Piece Rate Pay System Law and Legal Definition

A piece-rate pay system is a system where compensation is based upon the number of units of work produced by an individual or distinct work team. Workers can earn more based on the rate of performance they adopt. These plans often provide greater incentive for higher levels of productivity.

A common example is auto mechanics that are paid a set amount for a type of repair, regardless of how long it takes them to actually perform the repair. Piece rate workers are not exempt from the overtime and minimum wage requirements. Those wage rules do apply, and piece rate workers must be appropriately paid. Various federal and state laws, which vary by state, apply to wages of piece rate workers.