Intro: Piecework - is it suitable for your company?
Side gigs. Freelancing. Flat Rate. There are lots of ways to describe piecework - but how do you know if its something your company should consider?
What is piecework?
Piecework has become common as we enter the new post-pandemic, work-from-home culture. However, its always been a common way for certain employers to pay their employees. Examples include cleaners, graphic designers, contractors, web developers, and more.
But when it comes to the everyday tasks your business needs done, could you consider paying your employees as pieceworkers?
What are the benefits of piecework?
If your employees are working from home, time tracking can prove to be a challenge. Piecework takes the stress out of scheduling and time tracking for you.
Another benefit is that you’ll better be able to predict cash flow, assemble budgets, and investigate your profit (or loss).
What are some examples of piecework?
Data entry and social media management are examples of jobs that are often done by employees remotely, and that could be paid on a per-project basis.
Typically, a piecework job would include measurable tasks such as manufacturing, installation, cleaning, or design.
Is your company product or service based?
Does your company sell product? Piecework could be suitable for companies that create and sell product, but employees may feel pressured to work faster and compromise on quality.
Is your company service based? Piecework can also be suitable for service based companies, as the employee would be paid once the job is completed, such as with repair services or health services.
How does piecework get paid?
Keep in mind that it’s extremely important to determine a fair rate of pay. This can be a complex calculation that will require good research of the average time needed to complete the job.
Of course you’ll want to consider your margins, but minimum wage still counts here. You’ll also want to offer competitive pay in response to today’s inflationary environment.
Be sure to come up with a detailed contract that outlines all areas of the pieceworker’s employment and pay. Include details about what happens with unfinished work, insurable hours, and overtime.
When you run payroll, you will have to determine how your software is set up to pay out piecework. This would require adding a new payroll item in QuickBooks Online, for example.
You’ll have to agree with the employee on the number of insurable hours that you’ll be entering into your accounting software. This is necessary for EI and for the employee’s ROE.
One last thing to remember is that the same payroll liabilities (taxes, vacation pay, etcetera) will apply to the employee and employer, regardless of the type of pay.
If you have questions about or need support with your payroll, contact us today! We’re Canadian payroll pros!
In Conclusion
Piecework can increase your business’ productivity and help you better manage cash.
Careful consideration needs to be made around the rate of pay as well as the rules of employment.
Setting up piecework pay in your accounting software and managing the liabilities around it can require extra support.
Contact us today if you have any questions about your payroll or how to pay employees for piecework!