What is piece-rate compensation?

Labor Code section 226.2 does not change the existing definition of what constitutes “piece-rate” compensation.

The existing Division of Labor Standards Enforcement Manual contains the following explanation of piece-rate compensation:

2.5.1 Piece-Rate or “Piece Work”

The American Heritage Dictionary defines the term piece-rate as: “Work paid for according to the number of units turned out.” Consequently, a piece-rate must be based upon an ascertainable figure paid for completing a particular task or making a particular piece of goods.


2.5.2 Examples of piece-rate plans

2.5.2 Examples of piece-rate plans can be as diverse as the following:

  1. Automobile mechanics paid on a “book rate” (i.e., brake job, one hour and fifty minutes, tune-up, one hour, etc.), usually based on the Chilton Manual or similar;
  2. Nurses paid on the basis of the number of procedures performed;
  3. Carpet layers paid by the yard of carpet laid;
  4. Technicians paid by the number of telephones installed;
  5. Factory workers paid by the widget completed;
  6. Carpenters paid by the linear foot on framing jobs.

2.5.3 A piece-rate plan of compensation

2.5.3 A piece-rate plan of compensation may include a group of employees who share in the wage earned for completing the task or making the product.

2.5.5.1 Piece-rate and commission plans

2.5.5.1 Piece-rate and commission plans may be in addition to an hourly rate or a salary rate of pay. Such plans may also be in the alternative to a salary or hourly rate. As an example, compensation plans may include salary plus commission or piece-rate; or a base or guaranteed salary or commission or piece-rate whichever is greater.


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