Our Productivity and Industrial Engineering Books,click cover for contents. The Industrial Engineering book includes
Mo ti vate
Piece Work, Piece RatesThey may or may not fit your organization, whether in construction, manufacturing or service industries.
Piece rates do have benefits; they motivate employees, lead to faster project completion and better cash flow, result in actual costs closer to estimates.
Piece rates also have drawbacks, not only the set-up expense but also the field reporting and bookkeeping necessary to calculate payrolls which conform to minimum wage, overtime and tax laws. Piece rates involve bookkeeping and labor law, so involve the company lawyer and CPA in any pay plan.
JPR is a boutique consultancy that applies piece work and piece rates expertly and rapidly, in construction, manufacturing and service industries. JPR's value is to manage the advantages and shortcomings of piece rates, tailored to the client's specific objectives, timing, and budget. JPR does not try to sell you on piece rates, but explains potential advantages, operating issues, costs, and practical considerations so you can determine the right course for your operation, culture, objectives. We can also implement a wide variety of useful actions to reduce costs of operations, whether or not you opt for piecerates.
Click on the Construction Piece Rates book, above, for a more comprehensive analysis. Learn to predict accurately how construction piece rates can be expected to perform in your situation.
Please note the useful actions to reduce costs of operations, whether or not you opt for piecerates.
Are Piece Rates for You? For your operation, culture, objectives? Especially if the economy is really picking up? Read on, please click on the topic,
Regarding minimum wage
Advantages of piece rates
Disadvantages of piece rates
Actions to reduce costs of operations
Study this some more, or act?
More about piece rates
Workers on piece rates must still be paid at least the minimum wage,
city, state and Federal. Period. End of discussion.
Advantages of Piece Rates
1. Piece rates jobs tend to be completed more rapidly, so the company can bill and move on to the next project, can keep the cash flowing.
2. Actual labor costs with piece rates tend to be closer to the estimate.
3. A company can attract the best tradespeople, who will want to work where individual effort and skill are monetarily rewarded.
4. Pay incentives are effective employee motivators, because most people go to work for money in the first place.
5. Incentives, or piece rates, offer an opportunity for employees to increase their pay by their own skill, effort and mental ability.
6. Piece rates for repetitive, high volume tasks are relatively easy to set, and accurate.
7. The process of setting rates requires observation of actual practice. Observation will uncover cost reduction opportunity in advance, which you can correct.
8. The use of piece rates will require that employees be told exactly what is expected, and accurate site reporting, both of which will benefit the business.
Disadvantages of Piece Rates
1. Piece rates may, probably will, require more careful reporting from the workplace. You will benefit to be sure, but the admin cost may increase.
Workplace study and rates setup will also be required for piece rates, and more administration in the workplace and office to apply them correctly. Legal and financial resources should advise on Federal and state requirements. Accounting and payroll software programs may not be designed for piecerates.
2. Product quality may suffer; it doesn't have to, but may. More pay for more output can cause an employee to cut corners, and if so you'll have to find the problem. In case of a do-over, the employee will correct his mistake but still earn at least minimum wage.
3. Custom work often requires a larger variety of different tasks than for repetitive, high volume tasks; piece rates will be harder to set and administer, and less accurate. Custom work doesn't allow employees the practice opportunity that leads to high pace rates, and so may not result in net cost improvement.
4. When working conditions vary widely, even on common tasks, piece rates are less accurate.
Actions to reduce costs of operations
Instead of committing immediately to piece rates, focus on factors that typically offer a quick, significant improvement for a low cost, that will benefit your bottom line enough that you may choose not to install piece rates. And even if you do, these factors will already be under control, so that piece rates will be easier to install and more reliable.
JPR is pretty good at these improvements, by the way. We'll be glad to help out, we have done it before, and another set of experienced eyes adds a valuable new, objective, perspective. Within a week or two, JPR follows the plan below to pull unnecessary costs out of your operations.
1. Observe actual practice in the field. Observation will uncover cost reduction opportunity which you can correct. Get the waste out; waiting, rework, travel, vendor delay, crew size inefficiency.
2. Use existing reports that identify and quantify waste, assign responsibility and report improvement.
3. Establish expectations for output and timing, of major activity. That may be an estimate, or management judgement.
4. Measure performance against expectations and publish results for tradesmen and management, monitor progress.
5. Improve reporting to include what is important to your organization .
Your particular objectives and circumstances are unique. As you decide to act to apply improvements to fit your situation, we'll help you.
Study this some more, or Act?
If you want to study some more,
please click the Construction Piece Rate book, or an article.They are more extensive. Come back when you are ready.
Article, Piece Rates Click to read
Article, Construction Piece Rates Click to read
But if you want to Act,
give me a call, Jack Greene, 843-422-1298
One size does not fit all. Your particular objectives and circumstances are unique. That is why we offer a two week action package at your location, and come equipped, but not with predetermined solutions because we don't know your situation. Instead, we bring a list of questions to ask, factors to observe in the work sites, checklists of critical workplace and admin practices, basic report forms we can quickly adapt.
Over two weeks, we'll address many of the effective actions to gain the benefits and minimize the drawbacks of piece rates. We observe a lot, ask many questions, then suggest specific actions to cut cost and improve output and calendar in your operation. If you desire to install piece rates in your operation, we'll also outline a plan and cost to do so.
Further detail about piece rates
1. More about why you must get the waste out first. Stay with me here, this is slightly technical. You do not want to set any kind of incentive rate with wasteful practices built in. Don't base incentives on an historical average, either. If any rate or history includes waste, that means the company will pay for the wasteful activity even if it is not performed. Employees can be counted on to identify unnecessary work and cut it out on their own, if it benefits them. If you want the cost saving, you pull the waste out. Believe me, it will pay dividends. JPR can quickly help to identify, quantify, and remove wasteful activity.
2. At this time, while there are various published data bases of work tasks and times required to perform them, written detail of the specific conditions that apply is not provided. Since it is quite risky to promise to pay without being sure of the conditions, a business had best develop the rates that apply to his particular circumstances, tools, crew size, market, support, supervision. The published data bases tend to be developed from "past performance", which will include wasted activity and lost time. If the "past performance" values are results from workers not motivated by incentive, they will tend to allow more than normal time.
3. Piece rates are not good for repair or rework, trouble shooting, warranty because content of that kind of work is not predictable.
4. In construction and service business, piece rates are closely related to values used by project estimators, and coordination between piecerates and estimating is extremely valuable. You will want to establish feedback systems to correlate piece rates, actuals, and estimated times. For best effect, you may want to incorporate piece rates and estimating organizationally, and / or to revise estimating and bidding practices and software.
Contact Jack Greene today for a rapid response, at 843-422-1298 or e-mail.