Paying by piecework

July 10, 2013 -  By

Does compensating employees by the job pay off?

When it comes to paying maintenance crewmen and foremen, have you considered the piecework system—paying your employees by the job instead of by the hour? With piecework you pay your employees for getting the job done; it doesn’t matter how long it takes them.

Pros of piecework

The one big pro is obvious: The employee begins to think like an owner.

Under a piecework system, employees are less often found milling around the shop. They think twice before coming back for a broken bracket on a trimmer. Time is money. If a foreman does have to come back, he’ll make smart decisions, like leaving the other workers on the job. You’ll also find him amazingly anxious to vanish from your presence to get back on the job. Routing will improve, too, as 7/11 stops suddenly will seem much less necessary and become less frequent.

Your foreman now correlates maximizing his paycheck to maximizing your product or service. Upon arrival at the job site, he’s no longer inclined to wait for the song on the radio to end or finish the conversation regarding the latest subtleties of last night’s game scores. He wants to start cutting as soon as he parks the truck.

In addition, instead of three crew members waiting around for the last crew member to finish up, they are all finishing up at the same time.

Wasted minutes add up quickly. If one crew does 20 jobs in a day and wastes five minutes on each job, it’s 100 wasted minutes per crew member. For a two-man crew (200 minutes) that’s three hours and 20 minutes per day. Can you afford it?

Raising pay

What if you could compete with the fast-food joints by attracting intelligent, motivated and hardworking employees who’d rather work in the great outdoors? Within the piecework system, you may be able to offer a hardworking individual the possibility of $20 per hour.

Plus, by using this system, owners spend less time managing employee problems and more time developing their businesses. In aligning employees’ goals with your own, workers can become the team you’ve worked so hard to produce.

Ultimately, with a piecework system employees now only make money when the company does. When the grass is long and wet, they make less money, just as the owner does. When the dry season comes and some employees make $20 per hour, remember that the same employees are providing $150 per hour in billables. Wouldn’t you like to be paying $20 per hour to your best employees?

Because the piecework system requires employees who are concerned about quality, not simply in making more money, this system needs the right kind of people. With piecework, employees need to be smart enough to realize that their paycheck depends upon satisfied customers.

Implementing piecework

Any time a change is implemented by an employer, employees immediately assume it’s to make the owner’s pocket fatter and theirs thinner. To address this concern, consider introducing the piecework system gradually. At first, you may want to institute a substantial production-based bonus system (where approximately 10 percent to 20 percent of employees’ pay would be a result of production bonuses). Then, begin by paying $1 per man-hour produced in a week, after 50 hours has been produced. Employees will see the immediate benefits of the system.

Ask yourself why you can be so much more productive in the field than your workers. Are you not already on the piecework system? Put your foremen and crew  members on the same system and you’ll find that your employees will not only work better, they’ll work smarter.

Piecework example

Each job is rated as X number of man-hours. A $45 job is approximately a 1.0 or 1.2 man-hour job, either $45 per hour or $37.50 per hour. If your labor costs average 40 percent, you can pay your workers 35 percent of the billing price, or $13.50. This strategy gives your otherwise $8-per-hour employee the opportunity to make $13.50 per job, no matter how long it takes him.

About the Author:

Dave Tucker is president of CLIP Software and author of “Lawn Maintenance and the Beautiful Business,” from where this article is adapted. Reach him via thebeautifulbusiness.com.

5 Comments on "Paying by piecework"

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  1. David Martinez says:

    This is something I have thought about for about 2 years and wasn’t too sure on how to make up a set price for each piece as doing piece work. Once maintenance is done and the end of the season comes, Completing fall clean ups which seem to take longer time, this should work the same way. Is there anyone that has tried this and likes the outcome for payroll and keeping the employees happy? Any feedback would be great.

  2. Dave says:

    We have used the piecework method in our own company, and we have seen multiple companies that have benefited greatly from it. Sometimes you can estimate leaf cleanups and mulching jobs accurately (and still use piecework). For a lot of the cleanup work that we do we charge the customer by an hourly rate, then pay the guys the hourly rate when they are doing that kind of work.

    If you are not pricing things accurately (cleanups are taking too long to complete) then you need to rethink how you are estimating properties, or make sure that your guys are working efficiently.

    We love the outcome for payroll, and our guys love getting paid this way!!

    For more information on Piecework checkout these blog posts:

    http://blog.clip.com/?s=piece+work

  3. Dave Tucker says:

    You will always have some problems with things like leaf cleanups. What we do and suggest is that you charge the customer by the hour and pay the guys by the hour for those jobs. Always the remember the 80/20 rule. I am interested in solving 80% of my problems with 20% of the effort (piece work for most of the year) but I realize that there will be another 20% that I will have to deal with, that’s okay.

    We have some webinars at http://www.clip.com on Piecework, how to set it up, run it, present it to your employees…… We hope this can be helpful to you!

  4. Justin says:

    Hi,

    I have some particularly slow workers, but they are good. They kill me in hourly rate. Are there any potential legal issues that could arise if they make less than minimum wage hourly rate?

  5. Cherish says:

    Hi Justin,

    Yes! Legally, you always need to pay minimum wage to your employees with or without piecework. I think you’ll find though that your employees don’t like making less than minimum wage and will increase their productivity if their pay is based on productivity. Still keep track of their hours and at the end of the pay period you can do the math to see if they made less than minimum wage. If not, you would just raise what you would have paid them to the minimum wage amount.

    The likelihood of that happening after you switch to piecework is very low! Dave Tucker wrote a book all about piecework that answers this question and many more. If you’re interested in piecework I would definitely check it out! Here’s the link to it on Amazon: http://www.amazon.com/Lawn-Maintenance-Piecework-Beautiful-Business/dp/0989165418/ref=sr_1_1?ie=UTF8&qid=1426011362&sr=8-1&keywords=piecework+dave