Some employees are compensated on a “piece rate” basis. Piece rate is defined as, “Work paid for according to the number of units turned out.”  For example, employers in the business of drywall installation may pay their drywall installers based on the number of feet of drywall they install each workday.  Additionally, massage therapists may be paid based upon each service they provide.  However, there are strict requirements employers must follow in order to meet the legal requirements for piece-rate pay.  The requirements are as follows:

  1. A piece-rate employee must be paid for rest breaks separately from any piece rate compensation, and the rate at which they must be paid is the higher of (a) an average hourly rate determined by dividing the total compensation for the workweek, exclusive of compensation for rest and recovery periods and any premium compensation for overtime, by the total hours worked during the work week, exclusive of rest breaks, or (b) the applicable minimum wage.
  2. Piece-rate employees must be paid for “other nonproductive time” at least at the minimum wage.  This includes time spent on the job that otherwise does not earn the employee piece-rate pay.  For instance, the drywall installer example above would require the employer to separately compensate the installers for time spent setting up at the beginning of the shift and cleaning up at the end of their shift. 
  3. The piece-rate employees’ paystub must include the number of piece-rate units earned and any applicable piece rate each pay period, and they must separately itemize the rest break compensation and compensation for other nonproductive time.

Employees paid on a piece-rate basis are eligible for overtime pay as well as meal breaks.  Piece-rate employees’ overtime rates must be based on their regular rate of pay.  Calculating their regular rate of pay can be complex.  Being paid based on a piece-rate formula is not illegal.  However, because the legal requirements of this method of compensation are strict, you should confirm whether you are being paid properly on a piece-rate basis.