Can we pay acasual employee a piece rate instead of an hourly rate?
It may be possible for an employer to pay any employee by piece rates. The ability for an employer to pay piece rates and the manner in which such an arrangement can be implemented will vary based on the industrial instrument that covers the employee.
Piecework is a system of payment where an employee receives a payment based on each “piece” they have processed. For example, an employee will be paid for each box filled, for each piece of fruit picked or for each item produced. This means the amount an employee earns each week may vary depending on how much work they do.
Some employees may be paid piece rates instead of hourly or weekly pay rates. Further, some employees may be paid by a mixture of piece rates and hourly rates.
A number of awards specifically allow for pieceworker and commission payments, such as the Horticulture Award 2010, the Textile, Clothing, Footwear and Associated Industries Award 2010, the Wine Industry Award 2010 and the Real Estate Industry Award 2010.
Before entering into a piecework arrangement it is important to check the relevant award or agreement to ensure that the specified conditions are met. Each industrial instrument could have different requirements for payment by piecework, although a common condition will often be the existence of a written and signed piecework agreement detailing the nature of the arrangement. A failure to comply with appropriate conditions may mean that an employee cannot be treated as a pieceworker.
It is important to remember that the purpose of piece rates is to improve productivity in the workplace, as opposed to undercutting minimum entitlements.
While some awards (and enterprise agreements) contain specific conditions for paying employees piece or commission rates, it is not necessarily clear whether employees can be paid in this manner if they are covered by an award or enterprise agreement without a specific provision for piecework rates.
Ai Group’s view at this time is that piecework arrangements (in the form of an incentive payment) are possible for employees covered by an award that does not expressly permit piecework arrangements. However, these employees must still receive award rates as a minimum and the hours of work provisions within the award must still be observed. An employer would not be able to pay these employees on a ‘piece rate basis’ only. For tailored advice and information about the different opinions that exist on this matter, please call the Ai Group Workplace Advice Line on 1300 55 66 77.
Award and agreement free employees can be paid piece rates. Section 21 of the Fair Work Act 2009 (Cth) includes award and agreement free employees who are “in a class of employees prescribed by the regulations as pieceworkers” in the definition of pieceworker. Regulation 1.12 specifies “a class” as award/agreement free employees who are paid a rate set by reference to a quantifiable output or task and are not paid by a rate set by reference to a period of time worked.
Regulation 1.09 of the Fair Work Regulations 2009 contains a formula to work out the base rate of pay for award and agreement free employees under a piecework arrangement. For more information about the structuring of piecework arrangements for award and agreement free employees, please call the Ai Group Workplace Advice Line on 1300 55 66 77.
An enterprise agreement is not precluded from specifying a piecework arrangement.
Section 197 of the Fair Work Act 2009 (Cth) enables an enterprise agreement to contain piecework terms in circumstances where the applicable award that covers the employees contemplated by the scope of the enterprise agreement does not contain such terms. However, the piecework terms within the enterprise agreement must not have a detrimental effect on an employee covered by the enterprise agreement in relation to the entitlements of that employee under the ‘National Employment Standards’.
For more information about the inclusion of piecework arrangements in enterprise agreements, please call the Ai Group Workplace Advice Line on 1300 55 66 77.
