who already has a designated wage that will naturally be deducted from that pieceworkers’ total wage earnings. Their crew leaders know a higher paid helper will produce more pay items so this system also works quite well.
Piecework is not new or experimental. Contractors have been using it successfully for centuries. There are many other methods for motivating and measuring jobsite productivity I hope you already are using one of those merit systems. If your best producers are not making those envious “bragging wages” and beating all of your labor budgets, you definitely should initiate piecework.