Take time to get piece rates right

Many growers see the use of piece rates as an attractive option to avoid paying overtime to casual workers employed under the Horticulture Award. While piece rate workers are not subject to the overtime provisions of the Horticulture Award, changing to piece rate payment is not a simple or easy process.

What is a piece rate?

Using piece rates to pay workers is a good way to encourage productivity and incentivise workers.

A piece rate payment is one where payment is made according to each “piece” processed. An example would be how much weight or volume of product is picked, packed, pruned or made. Prior to picking or packing, a rate is agreed and payment is made that depends, for example, on how many kilos, buckets or bins are picked or packed.

Once a rate is agreed, payment is solely based on how fast the worker is, with the fastest worker earning the most and the slowest the least.

The employees’ earnings will depend entirely on their productivity. A piece rate agreement does not guarantee that the employee will earn at least the minimum weekly or hourly wage in the award.

Piece rate payments don’t include overtime

Following a decision of the FairWork Commission on 2^nd April, a number of changes were made to the Horticulture Award including the requirement to pay overtime to casual workers from the 15^th April 2019. Nothing in the decision changes the payment of a casual employee on a piecework agreement. This means that the pieceworker does not get overtime or the night loading, and neither the overtime rate nor the night loading are factored into the calculation of the piece rate, but additional payments for working on public holidays still apply.

While the use of piece rates would seem to be an easy, legal way to avoid having to pay overtime, it’s not as simple as it sounds, and as with most things, the devil lies in the detail.

When can a piece rate be used?

A number of criteria must be followed before workers can be paid on a piece rate as follows:

• The award or registered agreement must allow for piece rate payments. Most horticulture workers are paid under the Horticulture Award 2010 which allows for piece rate payments.
• A piece rate can only be used when the weight, volume, or unit picked or packed by individual workers can be measured. So there is no opportunity for a group piece rate where for example two workers share picking into a bin, or a group of workers share how much is picked using a mango picking aid.
• If an employee is doing an hourly paid task and achieves 304 hours before the eight week overtime period is finished (which would trigger overtime payment), they cannot then be switched to piece rates (that don’t attract overtime) for the same task. If they have been doing an hourly paid shed job and then switched to a different piecework paid job such as picking, that will not attract overtime

How to implement piece rate payment

A number of criteria MUST be met before making piece rate payments:

• Check the FairWork Ombudsman website for information on piece rate payments – https://www.fairwork.gov.au/pay/minimum-wages/piece-rates-and-commission-payments
• There must be a written and signed piecework agreement setting out the pay rate per piece and how it is measured, before any work commences. An employer has to keep the agreement as part of their records and give a copy to the employee. If the agreement is varied, it must be agreed to in writing by the employee and employer.
• Piecework rates must enable the average competent employee to earn at least 15% more per hour than the minimum hourly rate in the Award for their type of employment and classification level. Competence is not to be confused with motivation, attitude, behaviour or proficiency. These are attributes or levels of skills that may determine how much a worker picks and is ultimately paid, but they are not indicators of competence.
• Piece rates may change several times a day if workers move to different paddocks/fields where crops might be heavier or lighter, or fruit smaller or larger etc. In this case workers must be aware, and agree to the new piece rate.
• A timesheet must be used for each worker that records the number of hours worked for each piece rate, including breaks.

Calculating the piece rate

Determining what an average competent worker is can be difficult, and may need adjustment if it doesn’t allow for an average competent worker to earn at least 15% above the minimum hourly rate in the Award.

Where historical data exists, use this to assist in calculating the piece rate. Where data does not exist, use a best estimate derived from neighbouring farms or similar crops in other areas. Workers can also be initially paid on an hourly rate to help determine realistic targets for piece rates.

It is preferable that the piece rate is calculated using sample data from as many workers as possible to ensure it is representative of the workforce.

Piecework is not intended to be mechanism to reduce wages costs. Piecework provides a 15% loading for workers as they are being placed on a productivity form of payment. If all workers on a property were considered to be competent, it follows that the total wages cost could actually be higher than if workers were paid on an hourly basis.

Remember, piece rates are an important productivity tool allowed for in the Horticulture Award. When calculated and implemented correctly piece rates can be a win-win for both growers and workers. But moving to piece rates is not quick or easy. Take your time, do some homework and seek advice before making the switch.