How to calculate piecework wages: formula, examples

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

The relationship between an employee and an employer is a complex process of interaction, which is based primarily on the main principle: both parties receive material benefits from each other.

In order to implement this task, various ways of organizing the wage system in companies are being developed. They can be divided into two large groups:

• piecework form of payment;
• time-based form of payment.

In this article, the first form will be discussed in more detail.

Piece wages are more complex than hourly wages as they can involve various combinations and options.

Piecework wages in modern enterprises is one of the most popular forms of wages. It provides for remuneration for work, which depends on the quantitative and qualitative indicators of the employee for the past period. In other words, payments are made solely for the amount of work performed. A bonus amount for various additional indicators can be added to piecework payment.

The concept of wages

The organization of wages is regulated by the all-Russian labor legislationat the following levels:

• minimum guarantees an employer must provide to an employee;
• tariff agreements of trade unions (or other workers' organizations) representing the interests of workers with employers' unions (at the level of performance-based guarantees);
• collective agreements between employers and trade unions (at the level of guarantees that a particular employer can afford);
• according to tax laws.

Regulations currently in place include:

• legislating and changing the minimum wage;
• tax regulation of cash income that is used to pay wages to organizations, as well as income of individuals;
• establishment of guarantees from the state.

Russian labor legislation defines the following forms of remuneration:

• tariffs that determine the performance of work of a given volume and a given complexity for a limited period of time;
• at a fixed rate, which is paid to the employee for a month in accordance with the job duties and a certain complexity.

The first form is piecework, and the second is time-based (or salary).

Both of these forms are an obligatory part of the salary - payments directly for the work performed. Another component is added here, which takes into account special special working conditions. The third element is part of the salary in the form of an incentive element. Therefore, an employer who uses an incentive (bonus) system at the enterprise must:

• make decisions about what he needs to pay, in addition to salary, also bonuses;
• define the rules for calculating bonuses.

Remuneration for piecework-bonus form is the sum of the following accruals:

• payment for the work itself at existing rates;
• bonuses and bonuses for special working conditions;
• payment of bonuses due to an employee in the event of certain conditions.

The concept of piecework wages

Piecework wages should be understood as such a type of payment (a method of determining wages), in which a monetary reward is paid for each unit of a product or amount of work, taking into account the specifics, quality and complexity of production. Here they take into account complicated working conditions, increased danger at work, harmfulness, etc.

Main species

The following types of payments are used in modern enterprises:

• a simple piecework-bonus form, in which permanent bonuses are paid through the payment of additional monetary remuneration for overfulfillment of established labor standards and the absence of marriage in the work performed and products;
• piecework-progressive, which provides for the establishment of special increased rates for work performed in excess of the establishedcertain norms for her;
• accord-bonus, which is used to assess the cost of a set of works performed within a certain short time (carried out on the basis of the cost of these works);
• indirect piece-work is used in the work of the auxiliary divisions of the company.

Key Features

The company's incentive system should focus on the following:

• managing employee motivation;
• stimulating staff to achieve the best results in achieving the goals of the business plan in accordance with the company's strategy;
• improving personal and team performance of employees;
• establishing a direct relationship between remuneration and other employee benefits upon their achievement of specific results in accordance with approved work plans;
• attract and retain the workers the company needs;
• positioning the company as a "best employer".

Characteristic features of the developed bonus system in the company with such a remuneration system are:

• applies only to those employees who receive wages at the rate;
• dependence of salary on employee performance;
• no need to constantly accrue bonuses, only if certain indicators are achieved;
• the need for mandatory application of the district coefficient, which has its own meaning in each region.

The incentive system must be comprehensive. It is built in accordance withemployee motivation factors, their needs and expectations. The use of incentives allows the company to reduce employee turnover and increase labor productivity.

The establishment of certain bonus rules includes the following types of information:

• characteristics of the types and features of the procedure for the applied material incentives;
• characteristics of the conditions for calculating bonuses;
• setting special numerical values for bonus calculation;
• determination of the accrual of cash surcharges;
• identifying conditions for deprivation of bonuses.

Positive aspects of piece-rate wages

The advantages of this system for the employer include:

• the popularity and sophistication of this system, as it allows the employee to be interested in the final indicators of his work and the growth of the efficiency of the entire company as a whole;
• willingness of staff to work productively and not just get paid;
• reducing the firm's fixed costs by intensifying labor.

The advantages of this system for the employee include:

• income directly depends on the quality of the employee's work;
• you can hire newbies for any job.

