A report by Better Work, a partnership between the International Labour Organization (ILO) and the International Finance Corporation (IFC), claims that the workers of garment factories under partial piece rate system are in a worse state than those working either 100 per cent on hourly wages or 100 per cent per piece.
The partial piece rate system has a detrimental effect on working conditions. It has a negative effect on workers’ self-reported physical and emotional health as well as on workers’ concern for accidents or injuries in the factory. Such workers are more likely of being subject to abusive treatments like sexual harassment and verbal abuse, reporting a lower life satisfaction.
Based on data of 6,000 workers from five countries namely Vietnam, Indonesia, Haiti, Jordan and Nicaragua, this research explores the impact of piece-rate pay on wages and working conditions in the apparel sector. Piece rate workers in these exporting factories are found to earn a higher hourly wage than workers paid by the hour only in three out of the five countries analysed.
A ‘full pieceworker’ receives a fixed rate for each piece produced while in ‘partial piece rate pay’, management pays a base salary irrespective of production output and, if a certain output threshold is reached, an incentive system, based on the output, is added to the base salary.
As far as apparel manufacturing is concerned, the share of wage workers paid by the piece is higher in Asian countries. It is 50 per cent in Vietnam, 23 per cent in Pakistan and 18 per cent in Indonesia. While the share of employees paid by the piece in Bangladesh is surprisingly low, just 1 per cent.
The report suggests that the extent to which piece rate can be of benefit for both employers and workers depends on how it is designed and regularly maintained after-ward.
“To be fair and effective, piece rate systems should be simple and transparent, rewards employees according to the difficulty and quality of their work, ensuring that motivated workers can earn substantially more than the minimum wage. Involving employees before implementing a piece-rate pay system will increase transparency and confidence, so a crucial role should be played by trade unions. To tackle the decent work deficit.” – ‘Piece Rate Pay and Working Conditions in the Export Garment Sector’ Report
