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The new piecerate floor – are you ready?
Every now and again a major change to the way we do business is forced upon us. Some resist, some complain, while others get on with working out how to deal with the change. The new piecework minimum wage is one such change.
Why have piecerates existed?
Piecework payments have been an integral part of the wages system for horticulture for a long time. The benefits have been felt by both employers and their workers in several ways.
The employer can plan and budget for a consistent cost per unit of production. They also benefit from a workforce motivated by the opportunity to increase their earnings, ensuring maximum productivity.
Workers who are efficient and productive can get rewarded with wages better than the hourly rate they would otherwise earn – sometimes significantly so. Workers who do not have the ability to work fast enough to be considered for an hourly-page job still have the capacity to earn something, rather than be forced onto welfare.
Some always spoil it for the rest
However, the legitimacy of this regime has relied upon the piecerate offered being realistic and fair. The existing Horticulture Award has stated how piecerates are to be paid, but has never prescribed how they are to be calculated. There has never been a single accepted formula available under which growers can fulfil their obligations with certainty. And with so many variables amongst the myriad of farms, commodities and conditions under which the work is done, it is unsurprising growers use many different calculation methods.
This has resulted in certain employers taking advantage of the grey area and offering piecework rates that are neither fair nor honest. And while every industry has its fair share of shonky operators, piecework has provided those within the horticulture sector with that mindset the opportunity to line their pockets with money that rightfully belongs to their workers. The negative publicity generated by stories of victims has done reputational damage to farmers Australia-wide.
The rotten apples
A well-organised campaign over an extended period by the Australian Workers Union has consistently highlighted in the media many examples of workers receiving very low wages under piecework conditions. Although greater scrutiny of some of the claims may have been warranted, it was clear there were sufficient genuine examples of exploitation to attract the attention of authorities.
However, rather than increase investigation and compliance actions against those accused of flouting the law, a broad brush approach was taken that has now impacted on all horticulture employers paying piecerates. There has been no change flagged to investigation or compliance activity, so those lining their pockets with victims’ money will presumably continue to do so. As a result, the stories of exploitation will likely endure and the farming sector will continue to have its reputation battered.
The Fair Work Commission
The AWU took an action in the Fair Work Commission to insert a minimum wage floor for piecework into the Horticulture Award. The final decision on 1 February2022 by the Fair Work Commission still retains piecework as a legitimate method of paying workers. However, the major change that has been enacted is the minimum payment that can be made to an employee for a days’ work is the minimum hourly rate they would otherwise be entitled for that day. So while a highly productive worker can still earn well above the hourly wage for that role, as many currently do, a worker with poor productivity must be paid at least their minimum wage.
The unit cost of production for the employer will no longer be consistent between workers, and will vary depending on their productivity as a whole. This will make it much more difficult to plan and budget for labour overheads, often the largest operating cost in horticulture operations. It also means that for every underperforming employee whose wage needs to be topped up to the minimum, the unit cost of production will increase.
How can farms deal with a floor?
As a result of this change, employers will consider whether it is viable to retain low performance employees. For many, the immediate resolution will be to replace that worker with a more productive one. In the current COVID-limited labour market, replacement may not be an option.
However, if the productivity of the worker can be increased to at least the minimum wage level, everybody wins. The employee keeps their job and the employer does not have to go to the time and cost of replacing them. So, how can an employer increase the productivity of underperforming workers?
An obvious step is at engagement. Providing a new worker with a quality induction, that includes training how to undertake the job efficiently, provides them the best opportunity to hit the ground running. This will take extra time and effort, and place more responsibility on supervisors of new staff. However, if successful, it may have the added positive impact of reducing staff turnover. New starters will no longer become quickly disillusioned with low earnings and resign without giving themselves enough time to gain speed – a hallmark of piecework without good training.
A key element in the new regime will be the need to record employee hours worked, including those remaining under piecework arrangements. Although this has always been recommended, it was never previously specifically required by the FWC. An upside will be that tracking individual worker hours will provide valuable information that can be used to improve productivity – data that has been sadly lacking for many horticulture enterprises.
Should you just switch to hourly rates?
Some growers will consider switching from piecerates to only hourly wages to maintain simplicity and easier compliance. This however will remove the incentive for high productivity that is the crowning glory of the piecerate system.
Lessons can be learned by the UK experience, where similar minimum wages were legislated in 2013. It has been suggested that although many growers immediately switched to hourly rates, the resulting drop in productivity was so great that they returned to piecerates and learned to manage floor payments. An excellent presentation on the subject was made by Laurie Adams, Manager at Burlington Berries, at the 2021 Fruit Growers Tasmania winter conference. One of his bold suggestions was to pay bonuses on top of the minimum wage during a training period. The purpose of this was to encourage a learner to improve as fast as possible, and to establish a work pattern that is likely to remain after the training ends.
Are you ready for the change?
A change as significant as this will provide challenges for the industry to adapt. The implementation date of 28 April is looming, and those horticulture operations that have been organising for the change since the decision was announced on 3 November 2021 will be well ahead of those who have simply protested but done nothing to prepare.
Are you ready?