Negative aspects of the system

Like any economic phenomenon, this system has its drawbacks.

Negatives for the employer:

• difficultyadministration, which should be understood as the need to maintain a staff of controllers and accountants (this gives an additional burden on the wage fund);
• possible decrease in the quality of work, since the employee may be focused not on the quality of the work performed, but on its quantity (the need for clear control of marriage);
• injury rate is higher than under normal conditions (worker in pursuit of work volumes loses attention and concentration);
• complexity of the labor rationing process.

Negatives for employees:

• The ratchet effect suggests that an increase in the amount of work performed entails an increase in standards. With the constant growth of standards, the employee’s capabilities are at the limit, he ceases to cope and, as a rule, loses interest in productive work.
• Decrease in income when going on vacation or sick leave.

Calculation formula

Consider how to calculate piecework wages. The calculation procedure determines the accounting for the number of units of goods produced by the employee. Each unit has its own value. Therefore, the calculation of piecework wages is formed from the amount of finished product at the output.

For the calculation we use two values:

• production rate per day (NI);
• official rate per day.

To understand how to calculate piecework wages, the calculation formula needs to be considered:

ZP=ND, where ZP - wagesemployee, thousand rubles.

With a piecework system of remuneration within the framework of the piecework form, the formula is used:

ZP=HMF, where B is the time that an employee needs to perform the necessary operations in relation to a unit of goods, expressed in hours; MF - the monetary value of one hour, rub.

Basic Rates

Let's consider the question of how to correctly calculate piecework wages and rates for it. The piece rate can be calculated by the rater based on an analysis of the work of an employee or team as a whole for several months.

The instruction for calculating the piece rate is as follows:

• Conduct three, six and twelve month performance reviews. To do this, all manufactured products for the analysis period are added up and divided by the number of working days in the billing period. This results in the average output per day. The resulting value must also be divided by the number of working hours, we get the number of products produced per hour.
• We are quoting for manufactured products. To do this, we determine the average daily wage of an employee. For such a calculation, we add up all the amounts earned by the employee for 12 months, divide them by 12 and by 29.4 (the average number of working days in a month). We get paid in one day.
• Divide the average daily wage by the number of products produced by an employee in one day. Get the cost of one part.
• Forto determine the average piece rates, we add up the number of products produced for three, six, twelve months of all employees and divide by the number of days during which the products were released.
• We calculate the average earnings for the analysis period.
• We divide the average daily wage by the number of products produced per day. This way we get the average piece rate.

Calculation of maternity leave (M&R)

Let's consider the features of such payments for piecework wages. How to calculate the BiR amount?

Amount of holiday pay for BiR:

S=SD x PO, where SD - average daily earnings, rub.; PO - vacation duration, days.

Before you calculate the maternity benefit, you need to take into account not only the minimum wage and the minimum insurance period. Limitations exist for maximum income. Accordingly, the amount of benefits and payments for pregnancy and childbirth is calculated from this maximum amount, regardless of the amount of income that exceeds it.

Calculation example

It is necessary to calculate the piecework wages of workers on a specific example.

Assume that Akkond LLC has a piece-rate wage system. In November 2017, the employee produced 250 units of goods per month. At the same time, the piece-rate for one unit of goods in the company is 30 rubles. Then the employee's salarywill be:

250 pcs30 rubles per item=7,500 rubles.

An example of calculation for a progressive form of remuneration is as follows. Take the same worker who made 250 units. products.

The piece rate for him is:

• up to 100 units - 30 RUB;
• from 100 to 300 units. – 40 rubles;
• over 300 units – 50 rub.

Payroll will look like this:

100 pcs30 rubles / unit + 150 units40 rubles / unit=3,000 + 6,000=9,000 rubles.

Obviously, with this type of remuneration, the employee's wages are higher. You can calculate piece-bonus wages in the following way.

To all the above conditions, we will add a bonus of 20% for the fulfillment of production norms, which is 250 units of goods.

Then the employee's salary will be:

250 pcs30 rub./unit=RUB 7,500

The premium will be:

7,50020%=RUB 1,500

Total earnings:

7,500 + 1,500=RUB 9,000

Calculation of piecework wages using an example showed that the option of a piecework-bonus system is more beneficial for the employee.

Conclusions

The transition to piecework wages for employees will stimulate labor productivity, and the number of products produced will increase significantly. But the mechanisms by which payments are made must work smoothly and clearly.